E. Joshua Rosenkranz, Orrick, Herrington & Sutcliffe (Rick Kopstein)
SAN FRANCISCO — The smartphone wars are causing battle fatigue at the Federal Circuit.
Apple Inc. and Google’s Motorola Mobility, squaring off Tuesday over wireless technology patents for the third time in 13 months, were met with a barrage of hostile questions from judges who are clearly running out of patience for the sprawling litigation.
“I don’t understand what any of you people are doing,” Judge Kimberly Moore barked at two of the country’s premier appellate advocates—Kathleen Sullivan, representing Motorola, and E. Joshua Rosenkranz, for Apple. “Why are you suing each other in 15 different courts and bringing completely unrelated counterclaims in these various actions? Because I don’t think even you can keep track of what patents are at issue in which suit.”
“That is why it is so important that you affirm Judge [Barbara] Crabb’s dismissal here,” Sullivan replied, staying on message despite the mortar shells exploding around her.
Sullivan, a name partner at Quinn Emanuel Urquhart & Sullivan, actually had the easier argument on the day. Orrick, Herrington & Sutcliffe’s Rosenkranz was nearly jeered off the lectern for arguing that Motorola’s unreasonable assertion of a standards essential patent violates antitrust laws, and that Apple is entitled to a judicial opinion on a fair and reasonable royalty—without being bound by the court’s decision. “Why can’t we just look at this as two parties not agreeing as to the appropriate value of patented technology—and that’s it?” Judge Raymond Chen asked him. “Every time that someone thinks that the patent owner is asking for an unreasonably high rate, we don’t invoke antitrust laws, do we?”
Rosenkranz argued as best he could. When he went 30 seconds beyond his allotted time, Moore ordered him to “sit yourself down.”
Tuesday’s hearing in Apple v. Motorola Mobility was at least the seventh smartphone case at the U.S. Court of Appeals for the Federal Circuit in two years between Apple and a Google subsidiary or Android partner. The rulings have mostly favored Apple, but the company may finally have overstepped with the appeal it brought Tuesday.
In dispute are Motorola patents on technology that has been adopted by two standard-setting organizations. Apple says Motorola promised those organizations it would license the technology on fair, reasonable and nondiscriminatory terms, but is now demanding that Apple pay $12.35 per iPhone—about 12 times what Apple says the technology is worth. Some of the patents have already been litigated before Judge Richard Posner and are under review by the Federal Circuit. But Apple also brought antitrust claims in the Western District of Wisconsin, arguing that Motorola is restraining trade with the threat of outsized royalties. The company also demanded specific performance of the FRAND rate.
U.S. District Judge Barbara Crabb of Wisconsin rejected the antitrust claims under the Noerr-Pennington doctrine, because Motorola’s patent litigation is protected petitioning activity. She also dismissed Apple’s contract claims just before trial when Apple refused to “pre-commit” to pay whatever FRAND rate Crabb set. Apple insisted it had the right to pursue its invalidity claims on the Motorola patents if Crabb set too high a royalty.
At Tuesday’s argument, Sullivan accused Apple of trying to use “the majesty of the federal district court as a kind of JAMS session, as a kind of adjunct to private negotiation … a vehicle for leverage in negotiations.”
Rosenkranz enjoyed a welcome reception last fall when he argued the appeal from the Posner litigation, and again in December when he argued Oracle’s smartphone case against Google. But on Tuesday the Orrick partner was put on the defensive immediately by Judge Chen about whether the Federal Circuit even had jurisdiction over the case. When Rosenkranz tried to steer the argument to the contract issues, Moore instead asked him about the antitrust injury. “I’ll just touch briefly on it,” Rosenkranz said.
“You want to touch briefly on everything we want to ask you about!” Moore said. “Read the panel. What’s the antitrust injury?”
Rosenkranz argued that the Sherman Act covers “threats” to commerce. With half a billion iPhones shipped, “the threat that we will agree to $3 or $5 or anything up to $12.35 is a huge antitrust threat,” he said.
But where’s the risk, Moore asked, when “you came into this litigation with the posture that ‘I want you to set the rate, but I’m not going to agree to the rate.’ You want to have your cake and eat it, too.”
Rosenkranz said Apple is only trying to force Motorola to make a reasonable offer, as Motorola is required to do under its contracts with the standard-setting organizations, which Apple can then accept or reject.
“So let me get this straight,” said Chen. “You want the court, a judge, to set a global royalty rate for an entire portfolio, to get the negotiations really going?”
For the first half of her argument, Quinn Emanuel’s Sullivan got an equally rough ride.
“Judge Chen, this court does not have jurisdiction under [Microchip Technology v.] Chamberlain,” she began.
If there’s no jurisdiction, Chen replied, why is Motorola bringing a cross appeal asking that the dismissal be with prejudice?
Sullivan downplayed the cross appeal, saying Motorola just wants the suit thrown out one way or the other. Turning to the merits, Sullivan said Motorola’s right to bring patent claims is “obviously protected by Noerr, and I didn’t even hear my friend Mr. Rosenkranz argue differently.”
“Does it protect fraudulent conduct in front of [a standard-setting organization]?” Chen asked.
Sullivan, a walking encyclopedia of legal theory, was at a rare loss for words. “Your honor, um, no …”
“The answer is no, right?” Chen said.
“Of course not,” Sullivan agreed. But she shifted gears quickly and argued that the statute of limitations has long run on Motorola’s dealings with the standard-setting organizations, which she described as “perfectly in conformity with industry practice.”
By the end of her 20 minutes Sullivan had built a head of steam. If Apple thinks Motorola is violating its FRAND obligations, it can raise the issue during the damages phase of a patent suit, such as the case before Posner. Moore quickly agreed, saying she recalled “whole sections of their pleadings talking about FRAND” in that case.
And it’s too late for Apple to claim antitrust injury, Sullivan argued. “They can’t causally link it back to the deceit, which we deny anyway, and therefore they cannot take time-barred 1990s claims, put them together with Noerr-protected 2007 and 2010 claims and create an antitrust case,” she said at her typical breakneck speed.
This time, there was no interruption.
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