Judge Kicks Apple, Motorola FRAND Suit to the Curb

A U.S. District Court judge has dismissed an Apple lawsuit alleging that Motorola Mobility abused its standard-essential patents by charging rates that exceeded fair, reasonable and nondiscriminatory (FRAND) terms.

Apple filed the case in March 2011, before Motorola was acquired by Google. It was scheduled for a hearing in Madison, Wisc., this week, but Judge Barbara Crabb dismissed it with prejudice, meaning that the case can be further considered only on appeal.

Apple’s position was that 2.25 percent for each iPhone sold — the rate Motorola Mobility apparently wanted to charge — was excessive and not in keeping with FRAND terms. It maintained that the court should set a rate of US$1 or less per device. Apple said in the filing that it would proceed with further litigation if the court should render a decision it found unsatisfactory.

The judge appears to have based her decision to dismiss the case in part on Apple’s reasoning.

“At the final pretrial conference, I asked Apple to explain why it believed the court should determine a FRAND rate even though the rate may not resolve the parties’ licensing or infringement disputes,” Crabb wrote. “I questioned whether it was appropriate for a court to undertake the complex task of determining a FRAND rate if the end result would be simply a suggestion that could be used later as a bargaining chip between the parties.”

Apple’s response did not assuage her concerns, she concluded.

Defining FRAND

Had the case gone to trial, it might have brought some clarity to what, exactly, is a fair, reasonable and nondiscriminatory term.

“There is no uniform definition for FRAND,” Peter S. Vogel, partner with Gardere Wynne Sewell, told the E-Commerce Times.

Establishing one would be difficult. “Every single patent has a different value in the marketplace, so determining a uniform definition would be a huge burden for any court,” he explained.

It is not possible to come up with a table or chart that would match patents with FRAND terms, said Vogel, because the value of a patent also varies depending on which company is using it.

“The value of a patent on a component in the iPhone will be inherently worth more than a patent for a similar component in BlackBerry,” he pointed out.

Increasingly Litigated

FRAND has become a closely watched issue, and many believe it will be increasingly litigated. Certainly, it would appear the government has its own ideas about FRAND terms. There are rumors circulating that U.S. Federal Trade Commission staff have recommended suing Google for antitrust violations because of its attempt to use standard-essential patents to block competitors’ imports.

Another court may provide some clarity before a possible FTC antitrust case does, however. Microsoft also has alleged that Motorola Mobility’s FRAND terms are too high and filed suit in the U.S. District Court in Seattle. That trial begins later this month.

“There are definitely more companies suing over FRAND and whether terms offered pursuant to FRAND are reasonable,” Peter Toren, an attorney with Weisbrod Matteis & Copley, told the E-Commerce Times.

It is a reflection of the dollar value and importance patents have assumed in the mobile technology world, he said. “Companies are looking for whatever advantage they can, and patents — and now FRAND — are a big weapon in their arsenals.”

Google and Apple did not respond to our requests to comment for this story.