This is unlikely to result in any more than at most Apple paying FRAND licensing fees for future use of Samsung’s FRAND patents.  And if Apple has infringed for past use of Samsung’s FRAND patents, the court is unlikely to do more than give Samsung more than three times the value of a per unit licensing fee for Apple’s infringing mobile iOS devices.

However, it may be that Apple has licensed the allegedly infringed Samsung FRAND patents by properly paying the pre-negotiated royalty.  Or it may be that Samsung refused to offer FRAND terms for its FRAND patents.  In either of those events, it could be Samsung that will be in trouble with the U.S. District Court.  In the first instance, Samsung could be liable for breach of license, perhaps bad faith breach of license, filing a frivolous action, patent misuse, and/or violation of antitrust law. 

In the second instance, the court could conclude that Samsung’s failure to offer FRAND terms was a prior material breach of its obligation to offer FRAND terms that relieved Apple of its obligation to pay any royalty, so that Samsung could not recover anything for the period of its breach and could only recover royalties for Apple’s future use of its FRAND patents.  Also, if sufficient evidence is adduced that Samsung refused to offer FRAND terms to hinder Apple’s ability to compete, Samsung could also be liable for violating antitrust law.  And the issue of patent misuse could also arise.

So in suing on its FRAND patents, Samsung’s hands had better be clean, because if they are not, it has very little to gain in a U.S. court and a lot to lose.

Oh no. Not again!

Let the arguing commence!!

Noted patent commentator Florian Mueller

You spelled “Microsoft funded astroturfer” wrong. At any rate, this looks to be a repeat of the whole Nokia situation, with the exception that there is already severe bad blood between the companies, and this is just another battlefield rather than the entire war. We all know how things worked out for Apple the last time they shipped a product without licensing the core wireless technologies.

If Apple really respected IP the way they claim that others should respect theirs, Apple would have either licensed Sammies patents or hauled them to court and/or standards bodies about the FRAND terms before shipping any products that included them. If Apple had had any common sense, or if its leaders had those traits that John M. respects about military leaders, they wouldn’t have gotten into a trench war with Samsung. In fact, they’d have just given Samsung a wide berth, as Samsung was so obviously giving them.

Haven’t we seen this movie before? Doesn’t it just end with Microsoft enabling cross licensing?

And when we saw this movie before in Nokia v. Apple, it ended with a payment to Nokia of an unknown amount and with cross-licensing of patents that Apple said were not the patents that give its iOS devices their competitive advantage in the market.  As for the payment to Nokia, it is unknown whether it did anything more than reflect the payment of FRAND licensing royalties for past use.

If we see that movie again, Samsung will have exposed itself to legal jeopardy for not much, if any, gain.

What is really interesting here is what this says about Samsung’s patent portfolio.  If asserting FRAND patents is the best that Samsung’s patent portfolio has to offer, it suggest that Samsung’s patent portfolio won’t be much help in defending against Apple’s infringement suits.

Also, I wonder what’s happened to Google’s $12.5 billion Motorola Mobility’s (Moto’s) patent portfolio, the alleged purpose of which was to defend Google’s Android OEMs.  Are Moto’s patents, as many commentators have opined, essentially powerless against Apple, consisting mostly of FRAND patents?  Or is Google for some reason refusing to license Moto’s strong patents to Samsung for Samsung to use those patents against Apple?  Inquiring minds, especially the minds of c-suite executives at Android OEMs, want to know.

Jordan Crook at Huffington TechCrunch has an interesting take on the strategy and demeanor of Sammie in the war. To summarize, they’ve been cautious as they took stock of what Apple was trying to accomplish and how it might affect its supplier relationship with Apple.

Realistically, they probably also wondered if they could just outlast Steve Jobs and whether things might cool down if they did. A prudent gamble despite not being on the right side of it.

A better business decision on Samsung’s part would have been to settle with Apple at the start by ceasing to infringe. Design a product that will stay out of court. The path they have chosen is like “cutting off your nose to spite your face.”

So they forfeit a ton of manufacturing business and profits to sell tablets that have been legally challenged. Add a ton of legal expenses and the uncertainty of shipping their product; one wonders what in the world they were thinking. It is a very risky proposition at best.

Exactly, skipaq!! Really the entire “we’re suing you because you’re suing us” mentality is immaterial.

Here’s what I posted on Sep 19 in the “Samsung Countersues Apple in Australia ...” article - along the same lines:

“Think of how much money in future revenue and profit that Samsung is going to lose from Apple on the component side because of their ongoing legal battles over a lackluster Galaxy tablet. IIRC Apple and Samsung had worked out a multi-billion dollar deal for displays, memory, and processors. Wasn’t it approaching $8 Billion?

So, while the execs in the components business units are celebrating, the tablet group copies Apple with their Galaxy Tab, has lackluster sales and near-zero profit, any of which is now sucked up in global legal fees, and in doing so they screw their components groups out of billions of dollars in future revenue and probably tens (hundreds?) of millions of dollars in future profit. Samsung really hosed themselves. They should shut down the Galaxy Tab, go back to Apple begging forgiveness on their knees for their tablet venture, and plead for the component business back. Then, they should fire the executives responsible for the Galaxy Tab. Talk about biting the hand that feeds you!! This should become a Harvard (or Stanford!!) Business School case study!!”

“A better business decision on Samsung’s part would have been to settle with Apple at the start by ceasing to infringe. Design a product that will stay out of court… So they forfeit a ton of manufacturing business and profits to sell tablets that have been legally challenged. Add a ton of legal expenses and the uncertainty of shipping their product; one wonders what in the world they were thinking...”

”...what in the world they were thinking..?”  My hunch is that cultural differences between western and Asian enterprise worlds just made it too difficult for Samsung to comprehend/recognize what IP rights in the west mean - they just naturally could not see that copying someone else’s IP might somehow not be a really great idea.

I’ll bet they are learning, though.

My hunch is that cultural differences between western and Asian enterprise worlds just made it too difficult for Samsung to comprehend/recognize what IP rights in the west mean

Is that kind of like “quite smooth” vs. “quite small”?

Dear BurmaYank:  I think that you have a good point.

My hunch is that cultural differences between western and Asian enterprise worlds just made it too difficult for Samsung to comprehend/recognize what IP rights in the west mean - they just naturally could not see that copying someone else’s IP might somehow not be a really great idea.

In Asia, there is rampant infringement of intellectual property and much less respect for intellectual property rights.  Some of this is natural, as countries enter the world economic scene.  In an earlier day, Americans infringed with impunity on the IP rights of the British.  New industries in countries that are just entering the world economy have little or no IP, so they have no IP to use or protect.  Thus, they benefit from infringement, if they can do so without having to pay any penalty that exceeds the net benefit of their infringement.  Asian countries and their new industries are just the latest example of this age-old phenomenon.

However, things have changed in important ways in international trade.  One, there is a lot more international trade, and, two, that trade is covered by treaties which require at least some respect for and enforcement of a foreign entity’s IP rights.  Asian firms have the problem that, because most of their trade is exported, they are subject to the jurisdiction of foreign courts, which often, if not always, have the authority and duty to protect the IP rights of not only their domestic firms but of all firms.  This is especially true in the biggest and most lucrative markets, such as the United States, the EU, Japan, Canada, Australia, etc.  And even China, South Korea, and Taiwan must, under their treaty obligations, provide some protection of all persons’ IP rights.

So Samsung and other Asian OEMs are learning the hard lesson that IP rights matter, at least for their important export markets.  And for the first time for many of them, they must take measures to deal with IP, such as appointing strong general counsels that have c-suite rank, acquiring patents that are at least defensive, respecting others’ IP, and even go so far as having to innovate and protect those innovations under the applicable IP law.

And Dear Bosco:  Waiting to deal with Tim Cook instead of Steve Jobs is like deciding to wait to be mauled by a Bengal Tiger instead of a Siberian Tiger.  Either way, you are going to torn limb from limb. 

As for Samsung not taking a passive approach to preserve its supplier relationship with Apple, Apple’s moves to diversify away from Samsung as supplier is rapidly diminishing that as a concern.  And Samsung’s future IP bombs had better consist of more than FRAND patents, because those don’t even rate as decent Fourth of July firecrackers.

I’m just under the impression that Samsung is panicky and pretty desperate here..

if the best Samsung could do is to show how desperate they are by using FRAND patents,  this is going to end very badly for Samsung…

by the way,  we already know the reason why Apple has not licensed these FRAND patents,  Apple themselves in a court filing has been quoted as saying that Samsung failed to even offer a license to Apple.

this isn’t even going to survive a preliminary hearing.  except that now Apple will finally get a license for the FRAND patents and pay some nominal fee going forward. 

(oh and then Samsung will claim some sort of victory by saying Apple has to pay)

yet people who know what is going on are going:  is this the best samsung has?  holy cr*p….. this is bad for the injunctions where Samsung has already lost, and the ones it is about to lose.

If it comes out that Samsung was trying to use it FRAND patents to leverage an unfair deal (like Nokia tried with its patents),

Bryan, I really don’t see why you and Nemo keep insisting that cross licensing terms are unfair.

Patent wars on this level are unprecedented, at least in the tech world.

Is it so hard to see why it’s unprecedented at this scale is because most tech companies rely on cross licensing to prevent this level of litigation?

@daemon: If you want to claim something is worth some arbitrary amount, it helps to have some sucker who has signed a receipt for that amount. Which is why Nokia was able to leverage its FRAND patents into de facto licensing of Apple’s multi-touch patents via non-aggression. So, as Bryan hypothesizes, if it come out that Samsung is playing they same game… let me complete the sentence… they’ll probably do just fine.

Apple has to figure out that in a patent war, the rules are that you’re arguing over an amount, not whether the patents will be licensed. Because they will be licensed, formally or otherwise. Even Oracle gets that point.

That specific passage from me related to Nokia, which had demanded licensing fees for its patents that were higher than other handset makers were paying under FRAND agreements. It’s the “Fair” in FRAND to which I was referring.

Bryan, at the time of Nokia’s initial filing against Apple the licensing fees being asked for were estimated at 1 - 2% of the iPhone’s sale price. What I find most telling about that is the fact most considered the amount to be small amount, described by busineessinsider as “a rounding error.”

http://www.businessinsider.com/nokia-wants-to-extract-200-million-from-apple-in-iphone-patent-suit-2009-10

At the time of the initial filings Nemo argued that seeking cross licensing as part of the FRAND terms was an abuse. In your article you only refer to “terms” and that they might not be FRAND terms. As the crux of the Patent battle between Apple and Samsung is on the use of unlicensed Patents by both parties on their respective platforms, is it so unreasonable for me to assume that you were taking the stance that cross licensing terms were not FRAND?

Another difference is the possible role that Nokia’s adoption of Windows Phone 7 played in this abruptly-reached settlement. That also isn’t a factor in Apple iOS vs. Samsung Android.

I disagree Bryan. Samsung makes probably the best hardware phones other than the iPhone (even if I don’t like all glass, it’s still a fabously made device) and they run three different Operating systems - Android, Bada, and Windows Phone 7. It’s quite concievable for Samsung to go Windows Phone 7 completely in markets that prevent them from selling Android devices (Bada currently is marketed in “developing markets” and South Korea).

Bryan, there is this drag racing game from Creative Mobile on my Android phone that I’ve gotten into lately. Not sure if there’s an iPhone equivalent. Typical of the genre, you pick a car, race, win money and experience, upgrade your car. Eventually you get to a point, where to beat competitors, you have to tune your car, which in this game’s case, means mucking with the gear ratios and the Nitrous. A quick, effective start in 1st and 2nd can be all you really need to win the quarter mile.

I bring this up because in the Nokia case, the FRANDliness of their 3G patents was a third gear issue for Apple, and Nokia played them that way. 1st gear was Apple not getting a license before shipping product. 2nd gear was Apple not suing and taking the issue before relevant standards bodies, before shipping product.

The letter of the rules may say that Nokia and Sammie can’t discriminate against Apple in licensing these particular patents despite Apple’s stated intentions and actual actions to sue them over UI patents. But the letter of the rules also says that Apple can’t go shipping products that infringe on patents without licensing them. And so, we once again enter a grey zone where different leverage applies. The wireless patents just happen to be a bit more immediate and cut and dry.

Dear daemon and Bosco:  FRAND licensing is a legally enforceable obligation of the owner of a FRAND patent, and FRAND licensing does not require cross-licensing, nor may the owner of FRAND patents even request, much less demand, cross-licensing as either a condition of or consideration for offering FRAND licensing terms.  So whether it be Nokia or Samsung or Motorola Mobility or any other owner of a FRAND patent, that owner is not entitled to cross-licensing under its obligation to offer FRAND terms, nor may he/it request cross-licensing in exchange for offering FRAND terms. 

Indeed, requesting cross-licensing as a condition or consideration for a FRAND patent is at least a breach of the owner’s FRAND obligations, and if the owner attempts to misuse his FRAND patents to hinder or diminish in any significant way a competitor’s ability to compete by offering non-FRAND terms, including but not limited to cross-licensing and/or demanding excessive licensing royalties, that could also very well constitute patent misuse and/or violation of antitrust/competition laws.

The foregoing is why attempting to get cross-licensing for FRAND patents is illicit, at least breaching the patent owner’s FRAND obligation, if not also constituting patent misuse and/or violation of competition law.

Third gear argument Nemo. Where and when is the FRAND licensing legally enforceable? It certainly was not during the Apple/Nokia dispute or Apple would have had absolutely no incentive to settle! As an aside, it probably depends more on the standards body agreements than any body of law, and you can expect that standards bodies will need to address “hostile party licensing” going forward. This Apple crap isn’t about competition in the market. It’s about legal bullying. The patent holders didn’t sign up for that, and most likely explicitly won’t in the future.

Bosco:  It is very much a first-gear requirement.  I’ve counseled clients to not consent to licensing terms for FRAND licenses were inconsistent with the patent holder’s FRAND obligations and advised the client to proceed with the practice of the FRAND patents at issue and obtained a favorable result, which is exactly what I expect Apple’s lawyers have done.

Offering FRAND terms is the licensor’s legal obligation, and the failure to honor that obligation can release the potential licensee from the obligation to pay any royalty, at least until the licensor cures his/its breach by offering FRAND terms.

In the Nokia v. Apple infringement suit, Apple plead defenses based, inter alia, on what it alleged where Nokia’s failure to offer FRAND terms.  And I am confident those defenses had a lot to do with Nokia settling the case and with, I suspect, Apple obtaining a favorable settlement.  But because the parties settled the matter, the court never determined whether Nokia had violated its FRAND obligations.  But it is not hard to find cases in the case law, where a licensor has been punished and waive or otherwise lost claims for failing to honor its FRAND obligations.

So yes, here and particularly in Europe, the FRAND licensing agreements and representations that the owner of an essential patent enters into to get his patents included in an essential standard are valid and enforceable at law and in equity as contracts, promises, estoppels, and as a commitment to FRAND IP licensing. 

And it is black letter law, that a prior material breach of contract releases the counter party of its obligations under the contract.  Since the FRAND commitment is a contract, the breach of it releases a licensee or potential licensee from his obligations, such as the obligation to obtain a FRAND license and/or pay a FRAND royalty. 

However, let me both advise and warn you that the determination that a FRAND licensor has materially breached its FRAND obligations so that a FRAND licensee or potential licensee is free of some or all of its obligations to obtain a FRAND license should only be made by expert counsel, after a thorough review of the facts.

I’ve counseled clients to not consent to licensing terms for FRAND licenses were inconsistent with the patent holder’s FRAND obligations and advised the client to proceed with the practice of the FRAND patents at issue and obtained a favorable result, which is exactly what I expect Apple’s lawyers have done.

Nemo, you really advised a client to intentionally violate another’s legal Patent? In the United States?

Would you advise a client to commit crimes that could carry a Death Sentence because you feel that the Death Sentence is “cruel and unusual punishment?”

Nemo, FRAND is not a suicide pact. If it were, or should it ever be perceived as such, you can forget participation in standards processes by the patent holders. And the case law is indeed still quite sparse. For example, what does the owner of an essential patent do when a potential licensee doesn’t appear to have the ability to pay? Or if the potential licensee violates the patent before seriously negotiating a license?

But hey, at the very least, we now know that you don’t respect IP as you have claimed, and take a pragmatic view based on what you think is enforceable, rather than an a priori right. With lawyers like you advising clients to just infringe and negotiate later, what incentive will there be for future patent holders to contribute to future standards, when they’ll have to sue for their license revenue regardless?

Dear daemon:  It is not infringement or at least you have perfectly good affirmative defense to infringement, where a licensor materially breaches its FRAND obligations, so no enforceable claim of infringement would lie where a licensor has materially breached its FRAND licensing committments.  Moreover, where you can prove that the licensor has the ulterior purpose of misusing his FRAND patents by attempting to accomplish some purpose beyond the scope of his FRAND patent rights, and if that ulterior purpose is to hinder a competition that will also give rise to an actionable antitrust claim.

Dear Bosco:  FRAND obligations to standard setting organizations (SSOs) are enforceable contracts, where, in exchange for his/its FRAND licensing undertakings, the licensor gets to have his/its patented invention included in a universal standard.  That’s the deal:  A FRAND license with only FRAND licensing terms, inclduing FRAND royalties, in exchange for your patented inventions being a part of a universal standard. 

If you don’t like that deal, you don’t have to take it.  But, of course, in that event, other technologies will be substituted for yours in the standard, locking your technology out and, thus, reducing it to a proprietary technology that no one use except you, which is useless if your device must work everywhere in the world.  So depending on the technology, it either does or doesn’t make sense to accept a SSO’s FRAND licensing deal.

Samsung had 3G technologies that would have been next to worthless if they had not been adopted into the 3G/UTMS standard, so it took the SSO’s deal.  Having taken that deal, Samsung much now honor all the provisions of its FRAND undertaking, including the requirement to timely and properly disclose its FRAND patents and its obligation to offer FRAND licensing to all who wish to practice its FRAND patents. 

So if Samsung is, as Apple alleges, attempting to have the benefits of its FRAND undertaking, its patented inventions established as a worldwide standard with worldwide royalties, without also honoring its FRAND obligations, courts here and in Europe will punish it fully as the law provides and grant Apple at least full compensatory relief as the law provides, and if Apple can prove that Samsungs’ alleged misuse of its patents is for the purpose of hindering competition, U.S. courts will place Samsung on the rack until its bones snap, and EU courts will draw and quarter Samsung.

But we will have to hear the evidence and the arguments.

And, as I explained to daemon, supra, infringement will not lie, where a licensor/owner materially breaches his FRAND undertaking.  So what I am counseling a client to do in that case is fully exploit his/its legal remedy for a prior material breach, patent misuse, inequitable conduct, and/or for violation of antitrust law.

And daemon:  One more thing.  There is a provision of the Model Rules of Professional Conduct that prohibits a lawyer from counseling a client on how to break the law in a way that avoids penalty; legal engineering may not go that far.  That, however, does not prevent a lawyer from counseling a client on the consequences of its actions or even advising a client on what is known as efficient breach, or from counseling a client on how to legally deal with the misconduct of others, such as not rendering performance where another’s initial material breach has relieved the client of his/its obligation to perform.