By Peter Scheer—Apple recently announced that it had reached a global settlement of its patent disputes with HTC, a producer of smartphones using Android, the Google-owned operating system for phones and tablets that compete head-on with Apple’s phones and tablets.
Although this settlement, covering some 50 lawsuits, will have a direct impact–almost certainly painful–on millions of American consumers, and many more around the world, you can’t find out the settlement’s terms. Why not?
Because, incredibly, all the relevant terms are secret–the secret results of a secret settlement process–known only to Apple and HTC, to a federal judge in a separate patent case involving Apple and Samsung, another Google-licensed maker of Android devices, and to Samsung’s lawyers. (A censored version of the settlement given to reporters has been cleansed of all financial terms).
If Congress took up legislation taxing handheld devices and removing some of their features, you would certainly hear about it–and you’d have a chance to protest loudly against such a (stupid!) law. Yet Apple and HTC have agreed to terms that almost certainly include licensing fees (raising prices to consumers) and patent use restrictions (limiting device functions) on its Android phones, all as part of a negotiated conclusion to lawsuits.
The only difference, in terms of impact on American citizens, is that the latter scenario is TOP SECRET. (Also, the revenues generated, instead of going to the US Treasury, are pocketed by Apple shareholders.)
Much has been written about the excesses of patent battles in the tech sector: how they divert resources from business expansion to paying armies of lawyers; deter innovation and the formation of new start-up companies; and force top executives to spend their time testifying in depositions instead of inventing the next new thing. But regardless of whether Apple, Google, Samsung, HTC and others should be allowed to tie each other in knots by filing dozens of patent lawsuits, the manner in which these companies go about settling their suits–this raises very serious questions.
That’s because the settlement of a patent infringement case between competitors is not like the settlement of run-of-the-mill commercial disputes. Settlement of a patent case invariably involves agreements to engage in anticompetitive practices that in any other setting could land the CEOs of both companies in prison. Agreements between competitors to raise prices or withhold features from their products are the most serious type of antitrust offenses.
Bad enough that competing companies may enter into these anticompetitive settlements at all. But there’s no excuse for allowing them to do so behind closed doors and then treat the resulting agreement like a state secret. The settlement agreement between Apple and HTC should be open to the public in its entirety, period.
It also should be subject to review by a court or agency. Settlements in class actions must be approved by a federal judge to protect the interests of class members. While the Apple-HTC suits were not filed as class actions, they nonetheless seek (and, under the settlement agreement, will impose) financial costs and other burdens on consumers on a class-wide basis.
Similarly, the US Justice Department has authority to vet most mergers in order to protect against harm to competition. Agreements in patent feuds between competitors, like the Apple-HTC settlement, pose an even greater threat to competition than mergers. If class actions and mergers require government approval, settlements in patent suits between rivals should be subject to at least the same level of scrutiny.
Apple, Samsung, et al. no doubt would defend the status quo by arguing that secrecy for settlement agreements is necessary to protect their “trade secrets,” meaning any information that is confidential and gives them a leg-up against their competitors. But where is the public interest in maintaining the confidentiality of companies’ financial information–which, if disclosed, could intensify price competition, resulting in lower prices?
When corporate interests and consumer interests diverge, courts should not automatically favor the former over the latter. The judicial habit of genuflecting before corporate assertions of confidentiality and trade secrets makes no sense in an era of patent lawsuits that are filed promiscuously to thwart competition in ways that cannot be achieved in the marketplace.
Apple should be forced to release its settlement with HTC now, in uncensored, unredacted form. Full disclosure should be the norm in patent lawsuits between competitors. If transparency means that tech companies, fearful of having to disclose their financial secrets, refrain from initiating new patent litigation, well, so much the better.
America’s best tech companies could go back to focusing their resources and energies on product innovation instead of legal strategy. We will all be better off.
Peter Scheer is executive director of the First Amendment Coalition. FAC is participating in the appeal of the Apple v. Samsung patent case, seeking disclosure of “sealed” records filed by both Apple and Samsung. The views expressed in this article are Scheer’s alone; they are not necessarily shared by the FAC Board of Directors.Coalition NewsNEWS ON FAC CASES, CALLS TO ACTION AND EVENTSCommentaryFAC lawsuit leads to model CPRA policy for dot-gov email
Auburn and San Jose are the first cities in California to adopt policies acknowledging the public’s right of access to city officials’ emails about government business–regardless of the kind of email accounts used to send or receive those emails.
Emails have long been covered by the California’s Public Records Act (PRA), which treats paper records the same as digital records. But public officials wishing to avoid the PRA–often the same officials who most loudly proclaim their support for government transparency–have been avoiding prying voters by using a private email account instead of their official dot-gov account.
San Jose and Auburn have adopted policies that will block–at least partly–this end-run around the PRA. San Jose’s policy says that public records include messages sent or received over “personal devices not owned by the City or connected to a city computer network.”
The Auburn policy is more specific. It requires all emails about city business to be saved on a city database for at least two years. And council members’ emails on their private email accounts must be forwarded on a regular basis to the city database.
Auburn’s new policy is the result of a settlement of a PRA suit filed by FAC in early 2012. Prior to the suit, Auburn, like many California local governments, viewed emails as a lesser species of public records, subject to being erased or destroyed virtually any time. Auburn’s former “retention” policy OK’d deletion after only 30 days. Under the settlement, emails will be saved as long as paper-and-ink records
Auburn’s requirement that city emails, regardless of account type, be forwarded and saved in a city database solves a problem that cities face when presented with a PRA request for official emails on private email accounts: How to obtain copies of emails residing in accounts to which the city has no access separate from the employee-owner of the account? Searching the gmail accounts of all council members is awkward, to say the least.
Another advantage of Auburn’s policy is that, by creating a single and comprehensive repository of government emails, accessing these documents is hugely simplified. This benefits city staff, who can use the database for internal research. And the single archive, searchable with key words, improves compliance with the PRA while reducing the cost of responding to PRA requests
That said, the Auburn policy also has its limitations. For example, council members’ emails from constituents are exempted on grounds that constituents’ communications are protected by the first amendment’s right to “petition” government. Although FAC agrees that constituents’ communications implicate the right to petition, that right has never been seen as requiring confidentiality in communications with government. Auburn’s email policy would be improved by either removing this exemption or, as a compromise, requiring disclosure of council members’ communications with persons or firms having business before the City Council.
The San Jose and Auburn policies should serve as models for the rest of the state. Local governments that want to level with their citizens will follow their example. Local governments that persist in playing hide-the-ball with citizens will pay for their recalcitrance at election time. –Peter Scheer