Judge Posner Rips Apart Apple's Patent Litigation Strategy: Being 'Really Annoyed' Is No Reason To Sue

from the get-out-of-court dept

A few weeks ago, we wrote about influential appeals court Judge Richard Posner, who was slumming it down in a district court for fun (appeals court judges do that sometimes) and gave a brief statement about his plans to dismiss a major patent lawsuit between Apple and Motorola Mobility (now owned by Google). The patent dispute was over smartphones, so given the Google/Apple battle, it was seen as a fight over whether or not Apple’s iPhone-related patents might stop Android. After Posner initial announcement, Apple sought a further chance to convince Posner he was wrong, leading to a followup. However, late last week, Posner came out with his full ruling (embedded below) and it’s pretty devastating.

The ruling itself is a bit technical, but basically, the companies did a horrible job trying to show any “damages,” so Posner noted that the evidence on damages was inadmissable, but without that, what kind of case is there? Apple then tried to claim that they should be able to get “nominal damages,” which is basically a tiny (meaningless) sum of money because there was no clear actual damages (or any statutory damages), but a “wrong” was still committed. In other words, Apple really really badly just wanted the court to say that Motorola infringed, even if it meant getting a dollar for it. Posner, while noting that there can be nominal damages awarded by a judge, it makes absolutely no sense to sue for nominal damages — and thus chastised Apple:

It’s not as if nominal damages were compensation for a nominal harm. They are a symbolic recognition of a wrong that produced no harm, though it may have infringed a right. You can’t go into federal court and say you had a contract with X and X broke it and you’re really annoyed even though you sustained no injury of any sort (in fact you made money because you’re contracted at a higher price) so please give me a judgment for $1 that I can pin on my wall.

Motorola, for its part, doesn’t get off easy either. Its own damages expert (on its counterclaim) made some outrageous claims that Posner calls out as well, including a ridiculous claim that a single patent taking out of a much larger portfolio could get a license of “up to” 40 or 50% of the entire portfolio. Posner mocks the use of “up to” noting that it “covers a lot of ground.” Then, Motorola’s “expert” tries to change his story, claiming at least 40 to 50%. Posner notes that this is just as vague, but now vague on the upside, rather than down, and then chides the expert for giving no actual basis for this estimate, before bringing it back around to the obvious real reason for the crazy damages estimate:

“Going for broke” is the inescapable characterization of Motorola’s damages claim. Motorola claims to be entitled to a minimum royalty of 2.25 percent for a license for the patents in the portfolio that contains the ‘898. Though it’s the only patent in the portfolio that remains in this suit, Motorola claims to be entitled to damages equal to (or “up to,” or “at least”—it seems not to have made up its mind) 40 to 50 percent of 2.25 percent, which would be 0.9 to 1.125 percent of sales of Apple devices that infringe the ‘898.

Finally, with both sets of damages requests dismissed, there’s the question of injunctive relief (blocking each other from making the product). There again, Posner finds the whole thing to be a waste of time. He goes back to the fact that both companies totally failed in putting forth reasonable damages claims, saying that it’s not that it’s impossible to do so, just that these companies went too far:

The problem is not that damages cannot be calculated, but that on the eve of trial, with the record closed, it became apparent that the parties had failed to make a responsible calculation.

He goes on to mock Apple’s claim that it was losing marketshare to Motorola, noting that even if he granted an injunction, it would be so easy to change Motorola’s smartphones to avoid infringement that it would have no impact on Apple’s dwindling smartphone marketshare. He also points out that the “value” of most tech patents are really to be used defensively, rather than offensively, and suggests that it’s silly to be fighting over such small pieces of the smartphone ecosystem. Basically, letting either party win is pointless, saying it would create a “windfall” for the other side.

Continuing in this vein, Posner again mocks Apple’s claim that its brand recognition and goodwill suffered from this competition, relying on a case that focused on a small company that faced such troubles. Posner notes the ridiculousness of Apple using a ruling designed to protect a small company here:

Apple is not a “small company”; its market capitalization exceeds that of Google and Microsoft combined. To suggest that it has suffered loss of market share, brand recognition, or customer goodwill as a result of Motorola’s alleged infringement of the patent claims still in play in this case is wild conjecture.

And then notes that Apple seemed to want to turn this into a show trial about how people love the iPhone:

In its latest written and oral submissions Apple attempts what I told its legal team at a pretrial conference I would not let it do in the liability trials then envisaged: turn the case into an Apple versus Motorola popularity contest. Apple wanted me to allow into evidence media reports attesting to what a terrific product the iPhone is. I said I would not permit this because the quality of the iPhone (and of related Apple products, primarily the iPad) and consumers’ regard for it have, so far as the record shows, nothing to do with the handful of patent claims that I had ruled presented triable issues of infringement. Apple’s “feel good” theory does not indicate that infringement of these claims (if they were infringed) reduced Apple’s sales or market share, or impaired consumer goodwill toward Apple products.

As Posner notes, Apple may have suffered harm from having to compete against Motorola, but that “harm is a perfectly legal one” unrelated to the specific patents in question.

The notion that these minor-seeming infringements have cost Apple market share and consumer goodwill is implausible, has virtually no support in the record, and so fails to indicate that the benefits to Apple from an injunction would exceed the costs to Motorola. An injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare.

In the end, he dismisses the case with prejudice (so they can’t just refile it), arguing that to do otherwise would just give the companies a second shot at trying again to prove damages.

Filed Under: brand recognition, damages, richard posner
Companies: apple, google, motorola

New iPhone Connector Port Revealed, Thus Wiping Out Several Generations Of Accessories In One Fell Swoop

from the planned-obsolesence dept

Clarification: As some people have pointed out, Apple themselves have not revealed this—the information comes from TechCrunch’s conversations with accessory manufacturers. The headline was misleading and has been updated.

As iPhones and iPads have gotten more powerful, they’ve been adopted for a lot of professional applications, and this has spawned a huge industry of compatible devices—not just accessories, but significant expansions that can run into the same price range as the iPhone/iPad itself. In music, for example, there are DJ controllers, audio interfaces, studio microphones, stompbox pedals and more—all utilizing the ubiquitous iPod/iPhone/iPad connector port that has remained the same for years. But now TechCrunch has confirmed that the new iPhone will feature a new mini connector with a yet-to-be-announced standard—which means the rest of the Apple line is sure to follow, and all those products are officially on the road to obsolescence.

Apple’s 30-pin ports have been the standard since Apple released the third generation iPod. The connectors offered structural stability when connecting to most accessories but it’s clear – especially with the introduction of the MagSafe 2 port – Apple is more concerned with space savings inside each device.

Three independent manufacturers all agreed that the 19-pin dock port is in the works and many accessory manufacturers are facing an uneasy few months as they wait for official news of the standard to be announced.

This is going to frustrate a lot of users—but despite TechCrunch’s suggestion, most manufacturers probably aren’t “uneasy”. For them, it’s a great cash-grab, and an apparently pointless one. Sometimes things have to become obsolete—but this doesn’t seem like one of those cases. There were no problems with the old connectors, and they weren’t causing any kind of technological bottleneck, so apart from the space-saving aspect, there doesn’t seem to be much to gain—certainly not for the user, and certainly not compared to what’s lost by abandoning such a well-established standard. This has led some to suggest that the accessory manufacturers were in fact the driving force behind the change:

Have you guys ever heard of ‘planned obsolescence?’ It’s a practice which encourages planning and designing a product so it’s only useful for a limited time, before becoming obsolete. It’s common practice, and used by many companies to create demand for the ‘newer, better’ model of the product. Yet this move is possibly prompted by the major accessory makers facing dwindling sales, as customers see no need to buy new accessories for a smartphone that had a universal dock system for 6 generations. What most tech blogs failed to address was the following question: Did the top accessory makers pad Apple’s pockets, or hardball negotiate for an incentive to drop the standard cable as a means of forcing consumers to buy new accessories? We’re inclined to think so.

Considering that three of the top accessory makers have been the first to confirm that they’re working on 19 pin accessories already for the launch of the iPhone 5, the motive is simple : Greed. And why not? It’s a fail safe business plan, designed to shake out the smaller accessory makers with tons of unsold ’30 pin’ stock and a good amount of people will probably conform to this odd decision without question.

Of course, Apple gets plenty of benefits too. The new connector will be yet another proprietary standard, following their typical walled-garden approach, which means most accessory developers will build Apple-first, everything-else-second-if-at-all, thus pushing more people towards Apple products. It’s not surprising, but it’s not a consumer-friendly decision either. Additionally, manufacturers/owners of some of the aforementioned professional accessories to do with music and photography get the worst deal—for them, iPhone/iPad compatibility is a great feature, but not central to their businesses/buying habits. Breaking the compatibility is a source of nothing but frustration, and will probably discourage a lot of such users from upgrading at all—while the manufacturers are slowly forced to leave them behind.

Filed Under: accessories, connector, ipad, iphone, ipod, obsolescence
Companies: apple

Once More, With Feeling: Having Open WiFi Does Not Make You 'Negligent' Under The Law

from the hopefully-the-court-agrees dept

Over a year ago, we wrote about an attempt by a porn company, Liberty Media, to sue a bunch of people it accused of infringing on its copyright. The case had many similarities to copyright trolling lawsuits, but there was one claim in particular that we found quite troubling: the idea that not securing your WiFi was a form of negligence. The lawyer representing Liberty, Marc Randazza, is someone I know and like, and who I normally find on the good side of lots of cases (and, in fact, I’ve sent people his way when they’ve been looking for good lawyers). When news came out that someone had “settled” with the company and the vast majority of the amount the person agreed to pay was for that “negligence,” we found it quite problematic and told Randazza we were planning to write about it. In response, he sent a long email to both me and Torrentfreak — which they published as a guest opinion — defending why an open WiFi qualifies as negligence. I wrote back a response as to why I thought he was completely wrong on this one.

And, now, a court may be deciding the same thing. The EFF has filed an amicus brief in what I believe is a related case arguing that this theory of negligence is ridiculous (Update: Randazza informs me that he’s not counsel on this particular case and says that the negligence claim here is quite different and, contrary to the EFF’s claim has nothing to do with open WiFi. Instead, the negligence theory put forth focused more on the fact that the guy being sued was aware of infringement on his WiFi and still allowed the user to use it — more on that below). Here’s just a snippet from the lawsuit:

LMH’s theory of liability cannot withstand even passing scrutiny. No matter how artfully pled, LMH’s claim sounds in, and is preempted by, copyright law. And as decades of copyright jurisprudence and legislation make clear, that body of law does not recognize a cause of action based on mere negligence. Accordingly, no court has ever found, or could ever find, that anyone has violated copyright law simply because another user of his or her Internet connection did so.

And that is a good thing. Every day cafes, airports, libraries, laundromats, schools and individuals operate “open” Wi-Fi routers, sharing their connection with neighbors and passers-by at no charge. Sometimes people use those connections for bad acts. Most of the time they don’t, and the world gets a valuable public service of simple, ubiquitous Internet access.

Creating a duty under tort law to prevent others from infringing copyright would drastically inhibit this activity, to the detriment of the general public and clear federal copyright and telecommunications policies promoting convenient, universal access to the Internet. Thus, manufacturing a new copyright cause of action based on negligence – which, make no mistake, is precisely what LMH asks the Court to do – would “stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

It would be nice to have a clear statement from the court on this matter, clarifying that merely having open WiFi — as thousands upon thousands of individuals and businesses do — is not a sign of “negligence” that automatically makes you liable for any infringement done on those networks.

Update: As I put in the update above, there is some argument over whether or not the case is even about open WiFi, but I think that the EFF’s point still stands and fits the facts of the case. Even if we’re talking about a situation in which a WiFi network owner knew someone was infringing on their WiFi, it is still a huge stretch to argue negligence on their behalf for allowing the usage of the network to continue, and that negligence claim could carry over to the question of open WiFi. As the EFF notes in its filing, using negligence as a theory related to copyright creates an entirely new theory of copyright liability not seen in the statute and with a significantly lower bar than existing theories of secondary liability in copyright. Thus, expanding negligence to cover liability in a copyright claim could have a massive impact beyond just the individuals in this case.

Filed Under: liability, marc randazza, negligence, wifi
Companies: eff, liberty media

Sprint Changes 'Unlimited' Broadband To 5 Gigs… While Still Advertising Unlimited Broadband

from the that's-not-unlimited dept

I’ve actually been one of the few satisfied Sprint customers for many years. Over the past few years, they were the only mobile broadband provider who didn’t limit mobile broadband to ridiculously low plans like 5 gigs per month, like other carriers. In fact, this was a key selling point, and one of the reasons why I happily stuck it out with Sprint. I know Wall St. analysts have been insisting that Sprint would need to cap such broadband usage at some point, but it seemed like a really short-sighted idea, since the unlimited broadband is really about the only facet of a Sprint account that makes it more appealing than its competitors. And so… of course… it appears to be going away. Here’s the email I recently received concerning my “phone as modem” option, which I use often enough:

Basically, with no warning, effective immediately, Sprint has unilaterally changed our deal from one where I was paying for unlimited data via the phone as a modem — to one where it’s capped at a stupidly low 5GB. And, the company even has the gall to then happily tell me (below the screenshot cut off) that this change won’t impact how much I pay — as if I should have expected them to increase the fees while taking away a feature I like.

Considering that unlimited mobile broadband was not only part of the marketing pitch, but also a big part of the reason for why I signed up for the plan I did, this certainly seems like a bait-and-switch deal… and I’d thought that bait-and-switch deals like this were violations of FTC rules, but what do I know?

Of course, on a whim, I wondered if Sprint’s marketing had changed… and I did a quick search on “Sprint unlimited broadband” and turned up the following advertisement:

If you can’t see it clearly — it appears Sprint is still advertising unlimited mobile broadband — highlighting that you can “avoid the data dilemma” and “get truly Unlimited data.” Except, um, that’s clearly not the case. Changing your plans unilaterally for those who specifically signed up for unlimited broadband is one thing. But continuing to advertise such plans while limiting them and — even worse, effectively mocking such limited plans — is simply adding rather obnoxious insult to injury. Sorry Sprint, but you may have finally convinced me it’s time to explore other options.

Filed Under: advertising, bait and switch, broadband, data caps, ftc, wireless
Companies: sprint

Insanity: Apple Rejects Podcatching App Because It Has Flattr Integration

from the cutting-off-your-nose dept

One purpose for which micropayment solution Flattr (which we use here on Techdirt) has certainly caught on is providing a way for people to support podcasts. Apparently, simple integration allowing people to designate some money for podcasters has just “felt right” for lots of users who do exactly that. And some podcasting/podcatching apps have tried to accommodate this. Instacast, a popular app for downloading and listening to podcasts on the iOS platform, integrated Flattr back in February, but in early May the arbitrary gatekeepers at Apple rejected the app because the Flattr integration went against Apple’s demands that all in-app payments go through its own system. Vemedio (the makers of Instacast) along with the folks at Flattr appealed to Apple that this was ridiculous… but Apple issued a final decision rejecting the app. In response, Vemedio is very reluctantly removing Flattr from its app, meaning podcasters just lost a good way of making money, all because Apple can’t control it. More evidence of Apple becoming a rather evil gatekeeper, rather than an enabler of new and interesting ideas.

Filed Under: apps, gatekeeper, instacast, micropayments, podcasting, podcatching, walled garden
Companies: apple, flattr, vemedio

Lodsys Continues Demanding Cut Of Smartphone Apps; Developers Hit Back In Court

from the innovation? dept

The story of Lodsys is, by now, quite an infamous one in smartphone app development circles. The “company” (and I use that term loosely) owns a few patents, which it basically claims covers any iPhone app that involves in-app payments:

• 5,999,908: Customer-based product design module
• 7,133,834: Product value information interchange server
• 7,222,078: Methods and systems for gathering information from units of a commodity across a network
• 7,620,565: Customer-based product design module

This is despite the fact that Apple offers in-app payments as a feature of its platform, and Apple, in fact, holds a license to the patent in question. Of course, Lodsys and its supporters argue that Apple’s “license” only applies to Apple and that it’s proof that the patent is valid. That’s not accurate however. The patents Lodsys holds were spun out of Intellectual Ventures, so it’s most likely that Apple’s “license” to them comes from the fact that it’s one of the many large tech companies who have paid off IV to be protected from such patents. Apple has said that it will defend iPhone developers in court if they take on Lodsys, but it’s still an expensive proposition, and even some of the most principled app developers are realizing that it’s cheaper to settle than to fight.

This is, of course, exactly what Lodsys (and many other patent trolls) rely on. The patent system today is such that if you get sued, you’re almost guaranteed to have to spend at least $1 million defending yourself in court. This is not fair. This is not reasonable. But it’s a key element in our broken system, and the trolls exploit it as much as they possibly can.

Thankfully, some companies are trying to fight back. Despite Apple’s promises to fight on behalf of its developers, Lodsys continues to both threaten and sue, including going after some big companies, like Dell, Rosetta Stone and Overstock. Of course, one reason why Lodsys wants to keep going is that at least one of its patents expires in a few months — and it probably wants to squeeze as much out of it as possible. As the article linked here by Jeff Roberts highlights, a Seattle app developer, A Thinking Ape, has decided to jump ahead of the line by filing for a declaratory judgment against Lodsys. Lodsys’s initial threat letter and A Thinking Ape’s filing are embedded below. The filing includes details of many other declaratory judgment filings against Lodsys and argues that the patents are both invalid and that A Thinking Ape doesn’t infringe them anyway. It certainly would be nice to see Lodsys smacked around in court a bit, but Lodsys and its secretive “owners” are still likely making out like bandits by effectively taxing tons of app makers.

Filed Under: app, patent troll, smartphone
Companies: a thinking ape, apple, dell, lodsys, overstock, rosetta stone

Woman Texting Boyfriend Not Liable For The Car Crash He Was In While Texting Back

from the common-sense-prevails dept

A few years ago, we noted the slight trend of people suing mobile operators over car crashes with drivers who were on their phones. Those lawsuits haven’t gone very far, but with the rise of “texting while driving” as a big issue these days, someone apparently tried to blame a woman who texted her boyfriend for a car accident, because as he attempted to reply, he plowed into a couple on a motorcycle. The lawyer for the couple argued that the woman should have known that her boyfriend was driving at the time they were texting. Even if that was true, that hardly means she’s to blame for the accident in any legal sense. Thankfully, the judge readily agreed, dismissing the case against her, and noting that the responsibility is on the recipient. Otherwise there would be some perverse results:

Rand said it’s reasonable for text message senders to assume the recipients will behave responsibly, and he also noted drivers are bombarded with many forms of distraction, whether they be text messages, notifications from smartphones, GPS devices or signs along the road.

“Were I to extend this duty to this case, in my judgment, any form of distraction could potentially serve as the basis of a liability case,” Rand said.

Filed Under: driving, liability, texting

As UK Government Considers Opt-Out Porn Censorship, Report Already Finds Overblocking On Mobile Networks

from the surprised?-me-neither dept

A few weeks ago, we noted the UK government was considering plans to bring in an opt-out form of censorship, in what would amount to a kind of porn license, and that such an approach runs the risk of blocking a far wider range of materials. Now the Open Rights Group (ORG) has released a report that shows the “child protection filters” on UK mobile Internet networks are already overblocking sites:

It shows how systems designed to help parents manage their childrens’ access to the Internet can actually affect many more users than intended and block many more sites than they should. It reveals widespread overblocking, problems with transparency and difficulties correcting mistakes.

The report and an update show that sites affected are found in the realms of digital rights (La Quadrature du Net and the Tor Project), technology (GigaOM, London Ruby User Group and the start-up organization Coadec), lifestyle, community and politics.

As the ORG report highlights, this kind of overblocking does not augur well for any UK government attempts to widen filtering to include fixed-line access:

If they follow a similar blueprint of ISP level filtering as mobile operators, all the problems we have highlighted would be reproduced at a larger scale. For example, most fixed-line connections are shared by a number of people using a variety of devices. Implementing filtering in that situation would require a range of approaches from whitelisting for young children to censorship-free connections for adults.

What’s rather depressing is that news that overblocking is already taking place is no surprise: it’s simply inevitable when this kind of network-level approach is taken. It underlines again why filtering has to be implemented locally:

we hope that if the government does pursue such a policy it will be flexible, concentrate on users and devices rather than networks, allow the tools to be properly described as “parental controls” and above all avoid turning on blocking by default.

Despite the mounting evidence of overblocking on mobile networks, it’s not clear if any of those sensible suggestions will be implemented when it comes to fixed-line access — details of the proposed UK legislation have yet to be announced.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Filed Under: censorship, filters, overblocking, porn license, uk

ITC Sides With Microsoft Over Patent; Motorola Android Phones Could Be Banned

from the we-protect-patents-by-blocking-cool-products? dept

It’s a difficult time to be making an Android phone, it appears. Just days after customs started blocking various HTC phones based on an ITC injunction due to some Apple patents, the ITC has also ruled in favor of Microsoft in a patent dispute with Motorola over Android phones. While there will be appeals and other such things, if this stands, and there is no settlement, Motorola’s phones could also be blocked at the border by ITC injunction. Motorola, for its part, noted that Microsoft filed with the ITC over nine patents, and the ITC has only said that the phones violate one patent. Of course, since the ITC has only injunctive relief, it doesn’t seem to much matter if it’s one, two, six or nine — the phone can be blocked. I am, once again, at a loss as to how this does any good. Keeping competing products from entering the market seems like the opposite of how you encourage innovation.

Filed Under: android, itc
Companies: apple, htc, microsoft, motorola