We learned a couple weeks ago that Barnes & Noble lost a key preliminary decision to Microsoft in their patent dispute. A new court filing explains the judge’s reasoning, and sheds light on some of the legal issues behind Microsoft’s effort to collect patent royalties from Android device makers.

Theodore Essex, administrative law judge for the International Trade Commission, wrote in his Jan. 31 decision that Microsoft’s negotiations with Barnes & Noble over the use of Android in the Nook were “certainly hard bargaining,” but he concluded they didn’t qualify as patent misuse.

“Even assuming that these transactions and the related evidence establishes that Microsoft is bent on eliminating Android as a competitor, the mere fact that Microsoft is targeting Android for destruction is insufficient to establish an antitrust violation let alone patent misuse,” he wrote.

The judge’s ruling was previously noted in the court docket, but the text of his decision wasn’t initially made public. A redacted version was filed this week: PDF, 18 pages.

The effect of Essex’s ruling was to narrow Barnes & Noble’s legal defense in a trial that took place last week, which focused on three Microsoft patents and technologies used in Barnes & Noble’s Android-based Nook Color, Simple Touch Reader and Nook Tablet devices. A preliminary decision in the broader case is expected in April, with a final ruling from the ITC four months later.

Barnes & Noble has already appealed the Jan. 31 patent misuse decision, as noted by Groklaw last week. The bookseller say that the judge overlooked the central basis of its argument. Write lawyers for Barnes & Noble in their appeal:

“In particular, the ALJ’s decision simply does not address the central basis for Barnes & Noble’s patent misuse defense—namely, that Microsoft’s Android licensing program has improperly leveraged patents covering at most trivial and outmoded design choices and implementation details in order to require OEMs to take licenses (and pay substantial licensing fees to Microsoft) for every Android device they sell, regardless of whether those devices infringe any of Microsoft’s patents.”

Barnes & Noble has previously said that Microsoft wanted “shockingly high” fees for Android. Analysts have estimated that Microsoft is seeking as much as $7.50 to $12.50 per Android device.

The bookseller has alleged that Microsoft’s Android patent campaign violates antitrust law, and it previously retained David Boies,  the lawyer who represented the U.S. Justice Department in its landmark antitrust case against Microsoft, to represent it in the case.

Microsoft says it has reached patent deals with Android device makers representing 70 percent of Android smartphones sold in the U.S.

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  • Guest

    And another desperate B&N tactic fails. Looks like they’re running out of options.

    • http://twitter.com/quidpro quidpro

      Yay! Eat it ya stupid book store trying to sell book things! Books are for stupids! 

      • Guest

        Reading impaired?

      • Guest

        Reading impaired?

    • Anonymous

      Contrary to what you are saying. B&N has a good chance of winning this case. 

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Except groklaw is exceedingly biased in its coverage.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Except groklaw is exceedingly biased in its coverage.

        • Anonymous

          lol yea right, give me one article from Groklaw that is biased. Give me one and i’ll believe you.

          Groklaw has been cited by the attorneys for several firms in law journal articles. It has also won 11 awards.

          • http://www.noisetech-software.com/Home.html Steven Noyes

            About 1/2 of them.  Take your pick.  Groklaw are solid software socialists and do not believe developers should be allowed to profit and protect their work except through copyright even though legal history has shown that is an inadequate method for protection.

  • http://www.christopherbudd.com Christopher Budd

    B&N trying to repeat the Microsoft anti-trust experiences of the 90’s by hiring Boies actually made me look at this in a different way.

    It’s interesting to look at this case at a high-level and compare it with the anti-trust case of the 90’s.

    The fact that there’s practically nothing the same between the two other than the name “Microsoft” is a very stark and telling marker of how Microsoft’s position has changed.
    1. Microsoft has been hauled into court for tactics not meant to ensure dominance, but to try and get a piece of the pie from the dominant player.

    2. This isn’t about PCs, it’s about tablets.

    3. It’s about a market that Microsoft isn’t present in as of today.

    4. It’s not THE trial of the decade. It really is more a legal footnote.

    5. Relative to #4, there’s no huge moral quality to the discussion around this. This isn’t B&N’s David standing up to the Goliath of the Evil Empire like you saw with Netscape v. Microsoft. It’s just legal wrangling that companies go through. 

    6. State and Federal Governments aren’t piling on this. They don’t see a chance for a victory that will burnish their crusader credentials and fill their coffers with tribute…er, settlement money.

    7. Microsoft won, at least this round.

    The world really is a different place. And, in a way, I would argue this ultimately proves that the old anti-trust trial was a waste of time and money. Nearly every one of those differences was driven by changes in the market not by antitrust remedies.

    • Bob

      Why would you compare them? This is a patent dispute. One of thousands. Obviously it doesn’t hold a candle to the historic US v MS. I agree that the latter was a waste of time and money. But because it was based on a fallacy, not because it may or may not have proved ineffective subsequently.

      Certainly fear of additional litigation, ongoing judicial oversight, and the prominent role internal lawyers have played in every MS decision post the DOJ trial has had a negative impact. But whether that’s the main reason for MS’s subsequent decline (from an industry dominance and competitive perspective), or a new/ rejuvenated crop of competitors (i.e. market forces), or just Ballmer’s repeatedly demonstrated ineffectiveness combined with a board that lacks the courage to replace him, is open to debate.

      • http://www.christopherbudd.com Christopher Budd

        I’m comparing them because they both involve antitrust and in reading I was struck by some of the differences. It’s by no means a rigorous analysis. It’s more a sketch on the back of an envelope to show how things are different now than then.

      • http://www.christopherbudd.com Christopher Budd

        I’m comparing them because they both involve antitrust and in reading I was struck by some of the differences. It’s by no means a rigorous analysis. It’s more a sketch on the back of an envelope to show how things are different now than then.

  • Anonymous

    you know what is the term for what MSFT is doing with patents: capitalism. you can’t apply selective justice and expect the law to fall on the side of a company you like or dislike. what they are doing is no different from any patent holder that collects income from their portfolio. just because it is msft, they aren’t banned from patents.

  • Maven99

    Seems like a key issue missing from the discussion is really more about what an *appropriate* fee should be for these patents. Let’s assume for the sake of argument that they have some validity. Doesn’t mean Microsoft should be able to go out and require $1,000 per device as a licensing fee. Given that the OEM licensing fee for a full copy of Windows is ~$50/copy, seems like ~$10 for these trivial components of Android is way overreaching. Maybe if they asked for $0.10 per device that might be defensible. Setting a ridiculously high price is effectively the same as refusing to license.

    If a company is going to benefit from the monopoly that a patent confers, it is inherent upon the company to act in reasonable fashion. Since companys have the incentive to act unreasonably if it will benefit their bottom line, the legal system needs to provide an effective mechanism for defining and enforcing reasonableness. As an example, what if the water company wanted to jack up the price of their services to residential customers to $500/mth – is that reasonable? Customers could always hire a private firm to top up water tanks they install so there is always an alternative, just often one that doesn’t make a lot of practical sense.
    From another perspective, how many other bit (or major) players holding random minor patents could pile on, effectively driving Android licensing up to hundreds if not thousands of dollars per device. This is not reasonable, is in no way defensible and is “patently” against the good of consumers and society. Time for the courts to get serious about managing this mess of a patent system even if it takes longer to appropriately gut it from a legislative angle.
    I would suggest that, in addition to appealing the decision, as a backup plan B&N (and Google) should get some good analysis done about what a truly reasonable fee should be.

    • Guest

      The reasonableness of the fees has already been investigated and a majority of entities who were infringing have chosen to license them. Comparing that fee to the license cost of Windows is irrelevant. The measure is how it relates to similar patents across industry. If you want to talk about unreasonable, how about Google owned MMI wanting 2.5% of the net selling cost of the overall device? Maybe MS should charge that instead?

      There’s no evidence that consumers have been harmed by this or any other patent licensing. If you infringe, you pay. It’s that simple. And ultimately consumers benefit from innovation, not people like Google knowingly deciding to ignore required licensing despite infringing the IP of others, as court records make clear they did in at least the Oracle case.

      • Maven99

        Interesting – who “investigated” the reasonableness of the fees? And BTW companies under the gun and threatened with mountains of litigation if they don’t bend over do not consistitute a valid source of such an assessment.
        And any claim that “there is no evidence that consumers have been harmed by this or any onther patent licensing” seems like an very obtuse observation given the massive evidence of all sorts of patent troll activity clearly damaging innovation. Just Google “NPR patent troll” and click on the first link to their investigation of Intellectual Ventures then try to make the same statement with a straight face.

        • Guest

          In addition to the ITC and the DOJ, the people who decided to pay them versus litigate. And who is more motivated to research them than the latter? Spare me the “they were threatened into agreeing” bs. Many of those who have signed are large and sophisticated firms that aren’t easily intimidated. The fact that they signed indicates that they felt they would lose in court.

          We’re not talking about patent trolls, except in your biased opinion. We’re talking about an OS that has been found to infringe the IP of others and that Google itself knew did so and instead chose to take their chances vs license (as surfaced in the Oracle lawsuit). Re IV, again spare me. They have patents which they invested a great deal of money in. If they’re infringed and IV seeks to collect a royalty, that’s perfectly legitimate. You may not like their business, but that doesn’t make it invalid.

      • http://profiles.google.com/kilzzz Kilz na

        There have been no findings in the Google/Oracle case. The trial hasnt even started.

        • Guest

          I didn’t say their had been a finding in the Google/Oracle case. I said “as court records make clear they did in at least the Oracle case”. Go read the internal memo from Rubin that Oracle was able to secure via discovery and which Google is now desperately trying to have thrown out. It makes it clear they knew that Android was likely to infringe Sun’s patents (now Oracle’s) and considered several options: adopt MS tech, license from Sun, ignore the issue and hope for the best. Guess which one they chose?

  • http://twitter.com/FeedingTheGeek Jason Zions

    Keith, for someone who clearly knows a lot about patents, your response shows some classic misinterpretations or misunderstandings about them.

    1) “developed independently” is irrelevant. Patents cover the mechanism, not its expression. Independent development is not a defense to patent infringement.

    2) “Just a few of the thousands” – again, irrelevant. If those few weren’t important to the product, then Android could easily be re-implemented to avoid infringement. The fact that suck reimplementation hasn’t happened is pretty strong proof that these aren’t minor or fringe patents.

    3) “extortion” – pretty strong word. The dollar values quoted in the article appear to represent 5% or less of the retail price of the product. That’s actually quite common in the patent licensing space.

    4) “slow down the progress of technology outside of Microsoft” – not the stated purpose of patents. All the Constitution cares about is the progress of technology – *period*. Microsoft spends a helluva lot of money on advancing the state of technology; money they collect from licensors of their patents certainly contributes to paying for more research. That’s what the founders cared about.

    • http://twitter.com/keithccurtis Keith Curtis

      I know that independent invention is not a defense of patent infringement. But it is relevant to the moral question of whether a software patent is useful capitalism. As a comparison, consider how people would license WMA technology from Microsoft. They’d get an isolated and well understood piece of complicated and clever technology from Microsoft in the form of specs and code. That can be seen as a sort of typical useful capitalism.

      When you consider how much money is being spent for how small and cheap to implement also makes the argument that is capitalism less true. Compare to WMA where it takes years of testing and analysis to tune the algorithms to the wide variety of music and bandwidth, etc. There is nothing complicated like that going on here.

      The patents can be worked around. However, the products are now in the market so you already have infringement and it is messy to fix. They haven’t been worked around because it is likely that B&N will pay up, or the patents will be thrown out. In either case is isn’t necessary to work around the code yet, and so programmers usually wait to the lawyers are done shouting before they bother. The TomTom lawsuits were about FAT patents. FAT is one of the oldest and most primitive and boring file systems on the planet. In general, if you follow the industry closely, you will find that the patents are not about interesting bits of important technology like WMA.

      5% of the retail value of a product for a few tiny bits of software is a massive price. Imagine if the whole product had 1,000 patents and they had to pay 5% x 1,000. I would expect to get an entire OS for that price.

      I would like B&N to succeed and keep their money so they can invest in future R&D. Microsoft has billions in the bank already, more money than it knows what to do with. This patent haven’t advanced the state of technology as it was developed independently years before the lawsuit. I don’t think our founding fathers would support software patents. Donald Knuth doesn’t.

      • Anonymous

         Most of the important standards in an industry are licensed under FRAND patents

  • http://profile.yahoo.com/2B7CL4V73PHVZPAB7O7C7JFHY4 Jerald

     If we use some good mobile security such as comodo mobile security for our android mobiles then no problem about it. its so safe and cool to use it

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