Before Apple collects a dime from Samsung, its first California case may already have fallen apart

Apple's anti-Android/anti-Samsung patents are an endangered species in every jurisdiction in which they get challenged (and may soon be an extinct species in Europe), except for the Northern District of California, where Judge Lucy Koh has so far acted as if she was the World Wildlife Fund for Apple patents. But a tipping point may have been reached at which conservation will come to an end even in her district court.

A few days ago the United States Court of Appeals for the Federal Circuit denied Samsung's motion to stay issuance of a mandate (pending a Supreme Court petition) following a recent appellate ruling on the first California Apple v. Samsung case. As a result, proceedings are now continuing in California, where they could still be put on hold. Apple's smart and hard-working lawyers were quick to request a partial final judgment because they must have realized that time and truth are not on Apple's side: the truth is that two key patents-in-suit are going down the tubes, which takes some time if all appeals are exhausted but will probably happen anyway. If Apple isn't allowed to physically collect money (so far, Samsung has merely posted a bond) now, it may take years and the amount is more likely than not to go down (with a successful Supreme Court appeal, it could even go down to less than 10% of the original billion-dollar damages award).

Basically, Apple is now behaving (with its efforts to be allowed to collect money prematurely, just to have at least something symbolic to show for years of suing) like the citizens of Greece this summer when they tried to bring home as much cash as possible before the banks would close.

There have been situations in which I have blamed Apple's adversaries--HTC more so than Samsung, but Samsung still more so than Motorola--of stalling. However, at this stage I can't accuse Samsung of dilatory tactics for two reasons:

• Two of Apple's patents-in-suit are rather unlikely to survive. This month the USPTO issued a very well-reasoned rejection of the D'677 design patent, and in December, Apple had suffered a major defeat at the next higher level, a Patent Trial and Appeal Board (PTAB), over the '915 pinch-to-zoom API patent. The D'677 patent was key from a damages point of view, and the '915 patent is the software patent in this case that Apple itself considered the most valuable one (of the three Samsung was found to infringe).

• Last summer, Apple dropped its cross-appeal. As a result, there won't be an injunction. We're now merely talking about when and how much money will change hands. Given both Apple and Samsung's untold wealth, I can't see why any payment would have to be made now on a premature and dubious basis. This applies to past damages as well as the ongoing (postjudgment) royalties Apple is seeking.

Samsung's lawyers have now filed a motion for judgment as a matter of law (JMOL) holding the '915 patent invalid or, alternatively, a stay (and in that motion they've also announced their forthcoming opposition to Apple's request for a partial final judgment).

While it would simply be the correct outcome to declare the '915 patent invalid, the problem here (at least in psychological and potentially also in procedural terms) is that Judge Koh previously had a JMOL motion about that patent before her, so she would now have to disagree with herself. It's actually great if people modify their stance based on new knowledge, but none of us finds it easy to do. However, a stay should be a no-brainer under the circumstances, and it would provide some relief for a busy court. Apple is going to oppose that plan vehemently, but again, time and truth are not on Apple's side in this case. If Apple's patents were as great as its products, this here would be a different story, but they aren't.

Finally, here's Samsung's motion:

15-08-26 Samsung Motion for JMOL or Stay by Florian Mueller

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Google defeats Apple in Germany's highest court: slide-to-unlock not a patentable invention

Well over a year ago, Apple and Google announced an armistice under which they withdrew all pending patent infringement lawsuits against one another. I described that one as a second-class settlement from a position of mutual weakness. I still stand by that assessment, with one modification: Google actually got a better deal than Apple. Here's why:

While Google had to give up its original hopes that Motorola's patents could force Apple into a patent cross-license agreement covering the entire Android ecosystem, Google and its partners can also achieve patent peace by getting all the Apple patents invalidated (or narrowed beyond recognition) that have been or could be asserted against Android. Unlike Motorola (prior to being sold to Google for the first time, which later sold it on to Lenovo), Google never wanted to impose a patent tax on Apple: it just wanted its ecosystem to be left alone. Apple hasn't brought any new infringement cases against Android device makers in more than four years, and whatever little is left of Apple v. Samsung is not of concern to Google.

The spring 2014 armistice with Google has a major downside for Apple: it related only to infringement cases, not to challenges to the validity of its patents, a fact that was not clear at the time of the original announcement. Five months ago, the European Patent Office revoked Apple's iconic rubberbanding patent on a Europe-wide basis. The sole remaining party opposing the grant of that patent was Motorola. I have no doubt that Google (not Lenovo) is the driving force behind this continuing effort to shoot down Apple patents, and I guess Google is paying Quinn Emanuel for representing Motorola in cases such as that one.

Today, Google and QE's continuing efforts have succeeded once again (and most probably not for the last time): the Federal Court of Justice, Germany's highest court (besides, theoretically, the Federal Constitutional Court, which has never heard a patent case in its history), today announced (German-language press release) affirmance of the Federal Patent Court's April 2013 decision to invalidate the German part of Apple's European slide-to-unlock patent.

At the time of the previous decision, Samsung was actually leading the effort. I attended that hearing in Munich and Zimmermann & Partner's Dr. Joel Naegerl ("Nägerl" in German), a patent attorney Samsung has been working with in Germany for a long time, was standing in the front row of the part of the courtroom assigned to the attorneys of the complainants (the parties seeking invalidation), and was first to plead. But a year ago, Apple and Samsung agreed to drop all non-U.S. lawsuits against each other, and Samsung withdrew from the invalidation proceedings as a result of that partial settlement. It's easy to imagine why: unlike Google, which has to take care of the Android ecosystem as a whole (a reason for which I believe it should settle the Java copyright dispute with Oracle sooner rather than later), Samsung has no incentive for continuing to challenge patents that won't be used against it anymore.

HTC had also played a key role in the early stages of the case, but already dropped out during the proceedings in the lower court due to a global settlement with Apple.

The Federal Court of Justice found, as I had predicted on Twitter, that the Neonode N1m smartphone, which predates Apple's slide-to-unlock patent, anticipated the slide-to-unlock mechanism per se, so all that Apple could claim as an innovation on top of that one comes down to the visual representation (a slider movement), for which there also is prior art. What is not patent-eligible by German standards (and not under post-Alice U.S. standards either) is the notion of users being able to figure out a certain graphical representation (a slider) more intuitively than, for example, a text (such as the one the Neonode N1m displayed in the same situation) instructing users to swipe.

The number of judges who have now found Apple's slide-to-unlock patent invalid has increased from 10 to 15 (a Federal Court of Justice panel has five members). The only judge in the world who has held so far that Apple deserved a patent on that concept is Judge Lucy Koh of the United States District Court for the Northern District of California. Judge Koh has also made public statements that suggest the opposite of sympathy for parties who challenge bad patents. Her position on what constitutes a patentable invention (as opposed to a great but merely psychological idea without any technologically impressive aspect, which is the way I would describe slide-to-unlock as well as rubberbanding) is an outlier among the 16 judges who have ruled on this "invention" so far.

It will be interesting to see how the Federal Circuit, which also has some exceedingly patentee-friendly judges (Circuit Judge Reyna, for example) but now has a chief judge with a more balanced perspective than her predecessor and appears to have read the Alice writing on the Supreme Court wall, rules on Samsung's appeal of Judge Koh's decision. The Federal Circuit judges frequently talk to and sometimes meet face-to-face with the members of the patent-specialized senate (division) of the Federal Court of Justice of Germany. Maybe they will see eye to eye on this question. Jurisdictional differences exist, but they don't justify upholding a patent on psychology.

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Google found its own Java libraries "half-ass at best", needed "another half of an ass", took Oracle's APIs

This morning I found out I had actually missed the funniest piece of evidence in that whole Oracle v. Google Android-Java copyright infringement case. I've been following the case ever since it started (it had its fifth anniversary last week) but just learned this morning, when reading a new filing by Oracle in the California remand proceedings, that a Google-internal email (by Android developer Chris Desalvo to his boss, Andy Rubin) stated the following (click on the image to enlarge or read the text below the image):

Subject: Java class libraries

With talks with Sun broken off[,] where does that leave us regarding Java class libraries? Ours are half-ass at best. We need another half of an ass.

-chris

Oracle points to this Google-internal memo (which I found on another blog that covered the 2012 trial but was totally biased in Google's favor, hence got the copyrightability part completely wrong and never wanted to draw attention to this rather telling email) as part of its argument that Google's use of the 37 Java APIs at issue in this copyright infringement case was willful and that Oracle should not be precluded (despite a Google motion in that regard) from telling the jury the whole story about Google's fully-intended infringement. This is the introductory section of the filing (the "ass" part comes after the part I quote here):

"Google is a willful infringer. Google copied and distributed without authorization Sun/Oracle's 37 Java API Packages (and RangeCheck and the eight decompiled files, for that matter). Google knew full well that this was copyrighted material, that it needed to take a license, and that its failure to do so subjected it to legal liability. Indeed, Google's employees were instructed to conceal the scope of the infringement for as long as possible as they 'scrubbed the js' from Android. At no point did anyone inside Google ever suggest that its unauthorized copying was 'fair use'--nor does it have an opinion of counsel justifying its actions.

Google simply didn't care that it was willfully infringing Sun's (and later Oracle's) copyrights. Sun was weak and Google needed to get to market with a mobile solution. When Oracle acquired Sun, Google again had the chance to do the right thing—and this time it faced an opponent that was not hemorrhaging revenue and watching its market capitalization drop through the floor. At that point, Google's executives candidly acknowledged that they needed the Java API Packages, because 'the alternatives all suck.' Google believed it would be 'out of business in 10 years' if it did not succeed in mobile. Still, Google did not do the right thing and take a license. Google stands alone among large companies who commercially exploit the Java Platform without complying with the license terms.

Now Google wants to escape any meaningful consequence for its actions. Google argues that the only consequence of a deliberate wrongdoing that earned it many billions of dollars in profit, severely harmed the Java Platform, and allowed Google to maintain a dominant market share in the search engine advertising market, is the difference between $75,000 and $150,000 in statutory damages. Google tries to convince this Court that it simply makes no difference at all that it knowingly and deliberately took the property of another in violation of the law while earning untold billions in the process.

Google is utterly wrong. Willfulness does matter—even when the infringement is on an epic scale. It matters because for hundreds of years, at law and equity, the courts have consistently recognized that conscious wrongdoers must be deprived of any benefit whatsoever from their knowing choice to disobey the law. The trier of fact has always had the discretion, at law and at equity, to take into account conscious wrongdoing when accounting for profits. The Supreme Court has repeatedly affirmed that rule in numerous contexts, the rule has been applied for decades in all types of intellectual property cases, and Congress legislated that rule when it explicitly adopted the rationale of one of those Supreme Court copyright cases, Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (1940), in Section 504(b) of the 1976 Copyright Act. The jury is entitled to consider it here. Accordingly, Oracle proposes herein both a verdict and a jury instruction that properly address this issue."

The section quoted above makes reference to "fair use," the defense because of which the appeals court ordered a remand. This week Steven Huwig, a professional software developer (who among other things wrote software for a large New York bank), said the following about Google's "fair use" defense on Twitter, which suggests (without him using the same terminology) that he still considers the Android class libraries "half-assed":

"Oracle v. Google in a nutshell: Android is like a parody of Oracle JDK, but there's no fair use exception for this kind of parody."

Parodies in general do fall under the "fair use" exception, but not unintended ones.

If you're interested in more detail on Oracle's lawyers' legal argument as to why they should be allowed to present willful-infringement evidence to the retrial jury, here's the filing:

15-08-20 Oracle Opposition to Google Motion to Preclude Willfulness Evidence by Florian Mueller

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Samsung tells Federal Circuit it will appeal Apple's design patent win to the Supreme Court

This week my most popular blog post in a long time brought to light the fact that the United States Patent and Trademark Office now believes one of Apple's iPhone design patents underlying the bulk of a $540 million judgment against Samsung shouldn't have been granted in the first place since it merely combined existing design elements.

In that post I expressed hopes that Samsung would take the design patent issues in that case to the Supreme Court, and a filing made by Samsung with the Federal Circuit on Wednesday (a motion to stay execution of a mandate, i.e., to prevent Apple from physically collecting money before the case is really over) now states clearly that this will happen (this post continues below the document):

15-08-19 Samsung Motion to Stay Issuance of Mandate by Florian Mueller

So there will be a petition for writ of certiorari (request for Supreme Court review), and I'll follow that process closely over the next months. Here's a quick initial assessment of the chances, given that only about 1% of such petitions succeed:

• Samsung states in the filing that it will raise two legal issues in its petition, one about claim construction and one about damages. The first one is about the need for a court to instruct a jury in clear terms that functional elements of a design must be ignored in the infringement analysis. The second one is about whether an unapportioned disgorgement of infringer's profits relating to an entire multifunctional product is the right way or--as Samsung and many others in the industry believe--the wrong way to apply the law.

  Either one of these points is very similar in nature to the questions of patent law the Supreme Court has accepted to look into on several occasions in recent years and on which it has usually, when it accepted to take a look, overruled the Federal Circuit, with Microsoft v. i4i (evidence standard for invalidity defense in infringement proceedings) being a regrettable exception. That is one of the differences that make Samsung's forthcoming petition more interesting than Google's failed attempt to appeal Oracle's copyrightability win to the Supreme Court was. Google's lawyers tried hard to establish parallels between their petition and long-standing philosophical differences between the Supreme Court and the Federal Circuit (which used to be even patentee-friendlier under then-Chief Judge Rader than under current Chief Judge Prost) over patent law and totally different issues in a copyright case. Samsung's petition will be precisely about the types of issues--defendants' rights and reasonableness in remedies--the Supreme Court, besides substantive patent law, does care about.

• The Supreme Court is not only interested in the legal issues raised by a petition but also considers the public interest in its involvement in a matter. Google orchestrated a massive but somewhat duplicative campaign, still the support that its Supreme Court petition in the Oracle case received from the industry at large was--sorry to say so because I generally like and respect Google--laughable. It was largely the same echo chamber teeming with Google's best friends as in the Federal Circuit proceedings.

  By contrast, Samsung's petition refers to the following supporters of its Federal Circuit rehearing petition:

  Dell Inc., eBay Inc., Facebook Inc., Google Inc., Hewlett-Packard Co., Limelight Networks, Inc., Newegg Inc., SAS Institute Inc., the Hispanic Leadership Fund, the National Black Chamber of Commerce, the National Grange of the Order of the Patrons of Husbandry, the Computer & Communications Industry Association, and Professor Mark Lemley, et al.

  That's already a much stronger issue coalition than the one in Oracle v. Google (there are overlaps, but Samsung has more industry support than Google ever had in the Oracle case).

Should Samsung manage to muster even more industry support for its Supreme Court petition than for its Federal Circuit rehearing petition, then I believe a call for views of the Solicitor General (CVSG), which even Google's copyright petition achieved, is very likely. And the Department of Justice will then talk to the industry at large and see that Apple is rather isolated on this issue. It's early for these kinds of predictions, but it's not unprecedented for this blog to offer one rather early (and the "hit rate" has been pretty good in my opinion). I predict that in the event of a CVSG, the U.S. government will side with Samsung on this one. If that happens, certiorari will no longer be a long shot.

So the most important question in the near term is whether even more industry players will chime in and ask the Supreme Court to prevent that someone could, for example, seek a disgorgement of the entirety of Facebook's (or anyone else's) profits over a single icon. I've had various conversations with industry players in recent years, but not in the months following the Federal Circuit decision. I believe Samsung will get more support because no one in his right mind can be interested in design patents becoming infinitely more valuable and threatening than technical patents. That's an absurdity that must be addressed now. If the Supreme Court denied cert, the signal would be terrible and patent trolls might spend many millions acquiring broad and vague design patents in order to shake down high-tech companies. "At your peril" is what I would tell anyone in the industry who for whatever reason might prefer to stay out of this.

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U.S. patent office considers Apple's D'677 iPhone design patent invalid on multiple grounds

Interesting things are still happening from time to time in connection with the generally much less interesting patent dispute between Apple and Samsung. Three months after the United States Court of Appeals for the Federal Circuit vacated $380 million in damages, thus necessitating a third trial in the first California case between these parties, but upheld approximately $547 million in mostly design patent-related damages, it looks like one of the patents underlying that damages claim should never have been granted in the first place.

On August 5, 2015, the Central Reexamination Division of the United States Patent and Trademark Office issued a non-final action in the reexamination (requested anonymously, by Samsung in all likelihood, in mid-2013) of U.S. Design Patent No. 618,677, an iPhone-related design patent. While technically non-final, the odds are long against Apple getting this patent, shortly referred to as "D'677" in the Samsung litigation, upheld. I'm so very skeptical because the USPTO has taken a long time since the filing of the reexamination requests to issue this Office action and, which is far more meaningful, it has determined that this design patent's single claim "stands twice rejected under 35 U.S.C. 103(a) [obviousness], rejected under 35 U.S.C. 103(a)/102(e) [obviousness in connection with a published patent application], and rejected under 35 U.S.C. 102(e)."

The problem the D'677 patent faces here is that the USPTO has determined (for now) that this patent "is not entitled to benefit of the filing date" of two previous Apple design patent applications because the design at issue was not disclosed in those earlier applications. As a result, certain prior art is eligible now, and against the background of that additional prior art, the USPTO believes the patent shouldn't have been granted.

The first rejection for obviousness is based on the combination of U.S. Design Patent No. D546,313 (obtained by LG, another Korean device maker) with either this Sharp patent application or some Japanese design patent application (JPD1235888).

The second rejection cites another Japanese design patent, JPD1204221, in combination with various other prior art, including among others a Samsung design patent (U.S. Design Patent No. D546,313).

The third rejection for obviousness combines one of Apple's own design patents, U.S. Design Patent No. D602,014 with other prior art.

Yet another Apple design patent, U.S. Design Patent No. D618,204, forms the basis of the fourth rejection.

The USPTO's holdings and findings call into question the legitimacy of Apple's intent to collect roughly half a billion dollars in design patent damages from Samsung. Apple's design patent damages claims have been considered outsized by 27 U.S. law professors as well as several of Apple's most significant Silicon Valley neighbors including Google, Facebook, and HP.

Just last Friday, the Patently-O blog published a guest post by Gary L. Griswold, former President and Chief Intellectual Property Counsel for 3M Innovative Properties Company, who disagrees with the Federal Circuit's decision to deny Samsung's request for a rehearing. To me, that denial was no surprise after a unanimous panel decision, and the only interesting question here is whether Samsung will file a petition for writ of certiorari with the Supreme Court. The Patently-O blog believes "Samsung will almost certainly" do so, and while I can't offer a prediction here, I strongly hope that it will because this issue is a serious threat to innovators. Mr. Griswold fears an "explosion" of design patent lawsuits and sees "troubling signs that increased assertion activity has already begun." If that is so, the Supreme Court may actually be interested in looking into this issue now and may overrule the Federal Circuit.

Mr. Griswold argues that courts should not allow a disgorgement of total infringer's profits over a design patent unless the patented design at issue really drives demand for the product. That is an interesting approach but there are other ways to solve the problem, such as the one proposed by industry body CCIA last year.

The bottom line is that Apple's design patent enforcement faces two kinds of legitimacy problems: widespread opposition against the idea that unapportioned disgorgement of profits is an appropriate remedy for design patent infringement by highly complex technology product (imagine what would happen if someone tried to collect all of Facebook's profits over a single icon) and now the USPTO's assessment that one of those iPhone design patents is actually invalid.

Finally, here's the USPTO's assessment of the D'677 patent:

15-08-05 Non-final Rejection of Apple D'677 Patent by Florian Mueller

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Oracle and Google agree on scope of supplemental Android-Java copyright infringement complaint

Further to last week's case management order in the Oracle v. Google Android-Java copyright infringement case, either party has filed a motion as ordered by Judge Alsup.

Google wants the court to preclude Oracle from presenting willful-infringement arguments to the jury unless Oracle definitively elects to seek statutory damages (as opposed to just claiming that it could do so later, no matter how likely or unlikely, given that statutory damages would be tiny as compared to what's at stake here). On that one, the parties disagree. I view this as part of the wider dispute between them over what the jury can be told next year. In a best-case scenario for Google, it would be able to confuse the jury as it did in 2012) with equitable-defenses arguments that are legally unrelated to fair use but easily mislead laypeople, while Oracle would not be allowed to argue that Google's infringement was (as it really was) reckless. In a best-case scenario for Oracle, the equitable defenses wouldn't play a role in the trial but Oracle would be able to present evidence for Google having willfully infringed (internal emails of the "making enemies down the road" kind support that one).

Oracle's motion is about supplementing its complaint in order to reflect new developments over the last few years (since the cut-off before the first trial). Google had said from the beginning that it would not oppose a mere supplementation in terms of making a few more years part of the trial scope, but that it wanted to prevent Oracle from (rather than just supplementing) amending its complaint. In other words, Google said they were fine with more of the same, but not with anything they would consider substantively new.

I wouldn't have expected this, but they have actually agreed on what Oracle can say in a supplemental complaint. Obviously, Google doesn't concede anything. It's not about merits, just about scope at this stage. Even the scope could still give rise to disagreements later in such contexts as discovery: the supplemental complaint would still be interpretable. But Oracle has made things easier for the court by dropping everything that Google would have considered to be an amendment and not merely a supplementation of the complaint. Unless the court has any concerns that Google doesn't have, this one will simply be approved now.

Here's the supplemental complaint (this post continues below the document with the key points ina bullet-point format):

15-08-06 Oracle v. Google Supplemental Complaint by Florian Mueller

A few key facts about the supplemental complaint:

• The additional Android versions Oracle says infringe its copyrights just like previous versions allegedly did are:

  • Gingebread (released in December 2010)

  • Honeycomb (released in February 2011)

  • Ice Cream Sandwich (released in October 2011)

  • Jelly Bean (released in July 2012)

  • KitKat (released in October 2013)

  • Lollipop (released in November 2014

• The 37 Java API packages at issue are (this is not new, just stating for a point of reference):

  java.awt.font, java.beans, java.io, java.lang, java.lang.annotation, java.lang.ref, java.lang.reflect, java.net, java.nio, java.nio.channels, java.nio.channels.spi, java.nio.charset, java.nio.charset.spi, java.security, java.security.acl, java.security.cert, java.security.interfaces, java.security.spec, java.sql, java.text, java.util, java.util.jar, java.util.logging, java.util.prefs, java.util.regex, java.util.zip, javax.crypto, javax.crypto.interfaces, javax.crypto.spec, javax.net, javax.net.ssl, javax.security.auth, javax.security.auth.callback, javax.security.auth.login, javax.security.auth.x500, javax.security.cert, javax.sql

• Oracle points to Android's expansion into various areas:

  • Android Wear

  • Android TV

  • Android Auto

  • Household appliances such as refrigerators, microwaves, washing machines, and air conditioners

  • Google Play, the "digital storefront [that] sells apps, television shows, movies, music, books, newspapers, and magazines for Android users to download and use on Android devices"

• Key market data Oracle's supplemental complaint cites (mostly from Gartner):

  • Android's mobile phone market share increased from 40% to 80% between 2011 and 2014

  • Android's tablet market share rose from 20% in 2011 to nearly 70% in 2014

  • more than one billion monthly active Android users

  • more than 8,000 different Android devices

  • app downloads (I'll try to contribute a tiny bit to that next year) increased from 10 billion in 2011 to now more than 50 billion

  • number of available apps increased from 300,000 in 2011 to 1.5 million now

  • mobile advertising: Android now the top platform by ad revenue (46% market share) and traffic (65% market share); Google also points to this CNET article on Android having three times the market share of mobile ad traffic as compared to iOS)

• Google's financials: annual total revenue more than doubled from $29 billion in 2010 to $66 billion in 2014

• On the basis of the foregoing data, the supplemented complaint argues that "Google is destroying the market for Java as a mobile platform"

It would be interesting to know what else Oracle wanted to say but left out so as to avoid opposition from Google. From the email correspondence between the parties' lawyers that Oracle attached to its motion I was able to glean the following two paragraphs (according to the documents I've seen, these were the last two paragraphs removed in order to reach an agreement):

24. Upon information and belief, Google has continued to refuse to make Android compatible with the Java platform, at least in part, because if Android applications were compatible with the Java platform, then another mobile OS provider could use the Java platform to create a mobile operating system compatible with those applications. If such a provider could attract users to a new mobile operating system capable of running both Android and Java applications, then Google would face a fundamental threat to its dominance in the market for search engine advertising, because it would not be able to direct users to its search engine.

25. Google, unlike Oracle, is not dependent upon revenues from the platform itself, because its real goal is to continue capturing search engine advertising revenues. Google is therefore able to offer at no charge what Oracle has worked hard to build and maintain, and in the process to destroy the value of the Java platform in a market that has become the most lucrative of this generation.

Basically, those two paragraphs are about the difference in business models and the implications it has. Those differences are obvious to all industry observers.

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Nokia completes next stage of transformation into patent troll with sale of HERE to automotive consortium

Nokia has just made the following announcement:

"Nokia completes next stage of transformation with agreement to sell HERE to automotive industry consortium at an enterprise value of EUR 2.8 billion"

The buyers are Audi, BMW, and Daimler. I once did a consulting project, unrelated to this transaction and more generally about IP strategy, for one of them (I closed my consulting business about a year ago, however, in order to focus on app development). It's a really positive sign that these traditional industry players decided to join forces (they're on better terms with each other than major smartphone makers, but don't coalesce every day) and to outbid the likes of Uber.

All three of them--I know their products fairly well because I've repeatedly bought cars from two of them and driven long-term rental cars from the remaining one--have a lot of work to do to defend their turf against Silicon Valley companies like Tesla, Google, and Apple (AppleInsider's Mikey Campbell is a great source on that secretive project). It's ridiculous that, for example, Mercedes doesn't even provide its customers (I'm driving a 2014 S-Class) with frequent software updates the way Tesla does. And I've seen massive user experience deficiencies in the user interfaces of all three of them, including stuff of the kind that is as crazy as the removal of the Start button from Windows was but would presumably get people fired (or never even hired in the first place) at a company like Apple.

For example, the list of recent destinations of my car's navigation system, which has an ultrawide screen (two, actually, but I'm speaking of the one relevant to this problem here), often displays the city and even the county before the street, which means that the street name doesn't appear (for space constraints, even on an ultrawide screen) until I select a list entry. That just makes no sense in a country in which streets have fairly distinct names and one rarely has destinations with identical street names in two cities. Another example: the same button that can be used to select a phone number while using voice control will get the entire operation aborted if you hit it again in order to dial, though you would use that very button to dial without voice control. These examples show that a company like Daimler may understand wheels and brakes, but hasn't (yet) figured out screen layout and user interface design. Today's announcement is not the only indication of progress. The Mercedes F 015 is also very exciting.

With the F 015 being many years off, my next car will most likely be a Tesla, and I will definitely consider an Apple or Google car once available. Still I hope that those automotive companies, who have now demonstrated that they increasingly invest in digital technologies, will learn about user experience up to the CEO level, will change their development cycles and business model so they can deliver frequent and free updates to customers, will dump fossil fuels before customers dump their products, and and will do all of that in time before companies like Apple, Google and Tesla will, in a hypothetical worst-case scenario, turn them into the next Nokia.

Talking about the Nokia we know, I think the headline of this blog post is an accurate modification of the headline of today's Nokia press release: the "next stage of transformation" here relates to Nokia's trollification. By selling the HERE mapping business, Nokia has divested yet another product business. It was a licensing business, but a licensing business in which customers got something real and functional, as opposed to paying up for overbroad and often invalid (at least that's what German courts thought when Nokia sued HTC and ViewSonic a couple of years ago) patents.

Nokia's acquisition of Alcatel-Lucent has received regulatory clearance in the U.S. and Europe. Today's press release says the deal is expected to "close in the first half of 2016." It would be nice if this resulted in Nokia again focusing a bit more on actual products, but I'm very skeptical.

I guess it won't take long before numerous former Alcatel-Lucent patents show up in various lawsuits brought by patent assertion entities (PAEs). No company in the industry appears to be nearly as active and agressive in connection with privateering as Nokia. In May, Nokia and Ericsson sought to justify their privateering ways after IAM (Intellectual Asset Management) Magazine wrote about this topic, citing this blog.

Audi, BMW and Daimler will probably be among the targets of such patent assertions, given that cars are increasingly smartphones on wheels...

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