The illogical reason for a two phase trial and did Microsoft forfeited its right to FRAND from Motorola

PJ has a good write up on the latest state of Microsoft “(intentionally) jumped the gun” lawsuit against Motorola. I had been following PJ’s reporting of the lawsuit, focusing on the filings as it give the best picture of what is happening. My belief is the judge should had told Microsoft to go into negotiation first and the more I read his orders, the more I realized that he is trying his very best to ignore the elephant in the room: Microsoft haven’t even negotiated with Motorola. For this fact and this alone, I believe, if the case ever goes to the US Supreme Court, Motorola will win.

Never mind that. PJ highlighted his footnote #9, which in effect, acknowledged, and since I am not feeling charitable, conceded,  that Motorola’s initial offer need not be FRAND. That defeats the whole purpose of his two-phase trial to determine whether Motorola’s offer was indeed FRAND. The two phase trial, as proposed by the judge, is not without problems: Why do we need a first phase to determine what is the appropriate offer? That would not necessarily help the jury to second phase to decide whether Motorola breach its FRAND obligation. If fact, it mislead the jury as it give undue emphasis to the court-decided price point. I would say just let the jury decide both at the same time. I am charitable enough to say the court is free to put the question of what is the fair price for Motorola’s patents ahead of the question whether Motorola breached its FRAND obligation in its initial price even though in my opinion, it should be the other way because if Motorola did not breach its FRAND obligation, there is no need for the jury to determine what is the FRAND price.

Also, by insisting that Microsoft need not go into a negotiation first, the decision on what is a FRAND price point is even more difficult to decide. To derive a FRAND price we need to know what both parties are willing to offer and crucially, we need the final negotiation position of both parties to narrow down the range of potential decision. Breaking the deadlock is just what it says on the tin: It is an attempt to overcome  the one and only one narrow point that both parties cannot agree on. Right now the court (and jury) has no such guidance and is in effect mediating the negotiation, which it is not entitled to do.  That’s why it is running into difficult. For example, Motorola’s licensing offers include discount for Microsoft’s patent, should the jury now evaluate the worth of Microsoft’s patent that it is willing to put on the negotiation table? In fact, whatever the court comes up, I think there is a fair chance that if the  case goes to the Supreme Court, the court’s decision will be struck down.

From PJ’s article, I went back and re-read the Judge’s Oct 10 order. For reasons unknown, I was fixated on the judge comments that eventually Motorola will have to grant Microsoft a RAND license. Does it? I had always think so. That was the reasoning behind me supporting Judge Posner decision that he cannot give injunction banning the sales of infringing devices even if the patentee prevail. Now I am not sure. With the hindsight of this case, I think anyone who had decided to abuse the FRAND process should run the risk of forfeiting its right to a FRAND license.

Does Apple’s website notice satisfy the court order?

This is something you don’t see happen every day: A company being told it has to carry a message on the website.

Guess what? Apple was told to do so. See GrokLaw’s coverage and BBC coverage. We know Apple is not happy with that court order,  since  it appears to had argued on appeal that carry such a message is going to affect the aesthetic of its website.

In the end, it provides a link t the bottom right corner to the court-mandated notice. I am not  going to take that against Apple, as the appeal court order more or less OK this move.

The thing that I think is really wrong is Apple’s running commentary attached to the notice. In that notice, only the first paragraph is the one that the court requires Apple to display. Apple then spent 5 more paragraphs, or visually speaking approximately 4x more screen space arguing its position Samsung did infringe its right. I have no quarrel with Apple presenting its position, but I do not think that position should be stated on the page. If it does, it should clearly delineate the court-mandated portion from its position.

That failure to delineate means the intended message of the court order was not delivered to the reader. In my opinion, it means the notice does not satisfy the requirement of the court order, that is, to direct readers attention that the UK court had decided that Samsung did not infringe on Apple’s design. Did Samsung have a chance to see the notice before it is posted? I do not know?  Neither do I know whether Samsung will appeal and say the notice was insufficient. Needless to say, I hope it does.

For a company (and whose website) known for simplicity and brevity, the notice is surprisingly cluttered.

Apple setting Samsung up for the lawsuit and a surprise beneficiary of the lawsuit

When I saw the monetary figures PJ put up on Groklaw about Apple’s initial licensing offer to Samsung I had two thoughts. First, my brain immediately thought of the trans-continent lawsuit between Microsoft and Motorola Mobility. I can see Motorola Mobility jumping up and down and say Hurrah! coz they finally have proof that their offer to Microsoft was not outrageous. Second, I saw that Apple has no intention of licensing whatever it says it is licensing to Samsung.

Second point first. PJ sees the artificially high  licensing fee as threat against Android. It is very lightly to be true. I, however, see it as Apple setting Samsung  up the now infamous Apple vs Samsung trial. It is a necessary legal maneuver that Apple do to foreclose Samsung from saying Apple is offering it a license. It is designed to ensure  that Samsung will not take a license. Why? As PJ pointed out, it is targeting Android phones that Samsung makes. Apple knows that a large part of Samsung business is about Andriod phones. Samsung will not agree to that price because if it had (stupidly) signed on the dotted line, their Android business would be in the gutter as all Samsung’s Android phone will not be competitively priced at all. The high price Apple demands is beyond what a company interested in license fees will use as a starting point in negotiation. As to all the fancy discount schemes, especially that discount that involve a  very steep discount for involving other operating systems, surely Apple is expecting Samsung to see the real meaning of the discount: A bait to tempt Samsung to dump its proven business of Android Phone for other unproven operating systems, thus remove it as  a competitor. It is equally unacceptable to Samsung as the high Android licensing fee. That discount scheme is another setup to allow Apple to argue that it is not unreasonable in its high licensing fee offer since it also provides a lower cost alternatives. Perhaps most importantly, the jargon “No (presume Apple’s) Proprietary  features” practically give Apple a say on what Samsung produce. Samsung is not stupid enough to do that lousy deal.

Back to first point. Apple was not offering the deal to Samsung on a FRAND basis. It did not have to. It is within its right not to offer  a license, or if it really mean to offer one, set its own price. What it did, is to make Motorola’s starting offer of 2.4 per cent to Microsoft in the case I had mentioned looks reasonable. Instead of saying the cost of building a mobile phone as sophisticated as an Android phone is around USD 300 (bill of material + assembly cost + R&D), let’s do the maths in Microsoft favour and jack it up to USD 400. The license fee Apple is demanding (30/400) is 7.5%. Although I had established that this is a rate that Samsung will not pay and one of the reason is it is too high, it does, however, set the upper limit on what constitute a fair offer on FRAND. FRAND licensing does not and never meant to mean the licensor has to give everyone a discount. The licensor is still entitle to get its full share of what the patent is worth in the licensee’s product. FRAND simply means the licensor must not set an unreasonable price as to exclude competitor from licensing the technology. So, if Apple thinks 7.5% is fair, Motorola starting the negotiation at 2.4% demonstrates two things: It is a reasonable starting point and it is willing to negotiate.

Unfortunately for Motorola, I think this point will fall on deaf ears. That lawsuit history is not favoring Motorola. If any, there are strong suggestion that the deck is stack against it as the courts have declined several opportunities to follow the international norm and ignores common international business practice.

Bypassing Secure Boot

The situation of SecureBoot for people wanting to install their own operating system is bad. Really bad. They put so much technical hurdle in the name of security that most people will just not be able to do it. To make matter worse, the security would not work in the way Joe Users understand. While locking out genuine operating systems, it does not stop malicious operating system from signing their own keys and use SecureBoot. The critical element of a Trusted Authority is not there, nor is it likely to appear anytime soon.

You can turn SecureBoot off. But a lot of operating systems, proprietary and open source alike, will probably do not like this and stop you from using them. So, the logical solution is to create a key that actually boots to multiple operating systems. In effect, bypassing SecureBoot.

That is precisely what the Linux Foundation is working on. It claims that it will require user to specifically authorize operating systems on a splash screen. That is, however, just a matter of time someone figure out how to bypass that screen. I cannot say LF’s system is a not a desirable solution as I can see its advantage, in particular, returning control  of your computer back to you. What I will say is, use it with care.

I am sure creators of SecureBoot is aware of the possibility of having a signed key that will boot to any systems is possible. That is why they will not be surprised. In fact I will not be surprised if they claim that this is within the philosophy of SecureBoot: We just allowed signed operating system to boot. As long as it is signed, we don’t care who signed it. It is a buyer-beware situation. That is precisely the philosophy that makes SecureBoot fails in its promise.

Two Interesting Patents Titbits [Updated]

Two interesting news on patents. The first one is on the biotech industry, it is interesting because it highlights a problem with patenting genes, especially those which can reproduce. The Supreme Court decided to visit the case of a farmer got sued by a biotech company for using seeds from a third party source that contains seed with the patented genes. It is interesting because of its implication. There had always been cases where farmland was contaminated by patented seeds from neighbouring farms. Those cases are easy to settle, but in this case, the farmer did knowingly deliberately sow the seeds, regardless of whether he knows it contains the contaminating seeds. In fact, because the patented seeds is so widely used, it is difficult to argue the farmer did not know. Honest mistake by the farmer? If so, right now it is an expensive one. If the Supreme Court says that the farmer is able to use the seeds in question, how is one going to be able to use the patents on genes for financial gain? Conversely, if the farmer is wrong, it has the effect of killing the ability of buy seeds from third parties for the fear of contaminated seeds. That would be equivalent to handing agriculture to a few companies and turn agriculture upside down.

The second is a little development from one of the Samsung vs Apple cases as reported by Groklaw. It appears that the Appeal Court is insisting that for Apple’s Search patent to be considered valid, each of the different part of the search must use a different algorithms. While PJ missed the implication that if two parts of the search uses the same algorithm is enough to workaround the patent,  I did not coz I am a programmer. I am surprised that you can patent what is obvious from the day people start using computers to can aggregate results from different sources but my surprise is not the point. The point is I think it is not possible to get a patent that simply aggregate results from different source, that is why the patent attorney was forced to dance around this by arguing that the claim is limited by the requirement that “each part using a different algorithms”  to get the patent. I certainly do not think it is an oversight or ignorance  or mistake on the part of the patent attorney that comes back and bite Apple. If any, I believe the chances that the patent attorney deliberately wrote the patent in the way he did to create enough ambiguity for Apple to assert the patent against others. Unfortunately, the Appeals Court just called his bluff.

[Updated 20121018: PatentlyO has a more detail analysis on the topic of  algorithms in Apple Vs Samsung. His proposed claim construction that Apple should use if it wanted to mean what Apple wants it is very subtle.  One do really need a very good understanding of English to be able to spot the  difference. It definitely takes a wordsmith to mint the languages. Lawyers are by definition wordsmith. Most importantly, he says the history of the patent suggested that the Apple conceded that there its patent required all algorithms to be different. Kudos to the examiner who extracted this concession,  Samsung’s lawyer for running with it and the Appeal Court for forcing Apple to stick what it already conceded. I do not blame Judge Koh for reading the patent incorrectly. The difference is subtle and difficult to spot. As for Apple, shame on you for being naughty]

In defense of Hogan’s 10 years claim …

I was wondering whether there is a reason behind Hogan’s claim that the judge only ask for disclosure of lawsuits filed in the past 10 years only. In particular, where does the figure of 10 years come from. Why not 7 years or 13 years?

Then it struck me. He was declared bankrupt. One thing a person who was discharged from bankruptcy is interested in is how long that stain will stay with him. In particular, he will be interested to find out how long must he disclose he was bankrupt and how long a credit bureau (Credit Reference Agency in UK) can hold on file that he was bankrupt. I did not find any reference to the former but did find this article in 2009 that says a credit bureau can hold information about someone’s bankruptcy for  10 years only.

Thus, it is possible that he made an honest mistake that he thought the judge was asking for disclosure of any lawsuit for the past 10 years only because he was predisposed to think so.

However, this still does not excuse him  for not disclosing his lawsuit with the company that has dealing with Samsung as discussed in my previous article.  Furthermore as GrokLaw points out in PJ’s second update of the article, another juror disclosed a lawsuit back in 1998 and the judge did inquire more about the case. If any, that is a cue to him that his understanding that the judge is only looking for lawsuit that is less than 10 years old is wrong, if he was paying attention.

Its all about timing, but timing put Motorola at a disadvantage

Poor Motorola, it got its appeal against the ruling that it cannot enforce German court ruling against Microsoft in Germany because a court in US says it cannot based on the timing of both suits. [See this GrokLaw article]. But if one examine the timeline, Motorola cannot avoid this.

So what happened? Motorola US sent Microsoft US letters of offers for the patents in question on the dying days of October (29th to be precise). As one need to give the other party time to evaluate and consider the offer, Motorola gave Microsoft 20 days  to reply. Unfortunately, before the 20 days was up, on November 9th, Microsoft pre-empted by sending Motorola to a US Court, thus manufacturing the unsatisfactory situation we are in today.

Could Motorola had avoided it? It cannot sue Microsoft before the 20 days is up unless Microsoft made the first move. In fact, because Motorola filed the German lawsuit one day after Microsoft filed theirs in US, one can say it did sued Microsoft in a timely fashion. Thus we can safely conclude that once the offer letter was sent, Motorola’s hand were tied. The next question is could Motorola had avoided all this by getting Motorola Germany to send the offer to Microsoft Germany? That won’t help as Microsoft Germany will tell Motorola to send the offer the US instead. Furthermore, it is very likely that in the case of multinationals dealing with products that cross national boundaries,  the offer letter is normally sent from Worldwide HQ to Worldwide HQ.

Given that the whole thing is basically happening in Germany one would had expected the US court to refer the case to the German court as a matter of respecting each other jurisdiction and to prevent jurisdiction shopping. I think we have a “my house is bigger than your house” contest between US courts and German courts. That is why US courts want to retain jurisdiction on the case.

One interesting fact is that the US court is treating FRAND terms an actual contract instead of an offer. Unusual in the fact that the contract binds one party without even knowing who the other party might be. That is unfair to the former. Not that Microsoft is the only one who use this. Apple appears to be doing so as well. While giving kudos to Microsoft’s  and Apple’s lawyers for thinking this up, it does flies against common sense and normal practice in FRAND. It will be interesting to see how this argument on whether FRAND is a contract or not, and if so, how does it works. As FRAND is very important in standard settings, the sooner we have an answer, preferably in the form of US Supreme Court judgement, or highest court to which there is no more appeals in other jurisdiction, the better.

How not to be a juror

The unredacted Samsung Motion for Judgement As A Matter of Law in the Apple vs. Samsung case shows what Samsung thinks about the Jury Foreman Hogan. I do think Samsung was right in filing a redacted version in an attempt not to subject Hogan to too much scrutiny. Unfortunately, the information Samsung seek to redact is in the public domain, and in such an important case it is a fine line between Hogan’s privacy and the public’s interest to know what Samsung thinks about the jury. Thus, I have mixed feeling about releasing an unredacted copy. I believe Hogan should be given the chance of filing his own papers with the court as that will allow his point of view to be kept on record.

As GrokLaw reported, the judge is not inclined to intervene in the jury’s thought process. The few cases involving jury mentioned in the motion all deals with jury misconduct. They all rightly require two ingredients before the trial verdict is vacated: (1) Something the jury did in contrary to the judge’s instruction;, and (2) The thing that the jury did in (1) has significant bearing to the verdict.

I always believe that nothing much in Hogan’s post trial comments that tantamount will warrant an automatic vacation of the verdict. Take away the fact that we might have a juror  here likes to bask in the limelight a bit too much, that we have someone that took his prejudice into the jury room and make a lot of mistakes in his deliberation, that we have someone pro-patent in the jury, and human’s natural instinct to boost and overstates about one’s involvement in something one is proud of, we are still some distance away from  demonstrating his action weights significantly on the outcome of the verdict.

Samsung best chance to vacate the verdict based on Hogan misconduct is his potential prior bias against Samsung. On the surface, his failure to disclose he had a lawsuit with a company that had significant dealing  with Samsung since his lawsuit is  disturbing. It all, however, predicated on Mr Hogan making the link between that company and Samsung before or during the trial. Did he? I am not sure. A lot of time has passed since the lawsuit in 1993. It is not that difficult to find anyone on the street who has less than two degree of separation between himself and a company as big as Samsung.  Is it possible that he knew? The fact that he and his wife had to declare bankruptcy as a result of the lawsuit means it is very likely that he has heighten interest in that third party company’s dealings. Even if he did not, he might be in an industry where the link between Samsung and the company is widespread knowledge.

Proving he has prior knowledge is difficult. Samsung’s lawyer know that. That is why their attack concentrate on him not laying bare the facts during jury selection. In particular, they are building on the fact that he had not disclosed the lawsuit as prejudice against Samsung.

Without a doubt, Hogan’s eagerness for the limelight has came back to haunt him. His words and his conduct are being used by Samsung’s lawyer in an effort to get the verdict vacated.

So far, he have not come up with good answer to support the fact that he is fair to Samsung. Significantly, instead of claiming that he did not know about the potential link to Samsung in his prior lawsuit, he said that he did not disclose the lawsuit because he believe the judge is asking about the past 10 years only. That suggests strongly that he knew about the link then. Not good for him. Anyone trying to be fair to Samsung would disclose it regardless whether he thinks the judge’s instruction is about the past 10 years only.