Apple-HTC, Kodak, Borders, Oracle: Intellectual Property

Apple Inc.’s victory over HTC Corp. (2498) in a patent dispute at the U.S. International Trade Commission may slow the advance of rival Google Inc.’s fast-growing Android operating system for mobile phones and tablets.

A trade judge found on July 15 that HTC infringed two patents owned by Apple, whose iPhone competes with Android-based devices, including those made by HTC. If his decision is upheld, HTC may be prevented from bringing phones into the U.S., and companies such as Samsung Electronics Co. and Motorola Mobility Holdings Inc. may find it more expensive to sell Android phones.

Android is poised to be the most-used smartphone software in a mobile market that may reach $206.6 billion worldwide this year, according to IHS Inc. Google is under attack from rivals including Apple and Microsoft Corp. (MSFT) that allege infringement by handset makers that use Android.

Apple, which also has pending legal fights with Samsung and Motorola, is looking to thwart rivals rather than extract payment for use of the patents, making it more likely to hold out for a ban on imports, said Ron Laurie, managing director of Inflexion Point Strategy LLC, which counsels companies on purchasing intellectual property.

“This is not about money,” Laurie, a former patent lawyer who is based in Palo Alto, California, said in an interview. “This is about market share in the hottest market out there.”

Taiwan-based HTC said it will appeal Administrative Law Judge Carl Charneski’s finding, which is subject to review by the full six-member commission in Washington. The smartphone maker, Asia’s second-biggest, denied violating Apple’s patents and said it will use “all means possible” to defend itself in a statement after the ruling

Google Chairman Eric Schmidt, speaking at a Google Mobile Revolution conference in Tokyo July 19, said he was “not too worried” about the litigation over Android.

Android is the fastest-growing operating system in the smartphone market, according to researcher Gartner Inc. Google’s software powered half of all smartphones bought in the U.S. in the six months that ended in March, Nielsen Inc. said.

Among large Android phone makers, HTC faces the biggest hurdles, because it holds few patents of its own to tempt Apple into a cross-licensing agreement. Apple may even refuse to license the patents, said Will Stofega, a program manager at researcher IDC, leaving HTC struggling to produce a phone that works around them.

“I don’t see Apple giving an inch,” Stofega said in an interview.

Apple may be more likely to sign a license accord with Samsung or Motorola. Still, such deals may involve payments to Apple that would be passed along to Android customers, said Florian Mueller, a Munich-based consultant.

Many of Google’s 39 licensees to make phones based on Android are smaller manufacturers that have far less cash than HTC, Motorola and Samsung to defend against suits and pay fees to patent holders, Mueller said.

Mountain View, California-based Google also faces other claims that Android encroaches on patents. Microsoft, which makes a rival Windows system for mobile phones, signed four patent licenses with Android device makers in the past month and already has a deal with HTC.

Microsoft also sued Barnes & Noble Inc. (BKS) after the bookseller refused to sign a license for sales of the Android- powered Nook reader. Oracle Corp. contends that Google used code from the Java operating system without permission and is seeking billions of dollars in royalties.

HTC may have some leverage in its dispute with Apple. The company agreed earlier this month to buy S3 Graphics Co., which won an ITC patent ruling against Apple in June. HTC also has its own pending case against Apple.

A final decision in the Apple-HTC case will take months. The six-member commission is expected to complete the case by December. If the panel agrees with the judge’s finding, it may block HTC’s Android phone imports to the U.S. HTC also may seek an order to delay any import ban until the appeals court rules, which might take a year or more.

The case is In the Matter Of Certain Personal Data and Mobile Communications Devices and Related Software, 337-710, U.S. International Trade Commission (Washington).

Kodak Explores Options for Digital-Imaging Patent Portfolio

Eastman Kodak Co. (EK), the 131-year-old camera company, said it’s exploring “strategic alternatives” for its digital- imaging patent portfolio.

The portfolio includes more than 1,100 U.S. patents including processing, editing and storing digital images, Rochester, New York-based Kodak said yesterday in a statement.

Kodak’s patents may be worth $2 billion or more and could attract bids from Apple Inc. (AAPL), Samsung Electronics Co. and LG Electronics, Mark Kaufman, an analyst at Rafferty Capital Markets LLC in New York, said yesterday in an interview.

“If you are a large consumer electronics manufacturer, you’ve got to sit up and take notice,” said Kaufman, who has a “buy” rating on the shares. “The patents are for cameras, and as a manufacturer you’re not going to the market today with a smartphone without a camera.”

David Lanzillo, a spokesman for Kodak, declined to comment beyond the statement.

Earlier this month, the U.S. International Trade Commission failed to reach consensus on Kodak’s claims that Apple and Research in Motion Ltd. infringe its image-preview technology. It was the second delay by the Washington-based agency in a case from which Kodak aims to extract $1 billion in licensing fees from Apple and RIM. Apple and RIM deny infringing the patent.

“The ITC process is taking longer than it should have so they are looking to get started a competitive bidding process for the whole portfolio,” said Kaufman. “The company needs money,” he said.

Kodak said yesterday that there is “heightened market demand for intellectual property,” according to the statement. The patents represent 10 percent of Kodak’s total U.S. patent portfolio, the company said. Kodak hired Lazard Ltd. as an adviser.

Kodak, which traces its roots to 1880, was founded by George Eastman, who developed a method for dry-plate photography and introduced the Kodak camera in 1888, according to the company’s website.

The company’s credit has deteriorated as it has shifted from traditional film to digital cameras, accessories and printers. Kodak, which popularized photography with its Brownie and Instamatic cameras, has been trying to drum up royalties from its more than 1,000 digital-imaging patents to fund a shift to more modern devices.

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Trademark

Borders Says Objections Irrelevant, Contracts Won’t Be Kept

Borders Group Inc., the bankrupt bookstore chain, said 99 objections from creditors are irrelevant because the company’s liquidation means it won’t carry on any contracts with business partners.

Starbucks Corp. (SBUX)’s Seattle’s Best Coffee LLC unit said its intellectual property might be improperly transferred because trademarked goods such as beverage-making instructions haven’t been removed from Borders stores.

Borders is scheduled to seek court approval today to liquidate its 399 remaining stores. All objections from creditors should be overruled, the company said in court papers filed July 19.

“Nonetheless, the debtors and the liquidators have been, and will continue, working to resolve all pending objections to narrow, if not resolve, all outstanding issues” before today’s hearing in U.S. Bankruptcy Court in Manhattan, Borders said.

Borders, based in Ann Arbor, Michigan, has about 10,700 employees. A phased rollout will close its stores by September. The company said it will complete the wind-down under Chapter 11 and expects to be able to pay business partners.

The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Copyright

Evangelical Church Seeks Destruction of ‘Salvation Boulevard’ Film

Comcast Corp., a unit of Sony Corp., IFC In Theaters LLC, and Mandalay Pictures LLC were all sued for copyright infringement by a 125-year-old evangelical church.

The suit, filed July 14 in federal court in Chattanooga, Tennessee, is related to Mandalay’s “Salvation Boulevard” film. The church seeks the destruction of all copies of the film.

“Salvation Boulevard,” based on a novel of the same name by Larry Beinhart, was released July 15. The film is a comedy about a charismatic evangelical pastor, played by Pierce Brosnan, who is involved in a real estate development in a small western town.

The Church of God, based in Cleveland, Tennessee, claims the film uses a cross design that is “a substantial reproduction” of its own cross mark. The mark seen in the firm is a mirror image of the church’s mark, for which it has a copyright registration.

Included in the complaint are two still photos from the film, one showing a cross mark displayed on the front of the fictional Church of the Third Millennium. A second photo shows a character from the film wearing a vest embroidered with a cross mark.

These marks are used without license from the church, according to court papers. The church claims that the use of the allegedly infringing symbol in the film is likely to “engender a false belief in the minds of the public and persons in the trade and industry in general” that an affiliation exists between the church and the film. This causes “irreparable harm, damage and injury to the church,” according to court papers.

The church asked the court for an order barring the unauthorized use of its mark, and an accounting and award of the profits from sales and other activities related to the “Salvation Boulevard” film for goods and services that bear the allegedly infringing symbol.

It also seeks an order for the destruction of all films, and promotional materials containing the infringing mark, and awards of money damages, attorney fees and litigation costs.

None of the defendants responded immediately to an e-mailed request for comment.

The church is represented by Mark S. Graham, Robert O. Fox and Michael J. Bradford of Luedeka, Neely & Graham PC of Knoxville, Tennessee.

The case is Church of God v. Mandalay Pictures LLC, 1:11- cv-00189, U.S. District Court, Eastern District of Tennessee (Chattanooga).

Oracle, Google Spar Over Stay in Patent and Copyright Case

Oracle Corp. (ORCL) and Google Inc. are at odds about the pace of the billion-dollar copyright and patent-infringement suit between the two companies.

In a filing yesterday in federal court in San Francisco, the parties updated the court on the reexamination of six of the seven patents at issue in the suit Oracle filed against Google in August. According to that filing, the U.S. Patent and Trademark Office has rejected the claims of four of the six patents under consideration.

The patent office hasn’t issued any office actions for two other patents, and has confirmed that the claims in the seventh patent are patentable.

Oracle told the court there’s no reason to put the case on hold. To do so would cause the court “dramatic disruption,” the Redwood City, California-based software company said. A stay is unwarranted and “would be highly prejudicial to Oracle, the company said.

It claimed that the court “should not surrender control of its docket to an overburdened administrative agency,” noting that the backlogs are growing at the patent office, “with over 20,000 appeals pending, 1,100 more being filed every month and only about 570 dispositions per month.”

Each day the trial is delayed, Oracle argued, “the more damage is done to Oracle.”

Google argues that it’s practical to put the case on hold until the patent office determines which claims in the patents survive reexamination.

It argued that even though the patent office has rejected some of the patent claims, “Oracle continues to assert 50 claims in seven patents and has stepped up its harassing and burdensome discovery tactics, leaving the case in a condition that is far from trial-ready.”

The Mountain View, California-based search-engine company said it would be willing to go to trial at the set date in October, only if Oracle reduced its patent claims “to a number reasonably triable in the three-week trial.”

“Indeed, should this case be narrowed to only a few claims modified in the course of the reexamination, any damages claim would be materially limited by, among other things, the doctrine of intervening rights,” Google said in its filing. “Such a narrowed case will also eliminate the need for those efforts specifically directed at the claims rejected through reexamination, including motion practice, expert reports, and other trial preparation, as well as make it more likely that the parties could reach an informal resolution of the matter.”

The case is Oracle America Inc. v. Google Inc. (GOOG), 10-03561, U.S. District Court, Northern District of California (San Francisco).

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IP Moves

Sunstein Firm Hires Nancy Chiu Wilker for Life Sciences Group

Sunstein Kann Murphy & Timbers LLP hired Nancy Chiu Wilker for its life sciences practice group, the Boston-based IP specialty firm said in a statement.

Wilker does patent and trademark acquisition and IP-related transactional work. She’s helped clients acquire patents in a range of biotech areas, including transgenic plants and animals, cancer biomarkers, stem cells, new genes, vaccines, antibodies, biological and small molecule chemical therapeutics, and nucleic acid and protect detection and analysis technologies.

She previously worked in-house.

Wilker has an undergraduate degree I biology and biochemistry from Colorado State University, a doctorate in immunology from Harvard University and a law degree from Suffolk University.

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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