back to article EC: Motorola abused its patents in Apple iPhone spat

Google's Motorola Mobility division was dealt another blow in Europe on Monday, when the European Commission (EC) informed the company that its use of standard-essential patents (SEPs) likely constitutes a violation of EU antitrust rules. The preliminary decision comes following two yearlong investigations launched in April 2012 …

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Good

The less patents, especially standard-essential patents, can be used to shut down your competitors, the better.

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Meh

Re: Good

Agreed, anything standard essential should be taken out of the patent equation. It is after all a combined effort of manufacturers and other agencies that set the standard, therefore if it becomes the norm it should be available to the public for a peppercorn fee or for free..

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Re: Good

as I understand it (feel free to correct me), the situation is as follows:

a) Apple start selling their phone, neglecting to license all relevant 3GPP SEPs

b) Moto notices, asks for royalty

c) Apple sues

d) Moto counter-sue, asking for injunctive relief as Apple still haven't paid a penny to them

e) Apple starts moaning about anti-trust

I'm not saying the situation isn't daft, merely that Moto isn't as bas as you might think.

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Anonymous Coward

Re: Good

You've missed the part out about (b) where Motorola charged more to Apple than other companies, something that is not legal. FRAND means fair, reasonable and non discriminatory. You can't therefore use FRAND to overcharge a rival to impede their business.

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Anonymous Coward

Re: Good

Why? there is a good reason for FRAND and patents, it stops us having lots of very similar systems based on the same technology.

Would you really want 10 different flavours of GSM all incompatible? having FRAND patent means that any incompatible variations can be killed off.

Things like USB, SATA and others only succeeded because they were successfully controlled.

You've only got to look at the state of the Linux desktop to see what happens with total freedom, small amounts of genius amongst masses of very average crap.

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Re: Good

Did I? All I've seen is statements like "Motorola made their standard opening offer of 2.5% of device price", expecting a negotiation, not litigation. Moto did not present them with an invoice. There may also have been reference to a cross-licensing deal for Apple's non-SEP patents. Just because Apple have a different business model which has resulted in their operating margin being up in the 30% range, rather than the <10% (being generous) that MMI enjoys, doesn't mean that the opening offer is any less valid.

I'm not aware of anyone coming forth with what is a "fair and reasonable" SEP rate, primarily because the deals that are entered into are usually enormously complicated due to both parties having differing lists of SEPs in their back pockets, plus other non-SEP, but standards relevant patents, plus other "regular" patents, plus other "software"/"design" patents that might be useful.

If you buy a car (used or not), do you pay sticker price? Or do you sue the dealership?

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FAIL

Re: Good

Motorola were obliged to offer SEP patents under FRAND terms, which the EC (and you) are saying they didn't do. The EC say this is bad, you say it is fine...

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Re: Good

I'm not saying they didn't do it at all, I'm saying they made an offer which was consistent with previous opening offers in FRAND negotiations with other companies. Apple declined to negotiate, preferring to litigate the rate. Motorola would seem to have been able to reach FRAND agreements in a similar way for at least the last one or two dozen years with a wide variety of other phone manufacturers without anyone raising a gripe like this.

Similarly Apple have tried to get the courts to set a FRAND rate while withholding the right to disagree with it if it is over $1/device (or whatever low rate they stated).

That's the whole problem with the FRAND stuff is that there is no fixed rate per SEP, and different companies will have a different opinion as to what meets the criteria of FRAND. Perhaps up until now the whole FRAND negotiation has only been tested between companies holding their own piles of SEPs, and Apple, with their small holding of SEPs from the Nortel IPR purchase and limited recent activities, doesn't fit that mould. But is it "reasonable", or even "fair" for someone who has not contributed to the standards process (either in the working groups that do research, or in the standards setting procedure) to get the whole standard for a minimal price?

Put another way, is it fair for the incumbent 3GPP manufacturers to have to subsidise Apple's margin (with their many years of research) so that Apple can "compete"? I would argue not. Apple *should* have to pay for it, as that is only fair and reasonable.

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Re: Motorola were obliged to offer SEP patents under FRAND terms

No, the EC and you are claiming they weren't FRAND, JSJ clearly stated Motorola staked "their opening position and expect negotiations not litigtion." This is standard business practice and is exactly what I would have done in Motorola's position. Motorola clearly want a cross licensing agreement for the ridiculous rounded corners patent Apple own. This is what always happens in complex cross licensing deals.

I once worked for a small company you've never heard of that developed a software based program for some HP scientific apparatus. They hit a road block extracting data from the unit and had to enter into an agreement with HP to get the data formatting information. Once they entered into the agreement, HP wanted to cross license the software back to themselves as well as have some additional capabilities which would be reserved to HP. The company I was working for got better code and and steady customer out of the deal. Most importantly it was beneficial to BOTH companies. So long as you don't immediately to the Lawyers these sorts of things can be worked out.

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Re: Good

Apple were buying ICs from Qualcom.

Qualcom had a licence to sell said chips to 3rd parties. (the licence to use the chips is transferred to the buyer)

Google/Motorola told Qualcom to stop selling to Apple or lose their licence.

Google/Motorola tries to gouge Apple (for standards necessary patents)

The victims here are Qualcom - caught between a rock and a hard place and Apple, Motorola were discriminatory in their pricing and actions.

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Trollface

They'll just not be a part of the standards body

and sue everyone later.

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Re: They'll just not be a part of the standards body

Yes, it's kind of hard to see what the benefit of declaring your patents when new standards are being discussed nowadays.

It used to be that it'd guarantee you some income, but this decision seems to imply that it's potentially little more than a gentleman's agreement. Given the increase in patent litigation of late, it's sure much more attractive to keep schtum and the gouge the competition a few years down the line, free of the SEP restrictions

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Anonymous Coward

@Ben Tasker

You have no idea what this is about, do you?

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Facepalm

Re: They'll just not be a part of the standards body

"They'll just not be a part of the standards body and sue everyone later."

Er, No. You have to publish the patent. This is better than the Unisys LZW submarine patent when everyone was asked to pay for GIF technology years after the "GIF standard" was agreed. Link everything2.com

Hence the development of PNG.

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Anonymous Coward

Re: They'll just not be a part of the standards body

Except that SEP's are required in order to have a standard with which to base something on. Like 4G, or 3G or mobile telephony at all. Without a group of patents that form a standard, you might not be able to call your next door neighbour that their house is burning down because their mobile phone was using a different set of patents to communicate.

So, you could sue, but your patents weren't being used, so you would just waste your money.

Sort of like Google did with Motorola.

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Boffin

Re: They'll just not be a part of the standards body

@Ben Tasker

If you don't take part in the standards process at all you may not have to declare patents but your patents are unlikely to be essential to the standard. Someone else with a patented alternative approach will have argued for it and probably got it in as a quid pro quo for accepting another participant's technology in another aspect of the standard.

If you take part and do not declare relevant patents you are likely to be in severe legal difficulties as the rules have been tightened up since RAMBUS and even they suffered legally in the end.

There is still an incentive to take part in standards, declare patents, and collect FRAND pool rates rather than not taking part and probably being entitled to no licensing whatsoever as your technology doesn't get used unless it is included in a standard.

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Re: They'll just not be a part of the standards body

@AC and others

You'll have to forgive me, committed the crime of posting whilst under the influence of some heavy painkillers! I'm on some lighter ones tonight, so hopefully this'll be a little clearer

What (I think) I was getting at, is more the fact that you've very little to use against someone who comes along after the fact, doesn't participate when standards are being made, but decides not to pay your fees. Injunctive relief should be a measure of last resort, but I'm not sure it should be ruled out completely. That said, it needs to come down to how big a part the "innovation" in question actually plays - sure it might be essential, but how much of the end device does it make up?

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FAIL

B U T ...

I thought Apple had patents on everything including prior art.

Nice to know they haven't ...

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FRAND

I guess all new standards which include FRAND terms will stipulate as part of the agreement any licensee must agree to cross license non SEP to stop the nonsense where companies that invent things can be forced to license their efforts to others, but then blocked from producing the products they're responsible for inventing.

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Re: FRAND

No company will sign up for that, because a cross license essentially means that your competition can use everything you invent for free, and vice versa. The companies with big patent portfolios like say a Nokia aren't going to want to do a cross license deal with some upstart who has nothing to offer in return, but your idea would force them to do so if they want to have any access to standards patents. Where is the incentive to spend a lot of money inventing anything if all of your competitors can immediately take the idea you worked on and use it for free?

If dumb stuff is getting patented and clogging up the courts, the solution isn't to let everyone use everyone else's patents for free. The solution is to fix the patent system. You just like your idea better because it is easy to implement, and fixing the patent system is hard, but the unintended consequences make your solution much worse than just continuing on with things they way they are today.

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Re: FRAND

The solution is to fix the patent system.

I agree completely, but this is even less likely to happen.

I hadn't meant to imply that you'd have to give free cross licensing, but that if company A owns a standards essential patent and company B owns some minor look and feel patent, that as part of company B gaining access to A's SEP company B must agree to license their patents used in the same product back to company A. So you can't have a situation where A is forced to license their work to B, but B can stop A from producing products that compete with B. My aim was that the owner of the SEP shouldn't be disadvantaged in the negotiation over licenses agreements as their work is considered essential.

The EU statement was that the need for competition trumps the right of return on investment of the owner of SEP. But this creates a very one sided playing field. Using this the owner of non SEP have a free hand to attack the owner of the SEP while the owner of the SEP can't attack back.

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Anonymous Coward

Re: FRAND

Apple and Microsoft being out to try to Kill OSS in any way they can will not want to cross license their patents with any of Motorollas patents or SEPs, patent FUD is needed as a big club. I believe when big companies do look at each other to negotiate it'd be silly to assume you wouldn't look at the whole picture, so "fair and reasonable" means cross licensing patents with SEPs and visa-versa. Then when generalising a lot, but SEP do appear to be actually useful and pioneering compared to ones to do with a device looking square with rounded corners, or swipe to unlock (like a door bolt), etc. Microsoft couldn't handle Barnes and Noble when they stood up for themselves (a coincidence that B&N didn't sell Windows, what a very big coincidence), it's just FUD stifling progress originating from the convicted and continuing monopolist Microsoft. More competition please.

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Re: FRAND

I hadn't meant to imply that you'd have to give free cross licensing, but that if company A owns a standards essential patent and company B owns some minor look and feel patent, that as part of company B gaining access to A's SEP company B must agree to license their patents used in the same product back to company A.

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Who defines what a "minor" look and feel patent is? There are a lot of very minor SEP patents covered by FRAND. If Boeing uses h.264 in the Dreamliner, and it turns out Airbus contributed one patent to that standard that is FRAND licensed, should Airbus be able to copy the Dreamliner's wing shape (I have no idea if it is patented, let's just assume there is something special about it and therefore is patented)

Your solution takes a bad patent system and makes it worse. If companies don't like the outcome when the court tells them they can't use FRAND patents in a way that isn't "F"air, "R"easonable or "N"on "D"iscriminatory, they are free to not join in future standards efforts. The reason large companies in the tech field always join standards efforts is because the benefits outweigh the costs.

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Anonymous Coward

Don't be evil lol. Google does all its evil bidding via Motorola so it seems as if Google aren't involved in patent disputes.

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@Don't be evil lol

I think you'll find that its the companies that don’t want to take Google to court and sue people who distribute and buy their software that are the evil ones. They know they cant fight google in court so they pick on minnows for protection money.

I'm sure Google would love to stand up in court to defend themselves but the opposition are very careful to ensure they cant be invited in.

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Perhaps they could have avoided it in the first place

If Apple & MS had just paid for the patents which, presumably, they still haven't, cynically assuming they could out-manouevre Moto in this manner. If they get away with this then you can expect a lot more of FRAND trolling one way or another.

Though over time I suppose lawyers are cheaper than paying a fair cut from the outset and risking a negative judgement for damages should you lose and have to cough up.

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I'm in two minds

On one hand, a SEP should be "freely" available. There should be a standard rate, anyone can use it and just pay that standard rate of royalties. OK, big corps may do cross licensing or bulk discount negotiations, but the default position is "use it as you want, pay us this amount".

On the other hand, AFAIK Apple did not even try to license the patents or negotiate (I'm happy to be corrected if I'm wrong). They just started using them. Just because it is part of a standard doesn't mean anyone can use it without reimbursing the patent holder. If they do, the patent holder should be allowed to use it as any other patent in court.

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Anonymous Coward

I'm with your second mind

As if SEP was free no one would contribute thier good stuff, standards would degenerate to be low quality, ending up with multiple incompatibilities.

Apple (and Microsoft) do not want to negotiate.

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Re: I'm in two minds

It's your second point here that makes me think the EU has issued a deeply flawed opinion.

If Apple had negotiated in good faith, then yes, the EU decision would be appropriate. But there's no evidence Apple negotiated in good faith.

The problem with your first hand is the question of what is the appropriate standard rate for a given patent. Standards negotiations are messy ugly things. Once upon a time I worked at an LP that was in that business in a private context. They were trying to set and license standards amongst only three manufacturers. Negotiations took months and stumbled over the tiniest of details because anything might give one manufacturer a major advantage over the other two.

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