How Microsoft Trumped an Injunction Google Obtained in Germany
Forum shopping is the process by which a plaintiff chooses which court to decide the plaintiff’s case from among several courts having jurisdiction and venue. As a strategic patent tool, forum shopping allows a plaintiff to pick a court for filing the lawsuit that may provide plaintiff with an advantage over the defendants (e.g., favorable judge; speed of deciding a case; procedural rules; cost; convenience, etc.) For the same reasons, defendants too may engage in forum shopping as a strategic patent tool in a responsive filing of one or more new actions against the plaintiff to open up new lines of counter-attack.
The decision by the 9th Cir. U.S. Court of Appeals in Microsoft v. Motorola on September 28, 2012 is a good example illustrating how forum shopping, including foreign forum shopping, can be used as a strategy to gain an advantage. It also shows how forum shopping does not always provide the expected advantage. There, Microsoft’s home court advantage trumped Motorola (a division of Google) forum shopping.
In Microsoft v. Motorola, Motorola sent Microsoft an offer-to-license letter, offering Microsoft a license under certain standards-essential patents. The offer was at a “2.25% royalty rate,” “subject to a grant back of Microsoft standard-essential patents,” “based on the price of end products and not on component software,” and gave Microsoft 20 days to accept. On November 9, 2010, before the expiration of the 20 days time to respond, Microsoft did some forum shopping and chose its home court of the U.S. Dist. Court of Washington to file a breach-of-contract suit against Motorola, providing immediate advantages over Motorola. Microsoft alleged that Motorola’s offer-to-license letter breached Motorola’s contractual RAND obligations to the standards bodies to which Microsoft is a third-party beneficiary.
In response, the next day, Motorola did some forum shopping of its own and chose the U.S. District Court for the Western District of Wisconsin to file a patent suit against Microsoft – a court known for its speed in deciding patent cases. This forum provided a decided advantage to Motorola in the promise of a speedy decision on patents which could then be used to drive Microsoft to capitulate to the terms offered by Motorola under the standards-essential patents that were the subject of the breach-of-contract action before Washington’s home court could decide the issue. Motorola (and more particularly its parent Google) fears an unfavorable ruling by the Washington court, which could find the standards-essential license, including the “grant back of Microsoft standard-essential patents,” unreasonable. This would leave Android products exposed to Microsoft patents. The complaint alleged infringement of U.S. patents ‘374, ‘375, and ‘376, three of the standards essential patents Motorola had offered to license and that were part of the breach-of-contract suit.
In reply, Microsoft successfully moved to transfer the Wisconsin case to its home forum court of Washington. Not only did Microsoft dodge the Wisconsin bullet by providing the Wisconsin court with an alternative court venue and a reason to transfer the Motorola filing, but the Washington court also consolidated the Wisconsin patent case with the breach-of-contract case before it. This was a nice bonus from Microsoft’s home court since the Wisconsin patent claims were non-compulsory to the breach-of-contract claims and so were not required to be consolidated.
Intent on getting a decision on its patents before the Washington District Court could decide the breach-of-contract case, Motorola did some more forum shopping and in July 2011, Motorola opened up a new front for attack by choosing the Mannheim court in Germany to file a suit against Microsoft; alleging infringement of the German ‘667 and ‘384 standards-essential patents and seeking, among other things, an injunction. These patents were included among the standards essential patents Motorola had offered to license and that were part of the breach-of-contract suit in Washington.
The German court system is one forum gaining particular favor with litigators. The German court system provides quality patent jurisprudence that delivers infringement decisions in typically a shorter period of time and at a fraction of the cost of U.S. District Court litigation. An infringement decision or an injunction to stop sales based on the German patent infringement decision can then be used to settle patent disputes in the U.S. and/or elsewhere. This is precisely the strategy Motorola decided to use against Microsoft and it seemed to be working. On May 2, 2012, less than one year after its July 2011 filing, the German court rendered a decision favorable to Motorola holding that Microsoft’s Xbox gaming system and certain software infringed the patents and enjoining Microsoft from selling those products in Germany.
Anticipating the worst, prior to the decision by the German court, on March 28, 2012, Microsoft sought to get further dividends from its home court advantage. Microsoft moved the Washington District Court for a temporary restraining order to enjoin Motorola from enforcing any injunction that may issue in Germany pending the resolution of the breach-of-contract action by the home court. This is known as a foreign anti-suit injunction and was possible since an injunction in Germany is not self-enforcing (i.e., after an injunction is decided, the plaintiff is required to take further actions like posting of a bond to enforce the injunction). The Washington court granted the TRO. After the German court issued its next ruling, the Washington District Court converted the TRO to a preliminary injunction; advantageously giving Microsoft a temporary relief from an injunction in Germany.
The decision by the 9th Cir. U.S. Court of Appeals in Microsoft v. Motorola nicely illustrates how forum shopping can provide strategic advantage and how it may sometimes go awry. The strategic advantages noted above that Microsoft has and continues to enjoy from having forum shopped its breach-of-contract suit to its Washington home court has and continues to provide dividends.
On the other hand, Motorola’s attempt to forum shop to the German court before the U.S. District Court could adjudicate the breach-of-contract case fell short; just as did Motorola’s earlier attempt to forum shop to the District Court of Wisconsin. The strategy sought to use the favorable ruling from the German court to snatch victory from the jaws of a likely defeat by a Washington court that may likely decide the essential patents issue in favor of Microsoft; leaving Android exposed to Microsoft patents.
The District Court would hear none of it and the Ninth Circuit agreed. The 9th Circuit found that the District Court applied the correct legal standard and did not abuse its discretion in barring Motorola from enforcement of the injunction in Germany. The parties and issues are the same in both actions, the 9th Cir. explained. “Microsoft’s contract-based claims, including its claim that the RAND commitment precludes injunctive relief, would, if decided in favor of Microsoft, determine the propriety of the enforcement by Motorola of the injunctive relief obtained in Germany.” Slip. 26.
Foreign forum shopping by Motorola was unsuccessful in Microsoft v. Motorola because of the close nexus existing between the German patents on which the injunction was based and the contractual lawsuit before the U.S. District court. Motorola’s earlier attempt to forum shop to the Wisconsin court likewise failed because of the close nexus existing between the litigated patents and the breach-of-contract suit. Absent such a close nexus, however, forum shopping (domestic and foreign) remains an important strategic tool for companies to use in advancing patent objectives. As the advantages enjoyed by Microsoft from having forum shopped its breach-of-contract action to its home court shows, forum shopping provides a valuable strategic tool to help your company get the upper hand over competitors.
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