FOSS Patents

The Microsoft-Samsung contract dispute in the Southern District of New York over the implications of Microsoft's acquisition of Nokia's wireless device business for the parties' 2011 Android/Chrome patent license agreement has already exceeded my expectations concerning transparency. Three weeks ago this case brought to light that Samsung forked over more than a billion dollars in patent royalties on its Android/Chrome devices to Microsoft in the 12-month period from July 2012 to June 2013. Last week, a Samsung motion to compel arbitration explained certain interdependencies between the parties' Android/Chrome patent license agreement and a second contract, a Windows- and Windows Phone-related business collaboration agreement.

Here comes the latest and greatest revelation, which in certain respects is of even greater interest than the billion-dollar figure: yesterday, Samsung's counsel in the New York case had to file a public redacted version of the declaration supporting Samsung's motion for referral to arbitration, including the key exhibits--the patent license agreement and the business collaboration agreement.

The following PDF document contains the declaration and the redacted versions of the two contracts (this post continues below the document):

Redacted version of Microsoft's 2011 contracts with Samsung.pdf by Florian Mueller

These contracts are interesting from different angles. One of them is Samsung's motion to compel arbitration. At first sight (and I will have to look at it more closely and think about it some more) it does appear that the two contracts, both of which were concluded within a couple of months of each other, are indeed closely connected. The business collaboration agreement was signed first but already referred to credits (based on Samsung's success with Windows devices) against Android/Chrome-related license fees. Technically they both have the same date: July 1, 2011.

The aspect I found most interesting is all about exclusions. While the license agreement is not limited to a particular list of patents, it's no total-portfolio license either. There are two key limitations: "Excluded Technologies" and "Excluded Software" (any software licensed under an "Excluded License").

As for excluded technologies, Microsoft did not license to Samsung any of its patents relating to

1. Kinect-style gesture-based functionality (this exclusion has nothing to do with touchscreen gesture control, as the contract clarifies),

2. Virtual Reality, and

3. "Information Worker Software": a software or a service "designed or offered as a replacement" of Microsoft's office applications, with OpenOffice and LibreOffice being specifically mentioned as replacements for one or more Office components.

The definition of "Excluded License" includes any version of the GPL, LGPL, Mozilla Public License, and Common Public License, or similar licenses with a copyleft (share-alike) feature. This exclusion, however, relates only to "Other Samsung Products" and not to Samsung's Android and Chrome devices, where the only excluded license is the GPLv3. In other words, the license agreement does cover the GPLv2 parts of Android, such as the GNU operating system and the Linux kernel. This might spark some debate in Free Software circles. It also reminds me of what I said four years ago when there was a debate raging in Europe over "open standards" and the compatibility of free and open source software with FRAND (fair, reasonable and non-discriminatory) licensing terms. I said that patent royalties are paid on free and open source software, including GPLv2 software such as Linux, all the time, also by such companies as Red Hat. The now-public terms of the Microsoft-Samsung patent license agreement are another example.

Besides the actual exclusions I mentioned, there's also a mechanism in the contract that can lead to the exclusion of a category of devices. There are special rules in the contract for a "Deferred Android Device," defined as "an Android/Chrome Device that (a) does not have voice communication as a primary functionality, (b) has web browsing as a primary functionality and (c) has a display screen no larger than 6.25 inches across its diagonal." For such devices, the contract requires the parties to take certain steps for the purpose of agreeing on a license fee on such a device, but if the parties couldn't agree on a fee, then such devices would just not be covered by the license agreement.

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More than 27 months after Motorola filed an ITC complaint against Microsoft's Xbox gaming console, Google still hasn't won an import ban, but keeps pursuing one. On March 22, Administrative Law Judge David P. Shaw issued a preliminary ruling recommending the dismissal of the remainder of the complaint, and based on the detailed version of Judge David Shaw's remand initial determination that was published today, it's going to be fairly difficult for Google (Motorola Mobility's owner) to persuade the Comission (the six-member decision-making body at the top of the U.S. trade agency) to overrule Judge Shaw. At this point, only one patent -- a WiFi-related but not standard-essential one -- is still in the game. Google withdrew two WiFi standard-essential patents (SEPs) in October 2012 and two H.264 (video codec) SEPs in January 2013.

I realize that in my most recent post on this case (the one on Judge Shaw's remand initial determination) I had incorrectly stated that the sole remaining patent in this case is U.S. Patent No. 6,246,862 on a "sensor controlled user interface for portable communication device" -- but that's the patent in the Apple case. The sole remaining patent-in-suit in the Microsoft case is U.S. Patent No. 6,069,896 on a "capability addressable network and method therefor". This kind of oversight happens when you look up the wrong document and I apologize for it. Also, while I'm in autocorrect mode, in my post on the withdrawal of the two H.264 patents I originally said that Google would need a successful appeal to the Federal Circuit to bring the '896 patent back into the game. I correctly noted that the ALJ had found that patent infringed, and what happened is that the Commission did not adopt his infringement finding, but it didn't reverse it either. I apologize for this inaccuracy as well. The parallel Apple ITC case got me too confused, but I promise that it won't happen again in this context -- and that I'll try to avoid it in other cases as well.

Anyway, today the detailed version of Judge Shaw's remand initial determination ("RID") entered the public electronic record. Neither party requested any redactions of confidential business information. Otherwise it would have taken several more weeks for the RID to be published.

The RID sided with Microsoft for two separate reasons, any one of which would be sufficient on its own to fend off the remainder of Google's case. I'll explain.

The key problem for Google in this case is that Motorola, when it brought the complaint in late 2010, didn't anticipate the landmark Commission ruling on (now-HTC-subsidiary) S3 Graphics' complaint against Apple, in which the Commission clarified that method claims can only give rise to ITC exclusion orders (import bans) under special circumstances. That's because the ITC only has the authority to prohibit imports of goods if importation itself -- as opposed to post-importation use of the imported goods -- violates U.S. patent law. For product claims ("apparatus", "device" etc.), that's typically the case, but a method claim can only be infringed at the time a product crosses the border if it was manufactured in violation of a manufacturing-related method patent or if the importer is liable for indirect (induced or contributory) infringement. If Motorola's lawyers back in 2010 had interpreted the statute governing the ITC's patent infringement investigations ("Section 337") that way, they would probably have chosen different patent claims, or even entirely different patents. But they didn't, and they built their whole case on direct infringement theories, with indirect infringement being, at best, an afterthought. As a result, one of the two independent reasons for which Motorola's case must be dismissed in Judge Shaw's view is simply that it failed to develop an indirect-infringement theory at the appropriate stage of the proceedings:

"As noted by Microsoft, the administrative law judge previously found that Motorola had not shown that Microsoft's accused products indirectly infringe the asserted claims of the '896 patent. [...] The administrative law judge noted that Motorola's pre-hearing brief included only a single sentence on indirect infringement of the '896 patent. [...] The administrative law judge found that Motorola did not include, and has therefore waived, any argument that the accused products lack substantial noninfringing uses or that Microsoft intends others to infringe. [...]

Accordingly, the undersigned [judge] finds that there is no need for further analysis concerning indirect infringement. Indeed, even after being afforded a hearing to address the application of [the S3 Graphics ruling], Motorola was only able to presented indirect infringement evidence that could have been presented earlier."

If the RID had stopped there, Google would have lost only for procedural reasons, but Judge Shaw decided to address Motorola's arguments anyway, even though he deemed them waived, which makes it even harder for Motorola to win a favorable ruling because the Commission would have to overrule Judge Shaw procedurally and substantively:

"Nonetheless, in the event the Commission disagrees with the administrative law judge's findings in the underlying investigation on this issue, the undersigned provides the following analysis.

As discussed below, Motorola failed to show essential elements of both induced and contributory infringement. Motorola's induced infringement argument fails because Motorola has not established intent to cause infringement. Motorola's contributory infringement argument also falls short because it did not show that the accused 'components' are material parts of the claimed invention. Further, Motorola has not shown that these 'components' lack substantial noninfringing uses."

In connection with the intent that is required for a finding of induced infringement, the RID explains that the Kinect controller would not be affected by the import ban Google is seeking and, in fact, the marketing effort Microsoft puts behind the non-infringing Kinect is a key reason to deny intent to induce infringement by end users:

"The evidence shows that there is another way of controlling the Xbox 360 that is not accused of infringement: the Kinect accessory. Microsoft offers the Kinect accessory in certain packages with the Xbox 360 and advertises it on other packages that do not include the Kinect. [...].

The Kinect is a wired Xbox 360 accessory that is 'packed with an array of cameras and microphones that track users' movements and listen to their voices, allowing the Xbox to be controlled through speech and motion instead of a clunky game pad.' [...]

The evidence shows that Microsoft markets the use of Kinect as a way to control the Xbox without using a game pad — either wired or wireless. [...] Microsoft's inclusion and promotion of the Kinect (and 'controller-free' entertainment) weighs against Motorola's argument that Microsoft has specific intent to induce users to infringe."

With the ITC case not looking too promising for Google, it may at some point have to choose between continuing its pursuit of an import ban despite the challenges it faces and, in the alternative, focusing on its companion complaint in federal court. A district court could hold Microsoft liable for direct infringement of a method claim even if no infringement occurs at the time of importation. But the federal case is stayed pending resolution (including appeals) of the ITC investigation, and if and when it finally resumes, it will take a while before it goes to trial. And even if Google won an infringement finding, its commercial scale is likely limited if it just comes down to Microsoft's own use of the Xbox in connection with wireless controllers. In a patent dispute of this kind you really need infringement of reasonably massive scale to win a substantial amount of damages.

Google continues to get no leverage on the patent litigation front out of its 12ドル.5 billion acquisition of Motorola Mobility. Later this month the ITC will rule on its complaint against Apple, and the sole remaining patent-in-suit in that case has already been found invalid twice by an administrative law judge.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

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This week I got the impression that high tech companies -- especially if they're in the smartphone business -- now send each other patent suits instead of Christmas cards. Yesterday (23 December 2010) was particularly eventful, with heavyweights Microsoft and Motorola trading some additional patent infringement allegations.

Prior to this week, that dispute already involved 9 Microsoft patents, 17 Motorola patents, 3 US District Courts and complaints with the US International Trade Commission. Now we're talking about a total of 35 patents-in-suit (16 Microsoft patents and 19 Motorola patents). Motorola filed a new suit in the Western District of Wisconsin (where it previously filed two other ones) over 3 patents (one of which it previously asserted in another case, so the net gain is +2), and Microsoft made counterclaims in the Southern District of Florida, alleging the infringement of 7 of its patents.

Both companies have also expanded the range of products they accuse of infringing their patents. In its new suit, Motorola tries to attack the Kinect. In the aforementioned counterclaims, Microsoft asserts not only five patents against Android phones (just like it did before) but also two patents against Motorola set-top boxes with DVR functionality.

It's also worth noting that two of the seven patents added by Microsoft cover important touchscreen functionalities: US Patent No. 6,791,536 on "simulating gestures of a pointing device using a stylus and providing feedback thereto" and US Patent No. 6,897,853 on a "highlevel active pen matrix". While those patents were originally applied for in connection with "pointing devices" such as a stylus, they appear to cover user interface technologies that are nowadays most relevant in connection with touchscreens. Apple already asserts various touchscreen patents against Motorola (and other companies).

I could try to explain in detail how much this dispute has evolved in less than three months. But there's a better way to convey that information. I've put together a 13-page PDF document that shows you the current battlemap, then walks you through this in six steps, and finally there are 6 reference pages that list all of the patent numbers and titles and other detail concerning those suits, including, quite importantly, the accused products. You can look at it below (it's recommended to view it in full-screen mode) or on Scribd.com by clicking on the link:

I previously produced two other visualizations (using consistent colors for the various companies). On Scribd I have created a collection of files describing smartphone patent disputes, to which I will soon add some new ones, including a visualization of the epic battle between Nokia and Apple.

For now, I wish you all a Happy (and Peaceful) Holiday Season!

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

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