Posner throws out Apple-Motorola Case

by on June 23, 2012 at 11:44 am in Economics, Law | Permalink

As suggested by earlier rulings, Posner has thrown out the entire Apple-Motorola case. As I argued in Launching the Innovation Renaissance our patent system has became a weapon wielded by large corporations against competitor innovations. Posner’s ruling is complex but one point is clear he thinks that the courts should not act as a second in these corporate battles:

…The danger that Apple’s goal in obtaining an injunction is harassment of its bitter rival, requiring particularly watchful supervision by the court should it issue the injunction, is suggested by the fact that while a delayed injunction would in principle render no benefit to Apple besides harming its competitor by forcing it to waste time and money finding a new way of performing the functions now performed in an allegedly infringing manner, an ongoing royalty would yield significant income to Apple—yet which it wants to forgo in favor of imposing costs and litigation burdens on its adversary.

The notion that these minor-seeming infringements have cost Apple market share and consumer goodwill is implausible, has virtually no support in the record, and so fails to indicate that the benefits to Apple from an injunction would exceed the costs to Motorola. An injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare. That is the insight behind the “balance of hard-ships” component of the eBay standard for injunctive relief in patent cases.

Hat tip: @postlibertarian.

Bill June 23, 2012 at 12:18 pm

The comment is overbroad, and not indicative of a reversal of the patent system as the comment states.

Specifically, Motorola sued Apple for violation of a standards essential patent which it was obligated to license under fair and reasonable royalty terms. The parties could not arrive at an agreement on fair and reasonable, which means that a court will set the fair and reasonable rates, but this undercuts entirely the claim for injunctive relief….since a court will be determining the value of the patent, and thus there is no irreparable harm.

Second, Posner argued that Apple failed to prove the value of its patents which it claimed were violated.

Bill June 23, 2012 at 12:21 pm

Cases turn on facts.

This is not new law.

Adrian Ratnapala June 23, 2012 at 1:38 pm

But the sort of facts we are talking about here are the bread and butter of the phone-wars; the rules of engament (don’t call them laws) will be changed if other judges start following his way of categorising facts.

It seems to me that Posner is on the warpath.

Ray Lopez June 23, 2012 at 1:19 pm

Seems Posner was looking to get rid of the patent case, typical of anti-tech jurists. Posner actually had granted preliminary relief to one of the parties (I don’t know the details but I remember that much) then threw the case out when he deemed the lawyers were not negotiating to settle in good faith. A drastic remedy that is indicative of somebody who does not want to hear the case. To paraphrase the cliche about great men having bad offspring: ‘great jurists make bad law’.

Willitts June 23, 2012 at 1:47 pm

Uh, it’s “hard cases make bad law.”

“This is one of those unfortunate cases…in which, it is, no doubt, a hardship upon the plaintiff to be without a remedy but by that consideration we ought not to be influenced. Hard cases, it has frequently been observed, are apt to introduce bad law.” – Winterbottom v. Wright, Judge Robert Rolf presiding.

This is a problem particular to common law which generally finds relief in equity for every wrong, but also begins a chain of decisions that depart drastically from the original intent of the law.

This is less uncommon than you would think. It’s almost literally a Pontius Pilate decision. In some cases it is appropriate, as it is here. The judge is sending a message that the courts shall not be at the beck and call of every litigant, especially when litigation is part of their profit model. Kodak earned much of its profits from patent infringement for years, and this is not sustainable revenue for a going concern. There is a balance to be struck between the interests of competition and the interests of proprietary rights.

Whenever both sides are asking for summary judgment, it’s usually clear that both are wrong. A null decision throws it back at them to resolve their differences through negotiation or competition. This will end up good for everyone. Posner did the right thing.

Careless June 23, 2012 at 10:57 pm

Uh, it’s “hard cases make bad law.”

Easterbrook is trying to prove “great jurists make bad law” I think

Urso June 25, 2012 at 12:05 pm

I’ve always argued that saying is completely backwards. Hard cases make good law, because they force the judge to think carefully about the competing claims and how his decision will affect, not only these parties, but future parties in similar situations. Bad cases require additional thought, which usually leads to a more nuanced, narrower resolution.

Whereas easy cases don’t require the same amount of thought – everyone knows what the answer should be. Therefore, careful drafting goes out the window, and these cases are more apt to include loose language that decides issues it that weren’t really necessary to the case. Easy cases make bad law.

And consider that many courts sit on 3 judge panels. For an easy case, where everyone immediately agrees on the right answer, will the other two judges put the same time and effort into carefully inspecting the authoring judge’s opinion? Probably not.

The Original D June 23, 2012 at 2:36 pm

Anti-tech? Most tech VCs I know would like to see most of the patent system thrown out.

Cliff June 23, 2012 at 1:39 pm

Posner is denying Apple’s motion for an injunction, not Motorola’s.

q June 23, 2012 at 3:40 pm

It’s not indicative of a reversal since it’s just one judge who is subject to review from the Federal Circuit. Still, this case is very noteworthy for the fact that infringement actually was found, but no damages or injunction is forthcoming. That’s just unheard of and reflects Posner’s ability to cut through the bullshit.

But I absolutely expect the Federal Circuit to reverse him.

Norman Pfyster June 23, 2012 at 4:13 pm

Of course, he sits on the circuit court that would hear the case (although he probably would not be on the panel).

No injunction because the harm is capable of monetary damages, and no damages because neither party submitted enough proof of damages for the infringement. Better lawyers would have gotten a damage award.

Dave June 23, 2012 at 5:07 pm

Posner sits on the 7th circuit. Patent cases go to the Federal Circuit. Also, without having anywhere near what it would take to have an informed opinion, I find it hard to believe these companies were t represented by excellent counsel.

q June 23, 2012 at 9:52 pm

Posner normally sits on the 7th Circuit, but he was sitting in a District Court case by designation (fairly common). All patent cases get appealed to the Federal Circuit, and they’re generally a lot more patent friendly than Posner.

Norman Pfyster June 23, 2012 at 4:07 pm

This appears to be the key point of the ruling:

In fact neither party is entitled to an injunction. Neither has shown that damages would not be an adequate remedy. True,neither has presented sufficient evidence of damages to withstand summary judgment—but that is not because damages are impossible to calculate with reasonable certainty and are therefore an inadequate remedy; it’s because the parties have failed to present enough evidence to create a triable issue. They had an adequate legal remedy but failed to make a prima facie case ofhow much money, by way of such remedy, they are entitled to. That was a simple failure of proof.

As Bill and I pointed out in the last post on this subject, this is not new patent law…this is just “Into to Legal Actions 101.” We learned it very early in law school.

For others commenting, Apple and Motorola were suing each other, and Posner dismissed both suits for the same reasons.

Willitts June 24, 2012 at 1:33 am

This is correct. Someone suggested that it is extraordinary for there to be a finding of infringement but no damages. Wouldn’t infringement imply some form of damages? Not exactly.

First, patent infringement does not require proof of harm as an element. First, the judge decides whether there was infringement under 35 USC 271. If there is infringement, then the judge turns to damages.

Damages are adequate to compensate for the infringement but in no event less than a reasonable royalty. This appears to suggest damages can never be zero. Not so.

With IP, a firm can use a nonrivalrous technology without causing harm per se to the patentee. Theoretically, there are always competitive damages, but that must be proven, and the burden of proof falls on the plaintiff. How much did defendants use of the technology deprive the patentee of profits? If royalties are the damages, how are they calculated?

If I understand correctly, Posner’s ruling against Apple after disqualifying some experts was an “even if” determination that Apple could not prove damages. In the absence of proof, the proper award is zero or nominal damages.

As for whether the Federal Circuit will uphold the decision, I’m not familiar with their temperament. At best they would throw it back for a damages hearing, but how would the litigants do better the second time around? They aren’t going to get injunctive relief when FRAND is available. Apple tried to make its case exactly how the judge told them not to do it. If they could have done better, I think they would have. The Federal Circuit isn’t going to accept a “my dog’s better than your dog” damages argument.

Bill June 24, 2012 at 1:02 pm

+1

Ray Lopez June 24, 2012 at 9:57 pm

Wrong Willitts and Norman P. As the more informed posters posit on Posner upstream of your posts, he will be reversed by the Fed. Cir. In part because he showed his prejudice by ‘dismissing with prejudice’ (so the parties cannot refile) and in part because, like the Supremes, other judges don’t like Posner because he’s a show boat. You watch.

Noah Smith June 23, 2012 at 1:03 pm

POSNER!!!!!

Posner is my hero.

Bill June 23, 2012 at 4:18 pm

You mean Vladimer Posner the Russian journalist who defended and explained the views of the Soviet Union during the Cold War?

FredR June 23, 2012 at 1:15 pm

I’ll never trust Posner after what he did to Conrad Black.

Turing Test June 23, 2012 at 3:29 pm

“Judge” Posner railroaded Conrad Black, especially after the supreme court has overturned his conviction — Posner did what all activist (or “pragmatic”), results-oriented lifetime tenure judges do: apply his personal preferences to the facts and law of the case to reach the result he wanted

This is why lifetime tenure is actually a bad idea. Judges (including supreme court justices) should serve a maximum of 10 years on the bench and then be forced to make a regular living like everyone else

byomtov June 23, 2012 at 3:07 pm

The implication here seems to be that you must license your patents, because requiring others to develop workarounds reduces net social welfare. After all, royalties merely transfer wealth, while the workaround is costly. Is that right?

Bill June 23, 2012 at 4:28 pm

No, not really.

Licensing obligations that arise from a disclosed patent where you as the licensor urge that the patented technology be incorporated in the standard are usually subject to requirements to license under reasonable royalty terms, or otherwise the industry standard setting group would write a standard that did not include it.

Second, just because you infringe my patent doesn’t necessarily mean I was automatically damaged.

byomtov June 23, 2012 at 7:49 pm

I can understand that when you want it to be part of a standard.

I’m not sure what your point is with regard to damages, but I suppose I was assuming that I was damaged by the infringement. It seems to me that there would virtually always be some hypothetical damage.

All that said, I agree that the patent system is a mess.

Cliff June 23, 2012 at 11:34 pm

Bill,

You don’t have to be “damaged.” You are entitled to reasonable royalties. In the sense that royalties are damages, yes, you are automatically damaged.

Willitts June 24, 2012 at 2:03 am

Correct. Harm is not an essential element.

There’s nothing automatic about damages though. That’s the crux of this decision, at least with respect to Apple.

For Motorola, they could not prove damages other than FRAND, and failed to prove even that.

Even when reasonable royalties are available, damages must still be proven.

It does not do to say, “But your Honor, I was like soooo damaged by those guys over there because I’m like so super awesome and they infringed upon my innate awesomeness. I demand that you, like, tell them to stop being so evil to me because I really don’t deserve this sort of thing cuz I’m me.”

Bill June 24, 2012 at 11:02 am

Cliff,

The suit was for injunctive relief. If damages are adequate, there is no basis for injunctive relief as a matter of law. Since Motorola is entitled to reasonable royalties under an an arbitration process, it is not entitled to injunctive relief.

Willitts June 24, 2012 at 1:55 am

Damages don’t exist per se. If you invented a great gadget and I infringed on your design, you would first have to prove that my use of the design deprived you of something. Knowledge is nonrivalrous.

Suppose your name is Pythagorus and you discover a cool theorem about triangles. I read about your theorem and use it to design a perfect pyramid. My pyramids are so good, I get paid lots of gold by pharaohs to build them.

How much have you lost because I used your theorem in my designs?

You can surmise that you lost out on a ton of gold, but you must PROVE you were deprived of that. You can hire a mathematician named Euclid to estimate the number of right triangle measurements I had to use for my pyramid and then attach a value for each use. The judge would have to accept Euclid’s status as an expert, approve of his method, and judge the result equitable.

Suppose instead that you hired a guy named Plato to speak gloriously about the wonders of your theorem and how, logically, I could not have built my pyramids without them. He proclaims that before your theorem, pyramids were lopsided and took 20% more resources to build. He estimates that 80% of the value of my pyramid comes from my use of your theorem. Plato is an expert in rhetoric. His arguments might even be plausible. But he sheds no light on the amount of damages. You fail to prove damages, and you get nothing.

Planet dismissed Apple’s claim with prejudice because he concluded they could not, with their best efforts, ever prove damages.

Paul Johnson June 23, 2012 at 8:31 pm

It’s written in plain and clear English. Sorry, but that’s the part that impresses me. Consider the conclusion:

“It would be ridiculous to dismiss a suit for failure to prove damages and allow the plaintiff to refile the suit so that have a second chance to prove damages. This case is therefore dismissed with prejudice; a separate order to that effect is being entered today.”

Bill June 24, 2012 at 11:07 am

I enjoy reading a libertarian website for its logical inconsistency.

First, from the comment, you have the commenter applauding judicial activism when it is going his way, and when the judge, in his opinion, is making new law.

Second, you get a comment that focuses on having judges being appointed for a fixed term, apparently to put pressure on them. Consider this: do you want the executive branch to appoint judges (with confirmation) for fixed terms, and as the judge ends his term, approaches the executive branch for a new job or reinstatement in his/her old job? Prosecutor one year, judge for ten years, go back being a prosecutor for ten years.

TallDave June 24, 2012 at 12:49 pm

Your understanding of libertarian philosophy is certainly amusing. I’ve never once it heard it suggested that decisions against litigation that amounts to rentseeking are some sort of objectionable “judicial activism.” Never overturning bad legal precedent isn’t a libertarian value — the objection is generally to things like Wickard that clearly violate the intent of the highest law.

Of course as a rule, one would expect lawyers to favor laws favoring legal rentseeking, which favors lawyers. Incentives matter!

Maybe if the GOP takes over in 2012 we could get legislation that makes legal rentseeking (“an ongoing royalty would yield significant income to Apple—yet which it wants to forgo in favor of imposing costs and litigation burdens on its adversary”) less attractive.

Bill June 24, 2012 at 1:01 pm

Tall,
You answer your strawman “litigation involving rentseeking” but do not answer the questions or observations posed in my comment. Furthermore, classification as to rent seeking is an interesting way to say it. Every legitimate patent is seeking rent from an infringer. The question is: is the patent valid, and are there damages. If there are no damages, there are no damages, and you do not have to classify it as rent seeking and seek to apply some amorphous, unknown only to you, standard enforced by judges who agree with your political philosophy.

TallDave June 24, 2012 at 4:40 pm

Of course I answered them, I explained why they were nonsense.

You don’t seem to understand the concept of economic rentseeking. Legal fees imposed on others in lieu of profits are a deadweight loss. That’s a fact, not a political philosophy.

TallDave June 24, 2012 at 12:24 pm

See, defense is a public good (ducks).

TallDave June 24, 2012 at 12:42 pm

Oops, that was for moneyball.

Andre Fernandes June 28, 2012 at 3:38 am

I don’t like the result at all. Who wins is not the issue but who got the money.

Comments on this entry are closed.

Previous post:

Next post: