The ‘Sleeping Giant’ May Have Awoken

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Legend has it that Admiral Yamamoto made the following statement shortly after Japan’s 1941 bombing of Pearl Harbor: “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.” While the validity of the statement has never been verified, the principle remains that you should be careful that the enemy you try to tease and poke is not a lion ready to devour you. I have seen a lion first-hand in the wild, and their tails will swat at the flies with nary a concern in the world, but piss them off enough and they will go for blood.

In the last year and a half, Apple has filed over 20 lawsuits against smartphone manufacturers Samsung and HTC for the ways in which they have implemented their hardware designs and Android OS implementations. During that time Google has been largely silent, with the only thing closely resembling a corporate stance being a backhanded statement Google’s Executive Chairman Eric Schmidt made at a conference in Tokyo last year. When asked about whether Google would provide financial support to HTC should they lose a patent case with Apple, Schmidt said: “We will make sure they don’t lose, then.” That however has been the last statement made by Google about the whole mess. Until now.

When Google announced their deal to buy Motorola Mobility in August of 2011, speculation arose as to their motivation to do so, with the blogosphere exploding with word that Google’s true motivation was to gain control of over 17,000 patents that Motorola controlled. Google CEO Larry Page stated in a shareholder conference call about the acquisition:

“The combination of the two companies is going to create tremendous shareholder value, drive great user experiences and accelerate innovation. Motorola also has a strong patent portfolio, which will help protect Android from anticompetitive threats from Microsoft, Apple and other companies.”

With the finalized acquisition of Motorola by Google in May, it seemed like it was only a matter of time before Google would stop letting its hardware partners be attacked by Apple and would take a stand. On Friday Google did just that, filing a patent-infringement lawsuit against Apple for the following seven patents: 5,883,580, 5,922,047, 6,425,002, 6,983,370, 6,493,673,7,007,064 and 7,383,983. The products they are seeking an import ban on are the Apple’s iPod Touch, the iPhone 3GS, 4 and 4S, the iPad 2 and the “new” iPad, as well as the Mac Pro, iMac, Mac mini, MacBook Pro and MacBook Air and all other Apple devices “which utilize wireless communication technologies to manage various messages and content.” Motorola also argues Apple was fully aware of the patents in question.

The obvious worst-case scenario for Apple would be that all of their products would be banned in the U.S. until they resolve the issue. I don’t believe anyone sees the worst-case scenario happening, but it would not be surprising to see some sort of preliminary injunction until the International Trade Commission (ITC) makes a ruling which is scheduled for August 24.

What is obviously interesting in this case, is that Apple would seem to be caught between the proverbial rock and a hard place. Concerning the filing, Motorola states:

“We would like to settle these patent matters, but Apple’s unwillingness to work out a license leaves us little choice but to defend ourselves and our engineers’ innovations.”

It is common practice for a manufacturer to negotiate a license with a patent holder so that they can use the invention or innovation in their products, but Apple seems unwilling to do that with anyone. Samsung also stated almost the same thing in a filing in their current court battle with Apple, that they offered in 2011 a “fair and reasonable” royalty rate for using their standards-essential mobile technology that “is consistent with the royalty rates other companies charge.” The filing stated that Apple never made a counter-offer, but “Instead, it simply rejected Samsung’s opening offer, refused to negotiate further and to this day has not paid Samsung a dime for Apple’s use of Samsung’s standards-essential technology.” Apple replied that “Samsung’s royalty demands are multiple times more than Apple has paid any other patentees for licenses to their declared-essential patent portfolios.” That all sounds well and good, but the percentage Samsung was asking for was 2.4% of the entire selling price of Apple’s mobile products that utilized Samsung’s technology, amounting to roughly $16 per iPhone (and roughly $350 million dollars according to court records). Apple on the other hand tried to license to Samsung back in 2010 patents that it felt were being infringed upon, with a royalty fee of $30 per smartphone and $40 per tablet.

Now on the surface it sounds like both are seeking to be reasonable and offer licenses, but let’s look at this from a different perspective. Apple calls Samsung unfair for requesting royalties on industry standard-essential patents and cites their demands as being more than Apple has paid anyone else, but they were the ones who first tried to license to Samsung non-essential design patents which would be subject to perception for a fee which would be more than double what Samsung offered. Who’s really being unfair and unreasonable here?

So now we come back to the Motorola/Google vs. Apple case. With a precedent being shown that Apple is more than willing to try and license their patents and accept royalties, but unwilling to return the favor, I wonder how this case will play out. Google already has a very adept legal team, able to defend itself against baseless attacks (ala Oracle vs. Google), and Apple has been moderately successful around the world but has lost some very recent cases (ala Apple vs. HTC in the UK). Personally I do not feel that Apple will allow themselves to face seeing their main money-makers be banned in the U.S., but I also don’t see them stopping their baseless attacks on innovation around the world. I hope I am wrong, but I do see them turning around and unleashing on Google directly instead of attacking the partners like they have done, which will stifle innovation more than it already has. Seeing as that has been Apple’s modus operandi the last year and a half, it may not be far off from reality.

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[Image courtesy of Rule7Media]