U.S., E.C. Clear Google’s Acquisition of Motorola Mobility

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Department of Justice Antitrust Division and the European Commission (EC) on February 13 approved Google, Inc.’s proposed acquisition of Motorola Mobility, Inc., and its patent portfolio.

At the same time, the Antitrust Division announced that it had cleared the acquisitions by Apple Inc., Microsoft Corp., and Research in Motion Ltd. (RIM) of certain Nortel Networks Corporation patents, and the acquisition by Apple of certain Novell Inc. patents.

In its statement announcing the closing of the three investigations, the Justice Department said that the transactions were “not likely to significantly change existing market dynamics.” The agency, however, pledged to continue monitoring the use of standard essential patents (SEPs) in the wireless device industry.

“During the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their SEP licensing policies,” the Justice Department said.

“The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs. Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies.”

Google entered into an agreement to acquire Motorola Mobility in August 2011. Google is a provider of Internet search and online advertising services. Google is the developer of the Android open source mobile operating system. At the end of 2011, Google’s Android accounted for approximately 46 percent of the U.S. smartphone operating system platform subscribers.

Motorola Mobility is a manufacturer of smartphones and computer tablets. It is the holder of a portfolio of approximately 17,000 issued patents and 6,800 applications, including hundreds of SEPs relevant to wireless devices that Motorola Mobility committed to license through its participation in standard-setting organizations (SSOs).

Apple, Microsoft, and RIM also have developed mobile operating systems for smartphones and tablets. While Apple and RIM manufacture and sell the smartphones and tablets that run on their proprietary mobile operating systems, Microsoft licenses its proprietary mobile operating systems.

Through a partnership entitled Rockstar Bidco, RIM, Microsoft, Apple, and others sought to acquire patents at the June 2011 Nortel bankruptcy auction for licensing and distribution to certain partners. Nortel’s portfolio of approximately 6,000 patents and patent applications includes many SEPs that Nortel committed to license through its participation in SSOs.

Apple sought approval to acquire patents held by CPTN Holdings LLC, formerly owned by Novell, following CPTN’s acquisition in April 2011 of those patents on behalf of Apple, Oracle Corporation, and EMC Corporation.

Final Claims Dismissed in Novell’s Antitrust Suit Against Microsoft

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

Software developer Novell, Inc. could not pursue two claims remaining in an antitrust action against Microsoft because Novell transferred the claims to a third party in an asset purchase agreement, the federal district court in Baltimore has ruled.

Novell alleged that Microsoft’s anticompetitive conduct in 1994-1996 damaged Novell’s ability to market its office productivity applications, including WordPerfect and Quattro Pro. In 2007, the district court dismissed as time-barred Novell’s claims alleging anticompetitive conduct in the office productivity applications market (2007-2 Trade Cases ¶75,901, CCH Computer Cases ¶49,423).

Novell’s remaining monopolization and restraint of trade claims, alleging harm in the operating systems market, were allowed to proceed because they were tolled during the pendency of the government’s action against Microsoft.

Assignment of Claims

In an Asset Purchase Agreement dated July 23, 1996, Novell assigned to Caldera, Inc., claims “held by Novell at the Closing Date and associated directly or indirectly with any of the DOS Products.”

Novell contended that the agreement meant to assign only claims for harm inflicted on the DOS products themselves, not on the operating system market, which comprised the actual market in which the DOS Products competed. However, the plain language of the assignment clause did not limit its application to claims inflicting “harm” on the DOS products; rather, it assigned claims “associated” with the DOS products, according to the court.

The APA assignment language encompassed the present claims because they were “associated directly or indirectly with the DOS Products.”

Merits

Despite finding that Novell lacked standing to pursue the claims at issue, the court nevertheless addressed the merits of each claim. If Novell had not transferred the claims to Caldera, Novell’s restraint of trade claim would have been decided in favor of Microsoft, but its monopolization claim would have proceeded to trial.

Novell alleged that Microsoft violated Sec. 2 of the Sherman Act by exclusive dealing—entering into “agreements with OEMs and others not to license or distribute Novell's office productivity applications.” To be considered “exclusive,” an agreement must expressly preclude a party from doing business with the defendant's competitors or engage in other conduct that has the practical effect of exclusivity.

Microsoft's agreements with computer manufacturers (OEMs) did not foreclose a substantial share of the software applications market, and its agreements with distributors were not exclusive or otherwise anticompetitive—they simply provided modest rebates for increased sales and “blended share” of Microsoft products.

With regard to its Sherman Act Sec. 1 claim, Novell’s evidence raised sufficient factual issues to preclude summary judgment. Although a monopolist generally has a right to refuse to cooperate with a competitor, Novell’s evidence suggested more, including that Microsoft acted out of predatory motives and affirmatively misled Novell about Windows 95 functionality and licensing.

The opinion, In re Microsoft Corp. Antitrust Litigation, is reported at CCH Guide to Computer Law ¶49,927. It will appear in CCH Trade Regulation Reporter.