Apple, Inc. v. Motorola, Inc.

Judge Posner Dismisses Apple v. Motorola Patent Suit in its Entirety By Charlie Stiernberg – Edited by Jeff Habenicht Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540, 2012 WL 2376664 (N.D. Ill. June 22, 2012). Slip Opinion (Hosted by Electronic Frontier Foundation) The United States District Court for the Northern District of Illinois dismissed with prejudice the suit between Apple, Inc. and Motorola, Inc. in its entirety.  The court had previously excluded testimony from the parties’ damages experts and cancelled the jury trials on liability.  Before deciding whether to dismiss the case, however, the court requested briefs and heard oral arguments from the parties regarding each other’s damages claims, declaratory relief, injunctive relief, and reasonable royalties. Following the hearing, Circuit Judge Posner, sitting by designation, held that: (1) neither party had presented sufficient evidence to withstand summary judgment on damages, (2) neither party was entitled to injunctive relief, (3) neither party could establish a reasonable royalty rate for a compulsory license, and (4) declaratory judgment in favor of either party would confer no tangible benefit on the victor.  Judge Posner concluded by dismissing the case with prejudice, reasoning that, “It would be ridiculous to dismiss a suit for failure to prove damages and allow the plaintiff to refile the suit so that he could have a second chance to prove damages.”  Apple v. Motorola, No. 1:11-cv-08540, slip op. at 38. Forbes provides a high-level overview of the outcome.  Ars Technica places the case in the context of related litigation between Apple and Motorola.   FOSS Patents provides an in-depth analysis of Judge Posner’s reasoning and its potential precedential effect. The court began by rejecting each party’s damages claims, because they failed to present sufficient evidence to raise a triable issue.  With respect to Apple’s ‘263 patent (the realtime patent), the court held that Apple did not show that its suggested design-around was a commercially reasonable option for Motorola.  Establishing only the existence of a potential substitute, without more, “invites guesswork.”  Id. at 7.  Regarding Apple’s ‘647 patent (the structure detection and linking patent), the court held that Apple had not presented admissible evidence that the Georgia-Pacific factors support its damages claim.  In addition, the court held that Apple could not base its damages on the result of its litigation with HTC in the International Trade Commission, because the construction of the patent’s claims differed between the two cases.  The court also rejected Apple’s alternative argument for nominal damages.  Judge Posner opined, “Why nominal damages are ever awarded is a . . . question for which I doubt there is a satisfactory answer.”  Id. at 10.  Citing eBay v. MercExchange, the court held that proof of infringement alone is not enough to warrant a remedial order. With respect to Motorola’s ‘898 patent (the cellular base stations patent), the court held that because it is a standards-essential patent, Motorola had committed to license it to anyone on fair, reasonable, and nondiscriminatory (“FRAND”) terms.  The proper method for computing a FRAND royalty starts with what the cost to the licensee would have been to obtain the technology just before the patented invention was declared essential to compliance with the industry standard.  Judge Posner characterized Motorola’s damages claim as “[g]oing for broke,” because Motorola’s damages expert gave no basis for his estimate of a reasonable royalty rate consistent with this methodology.  Id. at 17–18. The court further held that neither party was entitled to an injunction, because neither party had shown that damages would not be an adequate remedy—due to their respective failures to present an adequate damages case in the first place.  Judge Posner reasoned that, by definition, “[a] FRAND royalty would provide all the relief to which Motorola would be entitled if it proved infringement of the ‘898 patent, and thus it is not entitled to an injunction.”  Id. at 18.  With respect to Apple’s patents, the court held that Apple’s case for injunctive relief failed the irreparable injury, balance of hardships, and public interest factors of eBay.  Apple had failed to quantify the benefits Motorola accrued by infringing Apple’s patents.  Noting that the patent claims at issue would be easy for Motorola to design around, the court also rejected Apple’s argument that it was losing market share as “wild conjecture” and “implausible.”  Id. at 23, 30, 33.  More generally, Judge Posner opined that “[f]or a variety of reasons patents in the field of information technology often have little if any value except defensively.”  Id. at 25. Judge Posner opined that a compulsory license with an ongoing royalty would be a superior remedy in cases such as this, because of the disproportion between harm to the patentee from infringement and harm to the infringer and the public from an injunction.  However, he held that damages experts on both sides had failed to estimate running royalties in this case.  Moreover, it would not be proper to consider ordering an injunction without evidence with which to compare the costs and benefits of an injunction with the costs and benefits of a substitute compulsory license. Finally, regarding Apple’s remaining claim for declaratory relief, the court held that when neither party can obtain monetary or injunction relief against the other, a declaratory judgment in favor of either party would confer no tangible benefit on the victor and so there would be no federal subject-matter jurisdiction.  Judge Posner also noted that the decision to grant declaratory relief is discretionary and that he would not do so because such a judgment “would have no practical effect.”  Id.  at 37. Judge Posner’s opinion is significant in its criticism of patent suits over “minor-seeming infringements” and “standards-essential patents.”  Id. at 19, 33.  He noted that “Motorola’s desire to sell products that compete with the iPhone is a separate harm—and a perfectly legal one—from any harm caused by patent infringement.”  Id. at 31.  But he also questioned how Motorola could “be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability—without which it would not be a cell phone.”  Id. at 19.  The order dismissing the case with prejudice is likely to be appealed by both parties. Charlie Stiernberg is a 3L at Harvard Law School.