Apple, Inc. v. Motorola, Inc. et al

Filing 167

Brief in Reply by Plaintiff Apple, Inc. in Support of 154 Motion to Stay (Haslam, Robert)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

APPLE INC., and NEXT SOFTWARE,
INC. (f/k/a NeXT COMPUTER, INC.),
Plaintiffs and
CounterclaimDefendants,
Case No. 10-CV-662 (BBC)

v.
MOTOROLA, INC. and MOTOROLA
MOBILITY, INC.
Defendants and
CounterclaimPlaintiffs

PLAINTIFFS AND COUNTERCLAIM-DEFENDANTS APPLE INC. AND NEXT
SOFTWARE, INC.’S REPLY IN SUPPORT OF THEIR MOTION FOR A STAY
PURSUANT TO FED. R. CIV. P. 19

TABLE OF CONTENTS
I.

Introduction....................................................................................................................... 1

II.

Motorola Lacks Prudential Standing.............................................................................. 2
A.

Motorola’s Surrender of Rights Deprived It of Prudential Standing.............. 2
1.

2.
B.

Motorola’s brief stands on a false premise: a patentee does not
need to grant a right to sue to another party in order to lose
prudential standing................................................................................... 2
The threat of a multiplicity of suits is not the litmus test for a
loss of prudential standing. ...................................................................... 3

Motorola’s Grant of Veto Rights to Google Deprives It of Prudential
Standing. ................................................................................................................ 6
1.
2.

C.

A putative plaintiff’s subordination of its exclusionary rights to
a non-party’s veto eliminates prudential standing. ............................... 6
No case supports the proposition that rights must be
transferred before there is a loss of prudential standing. ..................... 7

Motorola’s Status as Titleholder Does Not Render It Immune to a
Loss of Prudential Standing................................................................................. 8

III.

Google is a Required Party Under FRCP 19(a), Albeit a Required Party That
Cannot be Joined at This Time...................................................................................... 10

IV.

The Court Should Stay This Matter to Avoid Adjudication Subject to a
Jurisdictional Defect. ...................................................................................................... 11
A.

Motorola’s Standing Defect Threatens the Judgment in This Case............... 11

B.

Motorola’s Standing Defect Is Immediately Prejudicial to Apple and
the Litigation Process. ........................................................................................ 14

C.

There is No Support in the Law for Motorola’s Argument That the
Mere Possibility of a Future Cure Avoids a Defect in Prudential
Standing. .............................................................................................................. 15

D.

Motorola Articulates No Prejudice That It Will Incur Due to a Stay............ 16

V.

Google and Motorola’s Desire to Lock up Motorola’s Patents Does Not Cure
Motorola’s Lack of Standing. ........................................................................................ 17

VI.

Conclusion ....................................................................................................................... 18

i

TABLE OF AUTHORITIES
Cases
Abbott Labs. v. Diamedix Corp.,
47 F.3d 1128 (Fed. Cir. 1995)................................................................................................. 5, 9
Bushnell, Inc. v. Brunton Co.,
659 F. Supp. 2d 1150 (D. Kan. 2009)..................................................................................... 4, 5
Enhanced Security Res., LLC v. Cisco Sys., Inc. (“ESR”),
No. C.A. 09-390-JJF, 2010 WL 2573953 (D. Del., Jun. 25, 2010) ........................................ 5, 9
Intellectual Prop. v. TCI Cablevision,
248 F.3d 1333 (Fed. Cir. 2001)............................................................................................... 5, 9
Moore v. Ashland Oil, Inc.,
901 F.2d 1445 (7th Cir. 1990) .................................................................................................. 15
Morrow v. Microsoft Corp.,
499 F.3d 1332 (Fed. Cir. 2007)........................................................................................... 3, 4, 7
Prima Tek II, L.L.C. v. A-Roo Co.,
222 F.3d 1372 (Fed. Cir. 2000).......................................................................................... passim
Propat Int’l Corp. v. RPost, Inc.,
473 F.3d 1187 (Fed. Cir. 2007)....................................................................................... 6, 7, 8, 9
Schreiber Foods, Inc. v. Beatrice Cheese, Inc.,
402 F.3d 1198 (Fed. Cir. 2005)................................................................................................ 15
Sicom Sys., Ltd. v. Agilent Techs., Inc.,
427 F.3d 971 (Fed. Cir. 2005)............................................................................................ passim
Toshiba Corp. v. Wistron Corp.,
270 F.R.D. 538 (C.D. Cal. 2010) ............................................................................................ 4, 5
Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA,
944 F. 2d 870 (Fed. Cir. 1991)............................................................................................ 7, 8, 9
Waterman v. Mackenzie,
138 U.S. 252 (1891).................................................................................................................... 9
Zenith Electronics Corp. v. Exzec Inc.,
876 F. Supp. 175 (N.D. Ill. 1995) ........................................................................................... 5, 9

ii

Rules
Fed. R. Civ. P. 19(a) ..................................................................................................................... 10

iii

I.

Introduction
By virtue of its Merger Agreement with Google, Motorola has surrendered to Google’s

veto power its rights to (1) sue for infringement of its patents, (2) settle pending litigation, (3)
license or sublicense its patents, (4) assign its rights in its patents, and (5) grant a covenant not to
sue for infringement of its patents. 1 By so burdening its exclusionary rights in its patents,
Motorola has divested itself of prudential standing and may not maintain its suit against Apple.
Motorola does not deny that its rights are now subjugated to Google’s consent. Nor does
it deny that Google lacks constitutional standing to join this lawsuit to cure Motorola’s standing
problem. Instead, Motorola argues that so long as Google has not obtained its own independent
right to initiate suit based on the patents, there is no threat of multiple judgments against Apple
and therefore no defect in Motorola’s prudential standing.
Motorola’s argument rests on a plain misstatement of the law, a view that has been
expressly rejected by the Federal Circuit. The existence of a non-party with a right to sue is not
necessary to establish a lack of prudential standing. Motorola lacks prudential standing because
it has forfeited its rights to unilaterally exclude or indulge others’ use of its patents. And because
the party to whom Motorola subordinated its critical rights—Google—cannot be joined at this
time to cure this jurisdictional defect, the appropriate remedy is a stay of this litigation until the
issue of standing has been resolved.
Motorola does not dispute that, if it lacks standing and its merger is not complete before
judgment, this Court and Apple will have wasted enormous resources only to arrive at a void
judgment. And contrary to Motorola’s suggestion, there is no assurance that its transaction with
1

See Declaration of Samuel F. Ernst in Support of Motion of Plaintiff and Counterclaim
Defendants Apple Inc. and Next Software, Inc’s Motion for a Stay Pursuant to Fed. R. Civ. P. 19
(“Ernst Decl.”), Ex. 1 at 36.

1

Google—and the prerequisite global regulatory approvals—will be completed by the time this
case proceeds to trial. Indeed, on September 28 Motorola and Google each received a Request
for Additional Information and Documentary Materials from the Antitrust Division of the
Department of Justice (“the DOJ”). This will substantially delay the approval of the merger in
the United States alone. Second Requests from the DOJ have delayed the DOJ’s review of
mergers for as much as ten and eleven months, which would be well beyond the April 30, 2012
trial date in this matter.
Motorola’s standing defects are the result of its own business decision to enter into an
extraordinary Merger Agreement whereby a third party now has veto power over the exercise of
patent rights Motorola is currently asserting in litigation. Given the uncertainty of any cure to
Motorola’s standing problem, and the significant prejudice Apple faces defending a suit with no
proper cross-plaintiff, the Court should stay the case immediately.2
II.

Motorola Lacks Prudential Standing.
A.

Motorola’s Surrender of Rights Deprived It of Prudential Standing.
1.

Motorola’s brief stands on a false premise: a patentee does not need to
grant a right to sue to another party in order to lose prudential
standing.

Motorola’s central argument is that it must have retained standing because it has not
granted Google the right to initiate lawsuits to enforce the patents-in-suit. Motorola Opp. at 7.
This is incorrect. It is dispositive of prudential standing that Motorola has divested itself of the
rights unilaterally to sue, license, and assign the patents-in-suit—regardless of whether Google
may bring suit. Put simply, Motorola’s standing is determined by the diminished scope of the
2

On September 29, 2011, the U.S. District Court for the Southern District of Florida denied
Apple’s parallel motion to stay Case No. 10-23580-Civ-UU pending between the parties in that
court. Reply Declaration of Samuel F. Ernst (“Reply Ernst Decl.”), Ex. 1.

2

rights it retains, not on the extent of rights Google has obtained. See, e.g., Prima Tek II, L.L.C. v.
A-Roo Co., 222 F.3d 1372, 1381 (Fed. Cir. 2000) (“Standing to sue for infringement depends
entirely on the putative plaintiff’s proprietary interest in the patent . . . .”).
The very case on which Motorola purports to rely for its primary argument, Morrow v.
Microsoft Corp., directly refutes Motorola’s position. In Morrow, a plaintiff trust, GUCLT, had
an undivided and unfettered right to initiate infringement actions based on patents legally titled
to a second plaintiff trust. Morrow, 499 F.3d 1332, 1338 (Fed. Cir. 2007).3 Despite the fact that
no non-party also held rights to initiate suits on the patents—or even to consult with GUCLT
regarding the initiation of such suits—GUCLT was found to lack prudential standing because it
lacked “the right to license or sublicense or otherwise forgive activities that would normally be
prohibited under the patent statutes.” Id. at 1342. Thus, the fact that Google lacks the right to
initiate infringement actions based on the patents-in-suit does not “doom[]” Apple’s position on
prudential standing. Cf. Motorola Opp. at 7. Motorola lacks prudential standing because it has
surrendered significant proprietary rights to the patents. See Opening Br. at 7-12; see also infra
Section II.B.
2.

The threat of a multiplicity of suits is not the litmus test for a loss of
prudential standing.

Motorola’s policy argument in support of the “multiplicity of suits” bright-line rule it has
invented also is flatly inconsistent with the law. Motorola argues that Google’s lack of a right to
sue is dispositive because Apple faces no threat of multiple litigations or liabilities. Motorola
wrongly contends that in the absence of such a threat, Apple has “no basis” to challenge
Motorola’s prudential standing.
3

A third trust held a limited right to certain non-intellectual property causes of action against a
limited and specified number of defendants. Id. at 1335.

3

Motorola is incorrect. Prudential standing was found lacking in Morrow despite the
absence of any threat of multiple litigations or liabilities against a single plaintiff. See Morrow,
499 F.3d at 1348 (Prost, J., dissenting) (“[T]his case does not implicate the perils associated with
a relaxed standing requirement—that multiple plaintiffs may subject a defendant to suit for the
same conduct, or that the patentee may miss an opportunity to defend against invalidation.”).
In fact, the Federal Circuit has already expressly rejected Motorola’s argument. In Prima
Tek II, 222 F.3d 1372, the Federal Circuit held that the plaintiff licensee and sub-licensee lacked
prudential standing to sue without the patent owner being joined. The court came to this
conclusion based on the fact that certain patent rights transferred to the licensee were
circumscribed by the requirement that it immediately transfer them to the sub-licensee. Id. at
1380.
The plaintiffs argued that there could be no prudential standing problem because any
threat of multiple suits had been eliminated by the absent patent owner’s agreement to be bound
by any judgment for or against the licensee. Id. The Federal Circuit disagreed, rejecting the
notion that prudential standing concerns are implicated only by the threat of multiple lawsuits:
Appellees are correct that one of the underlying policies of
[prudential standing] is to prevent duplicative litigation against a
single accused infringer. This does not mean, however, that a
patent owner’s agreement to be bound by all judgments against a
licensee . . . necessarily resolves the issue of standing. Standing to
sue for infringement depends entirely on the putative plaintiff’s
proprietary interest in the patent, not on any contractual
arrangements among the parties regarding who may sue and who
will be bound by judgments.
Id. at 1381 (emphasis added)(internal citations omitted).
Motorola’s argument was recently rejected again by the courts in Bushnell, Inc. v.
Brunton Co., 659 F. Supp. 2d 1150 (D. Kan. 2009) and Toshiba Corp. v. Wistron Corp., 270
F.R.D. 538 (C.D. Cal. 2010). In Bushnell, the putative plaintiffs argued that the absence of a
4

joint patent owner did not destroy prudential standing because that party had waived its right to
sue under the patents, thereby removing any risk of multiple lawsuits. Bushnell, 659 F. Supp. 2d
at 1163. The court rejected this argument, noting that it had been “expressly” rejected by the
Federal Circuit in Prima Tek II. Id. at 1163-64. Similarly, in Toshiba, Wistron held the
exclusive right to sue on and license the patents-in-suit, and the absent joint owner agreed to be
bound by any judgment based on the patents. Toshiba, 270 F.R.D. at 540. While the court
recognized that there was little threat of multiple suits, id. at 541, it nonetheless found that
Wistron lacked prudential standing based on the fact that its right to license the patents was
subject to the absent joint owner’s right to make, use, and sell patented products. Id. at 540, 54243.
The cases cited in Apple’s opening brief are consistent with Prima Tek II and its progeny.
Sicom, Abbott, TCI, ESR and Zenith did not turn on concerns over a multiplicity of lawsuits. See
Motorola Opp. at 11-12. Rather, these cases turned on the nature and extent of the rights the
putative plaintiff lacked.4 To the extent these cases discuss multiplicity of suits in the context of
the standing analysis, it is an incidental point. For example, in Sicom, the discussion of
multiplicity of suits is focused on whether the plaintiff possessed the entire right to sue. The fact
“fatal” to Sicom’s standing was not that multiple suits were possible, but that the patent owner
retained a right to veto reassignments of the patent. Sicom, 427 F.3d at 979.

4

See Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 979 (Fed. Cir. 2005) (listing
numerous rights reserved to the patentee); Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1132
(Fed. Cir. 1995) (same); Intellectual Prop. v. TCI Cablevision, 248 F.3d 1333, 1344 (Fed. Cir.
2001) (same); Enhanced Security Res., LLC v. Cisco Sys., Inc. (“ESR”), No. C.A. 09-390-JJF,
2010 WL 2573953, *4-5 (D. Del., Jun. 25, 2010) (discussing rights surrendered by patentee);
Zenith Electronics Corp. v. Exzec Inc., 876 F. Supp. 175, 179 (N.D. Ill. 1995) (same).

5

B.

Motorola’s Grant of Veto Rights to Google Deprives It of Prudential
Standing.

As a result of its Merger Agreement with Google, Google’s consent is now required
before Motorola may license or assign its patents; or grant a covenant not to sue, initiate new
suits, or settle existing suits relating to its patents. The fact that Motorola’s ability to exercise its
rights is now subordinate to Google’s veto power is more than sufficient to divest Motorola of
prudential standing. By thus burdening its exclusionary rights, Motorola has lost its prudential
standing to maintain this suit. The case law is clear: no formal transfer of the right to sue is
required. The grant of a veto is impairment enough.
1.

A putative plaintiff’s subordination of its exclusionary rights to a nonparty’s veto eliminates prudential standing.

The Federal Circuit has held consistently that a non-party’s veto power over the putative
plaintiff’s exclusionary patent rights extinguishes prudential standing. In Sicom, the putative
plaintiff, Sicom, lacked the rights to settle patent litigation or assign or sublicense its patent
rights without prior consent from a non-party. 427 F.3d at 979. The court held that by
subordinating these exclusionary rights to a non-party’s veto, Sicom had lost any claim to
prudential standing. Id. In reaching this conclusion, the court found “the restriction on Sicom’s
right to assign” particularly important, agreeing with the district court that the non-party’s
reservation of a veto over this right was “fatal” to Sicom’s standing. Id.
Similarly, in Propat Int’l Corp. v. RPost, Inc., the Federal Circuit held that the putative
plaintiff lacked standing to pursue patent infringement claims because the non-party patentee
retained a right to veto licensing and litigation decisions and to bar transfers of the patents.
Propat, 473 F.3d 1187, 1191 (Fed. Cir. 2007). The Federal Circuit viewed its conclusion of no
standing as straightforward, remarking that “[i]n no case has this court held that a patentee who

6

retains such broad and wide-ranging powers with respect to a patent has nonetheless transferred
‘all substantial rights’ in the patent.” Id. (emphasis added).
The rights subjected to a non-party’s veto in Sicom and Propat are among the same rights
Motorola has subjected to Google’s veto here. Motorola does not deny that it cannot, without
Google’s consent, license the patents, initiate litigation based on the patents, or assign the
patents. Ernst Decl., Ex. 1 at 36. As in Sicom and Propat, Motorola’s surrender of its
exclusionary rights to a non-party’s veto is “fatal” to its standing to pursue this case as the sole
plaintiff.
2.

No case supports the proposition that rights must be transferred
before there is a loss of prudential standing.

Motorola purports to rely on the Federal Circuit’s decisions in Morrow and Vaupel
Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F. 2d 870 (Fed. Cir. 1991), for the
proposition that a complete transfer of exclusionary rights is required to eliminate prudential
standing—and that a veto grant to a non-party is insufficient. Neither case supports Motorola’s
sweeping argument.
Motorola mischaracterizes Morrow. Morrow describes three categories of plaintiffs
involved when analyzing standing issues: (1) those that can sue in their own name alone; (2)
those that can sue as long as the patent owner is named in the suit; and (3) those that cannot even
participate as a party to an infringement suit. Morrow, 499 F.3d at 1339. The second category
of potential plaintiffs—those who may sue only if an additional right-holder is joined—are those
who “hold exclusionary rights and interests created by the patent statutes, but not all substantial
rights to the patent.” Id. at 1340 (emphasis added).
Motorola cites Morrow for the proposition that “[t]he only way that Motorola could move
from the first to the second category is by transferring exclusionary rights to Google.” Motorola
7

Opp. at 8 (citing Morrow, 499 F.3d at 1340). But Morrow states no such proposition. Morrow
states that a party will fall into “category two” and lack prudential standing if it holds less than
all substantial rights to the patent(s)-in-suit. Nowhere does Morrow state that those rights have
to have been transferred in whole to a third party. Here, as in Sicom and Propat, Motorola holds
less than all substantial rights in the patents by virtue of the veto power it has surrendered to
Google.
Motorola also mischaracterizes the Federal Circuit’s decision in Vaupel. That decision
does not hold that “veto powers are not substantial rights,” Motorola Opp. at 10; indeed, it would
be contrary to the Federal Circuit’s more recent decisions in Sicom and Propat if it did so hold.
Vaupel merely held that where only the sublicensing right is subject to a non-party’s veto,
standing is not necessarily destroyed. Vaupel, 944 F. 2d at 875. Given that the Vaupel plaintiff
retained an unfettered right to sue for patent infringement, in addition to other substantial rights
in the patents, “[t]he sublicensing veto was a minor derogation from the grant of rights.” Id.
In the present case, Motorola has granted Google a veto not only over its right to
sublicense, but also over its right to sue for patent infringement, to settle such suits, and to assign
or license the patents. Where a party subjects this broad array of rights to a non-party’s veto
power, as in Sicom and Propat, it divests itself of standing. Vaupel is not to the contrary.
C.

Motorola’s Status as Titleholder Does Not Render It Immune to a Loss of
Prudential Standing.

Motorola suggests that its status as the titular owner of the patents-in-suit should
immunize it to a loss of prudential standing, purporting to distinguish a swath of cases on this
basis. See Motorola Opp. at 11. Motorola cites no case that supports such a proposition. As
Apple demonstrated in its opening brief, titular ownership of patents is not the touchstone for
determining a putative plaintiff’s standing. See Apple Br. at 12-14. Rather, a party’s prudential
8

standing “depends entirely on the putative plaintiff’s proprietary interest in the patent,”
regardless of that party’s formal ownership, vel non, of patent title. Prima Tek II, 222 F.3d at
1381.5
This principle is demonstrated affirmatively in the Zenith and ESR cases, in which patent
holder plaintiffs were found to have lost prudential standing by virtue of forfeiting rights in the
patents-in-suit. See Zenith, 876 F. Supp. at 179 (“[W]hile Zenith is the owner of the patent, its
ownership is so substantially limited in enjoyment that it is not in any realistic sense ownership
at all.”); ESR, 2010 WL 2573953 at *5 (“Although [ESR] appears to have retained legal title to
the patents-in-suit, as well as the ability to exploit the patents-in-suit, the Court concludes that
the Purchase Agreement nevertheless transferred ‘all substantial rights’ to [a licensee].”).
Motorola cannot distinguish these cases on the basis that the patent-holder surrendered the right
to sue, see Motorola Opp. at 12, because Motorola has itself surrendered its unilateral right to sue
by granting a veto to Google.
Contrary to Motorola’s suggestion, the Sicom, TCI, Propat, and Abbott cases did not turn
on the identity of the titular owner of the patents at issue. See Motorola Opp. at 11. Rather, the
holdings in those cases turned on whether the putative plaintiff held all substantial rights in the
patents—the question Motorola seeks to evade. See TCI, 248 F.3d at 1345 (finding that the
putative plaintiff held “fewer than all substantial rights”); Abbott, 47 F.3d at 1133 (concluding
that the putative plaintiff lacked prudential standing because it did “not have a sufficient interest”
in the patents-in-suit); see supra Section II.B.1 (discussing Sicom and Propat). None of these

5

Cf. Vaupel, 944 F. 2d at 875 (“It is well settled that ‘[w]hether a transfer of a particular right or
interest under a patent is an assignment or a license does not depend upon the name by which it
calls itself, but upon the legal effect of its provisions.’”) (quoting Waterman v. Mackenzie, 138
U.S. 252, 256 (1891)).

9

cases rest their holdings on the facile observation that one party or the other was the titular owner
of the patent.
III.

Google is a Required Party Under FRCP 19(a), Albeit a Required Party That
Cannot be Joined at This Time.
Motorola does not contest that if it lacks prudential standing, Google is a required party

under Rule 19(a). Nor can it. The Federal Circuit has consistently held that where the putative
plaintiff lacks prudential standing, the party holding the residual rights in the patent is a required
party under Rule 19(a). See, e.g., Prima Tek II, 222 F.3d at 1380-81.
Just as it is unnecessary to show that there is a threat of duplicative litigation to
demonstrate a lack of prudential standing, this showing is also not required for Google to be a
necessary party under Rule 19(a). The threat of a multiplicity of lawsuits is merely one way of
showing that a party is required. Rule 19(a) provides:
(1) Required Party. A person who is subject to service of process
and whose joinder will not deprive the court of subject-matter
jurisdiction must be joined as a party if:
(A) in that person’s absence, the court cannot accord complete
relief among existing parties; or
(B) that person claims an interest relating to the subject of the
action and is so situated that disposing of the action in the person’s
absence may:
(i) as a practical matter impair or impede the person’s ability to
protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring
double, multiple or otherwise inconsistent obligations because of
the interest.
Fed. R. Civ. P. 19(a) (emphases added). By the plain terms of Rule 19(a), the threat of “double,
multiple or otherwise inconsistent obligations” is merely one alternative way of showing that a
party is required. Thus it is not surprising that the Federal Circuit held that the absent patent

10

owner was a required party in Prima Tek II, even though there was no danger of multiple
lawsuits in that case. 222 F.3d at 1380-81.
Google is a required party even absent the threat of multiple lawsuits because the Court
cannot accord complete relief without the joinder of Google. This is because the Court’s
judgment on the parties’ claims respecting Motorola’s patents will be void if entered while
Motorola lacks prudential standing. Only by including the party with a right to veto Motorola’s
various rights to exclude will the two entities that together control the rights to sue and license be
present in this case. See, e.g., Sicom, 427 F.3d at 980 (putative plaintiff with right to sue could
not proceed in suit without joinder of non-party with veto power over assignments). But until
such time as Google can actually function as a plaintiff, it is not possible to achieve that state of
affairs.
Accordingly, a stay is the appropriate remedy at this time, so that the litigation only
proceeds once the required parties are included in this case.
IV.

The Court Should Stay This Matter to Avoid Adjudication Subject to a
Jurisdictional Defect.
A.

Motorola’s Standing Defect Threatens the Judgment in This Case.

Motorola does not dispute that, if it lacks standing and its merger is not complete before
judgment, this Court and Apple will have wasted enormous resources only to arrive at a void
judgment.6 Instead, it urges that its lack of standing is “transient” and that, because the merger
with Google will “likely” be resolved before judgment is entered in this case, this Court should
ignore Motorola’s lack of standing. But Motorola offers no assurance that the transaction will be
6

The danger of a void judgment persists despite the fact that Motorola may have the right to sue
for past damages occurring prior to its loss of standing. Motorola Br. at 13 n.4. A judgment on
Apple’s declaratory judgment claims of non-infringement and invalidity or a judgment granting
subsequent damages or an injunction would be void if Motorola lacks standing at the time it is
entered.

11

complete by the time of trial or judgment. Nor could it, given the regulatory approval timeline it
faces. As a result, Motorola’s position appears to be that the Court and Apple should bear the
risk of the uncertainty Motorola created through its agreement with Google.
Before the merger may be completed, Motorola must receive regulatory approval for its
merger in multiple jurisdictions, including the United States, the European Union, Russia and
China. See, e.g., Declaration of James McGill Aiken (“Aitken Decl.”), Ex. 2, Motorola’s Section
14A Proxy Statement to the SEC (“On August 29, 2011, Motorola Mobility and Google agreed
that, in addition to those in the United States and European Commission, pre-closing antitrust
clearances in Canada, China, Israel, Russia, Taiwan and Turkey are required and applicable to
the merger.”).
It is by no means assured that Motorola and Google will receive approval in the United
States prior to the trial in this matter. On September 28, 2011, the parties each received a
Request for Additional Information and Documentary Materials from the DOJ. Reply Ernst
Decl., Ex. 2. This Second Request will require the parties to make an exhaustive production of
documents and information, and the DOJ’s review of this information will substantially delay
any approval of the merger, perhaps well beyond the April 30, 2012 trial date in this matter.
Second Requests have been shown to significantly delay the approval of transactions.
For example, in the merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings
Inc., the DOJ issued a Second Request on April 12, 2007. Id., Ex. 3. The merger was not
approved by the DOJ until March 24, 2008, over eleven months later.7 Id., Ex. 4.

7

The merger was not completed until July 28, 2008, over fifteen months after the Second
Request. Reply Ernst Decl., Ex. 5.

12

As another example, in Echostar Communications Corporation’s attempted acquisition of
Hughes Electronics Corporation, the DOJ issued a Second Request on December 17, 2001. Id.,
Ex. 6 ¶ 5. The DOJ completed its review and decided to file a lawsuit to block the transaction on
October 31, 2002, over ten months later. Id., Ex. 7.
Google is a much larger company than Sirius Satellite Radio, XM Satellite Radio,
Echostar, and Hughes Electronics, and, accordingly, will have much more information and
documentation for the DOJ to review. Accordingly, it is quite possible that Motorola and
Google’s Merger Agreement will not be approved until well after the April 30, 2012 trial date in
this matter.
But even if Motorola receives regulatory approval in the United States before trial, it is
entirely possible that it will not receive approval in other critical jurisdictions until after the trial
date in this matter. Under the EU’s Merger Regulation, approval by the European Commission
can take between five weeks and eight months from the date of Motorola’s notice of the
transaction—a submission that, as far as the public is aware, Motorola has not yet even made.
See Aitken Decl. ¶¶ 8, 13, 17. Approval by China’s Ministry of Commerce (“MOFCOM”) can
take over six months from the date on which MOFCOM formally accepts any notification of the
merger provided by Motorola and Google. Declaration of Xie Guanbin (“Guanbin Decl.”) ¶¶ 611. Approval by the Federal Antimonopoly Service of the Russian Federation (the “FAS”) can
take between one and 11 months. Declaration of Alexander Viktorovich Viktorov ¶¶ 8-10.
Thus, even if Motorola files its Notice today, it is entirely possible that it will not receive
approval from each of these authorities until after trial—or even judgment—in this matter.
The risk of delay in these jurisdictions is not theoretical. These foreign regulatory bodies
have often reached conclusions different from the one reached by United States regulatory

13

officials in such transactions. For example, the European Commission has blocked or subjected
to lengthy review transactions involving companies such as Nokia Corp., Honeywell
International Inc., Oracle Corp., and Sun Microsystems—transactions that had received prompt
regulatory approval in the United States. See Aitken Decl. ¶ 18. And it took MOFCOM roughly
nine months to approve the recent acquisition by Nokia Siemens Networks of Motorola’s cellular
networks infrastructure business, despite the acquisition receiving prompt approval by other
regulatory bodies, including the DOJ. Id. ¶ 18.
Motorola does not dispute that, if its transaction is significantly delayed and it lacks
standing, this Court’s judgment will not be valid and will be at risk of reversal on appeal on that
basis. The waste of resources that would result is staggering. This matter involves arguments
regarding the invalidity and non-infringement of dozens of claims of Motorola’s six asserted
patents. Assuming this matter goes to trial, the Court will have expended significant resources
resolving issues of infringement, enforceability and validity of those claims, only to arrive at a
void judgment. The Court will then face the risk of re-litigation of those claims, perhaps by an
entirely different patent owner.
Apple will also be significantly prejudiced by such an outcome. For example, if Apple
prevails on its non-infringement and/or invalidity arguments—a portion of litigation that is
enormously expensive—it will be forced to expend the resources to make all of these arguments
again, but this time against an adversary with the tactical advantage of having previewed Apple’s
arguments.
B.

Motorola’s Standing Defect Is Immediately Prejudicial to Apple and the
Litigation Process.

Motorola’s standing defect also is immediately prejudicial to Apple in ways that could
not be resolved by the consummation of the Google/Motorola transaction before judgment. As
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Motorola notes, in the next six weeks, the parties will submit motions for summary judgment.
Apple thus must litigate against allegedly dispositive motions brought by a party that lacks
standing.
Litigating in the face of this defect also is directly contrary to the purpose of Rule 19.
Rule 19 expresses the policy of the federal courts to avoid the risk of waste of judicial resources.
See, e.g., Moore v. Ashland Oil, Inc., 901 F.2d 1445, 1447 (7th Cir. 1990) (“The purpose
of [Rule 19] is to permit joinder of all materially interested parties to a single lawsuit so as to
protect interested parties and avoid waste of judicial resources.”). Proceeding with the litigation
in the face of Motorola’s standing defect squarely presents such a risk. The Court will expend
significant resources in the near term resolving the parties’ summary judgment and claim
construction disputes, all to an uncertain outcome.
C.

There is No Support in the Law for Motorola’s Argument That the Mere
Possibility of a Future Cure Avoids a Defect in Prudential Standing.

Motorola urges the Court to continue on the current schedule, because at some uncertain
point (perhaps after trial) it might cure its existing standing defect. This argument flies in the
face of the basic precept that “[s]tanding to sue is a threshold requirement in every federal
action.” Sicom, 427 F.3d at 975 (emphasis added).
Not surprisingly, Motorola cites no support for the proposition that the case should
proceed in the face of a current defect in standing. Motorola’s only citation to the law in this
regard is to Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1203 (Fed. Cir.
2005). Motorola Opp. at 12. But Schreiber Foods does not stand for the proposition that the
Court should ignore a standing defect in light of the possibility that it might be resolved.
To the contrary, in Schreiber Foods the Federal Circuit confronted a situation where the
prudential standing problem had already been cured. Schreiber Foods, 402 F.3d at 1203. The
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court noted that, given the lack of a present standing defect, the case could proceed, but it did not
suggest that, where a known standing defect exists, a court should continue on in the face of that
defect in the hope that it will be cured before judgment.
Indeed, other cases stand for the proposition that prudential standing defects require
prompt cure or the claims will be dismissed. For example, in Prima Tek II LLC, 222 F.3d at
1382, the court declined to cure a standing defect by adding an indispensible party on appeal
where the defendant would be prejudiced by the late addition of that party. Likewise, Motorola’s
offer to prove standing sometime in the future is insufficient. If Motorola cannot cure its
standing defect now, the most prudent course would be for the Court to stay the matter until such
time as Motorola actually possesses standing to pursue its claims.
Even if Google somehow obtains sufficient rights in the patents to be joined as a party
and thereby cure the standing deficiency prior to judgment, the case likely will not be able to
proceed on the current schedule. The joinder of Google would be an event of major impact in
this litigation, as Google and Apple may add claims against each other that would need to be
developed through further extensive discovery and other proceedings. Until this situation is
resolved, the prudent course is therefore to stay the case.
D.

Motorola Articulates No Prejudice That It Will Incur Due to a Stay.

Notably, for all of the arguments it makes, Motorola’s opposition brief is silent on the
issue of whether Motorola would be prejudiced by a stay. As Apple pointed out in its opening
brief, there is no prejudice to Motorola here. Motorola’s opposition tacitly concedes the point.
Particularly in light of the fact that Apple proposes that the Court stay Apple’s infringement
claims as well as Motorola’s, there can be no prejudice to Motorola.

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V.

Google and Motorola’s Desire to Lock up Motorola’s Patents Does Not Cure
Motorola’s Lack of Standing.
Without providing any support for its contention, Motorola argues that the entry of a stay

in this matter will have a dramatic effect on patent litigation and mergers across the country.
Motorola’s argument, even if it had some factual support, is without merit.
First, the situation here is unusual: Motorola is in the process of completing an historic
transaction involving its own sale at the very same time that it is in active litigation over patents
that constitute a key part that transaction. See Ernst Decl. Exs. 2, 3 (the patents at issue are a
critical driver of the transaction). That Motorola has allowed a third party veto power over the
exercise of patent rights it is currently asserting in litigation is extraordinary, not business as
usual as Motorola contends. This convergence of elements is hardly the usual merger
arrangement.
Second, Motorola’s lack of standing is a direct result of its own business decisions.
Motorola could have crafted its agreement with Google differently. Alternatives having a lessinvasive effect on Motorola’s patent rights surely were available, but the parties to the merger
agreement did not choose those routes. Apple should not be prejudiced by Motorola and
Google’s decision.
Third, it bears emphasis that the remedy Apple proposes is quite modest. Apple merely
proposes that the matter be delayed until the standing issue, and the potential prejudice to Apple,
is resolved.8 Such a small remedy, designed to protect the litigation process and ultimate
outcome of this matter, will hardly bring an end to mergers and acquisitions in this country.
8

Motorola begins its brief with the insinuation that Apple has “grown tired of pursuing its
claims.” Motorola Opp. at 1. Apple has not. As discussed in Apple’s opening memorandum,
Apple suggested staying its own claims in addition to those of Motorola because, inter alia, it
would be more efficient for the Court.
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VI.

Conclusion
For the foregoing reasons and those articulated in Apple’s opening memorandum, this

matter should be stayed until the consummation of the Google/Motorola merger or until further
order of the Court.

Dated: September 29, 2011

Respectfully submitted,
/s/ Robert T. Haslam
Robert T. Haslam (CA Bar No. 71134)
[e-mail]
COVINGTON & BURLING LLP
333 Twin Dolphin Drive, Suite 700
Redwood Shores, CA 94065-1418
Telephone: [phone]
Facsimile: [phone]
Robert D. Fram (CA Bar No. 126750)
[e-mail]
Christine Saunders Haskett (CA Bar No. 188053)
[e-mail]
Samuel F. Ernst (CA Bar No. 223963)
[e-mail]
COVINGTON & BURLING LLP
One Front Street
San Francisco, CA 94111-5356
Telephone: [phone]
Facsimile: [phone]
Matthew D. Powers
[e-mail]
Steven Cherensky
[e-mail]
Tensegrity Law Group LLP
201 Redwood Shores Parkway
Redwood Shores, CA 94065
Telephone: [phone]
Facsimile: 650-802-6001
Mark G. Davis
[e-mail]
WEIL, GOTSHAL & MANGES LLP
1300 Eye Street, N.W., Suite 900
18

Washington, DC 20005
Telephone: [phone]
Facsimile: [phone]
Elizabeth Stotland Weiswasser
[e-mail]
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153
Telephone: [phone]
Facsimile: [phone]
Cathy Cetrangolo
Boardman Law Firm LLP
One South Pinckney Street, 4th Floor
Madison, WI 53703
Email: [e-mail]
Telephone: [phone]
Facsimile: 608-283-1709
Attorneys for Plaintiffs Apple Inc.
and NeXT Software, Inc.

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