Google caught a break Monday when federal Judge Barbara B. Crabb in the Western District of Wisconsin dismissed Apple's lawsuit against the Android-maker with prejudice. Apple believes Google's Motorola subsidiary is abusing its standard essential patents and not licensing them at fair terms. The judge didn't see the need for a trial and canned the whole thing.
Motorola and Apple have been at odds over smartphone licensing terms for some time. Motorola thinks its smartphone patents are worth 2.25% of the retail price of each smartphone sold. When you consider the full retail price of devices such as the iPhone, Apple is looking at $15 to $17 in licensing fees per iPhone, paid to Motorola. Apple suggested that it might pay to license Motorola's patents for less than $1 per device.
Obviously, that's quite a gulf between the two sides of the bargaining table.
"Motorola has long offered licensing to our extensive patent portfolio at a reasonable and non-discriminatory rate in line with industry standards," Google said in a statement. "We remain interested in reaching an agreement with Apple."
[ Learn how Apple strong-arms its rivals. See Apple Beats Competition With Design And Design Patents. ]
Google's Motorola unit won't be forced to license its patents to Apple at a low cost yet, but trouble is on the horizon.
Two dark clouds have formed over the road ahead in the shape of separate investigations over Motorola's licensing practices. The investigations are being conducted by both the U.S. Federal Trade Commission and European Commission.
Patents deemed standard-essential must be licensed at fair, reasonable and non-discriminatory (FRAND) rates. After receiving numerous complaints from Motorola's competitors, both the FTC and EC are preparing cases against Motorola and its parent company, Google.
Looking down the barrel of a gun held by the federal government, Google might want to settle quickly. If it is convicted of violating FRAND licensing practices, things could get costly in a hurry. The federal government has taken a more active role in overseeing the wireless industry in the last two years, as evidenced by its rejection of the AT&T/T-Mobile merger and establishment of Net neutrality rules.
Judges across the country overseeing the various patent lawsuits among smartphone companies have demonstrated impatience with the complaints. Earlier this year, a different lawsuit between Apple and Motorola was tossed completely when the judge decided that neither party could prove damages and it wasn't worth taxpayers' money to move forward with a trial.
Google is already facing antitrust allegations in other countries over its various business units. Google would do well to avoid adding another to the list.