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Breaking: Apple no longer allowed to sell Iphone 4S and all other mobile devices in Germany due to infringement of Motorola patent
[as people were upset about my quoted no. of people in Germany I have changed it to the correct number and given an indication of the scale of the German market. No other edits. Follow ups are in the comments and new posts http://bit.ly/t10Nwg and http://j.mp/tJdvet ]
In one of the strangest twists in the patent war in the mobile industry a German court has just forbidden Apple to import any mobile device in Germany.

The case is quite complex but let me summarize it in laymen´s term. The link below goes into detail and I´m happy to provide more detail in the comments, but I thought it would be handy to have an up to date post which summarizes things without complex judicial or technical terms. [edit:the comments already contain important clarifications but the summary is still correct]

Motorola has in many countries (also in the US) filed infringements against Apple as they violate crucial patents for the mobile technology. So it´s not about the smartphone aspect, nor the design issues, but just the basic mobile phone technology.
Apple has refused to take licenses for Motorola´s patents while all other mobile manufacturers have done so. This is not a new situation, but all attempt from Motorola to get Apple to start paying for licenses failed so they started a number of court cases a long time ago.

Today Florian Mueller who writes about patent technology (see link) got a still not published court verdict in his hands. It´s quite clear: Apple lost this court case in a German court. Why: because they didn´t defend themselves in a timely way.

Now Apple seems to state this is just ´procedural´, but an injunction just means you can´t get any Apple mobile products into the German market. Don´t forget that the German market is huge with a 100 80+ million people and an economy the size of New York and California together.

Apple seems to be in a bit of denial but reading the original court order (I can read German although not perfect) it´s quite clear this is an executable court decision. Apple can´t sell (or more precise import) in Germany.

Now for the why? Why didn´t Apple defend itself. It can´t be that Apple just ´forgot´ to respond to the court case so it will have been deliberate.

One reason of course is that Apple has trouble anyway defending itself in all court cases regarding Motorola´s basic technology.

I´m no judge neither a patent lawyer but I did study law and do understand technology quite well and it seems that Apple should pay a reasonable fee to Motorola for these old mobile technology patents.

What Apple probably wants (and you will see these words a lot in the discussions today) is to get a license on so called FRAND (or RAND) terms, meaning that Fair, Reasonable and Non Discrimanatory. Meaning if they have to pay, they don´t want to pay more than other competitors hence the term FRAND.

Apple could argue (it hasn´t argued don´t forget that) that this Motorola technology has become parts of the 3G and UMTS mobile phone standards and all patents which become part of an official standard have to be offered on these FRAND terms to all interested parties.

Makes sense as otherwise you could at random get one competitor out of the game and that can never be the result of an official standard. Otherwise one company could block someone from entering the mobile market at all or at a price much higher than all others in the market and that´s everything the acronym FRAND tries to prevent.

Is this the reason Apple let the court case slip? There is a rumour that as Apple who is involved in many court cases against a large number of manufacturers tries to get a ruling of the European Community on the FRAND issues in general because they would like to force Samsung to offer Apple technology on FRAND terms. It´s at this moment speculation.

My temporary conclusion, having read everything up until this moment is that Apple betted on the wrong horse and are now facing a huge problem in Germany.

Will they get around the problem by importing the Iphone 4S and all other devices through other European countries? Will they state that only Apple Inc. is convicted and not Apple Germany. A weak case so unlikely.

It could well be that they lost their important sales season in one of the largest single markets in the world

edit: see also my follow up post that Apple really will be hurt by this in Germany contrary to people who think only Apple US is involved hencde no real consequences. Don´t think so http://bit.ly/u9ScYO
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John A. Tamplin's profile photoMax Huijgen's profile photoFabian Scherschel's profile photoHamid Marc Afsharieh's profile photo
31 comments
 
Now that's gonna change a lot of things! Never though German court would actually go through with it!
 
Thanks for going to the trouble to background this, Max.
 
Hi +Jim Munro no problem. I happen to know too much about these things and thought the real challenge would be to make an easy to follow summary instead of going into the nitty gritty details.

Happy to provide them however as I can understand some people will want to know more about it. I will update where needed in the comments.
 
Might losing an important sales season in this large German market (~80 million people, btw) be a price Apple is willing to pay to create a strong media reaction and massive customer outcry? This might make sense if the ensuing debate creates conditions in which, on appeal, a higher German court overturns the injunction and takes a general stand on FRAND.
 
I can see that in another topic people wonder how important these patents are and what they are about. Officially it are respectively a European patent on a "method for performing a countdown function during a mobile-originated transfer for a packet radio system" It´s the equivalent of a US patent (number 6,359,898 for those interested) and a European patent on a "multiple pager status synchronization system and method" (US number 5,754,119).

Believe me that as far as I can see it´s impossible to make your mobile device compatible with the networks without implementing these standards and that Motorola is quite sure it´s the rights holder.

Motorola itself announced the court cases early october after as they say endless attempts to get Apple to the table for proper discussions about licensing. See f.i. their press release http://mediacenter.motorola.com/Press-Releases/Motorola-Mobility-Sues-Apple-for-Patent-Infringement-344d.aspx where they simply state that ¨After Apple’s late entry into the telecommunications market, we engaged in lengthy negotiations, but Apple has refused to take a license. We had no choice but to file these complaints to halt Apple’s continued infringement. Motorola will continue to take all necessary steps to protect its R&D and intellectual property, which are critical to the company’s business.”

It´s a total package of 18 patents and the court cases regarding these were filed by Motorola filed in the US in Illinois and Florida. However they also went to the ITC (International Trade commission) which regulates import of products. As Apple products are made in China the ITC is the official regulator against import of patent violators from outside the US. They have the power to block all import and numerous other cases (f.i. HTC versus Apple and Nokia vs Apple have been filed there in the recent past).

What the press release of Motorola didn´t state is that they also went to the ´East Texas´ court of Germany, the Mannheim Regional Court. Both courts are known for their speedy decisions and their tendency to give the complainant who states to have the patents his way. This German court is the same that blocked Samsung from selling it´s tablets in Germany after a complaint by Apple so it must be a bitter sweet cookie Apple got served now.
 
+Basti Hirsch I have seen this argument and I understand it but it´s difficult to go with it. As you rightly state the German market is huge (I will correct my 100 million :)) and the economy is strong so sales loss would be huge.
Another thing to consider is that the roll out of the Iphone 4S is concentrated on only a few countries for this year: the US, UK, Australia, France and Germany. Apple has made sure that apart from variants of English French and German are supported by Siri. It would be really silly to give up this crucial market for a general stand on FRAND.

One: it´s not sure Apple wants to raise a FRAND defense. Two: a public outcry shouldn´t influence a higher German court and third a general stand on FRAND is a European matter and German courts will not settle this.

As a last argument argument against the theory see my post above you. The same patent bundle is under court in the US and the interpretation of FRAND conditions by f.i. the ITC will not follow any future German jurisdiction.

At the moment it just looks like Apple choose to keep his cards close to the chest as they were afraid to lose this case. As they didn´t defend themselves they are allowed to come up with any argument in appeal. However if that´s the case Apple must be in serious legal problems otherwise they wouldn´t have taken this deliberate risk to lose such a large market.
 
Dear Apple, if you want it, you can get it.
 
I can see that some people go for the ´Verge´ argument where Nilay states it´s all irrelevant as only Apple Inc. got the infringement. I disagree wholeheartedly as stated in my summary. I will however explain a bit to clarify:
[edit: made this into an improved post of its own http://bit.ly/t10Nwg for people who like to follow the legal battles. That has some more detail and concludes with even more certainty that Apple will really have problems selling in Germany when Motorola enforces :)]

The court verdict is "Die beklagte wird verurteilt,
1a) es zu unterlassen, im Gebiet der Bundesrepubliek Deutschland mobile Geräte anzubieten und/oder zu liefern,

Translated Apple Inc (the party in the court case) is forbidden to offer or deliver mobile devices in Germany. That in itself has consequences as they can´t get the goods to Germany NOR can they offer their goods which normally is interpreted in European law systems as making ads or doing any marketing.

I assume Nilay is not fully up to speed with the European developments which is understandable. Another little backgrounder:
When Samsumg got a temporary infringement for it´s Galaxy 10.1 tablet in Germany it was widely published. Less attention was paid to the follow up during the huge European trade show IFA. On the brink of the opening of the show Apple filed another complaint against an IFA introduction by Samsung of their new 7.7 tablet. In an overnight rush the same German court decided to extend the temporary infringement to this tablet as well.

Now what happened next is the crux: Samsung immediately removed the 7.7 and EVERY MENTION of it of it´s stand the moment they got the letter. So clearly Samsung, unwillingly, sided with my view that under German law you can´t market a device when an infringement has hit it. See the quoted text from the court verdict against Apple. So at least a lot of European lawyers advised Samsung to remove the device from it´s prime spot of the European equivalent of the CES.
Following that reasoning Apple is underestimating or downplaying the consequences of the verdict and Nilay Pater, although a true expert on patent matters could be wrong in his judgement here.

To enhance the point the court´s verdict demands Apple to provide a list of all mobile devices sold in Germany since March 20, 2002 (yes) with brand names, model names, model numbers, prices, margins, parties who got these products for resale or distribution (f.i. Apple GMBH is the implication I would make) etc. It´s the major part of the court verdict and it clearly addresses Apple Inc. to do so.

So let´s be realistic. This court is not completely stupid. It knew it was addressing Apple Inc. and not Apple GMBH, but still it demands Apple itself to provide it with a complete list of all deliveries with all these details since 2002 to Germany. You don´t need to be a lawyer to see that here the court verdict is clearly targeted at Apple Inc and hence there is no way of hiding behind the German subsidiary. There are some other more judicial reasons related to the relation between Apple Inc and Apple Germany but let´s leave these to the highly paid lawyers of both companies who will no doubt be making over hours at the moment to interpret the consequences of the verdict in detail.

For me it´s clear that based on the text of the court´s verdict and my own background that this will hurt Apple in Germany.

[edit: made this a post of its own http://bit.ly/t10Nwg for people who like to follow the legal battles. That has some more detail and concludes with even more certainty that Apple´s online shop in Germany certainly can´t operate :)]
 
+John Tamplin Who plays with fire....
Apple also lost a case yesterday against a five person Spanish tablet ´maker´. Apparently in that case they are convicted for bullying as well as they tried to scare the small company and they fought back and won.
See http://www.techieinsider.com/news/11936 for the david vs goliath fight and Apple´s loss in that case.
 
updated the follow up post about the legal difference between Apple Inc and Apple Germany and concluded there that Apple´s online shop in Germany will also have to stop operating with immediate effect. http://bit.ly/t10Nwg
 
That's some news. Max Huijgen is a resource. Wonder if that will extend to rest of Europe?
 
Hi +Davide Marcato Will it extend to the rest of Europe? Short answer: don´t think so, because I don´t expect Apple to just not defend itself again. Longer anwer: see http://bit.ly/t10Nwg where I try to figure out what the real consequences are. This same court case from Motorola will anyway hit Apple in the US as well, but I explained all that in the other post.
 
+Fabian Scherschel I know, but I forgot to update it. It´s actually the fourth economy in the world. That is more important than the number of people. It´s like California AND New York together suddenly can´t buy Iphones. That would create quite a ripple in the US!
 
This morning Apple Germany´s online store was still selling so if Motorola would push for immediate enforcement it would cost Apple 250.000 E per violation. That would cut deep in the margin on every Ipone or Ipad sold :)

The court verdict even allows for prison sentences up to six months for the responsible people at Apple!

If you can read German it´s in paragraph 1c so I´m not making this up.
http://www.scribd.com/doc/71622154/11-11-04-Default-Judgment-for-MMI-Against-Apple
 
This is still not confirmed AFAICT and I do not trust Florian Mueller.
 
I haven´t seen Florian Mueller. I will later on head over to his statements about it but this is my working day. My source was a German who reported this to me directly. He purchased one. The rest of the info came out of the case verdict which is public. I don´t always agree with Florian and it would be wise if he made it a bit more clear that he is no lawyer at all, let alone a patent lawyer but as much as he can be wrong you can´t deny that he is dedicated and knowledgeable.
When I have time I will update the more legal explanation I have given in my other post of Friday http://bit.ly/t10Nwg For now I guess Apple will just run to the court house and ask for a suspension just like Motorola will be running to that same court house to get an immediate enforcement. No way Apple is going to sell any mobile device in Germany if they don´t get some extra time before they have to stop selling. However I can´t see the judge being very lenient for Apple who just didn´t show up in the first place. Judges don´t like that kind of misuse of trials so reverting now and running back pleading that they just ´forgot to show up´ in the first place will not be believed. Cupertino has the largest in house law department of any tech business and has bought up all the hot shot lawyers. Often the same guys who were the leading legal experts in cases they lost. Apple is certainly not stupid and can´t claim any ignorance here.
 
+Fabian Scherschel Couldn´t help myself so I have checked Florian´s latest contribution. A hastily write up now that he got some feedback from real lawyers and a lengthy read. It´s clear it´s a major issue for his blog and he likes to state these things.
The important issues which are worth repeating:
-Some German lawyers are quite sure that Apple will get a suspension. I need to see it before I believe it, but of course it can. Nobody knows why Apple didn´t show up and which arguments they will use.
- It could still be true that originally Motorola sued both Apple Inc. and Apple GMBH (German entity) but to cut his long story short: the judge was aware of it, doesn´t mention the local Apple, after looking into it I am 99% sure that Apple Inc is the party that not only delivers the products but even sells them in a legal way to German end users so the court verdict is targeted at the responsible one: Apple itself. No difference with my judgement last Friday.
-A lot of hokey pokey about civil law in Germany which is known to all German lawyers who finished their study and is completely similar to civil law in the rest of Europe so no news at all for people in the know. Can be ignored.

I don´t want to diminish his work, but it could have been worded a lot shorter. Stock tip: sell Apple :)
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+Max Huijgen I don't trust Florian because he has been known to spread completely unfounded anti-Android and anti-Linux FUD for years. Some would even call it outright lies. He has continuously misanalysed the GPL and other FOSS licensing issues and we know now that he is being payed by Microsoft for research he does. I can't say if this analysis is correct, but I take his writings with a lot of caution because of that history. He definitely gains personally from making patent issues look worse than they really are, I know that much.

I will keep an eye out for the official court documents once they release them as well as other news stories from more respectable outlets.
 
+Fabian Scherschel I now understand why you made the reference to +Florian Mueller He is posting here about it on G+ and I was not even aware of it! He has blocked me apparently! I see an empty list of posts until my colleague just showed me his series of posts on G+.

Very weird and in my view something you only do with spammers, but he must have had problems with some earlier criticism. So be assured whatever I post is not related to his contributions as I´m not willing to keep on using another account. Maybe he reconsiders and unblocks me. It´s his freedom of course to silence other sounds.
 
+Max Huijgen I think he's getting a lot of flak from lawyers and people who actually do understand FOSS licenses, which isn't surprising, really.
 
Amazing Post, thank you so much for clarifying. The +Florian Mueller guy seems too biased towards apple and microsoft to trust generally, so thanks
 
Florian is allowed to be as childish as he is by blocking me but that´s all a different subject (and yes +Fabian Scherschel I know his background quite well, but he is entitled to his own vision and it´s not something for this thread.
 
Meanwhile there haven´t been real updates except that the German Zeit (a proper newspaper) has asked the court in Manheim about the don´t show of Apple. The only real news there is that there are two other court cases scheduled in Germany (Nov. 18 and Dec. 2) against Apple legal entities.
One could guess at least one of them would be Apple GMBH (the German entity) but as long as this is not in the open it´s rather irrelevant. My conclusion as reached in my other post still holds: the moment Motorola asks for enforcement of the current verdict Apple sales by Apple entities will be blocked. By this I mean at least the Apple Stores and the online store. Likewise I didn´t change my opinion that Apple will have to be careful with marketing their mobile products in Germany. So far no game changers for those who have my read my two posts except for minor interesting facts.
If someone sees something new that suggest otherwise just comment and I will have a look at it.
 
I got a question about the legal entity Apple International. I know what it is, but I´m not sure what the relevance would be at the moment. I´m aware that the European fullfillment, support and logistic center is based in Ireland. Most Europeans orders will be processed by them.
I don´t know why this would change the situation. Apple Germany is no party so they are not mentioned in the verdict and Apple International is under full control of Apple Inc. so will be hit by the same court verdict.

It was also mentioned that this Apple International would use a German tax number (every country in Europe has a value added tax more or less comparable to sales tax in most US states). I don´t know how this came up, but possibly some non European misinterpreted.
A German value added tax number for an Irish based entity would
a) be legally impossible as it would violate the European taxation system at its heart.
b) the German Apple store makes clear that to the contrary you have to pay more tax on some services than the Germans would expect as the Irish percentages are used.

So that´s some bogus circulating.

For those who can read German it´s very simple and you don´t need a lawyer to interpret this as you can just read it at the store site. It just shows that Apple knows very well that you have to follow the value added tax of the selling country. Every company knows this by the way.

Der MwSt.-Satz für Kunden, die elektronisch ladbare Software oder andere Apple Produkte, die nach EU Steuerrecht als Dienstleistungen zu qualifizieren sind, im Apple Store kaufen, liegt derzeit bei (21 %). Der Grund dafür ist, dass nach EU Steuerrecht der Ort, an dem die Dienstleistung von Apple Sales International erbracht wird, Irland ist, so dass die irische MwSt. gilt. Im Bestellformular wird die MwSt. angegeben und ob für die von Ihnen gewählten Produkte Urheberrechtsabgaben anfallen

The english version on the UK store is identical. http://store.apple.com/uk/help/payments
and for those interested in the fine print you can check yourself that it says ...Ireland as the country from where Apple Sales International makes these ´supplies´ so it doesn´t say sales there.

edit: is this a story circulating in German blogs or papers? If German readers know the source that would help
 
Thanks for the thorough summary. It's great to get some real details & not just the quick couple sounds.
 
After all that pressure I have given in and changed the number of people in Germany from a 100 to 80+ million. Didn´t want to change the post as it was shared already, but if it´s important than I will obey :) Added an indication of the size of the economy. No other changes.
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