Cloud Computing: Google Cultivates a Rep as Patent Gouger

Apple’s lead IP lawyer Bruce Watrous told ETSI that the industry lacks consistent adherence to FRAND principles in licensing all the patents necessary to make mobile devices.

An appropriate rate, he said, would reflect the licensee’s portfolio of standards-essential patents and patent applications compared to the total industry-wide pool of such patents and applications.

The royalty base would be "no higher than the industry average sales price for a basic communications device that is capable of both voice and data communication." In other words, not on the entire freaking final product, just on the component with the patented functionality in it. No asking for 2.25% of all of Apple’s 3G-capable sales like MMI has – which the Journal estimates is worth a billion dollars – or 2.4% like Samsung has.

And, finally, seeking injunctive relief would amount to FRAND abuse, which is what the EC is now investigating Samsung for.

MMI last week enforced an injunction it got on a standards-essential patent that Apple managed to get lifted but not before sales of some iPhone and iPad models through Apple’s online store in Germany were suspended for a while.

Within hours of the Wall Street Journal breaking the news of the existence of the Apple letter Wednesday, Microsoft posted a patent pledge on its web site encapsulating the principles Apple is pushing. Then patent analyst Florian Mueller discovered that Cisco, which doesn’t have a dog in the current patent fight but does own a bunch of ETSI-pledged patents, wrote to ETSI just last week endorsing Apple’s proposal and telling ETSI to adopt the Apple framework tout suite.

Meanwhile, Google was supposed to be making its own pledge to "dozens" of standards bodies, including ETSI, to reassure them that Motorola Mobility’s essential-patents portfolio will be licensed fairly and to impress the European Commission, which is supposed to decide whether Google can acquire MMI and its 17,000 patents and 7,500 patent applications on Monday.

The EC is reportedly touchy about the patents. The Financial Times says the portfolio "has emerged as a key issue" for the regulator and that "a wider aim of the Commission is to better define the fair and reasonable terms for licensing patents, a process that would be assisted by Google providing greater clarity on the use of injunctions or royalties."

Well, as you might expect, patent litigation watcher Florian Mueller tracked down a copy of the Apple letter and put it and the Cisco letter on Scribd.

He also got a copy of the letter Google sent Wednesday to the IEEE and put that on Scribd too. Florian wasn’t expecting much out of Google to begin with, but he says its proposed definition of FRAND "makes a mockery of the term."

Nothing will change. MMI’s FRAND litigation tactics will continue.

It will continue to demand 2.25% of the "net selling price of the relevant end product" even if the patents are implemented only in one hardware or software component, and the only way to avoid an injunction, Florian says, is to "accept those out-of-line royalty demands that no responsible company in the industry will be able to accept." He says, "I can’t imagine that any major player ever acceded to that demand."

Pending litigation won’t go away either because Google reserves the right to pursue injunctions against those who didn’t take a license on unreasonable terms in the past.

Based on the Google letter Florian can’t see the EC waving the Google-MMI merger through. "It would be a terrible precedent if regulators contented themselves with this."

Not waving it through would mean an in-depth probe that would last about 90 business days. Google didn’t submit any so-called remedies or concessions to the EC by its deadline Monday night.

The scuttlebutt says the Justice Department will approve the merger next week.

Bloomberg reports that the regulator will also probably approve the $4.5 billion purchase of 6,000 Nortel wireless patents and patent applications by the Rockstar Bidco consortium consisting of Apple, Microsoft, EMC, RIM, Sony and Ericsson eight months ago.

The price the patents fetched at auction was a seminal event in the whole ongoing patent struggle and led to Google offering $12.5 billion for Motorola Mobility.

Bloomberg says it was told by sources that the DOJ will "continue to examine companies such as Google that haven’t sworn off the practice" of "suing to stop other companies from using their essential smartphone technology."

Below is Microsoft’s patent pledge in its own words. It’s a change in position since June when it was all for pledged-patent holders rights to seek an injunction on the theory it would push infringers into negotiating. Now it says:

1. Microsoft will always adhere to the promises it has made to standards organizations to make its standard essential patents available on fair, reasonable and nondiscriminatory terms.
2. This means that Microsoft will not seek an injunction or exclusion order against any firm on the basis of those essential patents.
3. This also means that Microsoft will make those essential patents available for license to other firms without requiring that those firms license their patents back to Microsoft, except for any patents they have that are essential to the same industry standard.
4. Microsoft will not transfer those standard essential patents to any other firm unless that firm agrees to adhere to the points outlined above.

Amusingly, Florian recalls that for purposes the European Interoperability Framework 2.0, the set of IT procurement guidelines adopted in December 2010, Google backed royalty-free, generally restriction-free open standards