Apple and Google Talk Arbitration in Smartphone Spat

Apple and Google haven’t yet buried their respective hatchets over the patent litigation between them, but evidently they are willing to put them aside for a moment in the hopes of negotiating a broader peace.

A new court filing in the pair’s infringement case reveals that Apple and Google have been discussing the idea of resolving their dispute over standard essential patents via arbitration. Earlier this month, the companies exchanged proposals about hammering out some sort of global licensing agreement over standard essential patents, and both seem to agree that binding arbitration is the way to go. From the filing:

Apple is also interested in resolving its dispute with Motorola completely and agrees that binding arbitration may be the best vehicle to resolve the parties’ dispute. Accordingly, on November 8, 2012, Apple sent Motorola a letter agreeing that the parties should enter into arbitration and proposing the parameters of the arbitration. On November 13, 2012, Motorola responded to Apple setting forth further proposals for the scope of the arbitration, and the parties are now negotiating how to proceed. Included in the parties’ discussions are proposals for a stand-still to the parties’ pending litigations.

A stand-down in litigation? Binding arbitration? That’s a remarkable easing of tensions between two companies that have been sparring the way Apple and Google have. What happened?

A few things:

First, some background … We need to remember that Apple CEO Tim Cook hates patent litigation, which he sees as a “pain in the ass.” And he’s gone on record saying Apple would prefer to settle IP disputes where it can. “I’ve always hated litigation and I continue to hate it,” Cook told analysts in April. “We just want people to invent their own stuff. So if we could get to some arrangement where we could be assured that’s the case and a fair settlement on the stuff that’s occurred, I would highly prefer to settle than to battle.”

The patents Google acquired through its $12.5 billion acquisition of Motorola Mobility haven’t exactly proven a formidable weapon in the smartphone patent wars. Indeed, the patent portfolio Motorola first brought to bear in many of its cases against Apple has largely been winnowed down to standard essential patents the company is obligated to license on FRAND (fair, reasonable and nondiscriminatory) terms. And the fact that Google is using them as a weapon in these battles at all is drawing a lot of unwanted regulatory scrutiny ahead of the company’s imminent showdown with the FTC.

Now on to the specifics …

Sources say those “secret” settlement talks between Apple CEO Tim Cook and Google CEO Larry Page earlier this year went reasonably well, setting the stage for the sort of tentative stand-down that’s now been proposed.

Indeed, Apple actually made a settlement offer to Google earlier this year, sources say, but nothing came of it.

Despite that, high-level background discussions between the two companies continued.

Then, in October, Google abruptly withdrew a complaint it had brought against Apple with the International Trade Commission, not a month after the ITC agreed to review it.

Sources say that withdrawal, which was never explained, was not a coincidence. Could it have been a goodwill gesture? Possibly. Certainly, it’s a clear de-escalation. As best I can tell, however, Apple has not responded in kind.

So what now?

That’s not at all clear. Though Google and Apple are talking arbitration, they are far from agreeing on the terms of an arbitration proceeding — let alone a reasonable royalty base. It’s entirely possible they never make it to arbitration.

But at least they’re talking about it.

Apple and Google both declined to comment on their negotiations.