Standards-essential patents (SEPs) cover, as the name suggests, technology that is essential to certain standards. SEPs are supposed to be licensed by the patent-holder on so-called fair, reasonable and non-discriminatory (FRAND) terms — essentially, because this technology is so important, the patent holder is not supposed to try blocking rivals from using it as long as they are willing to pay a FRAND rate.

In the case of Motorola, the SEPs in question cover part of the GPRS standard, which is in turn part of the rather important GSM cellular standard. Motorola and Google tried to get Apple to pay a rate of 2.25 percent of the entire device’s sale price in order to use the technology. Apple said this wasn’t a reasonable rate and Motorola sued in Germany, eventually winning its case and threatening the sales of iOS devices in that country. The Commission opened an investigation into this in April 2012.

Crucial to the Commission’s “statement of objections” today, Apple had agreed to let the German court set a reasonable licensing rate, but Motorola had pushed on with enforcing the injunction anyway. This showed Apple had been willing to pay something to Motorola – without that willingness, the Commission suggested, it might not have stepped in.

As the Commission summarized its preliminary conclusion:

“The seeking and enforcing of an injunction for SEPs can constitute an abuse of a dominant position in the exceptional circumstances of this case – where the holder of a SEP has given a commitment to license these patents on FRAND terms and where the company against which an injunction is sought has shown to be willing to enter into a FRAND licence.”

That said, Motorola maintained in its own statement today that “Apple had to make six offers before the court recognized them as a willing licensee.”

A statement of objections is effectively a warning and an invitation to the target to defend itself – after that defence has been heard, the Commission will come up with a final judgement.

In a statement on Monday, EU Competition Commissioner Joaquín Almunia said SEPs should not act as blockers to competition:

“The protection of intellectual property is a cornerstone of innovation and growth. But so is competition. I think that companies should spend their time innovating and competing on the merits of the products they offer — not misusing their intellectual property rights to hold up competitors to the detriment of innovation and consumer choice.”

In its statement, the Commission highlighted the difference between its preliminary ruling and the U.S. Federal Trade Commission’s (FTC) proposed Consent Order that would force Motorola to play by the FRAND rules — that order would only apply to Motorola’s future dealings, while the European Commission is preparing to rule on what Motorola has already done.

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Rackspace General Counsel Alan Schoenbaum detailed the legal challenge in a blog post on Friday. You can read the details there and in its petition to the United States Patent and Trademark Office, but the gist is that Rotatable sued Rackspace (as well as Apple, Netflix, Electronic Arts, Target, Whole Foods Market and numerous other large companies) and then told Rackspace it was ready to settle the claim for $75,000, possibly less. Classic troll behavior.

And even though its USPTO challenge will end up costing much more than $75,000, Rackspace decided to stick it to Rotatable and stick up for everyone else who has developed a rotatable mobile app. Some already have been sued and others might be, and all they did was utilize a feature of the operating system their apps run on. It’s the equivalent of suing Microsoft Office users for infringement if you thought Office had infringed your patent.

As Schoenbaum explained during a phone call, this is standard operating procedure in patent troll cases. Because of a legal theory called patent exhaustion, patent holders who sue and lose or settle with and grant a license to upstream defendants (e.g., OS or device manufacturers in this case) can’t then go after downstream users such as Rackspace or Whole Foods. It’s often a lot more effective to shake down lots of those downstream users — be they individuals, small businesses or corporations — for relatively small settlements than it is to target one or two big upstream infringers.

Small businesses, especially, are often ”perfectly situated sitting ducks for lawsuits,” Schoenbaum said. However, he added, “[Rotatable] probably shouldn’t have started with us.”

Going on the offensive against trolls

This isn’t the first time a large company has decided to stick it to a patent troll in the name of justice rather than settle, though. Last week, Rackspace decided to sue a troll called Parallel Iron that claimed Rackspace committed patent infringement by using the Hadoop Distributed File System. As part of its lawsuit against Parallel Iron, Rackspace is seeking a declaratory judgment that the patents involved don’t actually relate to Hadoop — a decision that could come in handy for other Parallel Iron defendants such as Facebook, Amazon and Oracle. (IP Nav, an alleged troll associated with Parallel Iron, gives its account of the situation here.)

In 2012, Cisco, Netgear and Motorola joined forces (albeit unsuccessfully in the end) to file a federal racketeering complaint against a patent troll demanding payments from hotels and restaurants for using WiFi.

And, of course, there are some more-defensive attempts to tackle the problem of patent trolls, such as Google’s decision to pledge non-assertion for a number of patents related to its MapReduce technology. That decision essentially freed up anyone to use the processing components (but, obviously, not the storage component) of the Hadoop platform without fear of infringement claims from anybody.

Covering the Rackspace-Parallel Iron news, I suggested more large companies serious about fighting the alleged scourge of patent trolling should do exactly what Rackspace is doing with Rotatable — and it’s possible that might happen. Rackspace is attacking Rotatable thanks to a provision of recent patent reform legislation that lets third parties (like Rackspace in this case, because it’s not claiming any patent ownership) to challenge the validity of a patent based solely on the existence of prior art. Prior art that would refute the novelty of a patent has historically been difficult to track down, but new tools such as Google Patent Search are making it an easier process.

In this case, Schoenbaum told me, the amount of prior art available made it a perfect opportunity to take advantage of the new law.

One of many pieces of evidence in the Rackspace petition.

However, he noted, just because the recent patent reform legislation was a step forward, that doesn’t mean the system is perfect. Patent examiners are still overloaded with applications, and in difficult-to-parse software and business-process patents there’s probably a bias to grant rather than deny. He’d also like to (and is optimistic he will) see Congress take up patent reform once again to give end-users (like mobile developers in this case, or WiFi users in the Cisco case) immunity against patent infringement suits.

Whatever happens in Washington, though, it appears Rackspace will keep on taking the fight to patent trolls. Just like Red Hat before it, new open source champion Rackspace wants to do what it can to defend the open source community, Schoenbaum said. “We want to start a movement.”

Feature image courtesy of Shutterstock user Denys Prykhodov.

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If tech companies were serious about getting rid of patent trolls and spurring innovation, their first steps might be building a unified front and applying their ideals uniformly across their IP efforts. On Friday, for example, Google teamed with BlackBerry, Red Hat and EarthLink to file comments with the Federal Trade Commission about the scourge that is patent-assertion entities — institutions that get the rights to IP from operational entities (i.e., companies that actually sell products versus just sue) and then file lawsuits on their behalf. It’s a meaningful action and it addresses a real problem — Red Hat and Rackspace just emerged victorious after a lawsuit with a patent-assertion entity, in fact — but the backstory is a bit more convoluted.

For starters, a skeptic might argue, Google’s interest (and possibly BlackBerry’s, as well) is primarily about sticking it to Microsoft in mobile. After all, it wasn’t so long ago — May 2012 — that Google filed a complaint with the European Union accusing Microsoft and Nokia of engaging with a known patent-assertion entity, called Mosaid, in order to stifle the growth of the Android operating system in Europe. Before ultimately teaming up to acquire Kodak’s patents out of bankruptcy, Google accused Apple and Microsoft of teaming up to buy them and dump them into a patent-assertion entity.

Ironically, though, the very same FTC to which Google is now petitioning recently said the search giant has been abusing its own standard essential patents in mobile by pursuing injunctions against competitors who sought to license them — namely Apple and Microsoft. And BlackBerry, under its former RIM moniker, was part of an Apple and Microsoft-led consortium that bought Nortel’s IP assets in 2011, much to Google’s chagrin. I suspect these apparent hypocrisies only scratch the surface of what’s going on in mobile and across the IT landscape.

There are obviously some complex legal matters and business relationships at play here, but the solution to stopping patent trolling and other questionable practices is for a unified front. There’s plenty of blame to go around among Microsoft, Google and their peers, but placing blame is counterproductive.

Large companies have a lot of money and can effect a lot of change if they use it to fight for things in which they actually believe. If innovation is such a noble cause and the billions in economic damage is really such a problem, then collective and strong action against patent trolls and patent-asserting entities is probably a better solution than talking out of both sides of your mouth about the issue. Maybe they could put those legal resources toward suing the pants off of patent trolls and trying to get their patents deemed invalid, or in defending smaller companies against the high-volume, low-profile IP extortion that keeps patent trolls’ pockets fat.

If it works for Hadoop …

A drawing from a Google MapReduce patent.

The types of patent activity we’re seeing shape up in the big data space — around Hadoop, in particular — help serve as an example of what’s possible but also highlight the shortcomings of half-hearted efforts. One piece of good news that got a lot of attention is that Google has pledged not to assert its patents against anyone using techniques covered by its MapReduce patents. This essentially covers anyone using Hadoop because Hadoop is, in part, an open-source implementation of MapReduce.

Another piece of good news — possibly bigger than Google’s move — is that Rackspace, the latest target of patent troll Parallel Iron’s offensive against companies using the Hadoop Distributed File System, has decided to fight back. In an aggressive blog post on Thursday by SVP and General Counsel Alan Schoenbaum, the cloud-computing heavyweight explained its decision to sue Parallel Iron for breach of contract and to seek declaratory judgments that the patents in question do not relate to HDFS.

This is such a big deal because if Rackspace wins, everyone else facing similar claims by Parallel Iron could win, too. In an emailed statement regarding this lawsuit, a Rackspace spokesperson wrote: “We are asking for a declaration of noninfringement because we just don’t see how the patents they have cited just could reasonably apply to HDFS. We believe that other companies will also be able to use similar arguments to fight this troll.” If a court finds Parallel Iron patents unrelated to HDFS, that could serve as strong evidence of noninfringement in the other cases or to preclude the infringement claims altogether.

Further, every big victory against a patent troll means less money in their pockets, which is the only real way to stem the tide of lawsuits. As long as it’s still profitable, they’ll keep coming. Often, though, large companies opt to negotiate and settle with patent trolls rather than deal with the headache of litigation.

Large companies can strike strong blows against the problem by fighting and winning, and by using their bully pulpits to add fuel to a growing fire around patent reform. As Schoenbaum wrote:

Until Congress reforms the patent laws, companies of all sizes and industries could – and likely will – find themselves in the crosshairs of a greedy patent troll looking for a quick cash-grab. No company is immune, and, sadly, small companies can’t afford to fight. If they don’t succumb to the troll’s demands by settling, they face certain ruin.

Our goal with this lawsuit is to highlight the tactics that IP Nav uses to divert hard-earned profits and precious capital from American businesses. This time, the patent troll should pay us.

One has to wonder, however, if Google couldn’t help put an end to this whole question of HDFS patents by pledging non-assertion of its Google File System patents (HDFS is based on GFS) or trying to get Parallel Iron’s patents deemed invalid. Maybe the whole big data industry could be convinced to set competitive concerns aside and put resources behind that effort. (A Google spokesperson said the company is considering how and where to extend its non-assertion pledge but doesn’t have specific details to share right now.)

Whatever they do, though, technology companies need to stop bemoaning patent trolls and promoting innovation on one hand and then suing each other with the other. When they do that, technology companies look as out of touch, or maybe just as full of it, as the media companies that keep crying wolf about piracy without ever taking the fundamental steps necessary to solve it.

Feature image courtesy Shutterstock user Maksim Shmeljov.

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Amazon Web Services, which has focused a ton of resources on wooing enterprise developers with higher end services is apparently staffing up a broader mobile development effort as well, as evidenced by job posts signaling the creation of a new group to be based in Palo Alto, Calif.

The new group appears to be dedicated to building client-side functionality — but observers say it’s likely that it will do more than that. Most developers access their AWS goodies from their PCs, but we’ve seen more users of all types supplementing or even replacing their laptop and desktop PCs with smartphones and tablets so it makes sense for Amazon to respond to that trend. (It already lets folks access the AWS management console with Androidand iOS devices. 

And, as GigaOM PRO analyst Janakiram MSV had already noted in a post (subscription required) last month, AWS already offers many of the building blocks– Amazon EC2, S3, DynamoDB, and RDS – needed to expose mobile backend services. And its Android and iOS software development kits (SDKs) make it easy for developers to consume these services, he said.

Google inks patent non-aggression pact

In hopes of staving off the sort of patent litigation that has embroiled the mobile phone market, Google last week unveiled a sort of nonagression pact – a patent pledge under which it says developers  can use or sell the technology described in the patents without fear of future lawsuits, as GigaOM’s Jeff Roberts reported. The pledge includes a controversial patent issued last year that covers a form of parallel processing known as MapReduce. That particular patent provoked concern that Google could monopolize tools like Hadoop, which is an integral part of the “big data” revolution.

PayPal caught in cross fire

The notion that any large company will completely rip-and-replace one technology stack for another came under the microscope this week after reports surfaced that PayPal was doing just that — yanking out VMware technology in favor of OpenStack. As it turns out, PayPal, a unit of eBay is building out a big project with OpenStack, with help from OpenStack integrator Mirantis, but stressed that it would also continue to use VMware — whether that’s vSphere and associated management tools; vCloud Director; or just VMware’s hypervisor.

It’s interesting that the clarification came via a VMware blog post by a VMware executive quoting a PayPal exec. Let’s face it — companies rarely yank any technology that’s working. They usually launch new projects with new technologies and keep running whatever works in tandem. But clearly these reports hit a nerve at a time when VMware is struggling to show that its new “hybrid public” cloud strategy has legs and when OpenStack appears to be gaining momentum as a cloud platform.

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The pledge, which Google announced on Thursday, says that developers are free to use or sell the technology described in the patents without fear of future lawsuits. The shield applies, however, only to projects based on open source software that is available to all.

Google’s patent pledge appears intended to complement the open-source software licenses that allow programmers to build on each other’s work. Such licenses, like the GNU General Public License, grant anyone the right under copyright law to use designated blocks of software code; these rights, however, can be undercut by competing patent rights.

The ten patents included in Google’s pledge include a controversial one issued last year that covers a form of parallel processing known as MapReduce. The patent gave rise to fears that Google would be able to monopolize tools like Hadoop, which is an integral part of the so-called “big data” revolution that is fueling a wide range of new products and services. Google’s pledge appears intended to allay that fear.

In a phone interview, a person at Google familiar with the project explained that the MapReduce patent pledge is intended to help the emerging big data and cloud software industry avoid a litigation train-wreck like the one that befell the mobile industry. (In recent years, an arms race of patents covering smartphones has led to a relentless series of global lawsuits which have limited the spread of software technology and increased prices for consumers.)

Google suggests it will add other patents to its non-aggression pool and is inviting others to do the same. In theory, this will lead to an open and expanding workshop of tools for cloud developers; however, there is no guarantee it will work out this way.

One problem is that the pledge will have little effect against patent trolls like Intellectual Ventures, which buy up old patents and use them to file lawsuits against productive companies. The trolls are largely immune from retaliation because they operate through shell companies and don’t actually make any products that can be the subject of a counter-suit.

The Google source said the pledge may not be effective against trolls but that it may curtain the practice of “privateering” — where major companies give patents to trolls in order to harass rivals or in return for a cut of the proceeds the trolls obtain. This person said that, under the terms of the pledge, Google reserves the right to sue anyone who financially benefits from such lawsuits.

There is also the question of whether the Google pledge is legally enforceable. Typically, promises to the world at large don’t carry any legal force because they lack what lawyers call “consideration.” The Google source, however, said those who rely on the pledge could likely prevent Google from going back on the pledge through a doctrine called “promissory estoppel.”

In the bigger picture, the Google patent pledge represents part of a growing effort among Silicon Valley companies to rein in a patent system that many believe has become over-extended. Twitter, for instance, last year introduced an employment contract that promises its engineers that their inventions won’t be used to fuel the patent wars.

(Image by alphaspirit via Shutterstock)

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Shanghai Zhi Zhen makes a product called Xiaoi, which the company calls a “chat robot system” used for customer service and hotlines. While Apple owns a patent on Siri, its voice-activated personal assistant app, the Chinese company claims its patent was applied for in 2004 and was granted in 2006. Siri appeared first on the iPhone in fall 2011.

Siri was developed with a technology Apple acquired when it purchased the company behind it in 2010. The speech recognition engine is believed to have been built using technology licensed from Nuance Communications.

Shanghai Zhi Zhen’s problem with Siri is the robot interaction aspect of Siri, not speech recognition, according to what its spokeswoman told Shanghai Daily:

“The core technology of Siri is man-machine interaction rather than speech recognition, and that is based on the word chat robot system Xiaoi patented,” Mei [Li] said.

Though the original suit was filed last year, the first hearing is set to take place Wednesday.

Last year Apple was forced to pay $60 million to a local company after a Chinese court ruled against Apple in a trademark dispute over the iPad. The company that won the damages award was bankrupt and looking for cash. But this company, Shanghai Zhi Zhen, has not asked for any damages yet. But it is asking for its patents to be enforced.

Apple, for its part, has reportedly asked the country’s intellectual property agency to invalidate Shangai Zhi Zhen’s patent.

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The patents in question cover the use of “intelligent network” services such as alternative billing – the premise of this case was that HTC was supposedly infringing by using the Google Play app store — and a method for brightening and dimming phone screens. According to CIO, the Mannheim district court found in two separate judgements that HTC was not infringing on the patents in question.

A Nokia spokesman was quoted as pointing out that the company still has 34 patents in suit against HTC, both in Germany and the U.S. He also hinted at an appeal. It’s worth pointing out that BlackBerry — known as Research In Motion at the time — was also one of the companies sued by Nokia, and it ended up agreeing to pay royalties (though not necessarily over these precise patents — such deals are usually pretty murky).

It’s hard to feel sorry for Nokia when it comes to these HTC suits. It looks like the court agreed with HTC that Nokia was exaggerating the applicability of the network services patent – I certainly struggled to see how it could give Nokia a monopoly on app store functionality – and a win for Nokia might have meant unnecessary hassle for other Android manufacturers, too. I guess Nokia will just need to forge ahead with its turnaround on other merits.

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GeekWire first reported the news. Here’s the description of the patent:

Digital objects including e-books, audio, video, computer applications, etc., purchased from an original vendor by a user are stored in a user’s personalized data store. Content in a personalized data store may be accessible to the user via transfer such as moving, streaming, or download. When the user no longer desires to retain the right to access the now-used digital content, the user may move the used digital content to another user’s personalized data store when permissible and the used digital content is deleted from the originating user’s personalized data store. When a digital object exceeds a threshold number of moves or downloads, the ability to move may be deemed impermissible and suspended or terminated. Additionally or alternatively, a collection of objects may be assembled from individual digital objects stored in the personalized data stores of different users, and moved to a user’s personalized data store.

Users’ rights to resell digital content is already a contentious issue under copyright law. Startup ReDigi, which allows users to resell digital music, says its model is legal according to U.S. copyright law’s “first sale” doctrine, which lets people resell physical content. But the record label EMI is suing ReDigi, claiming that digital files can’t be resold like physical objects because there is no way to ensure that the “original” digital file was deleted. A court will rule on the case this year, and the outcome could have implications for Amazon’s marketplace.

Amazon’s patent for this marketplace is likely to muddy the legal waters even further. If the patent is as broad as it seems, Amazon could theoretically bar ReDigi and everyone else from offering a resale market in the first place. The company, after all, has spent years in court fighting to own the right to “one-click shopping” based on a 1999 patent.

As for the “electronic marketplace” patent itself, Amazon appears to take account of copyright owners’ concerns. The patent outlines a system to “maintain scarcity” of content: “a threshold may limit how many times a used digital object may be permissibly moved to another personalized data store, how many downloads (if any) may occur before transfer is restricted, etc….These limits may be set for a specific digital object, a digital object type (such as a particular title of book), a digital object category (such as all movies), etc….Alternatively, a user’s ability to access the used digital object by streaming may also be limited upon the occurrence of certain events.” It’s not clear, though, how the system would ensure that a user hadn’t stored a copy of the file somewhere other than his or her “personalized data store.”

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Samsung brought the USPTO’s ruling to the attention of Judge Lucy Koh, who is still sorting out final rulings in the Apple-Samsung case. Samsung, naturally, wants the judge to know that a key patent in the trial is having its status questioned by the patent office, as noted by the Verge.

But, like last week’s reexamination and invalidation of the “Steve Jobs patent,” also used in the same trial, this is by no means a big setback for Apple — yet. This is an initial answer from the USPTO. Apple will be able to respond to the ruling. Even if the USPTO finds against Apple again in a final office action Apple still has many more avenues of appeal. And crucially, Apple can still continue to assert the patent as its own.

So, in the short term, the USPTO’s ruling should have no immediate effect on the outcome of the Apple-Samsung trial.

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The other patent licensees in the deal include Samsung, HTC, Faceboook,, Amazon, Fujifilm, RIM, Huawei, Adobe, and Shutterfly.

The news of the sale was first reported by Bloomberg last week, which pegged the offer at “more than $500 million.” Previously, the digital imaging patents had been valued at $2.6 billion.

Wednesday’s announced sale also brings a bit of closure on the legal front: with it, all outstanding patent claims between the 12 licensees and Kodak are settled. That includes Apple’s dispute with Kodak over iPhone and iPad image capture.

Updated at 8:40 a.m. with additional companies named as licensees.

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