Ericsson Files Request to Obtain Apple's Carrier Agreements and Apple asks the Court to Deny Ericsson's Request
On February 27, 2015 Ericsson filed their first two patent lawsuits against Apple followed by seven more lawsuits the day after. The battle between the two companies revolves around patent royalties. Apple may be relying on this year's IEEE ruling on how royalties should be paid to patent owners while Ericsson is adamant on demanding that the royalty formula should remain as is based on past FRAND terms. In August we followed-up with a report titled "Apple Seeks Discovery with Qualcomm over Ericsson Licenses," and today we're learning that two letters were filed by Apple and Ericsson in the Northern District of California last night that deal with an underlying legal question that is of the utmost importance to this case.
Ericsson wants to compel Apple to show its carrier agreements so Ericsson can see which commercial benefits Apple derives from those partnerships. In their letter to the Court Ericsson noted the following:
"Ericsson submits this letter in response to the Court's October 30, 2015 Minute Order (ECF 136) asking Ericsson to address (a) the damages-related information it believes is contained in Apple's mobile carrier agreements; (b) why that information cannot be obtained otherwise; and (c) why Ericsson's damages-related interests outweigh Apple's confidentiality concerns.
Although Apple brought this suit against Ericsson, it refuses to reveal the economic terms on which it sells its flagship devices to its largest customers. Those terms are too complex to be inferred from a financial report or summary. While it is true that Ericsson might glean something from depositions or interrogatories, as compared to production of the genuine agreements, those methods are cumbersome and more costly, less complete and less accurate, and yet no more protective of the information Apple wants to keep secret.
Apple's agreements with mobile carriers reflect information that is highly relevant to Ericsson's calculation of the total value Apple has received or will receive from selling LTE-compliant devices to LTE carriers for use on their networks. These are lucrative agreements that exist only because Apple has products to sell that incorporate Ericsson's patented technology. The rest of Ericsson's letter is noted in full in the first Scribd file below.
Apple argues in their letter to the courts (presented in full in the Second Scribd file below) that "Ericsson erroneously suggests that the agreements might be relevant to damages issues. But the agreements contain no information relevant to Ericsson's own damages theories."
In conclusion, Apple notes in their letter to the Court that "Apple respectfully requests that the Court deny Ericsson's motion to compel. If the Court orders production of any portion of these agreements, however, Apple respectfully requests that production be limited to specific portions and made available for review on a secure computer under the same conditions as source code."
Ericsson Letter Re. Apple's Carrier Agreements
Apple Letter Re. Ericsson's Discovery Request for Carrier Agreements
Why is this Issue Important?
As to why this issue is so critical, Florian Mueller of FOSS Patents weighs in on the matter as follows:
"Without a bright-line rule on the royalty base, Ericsson is right to demand access to Apple's carrier agreements. But I keep my fingers crossed that Apple will ultimately prevail over Ericsson in such a way that the much-needed bright-line rule against SEP royalty demands based on entire revenues from the sale of multifunctional devices will be established. The current discovery disputes only underscores the need for such a rule. For SEP trolls (and Ericsson is unfortunately a non-practicing entity now with respect to Apple's product markets), the ability to obtain carrier agreements is desirable because someone might pay up (among other things) to avoid the details of those deals ending up being discussed in public filings or at trials."