HOT OFF THE WIRE

Google, InterDigital, Irell & Manella: Intellectual Property

Google Inc. (GOOG) General Counsel Kent Walker said the smartphone industry is in an arms race for patents that is hurting consumers and leaving the company to “sort through the mess” of litigation.

“It’s hard to find what’s the best path -- there’s so much litigation,” Walker said in a July 25 interview. “We’re exploring a variety of different things.”

Google, whose Android mobile operating system has been targeted in at least six legal complaints, is seeking to buy intellectual property that could be used as a defense against litigation. Google, the world’s largest Internet search company, is also seeking to curb abuses of the system, calling on Congress and the Federal Trade Commission to rein in lawsuits, and asking the U.S. Patent and Trademark Office to take closer looks at patents being used in litigation, Walker said.

“The tech industry has a significant problem,” he said. “Software patents are kind of gumming up the works of innovation.”

Google’s competitors have said the Mountain View, California-based company is critical of the patent system because it has few patents of its own and entered a smartphone market where companies had been researching and selling products for years before Android phones went on sale in 2008.

Google has been assigned 728 patents through yesterday, according to the U.S. Patent and Trademark Office database, mostly for search engine technology. Apple has more than 4,000 U.S. patents, and Microsoft Corp. (MSFT) more than 18,000, according to the database.

The Android system is a free, open-source program that relies on some nonproprietary features Google didn’t create and allows outside developers to modify the code. That has left the company vulnerable to claims that it built Android on the backs of research done by other technology companies.

Google, which had $39.1 billion in cash and short-term investments as of June, put in an initial $900 million offer in April to buy the patents of bankrupt phone-equipment maker Nortel Networks Corp. It was outbid by a group that includes Apple, Microsoft, and Research In Motion Ltd. (RIM), which all make devices that compete with Android phones.

Walker wouldn’t say whether Google will bid on InterDigital Inc. -- an owner of more than 1,300 patents that is exploring a potential sale -- the digital-imaging patents of Eastman Kodak Co. (EK) or any other portfolio of intellectual property.

“We want to be disciplined about how we approach all this stuff,” Walker said. “We’re looking for a reasonable alternative, but we want to make sure Google and the companies Google partners with aren’t shut out of the opportunity to bring great new products and features to consumers.”

Oracle Corp., the world’s largest supplier of database software, contends Android uses its Java programming language, in violation of patents and copyrights, according to court filings. Redwood City, California-based Oracle sued, seeking as much as $6.1 billion in damages, after Google balked at paying $100 million for a license to use the technology.

In ruling last week on what type of damages should be considered, U.S. District Judge William Alsup said “Google may have simply been brazen, preferring to roll the dice on possible litigation rather than to pay a fair price.”

Apple, based in Cupertino, California, has patent cases before the U.S. International Trade Commission that target Android phones made by Samsung Electronics Co., HTC Corp. (2498) and Motorola Mobility Holdings Inc. Each of those companies has filed cases against Apple.

Microsoft and Motorola Mobility also have patent suits against each other, and Microsoft has a pending ITC complaint against Barnes & Noble Inc. over the Android-based Nook reader.

Winston Yung, chief financial officer of Taoyuan, Taiwan- based HTC, said in an interview yesterday that the company is willing to negotiate a settlement with Apple.

Walker said it’s “crazy” that both HTC and Apple phones could be barred from the U.S. market if a deal isn’t reached.

“Each side can blow the other up on some level -- everybody can block the other’s products from coming to market,” Walker said. “You create this mutually assured destruction scenario, but it’s very expensive to get all those munitions.”

The company is providing support and technical help to companies that make products for Android and are being sued, either by rival companies such as Apple and Microsoft, or by small patent owners that don’t make products.

“We’ll be fine,” Walker said. “We have the resources to balance the scales here.”

InterDigital Seeks to Halt Nokia, ZTE, Huawei Phone Imports

InterDigital Inc., owner of about 1,300 U.S. patents related to mobile phones, said it filed a patent-infringement complaint seeking to block imports of phones made by Nokia Oyj (NOK1V), ZTE Corp. (000063) and Huawei Technologies Co.

InterDigital filed a case with the U.S. International Trade Commission in Washington, alleging infringement of seven patents related to so-called third-generation wireless technology, according to a statement yesterday. The company also sued the phonemakers in federal court in Wilmington, Delaware, making the same allegations.

InterDigital, based in King of Prussia, Pennsylvania, last week hired Evercore Partners Inc. (EVR) and Barclays Capital to help explore a potential sale to take advantage of increased demand for wireless patents. InterDigital, whose stock has risen more than 70 percent in the past week, has said its patents are deeper and stronger than those that Nortel Networks Corp. auctioned for $4.5 billion in bidding concluded June 30.

“Over the past thirty years, InterDigital has invested nearly one billion dollars in the development of advanced digital cellular technologies, creating important innovations, and helping to drive an industry creating billions of wireless connections,” Lawrence Shay, head of InterDigital’s patent holding units, said in yesterday’s statement.

InterDigital said it filed the ITC complaint because Nokia, ZTE and Huawei refused to pay licensing fees. InterDigital already had a case against Espoo, Finland-based Nokia at the ITC that it lost, and is awaiting an appeals court ruling in that dispute.

“Nokia will take whatever steps are needed to protect its rights,” Mark Durrant, a Nokia spokesman, said in an e-mail.

A victory in the new case could result in a ban of phones, USB sticks, mobile hot spots and tablets made by the three companies. Huawei and ZTE are China’s two largest makers of phone equipment. Both are based in Shenzhen, China.

The ITC is a quasi-judicial agency that has the power to block imports of products that infringe U.S. patents. If it agrees to investigate the complaint, the judge assigned typically completes the review in 15 to 18 months.

HTC Says Willing to Negotiate With Apple on Patent Dispute

HTC Corp., the Taiwanese smartphone maker locked in a patent battle with Apple Inc. (AAPL), says it’s willing to negotiate with the iPhone maker after both sides scored victories at the U.S. International Trade Commission.

“We have to sit down and figure it out,” Winston Yung, chief financial officer of the Taoyuan, Taiwan-based company, said by phone yesterday. “We’re open to having discussions.”

HTC on July 6 announced a $300 million deal to buy S3 Graphics Co., less than a week after that company won an ITC ruling against Apple over two patents. In a July 15 initial determination, the same commission ruled in Apple’s favor on two other patents.

“We are open to all sorts of solutions, as long as the solution and the terms are fair and reasonable,” Yung said. “On and off we’ve had discussions with Apple, even before the initial determination came out.”

Yung said he’s not aware of any formal talks having been held since this month’s two separate ITC rulings. Carolyn Wu, a Beijing-based spokeswoman for Apple, didn’t immediately answer three calls to her mobile phone today.

Apple violates two S3 Graphics patents related to compression technology, the U.S. ITC said in a July 1 notice. HTC infringes two Apple patents related to data-detection and data transmission technologies, the commission ruled July 15. Both rulings are subject to review.

For more patent news, click here.

Trademark

China Police Raid 13,000 Counterfeiting Operations, Xinhua Says

Chinese police have raided more than 13,000 operations since the Ministry of Public Security began a campaign in November against the production and sale of counterfeit goods, Xinhua News Agency said, citing the ministry.

Police have detained almost 30,000 suspects and dissolved more than 4,900 wholesalers or groups, the official news service said, citing unidentified ministry officials.

Future IP enforcement activities this year will target agriculture, medicines, food products and fake versions of famous brands, Liu Jinguo, vice ministry of public security, said and Xinhua reported.

For more trademark news, click here.

Copyright

Sierra Leone Copyright Infringers Can Get Three Years in Prison

The West African nation of Sierra Leone has passed a copyright law that puts convicted infringers in jail for three years, Sierra Express Media reported.

They also face a minimum fine of 60 million Leones ($13,711), according to Sierra Express Media.

The bill was passed with the support of the Cassette Sellers Association, a network of music marketers and distributors that employed 15,000 Sierra Leone youth, according to the publication.

The new measure, which was passed after three hours of debate in that country’s parliament, “will change the landscape of the industry,” Sierra Leone President Ernest Bai Koroma said and Sierra Express Media reported.

Dress Designer Sherri Hill Wins Destruction of Knockoff Frocks

Sherri Hill, an Oklahoma-based designer of pageant gowns and prom dresses, settled a copyright infringement case against a Los Angeles wholesaler.

The suit, filed in August 2010 in federal court in Los Angeles, accused Nox Anabel Inc. of infringing the copyrights for some of her dress designs. She claimed that not only had the Los Angeles-based company copied the designs, but was informing its customers that they were getting genuine Sherry Hill gowns.

Hill’s dresses are promoted to prom-goers and pageant contestants through an annual mailing of as many as 400,000 catalogues in advance of prom and pageant season, according to her complaint.

She said in court papers that her gowns have been worn by winners of the Miss U.S.A., Miss America, and Miss Galaxy International beauty pageants and have been seen in several teen-oriented television programs.

Nox Anabel will pay Sherri Hill $60,000 and must turn over its entire inventory of six infringing dresses, according to a statement from her lawyer, Joseph Giaconda of New York’s Giaconda Law Group PLLC. The company faces further sanctions if its employees make any commercial use of Hill’s name.

The case is Sherri Hill v. Nox Anabel Inc., 2:10-cv-05871- GHK-JCG, U.S. District Court, Central District of California.

For more copyright news, click here.

IP Counsel

Morgan Chu Accused of Sexual Harassment in Wrongful Firing Suit

Irell & Manella LLP’s high-profile IP litigation partner Morgan Chu was accused of sexual harassment and the Los Angeles- based firm was sued for wrongful discharge by the former head of its entertainment practice.

In the complaint filed in Los Angeles Superior Court July 22, Juliette Youngblood said she was fired after she confronted Chu and complained of his conduct at a firm happy hour in late 2009. Youngblood was also a member of Irell & Manella’s IP practice group.

She accused the firm of treating her unfairly because she took three maternity leaves, and said that after she accosted Chu about the alleged harassment, he accused her of lying about a billing issue.

Neither Irell & Manella’s press contact nor Chu responded immediately to e-mailed requests for comment.

Youngblood, who after her August 2009 termination started Youngblood Group PC and says she’s working on movie production with Mark Burnett, asked the court for money damages, attorney fees, litigation costs, and extra damages to punish the firm for its actions.

She also asked for an order reinstating her to her partnership in the firm.

Youngblood is represented by Patricia McKibbin Teren and Lauren E. Miller of Teren Law Group PC of Redondo Beach, California.

The case is Juliette Youngblood v. Irell & Manella LLP, BC465977, California Superior Court, Los Angeles County.

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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