Apple attacks Motorola's efforts to block iPhone 4S using standards patents, asks for huge damages

In its patent battles with Apple, Motorola chose to rely upon its standards essential patents that are required to build GSM/GPRS/UMTS compatible devices, and committed to FRAND licensing because of that fact. Rather than negotiating the "fair, reasonable and nondiscriminatory" royalty rates the company has committed to as a member of the 3GPP standards body, Motorola has invented a new legal strategy.

Motorola first canceled elements of its patent license with baseband chipmaker Qualcomm, then insisted Apple had to license the technology supplied by Qualcomm's chips on its own, under terms intended to extract more than a billion dollars per year, perpetually, just for using chips that were already properly licensed to be used for that purpose.

Because Apple won't agree to give Motorola billions of dollars based on a percentage of the total value of the iPhones and other 3G-capable devices it sells that use Qualcomm baseband chips, Motorola is seeking to block sales of Apple products in a variety of countries, including efforts that temporarily forced Apple to remove products from its shelves and then later restock them.

Apple pulls out the linch pin

Now, in a report by Florian Mueller of FOSS Patents, the action taken by Apple in California to seek "declaratory and injunctive relief" with the intent of shutting down Motorola's German injunctions has been detailed with the full filing of the "antisuit lawsuit."

Apple's filing claims "Motorola’s German lawsuit is in direct breach of a Patent Licensing Agreement between Motorola and Qualcomm. As a Qualcomm customer, Apple is a third-party beneficiary of that contract.

"Moreover, under this same contract, Motorola’s rights under the ‘336 and the ‘898 patents are exhausted. Accordingly, Apple brings this suit for breach of contract, declaratory, and injunctive relief, and asks this Court to enjoin Motorola from prosecuting and enforcing its claims against Apple in Germany."

Qualcomm backs Apple

Qualcomm, the company building the baseband chips in Apple's iPhone 4S, reports in the complaint that "On January 11, 2011, Mr. Kirk Dailey, Motorola's Corporate Vice President, Intellectual Property, sent a letter to Qualcomm, copying Apple, purporting 'to terminate any and all license and covenant rights with respect to Apple, effective February 10, 2011 (30 days from the date of this letter).'"

The complaint further notes, "On April 25, 2011, Mr. Derek Aberle, Executive Vice President of Qualcomm and President of Qualcomm Technology Licensing responded to Motorola’s letter of January 11, 2011. Mr. Aberle disagreed with Motorola’s contention that it could invoke the Defensive Suspension Provision with respect to Apple. He noted that the Defensive Suspension provision did not entitle Motorola to terminate rights based on suits brought by Apple."

Say hello to my little FRAND

Mueller points out that Samsung has similarly attempted to terminate patent rights that benefitted Apple, efforts that courts in both France and Italy determined "was neither allowed under the agreement nor acceptable from a FRAND point of view."

Mueller added, "the French finding is particularly meaningful because ETSI [standards body] is based in France, and the related obligations must be interpreted under French law. The French court firmly ruled out that a company with a FRAND licensing obligation can grant a license and later terminate it with respect to one third-party beneficiary, given that ETSI's FRAND declaration requires the grant of irrevocable licenses to standard-essential patents."

Tremendous potential penalties for thwarting open standards, filing bogus lawsuits

Apple's series of legal actions in the US, which require relatively little deliberation or findings of facts (unlike complex patent arguments) are likely to results in an immediate stay of any infringement claims or enforcement requests Motorola is seeking against Apple in other countries.

Additionally, Motorola's conduct is likely to result in its involvement in ongoing antitrust investigations that have do far centered around Samsung. Yesterday, European Union Competition Commissioner Joaquin Almunia announced plans to "use antitrust powers to prevent patents from being used to unfairly control market share, including in ongoing investigations," according to a report by Dow Jones.

"I am determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market," Almunia said. "I have initiated investigations on this issue in several sectors and we will see the results in due time." Just weeks ago, the commission opened a formal investigation into Samsung's use of standards-essential patents to sue Apple.

"It is a major task of competition control to ensure that new generations of businesses are given a fair chance," Almunia said. "I am notably thinking of the surge in the strategic use of patents that confer market power to their holders."

Mueller also noted, "If any of the other [Apple] claims succeed, such as the one for damages, Google can already make room in its balance sheet for what could be multi-billion dollar damages. If the iPhone 4S got blocked in Germany on an illegal basis for even just a couple of quarters, Apple's resulting damages claim would likely exceed those of Oracle in its actions against Google and SAP combined."