Apple, Google Consider Arbitration Over Standard Patents - Businessweek

Apple Inc. (AAPL) and Google Inc. (GOOG)’s Motorola Mobility unit are talking about a way to resolve part of their dispute over patents related to critical smartphone technology, according to a court filing.

The companies have been exchanging proposals on using binding arbitration to reach a licensing agreement over patents that are essential to comply with industry standards on how phones operate. Such an agreement could lead to a global settlement of all of their patent disputes, Apple said in a Nov. 15 filing.

“Apple is also interested in resolving its dispute with Motorola completely and agrees that arbitration may be the best vehicle to resolve the parties’ dispute,” Apple said in the filing.

Motorola Mobility first raised the issue of arbitration on Nov. 5, before a federal judge in Madison, Wisconsin, threw out a breach-of-contract case that Apple had filed. The Cupertino, California-based maker of the iPhone claimed its mobile-phone competitor was misusing standard-essential patents to demand unreasonable royalties.

“We have long sought a path to resolving patent issues and we welcome the chance to build on the constructive dialogue between our companies,” Google General Counsel Kent Walker said in a Nov. 13 letter to Apple that was filed with the court. “While we prefer to seek a framework for a global (rather than piecemeal) resolution that addresses all of our patent disputes, we are committed to reaching agreement on a license for our respective standard-essential patents.”

Globe-Spanning Litigation

An agreement that goes beyond the Motorola Mobility dispute to cover other devices that run on Google’s Android operating system could help calm litigation that has spanned the globe, said Alex Spektor, an analyst with Strategy Analytics in Boston.

“It’s in everyone’s best interest in the industry to pull back and reach some sort of equilibrium,” Spektor said. “Google could offer a certain level of protection to licensees who comply with whatever standard it puts in place.”

The U.S. Federal Trade Commission and the European Commission are both investigating complaints by Microsoft Corp. (MSFT) and Apple that Motorola Mobility is misusing its standard- essential patents. The FTC staff has recommended filing a lawsuit against Google, according to four people familiar with the matter.

Unique Features

Apple, the world’s most valuable company, has argued that competing handsets running on Google’s Android operating system copy the look and unique features of its iPhones. A continuing battle with Samsung Electronics Co., which has the biggest share of the global market for smartphones, is being waged around the world.

Even so, Apple has recently shown a willingness to settle some of the disputes. It announced a 10-year licensing agreement with Taiwan’s HTC Corp. (2498) on Nov. 10. The company earlier settled a patent dispute with Nokia Oyj. (NOK1V)

Companies like Motorola Mobility that help develop specifications to let devices work together pledge to let competitors license inventions incorporated into those standards on fair and reasonable terms.

Not all of the Motorola Mobility patents in its dispute against Apple involve technologies used in industry standards. Motorola Mobility dropped its latest suit involving non- essential patents at the U.S. International Trade Commission. None of the Apple patents lodged against Motorola Mobility is standard-essential.

Fair, Reasonable

“Apple’s goal has always been to find a mutual and transparent process to resolve this dispute on terms that are fair, reasonable and non-discriminatory without the threat or taint of exclusionary remedies,” Apple General Counsel Bruce Sewell said in a Nov. 8 letter to Google that was included in the filing.

Spokeswomen Kristin Huguet of Apple and Niki Fenwick of Google declined to comment.

Microsoft has its own battles with Motorola Mobility over standard-essential patents, and a non-jury trial is under way in Seattle. U.S. District Judge James Robart could issue a ruling establishing a fair rate for the Motorola Mobility patents. That could lead to an agreement between those two companies, said Victor Siber, former chief intellectual property counsel for International Business Machines Corp., and now with Baker Hostetler in New York.

The cases are: Apple Inc. v. Motorola Mobility Inc., 11cv178, U.S. District Court for the Western District of Wisconsin (Madison); and Microsoft Corp. v. Motorola Mobility Inc., 10cv1823, U.S. District Court for the Western District of Washington.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Tom Giles at tgiles5@bloomberg.net