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Participants are seen in a Motorola stand at the Mobile World Congress, the world's largest mobile phone trade show, in Barcelona, Spain, Monday, Feb. 27, 2012. (MANU FERNANDEZ/Manu Fernandez/AP)
Participants are seen in a Motorola stand at the Mobile World Congress, the world's largest mobile phone trade show, in Barcelona, Spain, Monday, Feb. 27, 2012. (MANU FERNANDEZ/Manu Fernandez/AP)

Why a U.S. ruling could upend the smartphone patent wars Add to ...

With a single ruling this week, U.S. District Judge James Robart of Seattle federal court may have fundamentally altered the balance of power between Motorola Mobility and the leading opponents of Motorola's soon-to-be-parent Google, Microsoft and Apple.

In another indication that the smartphone war is shifting away from individual infringement suits, Justice Robart granted Microsoft's motion for a temporary restraining order, which effectively bars Motorola from acting to enforce whatever relief it is granted in an ongoing German patent case.

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In that case, before a court in Mannheim, Motorola has claimed Microsoft Windows and Xbox products infringe German patents that are part of Motorola's standard-essential portfolio. The Seattle judge, according to this transcript of the order he issued in open court, agreed with Microsoft that the German patents are already at issue in Microsoft's case before him, which accuses Motorola of breaching its obligation to offer standard-essential patents on fair and reasonable licensing terms.

Justice Robart granted the temporary restraining order under the Anti-Suit Act, which is intended to restrict forum-shopping and harassing litigation. That is how Microsoft and its counsel at Sidley Austin described Motorola's German suit. According to Microsoft, Motorola first tried to extract exorbitant licensing fees for a portfolio of about 100 worldwide standard-essential patents. Then, after Microsoft filed a Seattle federal-court suit asserting that Motorola's licensing demand was a breach of its contract with a European standard-setting body, Motorola sued Microsoft in Germany for infringing German patents that were part of the portfolio at issue in Seattle.

The judge agreed that Motorola appeared to have run to Germany to obtain an injunction there before he could decide the merits of Microsoft's contract case. Microsoft's U.S. suit, he said, included the same patents Motorola was asserting in Germany, because those German patents were part of the portfolio for which Motorola demanded allegedly improper licensing fees. Justice Robart concluded that under the Anti-Suit Act, he has the power to block Motorola from enforcing whatever relief it wins in Germany until he rules on the larger question of reasonable licensing fees for standard-essential patents.

“The battleground in this … is whether the United States action, or resolution of it, would be dispositive of the foreign action to be enjoined,” the judge said at Wednesday's hearing. “And I will add, for the edification of the Court of Appeals, so it knows where I'm coming from, that I consider the preservation of my ability to resolve this dispute to be something that needs to be carefully guarded, otherwise we run into the possibilities of conflicting resolutions, duplicative litigation, and unfortunate results that don't follow appropriate law.”

Why is the ruling so significant? Injunctions are hard to obtain in U.S. patent litigation, so patent holders in the last five or so years have taken advantage of easier injunction standards in Germany and elsewhere to gain leverage in global patent disputes. The Robart ruling holds that, at least in cases involving worldwide standard-setting portfolios, U.S. litigation trumps cases elsewhere. That's a potentially significant shift in the balance of power between patent holders and licensees.

Expect to see Apple, for instance, point to the ruling in its own standard-essential litigation with Motorola. Apple sued Motorola in San Diego federal court in February, making essentially the same argument as Microsoft. It claimed Motorola's German assertion of standard-setting patents against Apple violates Motorola's contract with the standard-setting body. The parallels with Microsoft's case suggest that Apple will also be able to use the Robart ruling to block Motorola from enforcing any German injunction it obtains.

The leading authority on standard-setting patents, Jorge Contreras of American University's Washington College of Law, told Reuters Robart's ruling is “pretty astounding.” He said he has never before seen a contract case involving standard-essential patents serve as the basis of an Anti-Suit injunction – and said that the U.S. judge's assertion of his authority to block foreign patent actions is “very surprising.” Motorola, he said, has to offer a worldwide portfolio of patents to licensees of standard-essential technology. So to say that conclude that such an offer precludes litigation over patents in the portfolio outside of the U.S. “seems like a significant reach….I can see this being a really important decision.”

Microsoft deputy general counsel David Howard told Reuters that the ruling means “Motorola can't prevent Microsoft from selling products until the court decides whether Motorola has lived up to its promise.” Motorola, pointing to the $100-million bond Justice Robart ordered Microsoft to post, said the ruling means Microsoft is committed to license its standard-essential patents. Motorola patent counsel K. McNeill Taylor and outside counsel Steven Pepe of Ropes & Gray was not available for comment.

Motorola has not said whether it intends to appeal the temporary restraining order, which is set to last only until a May 7 hearing on Microsoft's motion for summary judgment. The Mannheim court, meanwhile, is expected to issue its ruling in Motorola's German injunction bid on May 2.

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