Motorola submits this brief in response to the Court’s order of November 2, 2012. Dkt. 487
INTRODUCTION
Since 2007, when Apple introduced the first iPhone, Motorola has always tried to reach agreement with Apple on licensing terms—as it has with other cell phone makers—for the extensive and continuing use of Motorola's valuable intellectual property. Apple has built its profitable business on technology standards that others developed. In this case, Motorola was genuinely surprised when Apple declared on the eve of trial that it wanted the Court to set a FRAND rate. Motorola would welcome a final license agreement with Apple and a process to make that happen. However, the Court is correct that it would be inappropriate to grant Apple's request that the Court set a FRAND rate that would not bind Apple. As a result, there can be no trial because there are no remedies available to Apple in this case. There is no justiciable case or controversy before the Court now that Apple has refused to commit to the terms of the specific performance that it seeks. Importantly, there are scores of companies with essential patents, and many more companies that seek to implement standards and negotiate licenses.
Should the Court accept Apple’s request to declare a non-binding fair, reasonable, and non-discriminatory rate that Apple chooses not to pay, it is an open invitation for other companies to file contract-based declaratory judgment actions and burden this Court with similar requests for an advisory rate that would similarly not provide resolution of their disputes.
At the final pretrial conference held November 1, 2012, the Court and the parties “discussed at length questions about the justiciability of the issues raised by Apple and the implications of the court’s picking a specific FRAND rate in view of Apple’s statement that it does not consider itself bound to accept any rate determined by the court.” Dkt. 485. The Court “questioned whether it was appropriate for a court to undertake the complex task of determining
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a FRAND rate if the end result would be simply a suggestion that could be used later as a bargaining chip between the parties.” Dkt. 487 at 2. The Court concluded “it would be inappropriate to grant Apple’s clarified request for specific performance.”
Id. The Court is entirely correct. Indeed, given Apple’s position in refusing to be bound by the FRAND rate, jurisdictional limits, as well as principles of equity, support concluding that no trial is possible.
As the Court noted, monetary damages are the “normal” remedy for breach of contract. What Apple now seeks is an extraordinary remedy of specific performance whereby the Court would set the FRAND rate that Apple would treat as non-binding and advisory. Apple will not submit to being bound by that rate and claims the right to escape the Court’s finding if it is not to its liking, a circumstance no U.S. court has abided. Even if Apple “accepts” the Court’s rate, Apple claims the right to bargain down from there—thus prolonging indefinitely the very licensing “case or controversy” this Court planned to resolve. Apple's “have my cake but may not want to eat it” approach is wasteful of resources and incompatible with the established limits of this Court's Article III jurisdiction. To adjudicate FRAND terms that would bind only Motorola while doing nothing more than inform Apple's ensuing next licensing offer (should it wish to make any offer) would amount to rendering an advisory opinion without redressing any actual grievance or resolving a ripe case or controversy.
Jurisdictional limits aside, the Court is also correct that Apple’s request fails the four-factor test of eBay. Apple identifies no harm that is irreparable; nor has it shown that money damages (which it sought then dropped) are inadequate. Also, the licensing negotiations and lawsuits that constitute the supposed injury posed by Motorola’s alleged FRAND breach stand to persist regardless of whether the Court sets a non-binding rate. Likewise, the public interest
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factor favors declining to provide equitable relief. Once Apple’s request for equitable remedies is taken off the table, there is no purpose for an advisory trial on the FRAND question.
The remaining issues in this case are likewise unsuitable for trial because, without damages, there are no appropriate remedies. Apple alleges that Motorola’s ‘898 patent was untimely disclosed to ETSI. This, according to Apple, is a breach of contract and patent misuse even though the ‘898 patent is not asserted in this contract case. Apple seeks only equitable relief: Apple asks this Court to find the ‘898 patent unenforceable and also requests an injunction precluding Motorola from seeking an injunction in other cases in other courts in which Motorola might assert the ‘898 patent. The primary problem with this extraordinary relief is that it is in reality an affirmative defense to an assertion of patent infringement. These issues ought to be tried in the forum where the ‘898 patent is actually asserted. Indeed, Apple raised these exact affirmative defenses to Motorola’s assertion of the ‘898 patent in a recent case before Judge Posner that is currently on appeal. Should the Court accept Apple’s request to find prospectively that the ‘898 patent is unenforceable when it is not asserted in this action, this again would serve as an invitation for other parties to file timeliness lawsuits in this District (or elsewhere) about patents before those patents are ever asserted or raised. In addition, Apple’s remedies are all equitable, discretionary, and require Apple to demonstrate that damages are inadequate to compensate for any alleged harm. This, Apple cannot do.
BACKGROUND
