Apple Agrees With Google to Drop Smartphone Patent Suits

Apple Inc. and Google Inc. (GOOG) have declared a cease-fire in their intellectual-property wars.

The two Silicon Valley technology giants said they are dropping lawsuits against one another and will work together to reform patent law. The suits to be dismissed involve patent disputes regarding Google’s Motorola Mobility handset unit. The deal doesn’t include Apple’s patent battles with Samsung Electronics Co. (005930), which uses Google’s Android software for mobile devices.

“This could signal a new strategy on Apple’s part to focus its litigation efforts even more squarely on Samsung, which is by far the largest Android phone manufacturer,” said Brian Love, a Santa Clara University School of Law professor.

The agreement signals a de-escalation in hostilities between two companies that have filed about 20 lawsuits against each other in the U.S. and Europe and compete fiercely on many technology fronts. Apple’s iOS software and Google’s Android power the majority of the world’s smartphones and tablets and both are seeking to keep their pre-eminent positions in those growing markets. They are also dueling each other in areas including mobile maps and online music, among other products.

Photographer: Brent Lewin/Bloomberg

The agreement between Apple Inc. and Google Inc. signals a de-escalation in hostilities between two companies that have filed about 20 lawsuits against each other in the U.S. and Europe and compete fiercely on many technology fronts. Close

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Photographer: Brent Lewin/Bloomberg

The agreement between Apple Inc. and Google Inc. signals a de-escalation in hostilities between two companies that have filed about 20 lawsuits against each other in the U.S. and Europe and compete fiercely on many technology fronts.

Patent Reform

“Apple and Google have agreed to dismiss all the current lawsuits that exist directly between the two companies,” they said yesterday in a joint statement. “Apple and Google have also agreed to work together in some areas of patent reform. The agreement does not include a cross license.”

The announcement comes as the two companies, due to court rulings, were spending tens of millions of dollars in legal fees over an ever-shrinking list of possible rewards. In one case, Apple told a court that it spent $32 million in legal fees, midway through proceedings.

Mountain View, California-based Google was unable to win court orders to limit Apple sales and had been limited in its ability to demand royalties.

Google agreed in January to sell Motorola Mobility to Lenovo Group Ltd. (992) for $2.91 billion after buying it for more than $12 billion in 2012. As part of the deal, Google is keeping the majority of Motorola’s patents.

‘Largely Symbolic’

“It’s largely symbolic,” Michael Risch, a law professor at Villanova University, said of the joint statement. “Motorola isn’t as big of a competitor anymore,” and the cooperation shows Apple isn’t as concerned about the company, he said.

“When they decide to drop everything with Samsung, then we’ll be talking,” Risch said.

Google inherited the cases when it bought Motorola Mobility to obtain a trove of about 17,000 patents and applications. After almost three years of litigation, the web search company and Cupertino, California-based Apple have little to show for the litigation except legal bills.

Last month, an appeals court ruled the companies could pursue patent damages against each other in one case, while saying Google wouldn’t be entitled to an order stopping sales of Apple products based on the sole remaining Motorola Mobility patent in the case. Apple had at best a slim chance of blocking Motorola Mobility phones based on other court rulings.

In disputes before a U.S. trade agency, neither was able to win import bans on the other’s products. Apple was trying to revive claims that Motorola Mobility had reneged on its pledges to license patents for fundamental technology on fair and reasonable terms. European and U.S. regulators, acting on complaints filed by Apple and Microsoft Corp. (MSFT) forced Google into making concessions on its use of patents for industrywide standards.

Patent Licensing

The companies can now cooperate on one thing they agree on: curbing lawsuits against them by patent-licensing firms. Apple was the most-sued company last year when it came to patent cases, and Google was No. 4, according to a study by Lex Machina, a Menlo Park, California-based legal analysis company.

Google has been funding groups that are lobbying Congress to pass legislation that would put more stringent requirements on firms filing suits, cause the loser to pay the winner’s legal fees and expand review processes at the U.S. Patent and Trademark Office as an alternative to litigation. While supporting some changes, Apple is part of a group that includes Microsoft and General Electric Co. (GE) that has warned against Congress going too far in limiting patent rights.

Both companies also have been in a race to obtain more patents. In 2008, the year after the iPhone was introduced, Apple received 185 U.S. patents, while Google received 58. By 2012, each received more than 1,000, and that doesn’t include the numbers they bought.

‘Thermonuclear War’

Apple co-founder Steve Jobs had declared a “thermonuclear war” on Google after it introduced its Android software in 2008. Jobs had been furious that Google began competing with Apple, sparking a rivalry that led to Eric Schmidt, then Google’s chief executive officer, to leave Apple’s board of directors.

While the agreement settles differences between Apple and Google’s Motorola Mobility over basic patents, Apple remains embroiled in litigation with Samsung, the biggest maker of Android smartphones.

Adam Yates, a Samsung spokesman, didn’t immediately respond to an e-mail after regular business hours yesterday seeking comment on the announcement.

Second Verdict

In a second trial that ended this month, Apple won only $120 million from Samsung after seeking $2 billion in damages. The jury also found that Apple infringed one Samsung patent, awarding it $158,000. The verdict sets the stage for each company to seek a judge’s order banning U.S. sales of some older devices found to infringe its patents.

While Google wasn’t a defendant in the trial in San Jose, California, much of the case turned on its role. Samsung argued, with some success, that Apple’s real target in the litigation was Android.

Samsung called several Google engineers as witnesses to bolster its argument that it didn’t need to copy Apple’s technology for the software on its phones. Apple attempted to keep jurors focused on its claim that Samsung infringed its patents because, while many of the contested features were Android programs, the iPhone-maker argued Samsung was profiting from sales of smartphones using Google’s operating system.

Confidential Deal

Jury foreman Thomas Dunham, a retired International Business Machines Corp. executive, said jurors took note when Apple presented evidence that showed Samsung had a confidential agreement for Google to pay some of the defense costs and liability for patents related to Android, as well as to have some control over the litigation.

Dunham suggested the revelation about the Google indemnification agreement may have worked against the iPhone-maker. If Apple and Google “go head to head,” the courts will sort the truth out, he said. “If you feel Google is the cause behind this, as everyone has observed, don’t beat around the bush,” Dunham said. “A more direct approach is something to think about.”

The appellate case is Apple Inc. (AAPL) v. Motorola Inc., 12-1548, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Apple Inc. v. Motorola Inc., 11-cv-08540, U.S. District Court for the Northern District of Illinois (Chicago).

The Wisconsin case is Apple Inc. v. Motorola Mobility Inc., 11-cv-00178, U.S. District Court for the Western District of Wisconsin (Madison).

The California case is Apple Inc. v. Samsung Electronics Co., 12-cv-00630, U.S. District Court, Northern District of California (San Jose).

To contact the reporters on this story: Joel Rosenblatt in San Francisco at +1-415-617-7129 or jrosenblatt@bloomberg.net; Susan Decker in Washington at +1-202-624-1941 or sdecker1@bloomberg.net; Brian Womack in San Francisco at +1-415-617-7218 or bwomack1@bloomberg.net; Adam Satariano in San Francisco at +1-415-617-7204 or asatariano1@bloomberg.net To contact the editors responsible for this story: Bernard Kohn at +1-202-654-7361 or bkohn2@bloomberg.net; Michael Hytha at +1-415-617-7137 or mhytha@bloomberg.net; Pui-Wing Tam at +1-415-617-7327 or ptam13@bloomberg.net Michael Hytha, Peter Blumberg, Reed Stevenson

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