Apple v. Motorola – An End to the Smart Phone Wars or the Harbinger of New Standards for Proving Damages and Injunctions?
Judge Posner’s ruling in Apple v. Motorola last week may have brought an end to the patent war between the parties, but may be a harbinger for tougher standards for proving patent damages and injunctions. Apple and Motorola have accused each other of infringing patents directed to cell phone technology. Following a Daubert hearing, Judge Posner excluded the parties’ damages experts as unreliable. Because the parties cannot prove their respective damages without admissible expert opinion, the Court dismissed the case with prejudice.
Judge Posner’s opinion summarized the parties’ deficiencies in their respective claims for damages and injunctions. Of particular note is the issue of Motorola’s request for an injunction against Apple for refusing to pay a royalty under FRAND’s (Fair Reasonable and Non-Discriminatory) terms. The Judge noted that by agreeing to license its patents under the FRAND terms, Motorola had implicitly agreed that a royalty is adequate compensation to license the patented technology. Motorola cannot now seek to enjoin Apple from using technology that it states is a standard essential patent. To do so otherwise would amount to a form of patent hold up because Apple is locked into practicing the invention.
As to Motorola’s damages, Judge Posner dismissed its expert’s opinion as overreaching, characterizing it as “going for broke.” In other words, the Judge considered Motorola’s high damage estimate unsubstantiated in comparison to the actual representation of the patent in Motorola’s licensing portfolio.
The Court was likewise unmoved by Apple’s damages case. According to Judge Posner, Apple’s expert failed to show that a reasonable commercial design-around option was available to Motorola to support its damages claim, thus imparting a “reasonableness” aspect to the damages inquiry. Apple argued that even if it could not prove actual damages, it should be entitled to reasonable royalties. This argument did not persuade the Court which stated, “the statute 35 U.S.C. § 284 requires the award of a reasonable royalty, but to argue that this requirement exists even in the absence of any evidence from which a court may derive a reasonable royalty goes beyond the possible meaning of the statute.”
In sum, the Court’s decision left two of the world’s largest technology companies at a litigation stalemate for now. Until we hear from the Federal Circuit, patent litigants should pay heed to this decision in preparing proofs for damages and injunctions.