Apple Seeks Revival of Suit Against Google Over Royalties

Apple Inc. (AAPL), maker of the iPhone, asked a U.S. appeals court to revive its lawsuit claiming Google Inc. (GOOG)’s Motorola Mobility unit demanded unreasonably high royalties for standard mobile-phone technology.

“You’re talking about billions of dollars hanging over the head of Apple,” Apple lawyer Joshua Rosenkranz of Orrick Herrington, told a three-judge panel of the U.S. Court of Appeals for the Federal Circuit in Washington today.

The breach-of-contract and antitrust case is part of a broader fight over how to value patents that relate to technological standards used across industries, such as how to access Wi-Fi signals or transmit pictures. A trial to set a royalty was thrown out after Apple said it wouldn’t license the patents unless the judge set a rate at $1 or less for each iPhone.

“A reasonable rate can be different for different implementers,” said Kathleen Sullivan of Quinn Emanuel, who is representing Motorola Mobility. The mobile-phone maker made an “opening offer” and “Apple never responded.”

Apple and Motorola Mobility have been fighting over smartphone patents since October 2010, with no victory by either side. While Motorola Mobility filed suit first, it was brought as Cupertino, California-based Apple started suing other manufacturers claiming phones running on Google’s Android operating system were copying features of the iPhone.

To allow products from myriad manufacturers to work together, companies get together to develop specifications that will, for example, determine how data will be transmitted over airwaves or what plug will be used to recharge phones and electronic readers.

Fair, Reasonable

Because companies may benefit from having their own ideas adopted for industrywide use, they pledge to license any relevant patents on fair and reasonable terms without discriminating against competitors.

In the case on appeal, Apple claimed that Motorola Mobility violated that pledge on technology for wireless and 3G transmissions. Motorola Mobility demanded “a rate that was more than 12 times what Motorola was charging other licensees for the same technology,” Apple said in a July 23 filing with the Federal Circuit.

Motorola Mobility demanded 2.25 percent of the sale price of the iPhone, or about $12 per phone, even though it has “only a small percentage of the thousands of patents declared essential to the relevant standards,” Apple said.

Motorola Mobility, in a Nov. 5 filing with the court, argued Apple was late to the smartphone business and is trying to avoid paying anything to the innovators that came before it. Mountain View, California-based Google inherited the case through its $12.4 billion purchase of Motorola Mobility in 2012.

‘Free-Ride’

Apple “seeks to free-ride on the contributions of the technology companies that cooperatively advanced wireless communication while seeking a new set of rules to govern standard-essential patents,” Motorola Mobility said.

Related patent-infringement claims between Apple and Motorola Mobility were thrown out by Circuit Judge Richard Posner in Chicago after he rejected each company’s damages theories. The Federal Circuit heard arguments on that case in September. Other patent claims are pending in federal court in Miami, with a trial scheduled for August.

“I don’t understand what any of you are doing,” Circuit Judge Kimberly Moore said. “Why are you suing each other in 15 different courts? I don’t think even you can keep track of which patent is in which court.”

‘Satellite Litigation’

Sullivan said Apple was trying to create “satellite litigation” to win on issues it failed to raise in other lawsuits, while Rosenkranz said the other cases involved specific patents, not Motorola Mobility’s entire portfolio. Having a judge set a reasonable rate for all of Motorola Mobility’s standard-essential patents would “set a baseline” that the companies could use to negotiate a global settlement, Rosenkranz said.

The battle for market share among smartphone manufacturers has led to a debate over whether patents on standardized technology should be treated differently than other innovations, such as for unique features that distinguish a device from competitors.

As part of a broader settlement with the U.S. Federal Trade Commission, Google agreed to limits in its ability to block use of standard-essential technology, meaning most disputes will revolve around how much money should be paid, if any.

Microsoft had a breach-of-contract case against Motorola Mobility that was similar to Apple’s. A federal jury agreed with Microsoft last year and ordered Motorola Mobility to pay $14.5 million in damages. That case is on appeal to the Federal Circuit.

Apple persuaded President Barack Obama’s administration to veto an import ban on some older models of its iPhone 4 won by Samsung Electronics Co. patent on a way data is transmitted.

The case is Apple Inc. v. Motorola Mobility LLC, 13-1150, U.S. Court of Appeals for the Federal Circuit (Washington).

The lower court case is Apple Inc. v. Motorola Mobility Inc., 11cv178, U.S. District Court for the Western District of Wisconsin (Madison).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Jon Morgan

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