Bloomberg News

Apple Averts Import Ban After Motorola Patent Case Win

April 23, 2013

Apple Averts IPhone Import Ban After Winning Google Patent Case

The back side of an Apple iPhone 4. Photographer: Louis Abate

Apple Inc. (AAPL) (AAPL) averted an order that could have hindered imports of the iPhone 4 into the U.S. after persuading a U.S. trade agency to invalidate a patent owned by Google Inc. (GOOG) (GOOG)’s Motorola Mobility unit over a phone sensor,

The U.S. International Trade Commission in Washington yesterday upheld a judge’s findings that the Motorola Mobility patent is invalid, though for different reasons. The patent covers a sensor that prevents the phone from accidentally hanging up or activating an application when close to a person’s face.

The decision marks the latest instance in which neither Cupertino, California-based Apple nor Google has been able to strike a decisive blow against its competitor in a squabble that began more than two years ago. Each has claimed the other is infringing patents, and Apple accused Motorola Mobility of breaching obligations to license some of its most widely used technology on fair terms.

“This is not a surprise because the commission has heretofore not found a violation by Apple in any case as to any claim in any patent,” said Rodney Sweetland, a patent lawyer with Duane Morris in Washington who specializes in ITC cases. “The commission is particularly attentive to the details in cases involving Apple, which implicate such a popular product and such an important part of commerce.”

Matt Kallman, a spokesman for Google, said the Mountain View, California-based company was disappointed and is “evaluating our options.” Amy Bessette, a spokeswoman for Apple, said the company had no comment.

IPhone Revenue

The iPhone, in all models, generated $78.7 billion in sales last fiscal year for Apple, about half of the company’s revenue. The devices are assembled in China and imported into the U.S. Apple’s newest model, the iPhone 5, has been the company’s top seller since going on sale in September. Still, reduced-price older models like the iPhone 4 have retained their popularity, Canaccord Genuity Inc. said April 8.

Apple is scheduled to report earnings later today. The company is predicted by analysts to post its first profit decline since 2003, hurt by products with lower profit margins and slower iPhone-sales growth. Seventeen analysts surveyed by Bloomberg have lowered their outlook for the company in the past month.

The dispute with Motorola Mobility predates its acquisition by Google last year. Apple contends phones running on Google’s Android operating system copy the look and features that make the iPhone unique. In addition to Motorola Mobility and Samsung Electronics Co., Apple sued Taiwanese handset maker HTC Corp. (2498) in a case that settled in November with royalty payments and a pledge that HTC wouldn’t copy Apple designs.

Smartphone Market

At stake is a share of a U.S. smartphone market estimated at $51 billion last year by Neil Shah, an analyst with Strategy Analytics. Apple is the largest maker of smartphones in the U.S., with about 45 percent of the devices sold in the fourth quarter, he said last month.

Apple is appealing the loss of its own case against Motorola Mobility at the agency over touchscreen technology, and both companies are challenging a decision by a judge in Chicago to toss infringement claims they filed against each other. A federal judge in Miami presiding over another dispute between the two called them “obstreperous and cantankerous” and said they were more interested in never-ending litigation as a business strategy than in resolving disputes.

Google paid $12.4 billion for Motorola Mobility in large part to get access to its trove of more than 17,000 patents and gain leverage against Apple.

Sensor Patent

The sensor patent was all that was left of a case that also involved claims that Apple infringed Motorola Mobility patents for third-generation wireless technology used throughout the industry. The ITC in August cleared Apple of those allegations.

ITC Judge Thomas Pender in December said the Google sensor patent is invalid because it isn’t different enough from earlier inventions, and said he didn’t consider his decision to be a close call.

Motorola Mobility argued the sensor technology wouldn’t have been obvious to engineers in 1999, when the patent application was filed, because there were few touchscreen mobile devices so people were unlikely to realize it would be a problem. The company quoted the late co-founder of Apple, Steve Jobs, as saying the incorporation of a proximity sensor in the iPhone was a “breakthrough.”

Apple in turn contended the sensor is little different than those that prevented accidental dialing on keypads, and touchscreens have been around for years. It also said the paraphrased Jobs comment, which came from his official biography, was not about the same technology as that covered by the patent.

The case is In the Matter of Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, 337-745, U.S. International Trade Commission (Washington).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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