Judge Posner Rips Apart Apple's Patent Litigation Strategy: Being 'Really Annoyed' Is No Reason To Sue

from the get-out-of-court dept

A few weeks ago, we wrote about influential appeals court Judge Richard Posner, who was slumming it down in a district court for fun (appeals court judges do that sometimes) and gave a brief statement about his plans to dismiss a major patent lawsuit between Apple and Motorola Mobility (now owned by Google). The patent dispute was over smartphones, so given the Google/Apple battle, it was seen as a fight over whether or not Apple's iPhone-related patents might stop Android. After Posner initial announcement, Apple sought a further chance to convince Posner he was wrong, leading to a followup. However, late last week, Posner came out with his full ruling (embedded below) and it's pretty devastating.

The ruling itself is a bit technical, but basically, the companies did a horrible job trying to show any "damages," so Posner noted that the evidence on damages was inadmissable, but without that, what kind of case is there? Apple then tried to claim that they should be able to get "nominal damages," which is basically a tiny (meaningless) sum of money because there was no clear actual damages (or any statutory damages), but a "wrong" was still committed. In other words, Apple really really badly just wanted the court to say that Motorola infringed, even if it meant getting a dollar for it. Posner, while noting that there can be nominal damages awarded by a judge, it makes absolutely no sense to sue for nominal damages -- and thus chastised Apple:

It’s not as if nominal damages were compensation for a nominal harm. They are a symbolic recognition of a wrong that produced no harm, though it may have infringed a right. You can’t go into federal court and say you had a contract with X and X broke it and you’re really annoyed even though you sustained no injury of any sort (in fact you made money because you're contracted at a higher price) so please give me a judgment for $1 that I can pin on my wall.

Motorola, for its part, doesn't get off easy either. Its own damages expert (on its counterclaim) made some outrageous claims that Posner calls out as well, including a ridiculous claim that a single patent taking out of a much larger portfolio could get a license of "up to" 40 or 50% of the entire portfolio. Posner mocks the use of "up to" noting that it "covers a lot of ground." Then, Motorola's "expert" tries to change his story, claiming at least 40 to 50%. Posner notes that this is just as vague, but now vague on the upside, rather than down, and then chides the expert for giving no actual basis for this estimate, before bringing it back around to the obvious real reason for the crazy damages estimate:

“Going for broke” is the inescapable characterization of Motorola’s damages claim. Motorola claims to be entitled to a minimum royalty of 2.25 percent for a license for the patents in the portfolio that contains the ‘898. Though it’s the only patent in the portfolio that remains in this suit, Motorola claims to be entitled to damages equal to (or “up to,” or “at least”—it seems not to have made up its mind) 40 to 50 percent of 2.25 percent, which would be 0.9 to 1.125 percent of sales of Apple devices that infringe the ‘898.

Finally, with both sets of damages requests dismissed, there's the question of injunctive relief (blocking each other from making the product). There again, Posner finds the whole thing to be a waste of time. He goes back to the fact that both companies totally failed in putting forth reasonable damages claims, saying that it's not that it's impossible to do so, just that these companies went too far:

The problem is not that damages cannot be calculated, but that on the eve of trial, with the record closed, it became apparent that the parties had failed to make a responsible calculation.

He goes on to mock Apple's claim that it was losing marketshare to Motorola, noting that even if he granted an injunction, it would be so easy to change Motorola's smartphones to avoid infringement that it would have no impact on Apple's dwindling smartphone marketshare. He also points out that the "value" of most tech patents are really to be used defensively, rather than offensively, and suggests that it's silly to be fighting over such small pieces of the smartphone ecosystem. Basically, letting either party win is pointless, saying it would create a "windfall" for the other side.

Continuing in this vein, Posner again mocks Apple's claim that its brand recognition and goodwill suffered from this competition, relying on a case that focused on a small company that faced such troubles. Posner notes the ridiculousness of Apple using a ruling designed to protect a small company here:

Apple is not a “small company”; its market capitalization exceeds that of Google and Microsoft combined. To suggest that it has suffered loss of market share, brand recognition, or customer goodwill as a result of Motorola’s alleged infringement of the patent claims still in play in this case is wild conjecture.

And then notes that Apple seemed to want to turn this into a show trial about how people love the iPhone:

In its latest written and oral submissions Apple attempts what I told its legal team at a pretrial conference I would not let it do in the liability trials then envisaged: turn the case into an Apple versus Motorola popularity contest. Apple wanted me to allow into evidence media reports attesting to what a terrific product the iPhone is. I said I would not permit this because the quality of the iPhone (and of related Apple products, primarily the iPad) and consumers’ regard for it have, so far as the record shows, nothing to do with the handful of patent claims that I had ruled presented triable issues of infringement. Apple’s “feel good” theory does not indicate that infringement of these claims (if they were infringed) reduced Apple’s sales or market share, or impaired consumer goodwill toward Apple products.

As Posner notes, Apple may have suffered harm from having to compete against Motorola, but that "harm is a perfectly legal one" unrelated to the specific patents in question.

The notion that these minor-seeming infringements have cost Apple market share and consumer goodwill is implausible, has virtually no support in the record, and so fails to indicate that the benefits to Apple from an injunction would exceed the costs to Motorola. An injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare.

In the end, he dismisses the case with prejudice (so they can't just refile it), arguing that to do otherwise would just give the companies a second shot at trying again to prove damages.

Filed Under: brand recognition, damages, richard posner
Companies: apple, google, motorola