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Wednesday, November 14, 2012

PC Confidential: Judge Seals Documents Detailing Source Code, Negotiations & Product Specs In Microsoft v. Motorola Case

Microsoft and Google's Motorola Mobility unit squared off on Tuesday at a trial with strategic implications for the smartphone patent wars and which could reveal financial information the two companies usually keep under wraps.  The proceeding in a Seattle federal court will determine how much of a royalty Microsoft Corp should pay Google Inc for a license to some of Motorola's patents. Google bought Motorola for $12.5 billion, partly for its library of communications patents.  If U.S. District Judge James Robart decides Google deserves only a small royalty, then its Motorola patents would be a weaker bargaining chip for Google to negotiate licensing deals with rivals.

Based upon the recent opinion of the United States District Court for the Western District of Washington in Microsoft Corp. v. Motorola, Inc., 2012 WL 5476846 (W.D.Wash. 2012), three things that will not be revealed during trial are documents containing (1) confidential source code, (2) settlement negotiations, and (3) product specifications. 

In MotorolaMicrosoft sought to seal documents that it submitted contain confidential source code, settlement negotiations, and product specifications. The district judge agreed on all three counts. First, with regard to source code, the court concluded that

"[S]ource code is undoubtably[sic] a trade secret."...Moreover, the impending trial has little to do with the contents of Microsoft's source code, but instead is solely about determining a reasonable and non-discriminatory ("RAND") royalty rate and range for Motorola's 802.11 and H.264 standard essential patent portfolios. Thus, for purposes of understanding the court's final adjudication of the issue-at-hand, the public need not understand Microsoft's proprietary source code.

Second, the court

view[ed] settlement negotiations between Microsoft and Motorola related to Motorola's standard essential patent portfolios in a similar light. As the court explained in its order on the parties' motions in limine, the purpose of Federal Rule of Evidence 408 is to encourage the compromise and settlement of existing disputes...."By preventing settlement negotiations from being admitted as evidence, full and open disclosure is encouraged, thereby furthering the policy toward settlement." 

Third,

Microsoft assert[ed] that at trial the parties may introduce technical information related to the design and operation of the chips included in Microsoft's Xbox product....Such chips are supplied to Microsoft by a non-party company that considers the design and operation of these chips confidential and proprietary. Indeed, this non-party company only provides access to its technical information through non-disclosure agreements. Moreover, similar to source code and settlement negotiations, the design and operation of such chips play little role in the court's determination of the value of Motorola's patent portfolio because such a determination will be focused on Motorola's patent relevant portfolios and their importance to Microsoft. Thus, the court will seal documents related to such technical information.

-CM

http://lawprofessors.typepad.com/evidenceprof/2012/11/microsoftand-googles-motorolamobility-unit-squared-off-on-tuesday-at-a-trial-with-strategic-implications-for-the-smartphone.html

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Comments

I agree with the court on the second point. I disagree with court on points one and three. A person doesn't have an obligation to sue; it is a choice. And like all choices it comes with series of tradeoffs, costs and benefits. One of those costs is that if you want a public adjudication of your grievance you have to expose that grievance to the public. Whatever the benefit to Microsoft there is no good public policy reason why that information should not be available to the public. How is the public supposed to determine if the court's RAND rate is indeed "reasonable" if it doesn't actually see the underlying data? The court's basic thesis is that the public has right to oversee the decision but not, in effect, the sentence in a civil case. What tripe.

It is this type of judicial kowtowing to corporate interests that has so many people in this country angry. The judicial system is not Microsoft's bitch. It was instituted by the public for the public in the interests of the public. If Microsoft doesn't like it has a simple choice: don't sue.

Posted by: Daniel | Nov 14, 2012 9:07:55 AM

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