In January, the Administrative Law Judge (ALJ) at the ITC had dismissed B&N's initial antitrust related patent abuse case against Microsoft. With this decision, ITC has confirmed the decision of the ALJ. This is a major setback for B&N as the only option left for it, in its fight against Microsoft, is to convince the judges that it doesn't violate any of Microsoft's patents.
Case history
Microsoft had sued Barnes and Noble almost a year ago, claiming that its Android based Nook and Nook colour tablets were infringing upon Microsoft's patents.
B&N hit back in November, asking Department of Justice to intervene in the case.
In a preliminary ruling in January, ITC disagreed with B&N's arguments and dismissed the antitrust claims. B&N then filed an appeal, and it is this case where B&N has lost today.
Though later in February, B&N received a boost when ITC lawyers recommended to the judge that B&N has not infringed on the patents filed by Microsoft, as reported by Bloomberg.
Barnes & Noble's arguments
B&N had based its primary defense on the argument that Microsoft is resorting to patent misuse to stifle competition and asked the Department of Justice to investigate, according to an earlier Bloomberg news report.
In a letter written to Gene Kimmelman, the Justice Department’s chief counsel for competition policy, B&N said “Microsoft is embarking on a campaign of asserting trivial and outmoded patents against manufacturers of Android devices. Microsoft is attempting to raise its rivals’ costs in order to drive out competition and to deter innovation in mobile devices.”
It was always going to be difficult for B&N to win as Microsoft is not the dominant mobile player, was ready to license, B&N did not argue upon the validity of Microsoft's patents and instead pointed that the patent system is wrong and needs and overhaul.
But that seemed like the only option for B&N, short of paying, as neither B&N is strong in patents and nor is Android. Microsoft has already claimed that ~70% of the Android devices sold in the US have licensing arrangements with Microsoft.
With the verdict in the initial ruling in January and now reaffirmation of that ruling, all but closes B&N's attempt to target Microsoft in an anti-trust investigation.
Patents under question
Microsoft had initially brought 5 patents in the infringement suit against B&N, but later dropped two of them. Microsoft will have difficulty winning against B&N as far as these three patents go; ITC's staff has already recommended that B&N has not infringed upon the three patents under question.
But, for one, Microsoft has far too many patents that it can start new lawsuits against B&N. It is asserting over two dozen patent violations against Motorola and could continue adding patent infringements against Microsoft, till B&N agrees to pay. It seems that the only way B&N can win is if the patent system is overhauled completely.
Also, While the Commission will take into account the recommendation of ITC's staff, it is not bound by them and can always give a different verdict depending upon the evidence presented.
Microsoft in a strong position
Microsoft is currently in a strong position, as many of the patents it holds are non-standards essential patents. Do avoid infringements, device manufacturers can either do a workaround or drop the features altogether. While the device will suffer as a result, it won't stop the device from being manufactured and sold.
On the other hand, patents held by Motorola/Google/Samsung are largely standards essential patents and hence there are neither workarounds nor they can be dropped, short of discontinuing the device. So, the regulators have not been very comfortable with the use of these patents in legal cases. This was voiced recently by both the European and the American regulators while approving the Google-Motorola deal.
Microsoft has already struck licensing deals with major Android device manufacturers including HTC and Samsung, and its possible that eventually B&N will have to do the same.
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