Wednesday, October 17, 2018

Why would the Federal Trade Commission snatch defeat from the jaws of victory over Qualcomm?

This is a follow-up to yesterday's post on Judge Lucy H. Koh's decision to deny a joint administrative motion by the Federal Trade Commission and Qualcomm asking her not to rule on a motion for partial summary judgment on the obligation to extend standard-essential patent (SEP) licenses on FRAND terms to rival chipset makers (such as Intel).

I didn't want to jump to conclusions from a case management decision, but in purely probabilistic terms it's a fact that Judge Koh's order increases the likelihood of summary judgment being granted. There's no harder-working judge than her, and she wouldn't have decided to cancel the hearing and take this motion (as well as several other, less important motions) under submission if there had been any questions left to ask. However, if she had been inclined to deny the actual motion, she might just have given the parties four weeks to work out a settlement--the sole remaining plausible explanation would be that she wanted to make it clear her court is nobody's tool, much less a restaurant that serves litigation à la carte where you can put one motion on hold while letting the process continue on the same schedule in all other respects.

This antitrust litigation has been going very, very well for the FTC for a long time. It wouldn't make sense to let Qualcomm off the hook now that there is a near-term opportunity (with respect to the summary judgment motion, "near-term" is actually a gross understatement) to restore fair competition in the market for baseband chipsets and with respect to cellular SEP licensing.

There's probably a lot of fighting going on in DC behind the scenes, inside and outside the FTC. Prior to the latest twist I had already tried to find out about where the current five commissioners stand on FRAND, but haven't found any information that would enable me to predict the outcome of a vote on a hypothetical settlement proposal tantamount to the agency's surrender. In the past, the positions of Commissioners Maureen Ohlhausen and Joshua D. Wright were well-known (I mentioned Mrs. Ohlhausen on several occasions, and in 2013 I dedicated a blog post to Mr. Wright's stance), but they aren't in office anymore. So I extended my search for clues to high-ranking FTC officials. It turns out that two of them--Alden Abbott (the FTC's General Counsel) and Bruce H. Kobayashi--have a certain proximity to Qualcomm and are sympathetic to Qualcomm's unFRANDly positions to a degree that is clearly a minority opinion in the legal community. While I don't have the slightest indication of any impropriety, there is a conspicuous lack of impartiality.

In Mr. Abbott's case, I didn't even have to look far. The "Speeches, Articles, and Statements" section at the bottom of his official bio page mentions a May 2018 interview conducted by two people, one of whom is "Koren Wong-Ervin (Qualcomm)." Her title, according to LinkedIn and Twitter, is Director of IP & Competition Policy. I'll mention her again further below.

Mr. Abbott was already trying hard to make a case against the case against Qualcomm before his appointment, a fact that Bloomberg Law reported on ("Critic of FTC Qualcomm Suit Named Agency General Counsel").

While at the Heritage Foundation, Mr. Abbott organized antitrust conferences at which then-Commissioner Ohlhausen explained why she dissented from the FTC's complaint against Qualcomm. In January 2018, both Mr. Abbott and Qualcomm's Mrs. Wong-Ervin both spoke at a Heritage Foundation conference.

On the Heritage Foundation's website, I googled up this article by Mr. Abbott on the Qualcomm case. He predicted that foreign competition authorities would leverage this U.S. antitrust matter against innovative U.S. companies, something which hasn't happened to date. He wanted Mrs. Ohlhausen to lead the FTC (which she did only on an interim basis).

In March 2018, Mr. Abbott spoke at the "IP Leadership" conference, whose sponsors included Qualcomm and the law firm representing it against Apple in the Southern District of California, Cravath Swaine & Moore.

The FTC's chief economist, Mr. Kobayashi, crossed paths with Qualcomm's Mrs. Wong-Ervin at George Mason University. According to the FTC's website, he had been a law professor there since 1992, and she was the Director of George Mason's Global Antitrust Institute and an adjunct law professor from November 2015 to September 2017 (according to her LinkedIn profile).

In 2016, the two teamed up with DC Circuit Jugge Douglas Ginsburg and former FTC commissioner Joshua Wright to co-author at least a couple of articles one can find with Google: an article on "extra-jurisdictional remedies involving patent licensing" (PDF; published by Competition Policy International), and a paper (SSRN) on "the Korea Fair Trade Commission's Amendment to Its Review Guidelines on Unfair Exercise of Intellectual Property Rights."

Those people's views on SEP licensing boil down to saying that patents are legal monopolies, thus there's no room for the notion of overcharging--which is misguided for various reasons, including but not limited to

  • the fact that one must separate the value of someone's technical contribution to the state of the art from the value of a standard as a whole (as so many others, such as Judge Posner, explained before), and

  • the policy consideration that, without antitrust-based restrictions, a single SEP would enable any given patent holder to prevent an entire industry from implementing a standard on a commercially viable basis (or at all), and typically there's a plurality of SEP owners, especially in the field of cellular telecommunications where hundreds and often even thousands of patents are declared to be essential to a single standard.

Qualcomm's FTC friends hold views outside the mainstream--and contrary to the public interest. Let's hope the five commissioners won't adopt those views.

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Tuesday, October 16, 2018

FTC and Qualcomm trying to settle antitrust matter by November 14, but Judge Koh may rule on chipset licensing anytime

On Monday, the Federal Trade Commission and Qualcomm brought a joint administrative motion asking Judge Lucy H. Koh of the United States District Court for the Northern District of California not to adjudicate between now and November 14 the FTC's motion to require Qualcomm to extend standard-essential patent (SEP) licenses to rival chipset makers such as Intel:

"Pursuant to Local Civil Rule 7-11, Plaintiff Federal Trade Commission ('FTC') and Defendant Qualcomm Incorporated ('Qualcomm') hereby jointly move the Court to defer ruling on the FTC's Motion for Partial Summary Judgment [...] for a period of 30 days (until November 14, 2018). The FTC and Qualcomm each continues to stand behind the positions in its filings on the FTC's Motion. The Parties believe, however, that deferral of a ruling would facilitate the Parties' ongoing discussions concerning the potential settlement of this litigation.

The Parties do not request that the trial of this matter be taken off calendar and do not request any change to the schedule established by the Court's Case Management Order (ECF No. 678) or the Court's Order Continuing Further Case Management Conference (ECF No. 826). The Parties also do not request that the Court defer ruling on any other pending motion."

Judge Koh gave this administrative motion short shrift: she denied it quickly, without any further explanation.

Since my first commentary on the motion, I've always felt that nothing would make a settlement more likely at this stage than an order granting the motion and reminding Qualcomm of obligations it entered into when it made FRAND licensing declarations to two U.S. standard-development organizations, TIA and ATIS. Yesterday's administrative motion validates that assessment: while the FTC and Qualcomm have presumably talked about settlement on numerous occasions (even if just calling someone to find out whether the other party's position has changed), the current situation is unique. The importance of SEP licenses to competitors couldn't be made clearer than by a motion that says the parties don't have a problem with decisions on any other pending motion but this one. This motion unsurprisingly appears to scare the living daylights out of Qualcomm.

From the outside we can only ask ourselves three questions:

  1. Would a settlement between the FTC and Qualcomm be a good thing?

    The answer obviously depends on the terms. A settlement following a ruling according to which Qualcomm must license competing baseband chip makers like Intel would definitely be preferable over one at this stage since the FTC would then at least have accomplished something important and useful, and Qualcomm would be under more pressure to settle the remaining parts of the case. But if Qualcomm has simply made headway with its DC lobbying efforts and the Trump Administration wants to let it off the hook, then a settlement in all likelihood won't help and private-party litigation (such as Apple's Southern California case, a hypothetical lawsuit by Intel seeking a FRAND license to Qualcomm's SEPs, or the 250 million consumers' class action) would have to answer the most important questions. Just yesterday I published an infographic that shows all the presently-pending smartphone patent and antitrust cases, most of which involve Qualcomm in one way or another.

  2. Is it good news that Judge Koh denied the administrative motion to defer?

    Absolutely. The sooner she resolves the actual motion now, the better for industry and consumers. It's not about whether a settlement would be desirable. It's about whether the outcome will be good.

  3. Why did she deny it?

    We can just speculate. There are some possibilities that aren't even mutually exclusive. One possibility is that she's already done most of the work and a ruling is imminent. Whether or not her order is far along, she may be concerned about parties pushing a court around like they could tell a taxi driver "please wait another hour, we'll pay you for your time." Also, it may just not seem practical to her to rule on some other pending motions first: if the court finds Qualcomm has to extend licenses to rival chipset makers (as its ATIS and TIA declarations strongly suggest), some other questions (substantive as well as evidentiary) may be easier to resolve. And she, too, may feel that if a weak FTC-Qualcomm settlement doesn't really help, we'll just see more private litigation. And where would someone like Intel sue Qualcomm for a license? Presumably in her district, and the case would most likely be assigned to her.

    Judges generally like settlements, and this is particularly true of Judge Koh. But since she's a neutral arbiter--unlike the FTC, which has done great work so far but can be influenced through political lobbying that has nothing to do with the merits of the case--, she may think she has a particular responsibility here to ensure that certain problems be solved. If they can be solved without a trial, great. But if it takes a trial, or at least a decision on the motion regarding chipset licensing, so be it.

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Sunday, October 14, 2018

The new smartphone patents battlemap (infographic featuring Apple, Huawei, Intel, Qualcomm, Samsung)

Eight years ago, this blog started publishing battlemaps of major smartphone patent disputes. Apple and Microsoft aren't suing Android device makers at this point, but two major disputes are ongoing: Apple and, by extension, Intel's dispute with Qualcomm, which is under fire from competition enforcers around the globe; and Huawei v. Samsung, the most massive patent clash ever between two leading Android device makers.

That's why I took the time today to draw up my first battlemap (announced in a post earlier today) in more than half a decade (click on the image to enlarge; this post continues below the document):

You can find the PDF version (a single-page document) on Scribd.

As the text in the bottom right corner explains, solid red lines indicate disputes or conflicts (competitive activity or activity that may lead to litigation, such as a regulator fining a company, which then appeals the decision to a court of law); dotted red lines show that there was a dispute, but it has been settled or at least the parties agreed on a ceasefire; and green lines denote partnerships or alliances (including joint defense).

If a line has only one arrow, it goes from the party that first went to court (or took similar action) to the target, regardless of whether the other party counterclaimed. For an example, whenever Huawei brought offensive patent infringement assertions against Samsung, Samsung countersued, but the history of that litigation and the parties' pleadings suggest that Samsung, which according to a recent filing suggested a zero-zero cross-license at some point, would have preferred to be left alone. It's like an offense actually representing a kind of defense.

Apple's patent infringement counterclaims against Qualcomm are a similar story, and that's just one of various parallels between Apple's approach to Qualcomm's conduct and Samsung's defenses against Huawei. And the way Huawei is dealing with (Pan)Optis Wireless, which is asserting former Ericsson patents against it, is not entirely dissimilar to Apple's and Samsung's defensive efforts either.

I could have added companies like Nokia and Ericsson to the list (beyond PanOptis, which is an Ericsson proxy, or so-called privateer), but they have license deals with the likes of Apple, Samsung, and Huawei in place anyway. So I focused on the ones that are presently party to major conflicts.

In the early part of this decade, Apple v. Samsung (just thinking of the presidential veto of an ITC import ban and the first Supreme Court ruling on design patents in well over 100 years), Apple v. Google/Motorola (especially the "Posner case" in Chicago!) and Microsoft v. Google/Motorola were the two disputes in which the most interesting things happened. Now we're approaching the end of the 2010s, and the disputes visualized by the battlemap above are the ones to watch.

Just one last comment on similarities between Apple's litigation with Qualcomm and Samsung's with Huawei: I've uploaded an Apple reply brief to Scribd that notes Qualcomm dropped its request for a global FRAND determination in the Southern District of California (though Qualcomm still wants the U.S. district court to hold that its demands were FRAND-compliant). This reminds me of Huawei recently stipulating to a dismissal (without prejudice) of a similar request. And Apple's brief quotes something Judge William H. Orrick said in Huawei v. Samsung:

"How am I to adjudicate whether those offers were FRAND, if that determination depends on valuation of global portfolios, and can only be made subsequent to finding each patent valid and essential to the standard?"

This insistence on firstly establishing the merits of someone's standard-essential patents (as opposed to rushing to rate-setting based on sheer portfolio size, regardless of whether those patents are infringed and valid, be it in a court of law or in arbitration, which patent holders typically want to take place under extremely unfair preconditions and parameters) is a common element of Apple's positions in its dispute with Qualcomm and Samsung's defense against Huawei.

At the same time, Qualcomm and Huawei, despite the fact that the latter is rumored not to be paying patent royalties anymore to the former, have been described as "more partners than rivals." I, too, sometimes refer to them collectively as "Qualwei," though I still hope Huawei will ultimately focus on its product business more so than on outbound patent licensing.

Finally, I'd like to explain the logic behind placing Apple and Intel in a rectangle that is the target of patent lawsuits brought by Qualcomm. Apart from China, all patent infringement actions pursued by Qualcomm against Apple (in the ITC and Germany) target Intel-powered smartphones, and I've seen opposition briefs Intel filed with the European Patent Office, seeking the revocation of certain patents asserted by Qualcomm against Apple--with the same patent attorneys making virtually identical filings on Apple's behalf as well. Obviously, some of Qualcomm's patent infringement claims are technically closer to Intel's baseband processor (especially several assertions accusing a Qorvo envelope tracker of infringement) than others, a threshold question that the German judges presiding over multiple Qualcomm v. Apple cases in Munich and Mannheim are particularly interested in.

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Patent exhaustion keeps Qualcomm on the run from Apple's claims and motions

If exhaustion makes you run even further and faster, you're either above conventional physics--or you're Qualcomm.

Patent exhaustion has been an important and powerful concept for a very long time, but last year the Supreme Court provided a great deal of clarification in its Lexmark opinion. That opinion came down in the early phase of Qualcomm's disputes with the United States Federal Trade Commission (FTC) and Apple.

Apple asserted nine patents in its original Southern California complaint. Qualcomm surprisingly didn't bring mandatory infringement counterclaims, thereby waiving its right to assert infringement in that litigation or any other U.S. case against Apple. Apple threw in nine more patent DJs (declaratory judgment requests) in its first amended complaint, but Qualcomm persuaded Judge Gonzalo P. Curiel to throw those additional claims out. In order to do away with the original nine DJs for good (since Qualcomm would rather have everyone focus on the size of its portfolio--130K patents), Qualcomm "supersacked" (see this Lexology article for further information) Apple and the contract manufacturers by sending them a covenant not to enforce those patents against them, and in accordance with the Super Sack precedent immediately moved for dismissal of the original DJs including the patent exhaustion DJ for alleged lack of subject matter jurisdiction.

Apple and the contract manufacturers (Foxconn, Compal, Wistron, Pegatron) opposed. They basically argued that Qualcomm can't just duck patent-specific determinations while demanding billions of dollars in royalties. They pointed to a decision in the District of Massachusetts, where a judge still identified a justiciable controversy over patents despite a Super Sack-style covenant.

Qualcomm filed its reply in support of its motion for dismissal on Friday (this post continues below the document):

18-10-12 Qualcomm Reply Iso... by on Scribd

Qualcomm seeks to distinguish the Massachusetts precedent (Esoterix v. Qiagen) from its situation with Apple and the contract manufacturers. There are differences for sure, still it's true that the Massachusetts decision shows Super Sack isn't as absolute and comprehensive as some would have it.

The highlight of Qualcomm's reply is a true "gotcha" moment:

"Apple previously admitted that Qualcomm's position here is correct: “Qualcomm always has the power to remove the Nine Patents by granting Apple a covenant-not-to-sue pursuant to Super Sack.' [...] Now, faced with Qualcomm's covenant and Motion, Apple attempts to reverse course."

My guess is that Apple didn't quite expect Qualcomm to chicken out the way it ultimately did--at least not this late in the game. But this here is not about whether Apple had extended a standing invitation: a patent holder doesn't need any invitation to invoke Super Sack.

But Apple is determined to obtain judicial clarification of the all-important exhaustion question in the specific context of Qualcomm's alleged double-dipping by selling chipsets that substantially embody certain patented inventions and additionally charging patent license fees.

That's why Apple and its contract manufacturers--on Friday, just like Qualcomm's reply--brought a motion asking the court to entertain a new motion for partial summary judgment on patent exhaustion. The new motion relates to U.S. Patent No. 9,136,878 on a "file download and streaming system," one of 93 standard-essential patents (SEPs) Qualcomm listed in that San Diego case as part of its efforts to prove the value of its SEP portfolio and which its opening expert reports focus on (this post continues below the document):

18-10-12 Apple & Contr ... by on Scribd

The whole idea is to attack the '878 patent in case the pending motion for summary judgment on exhaustion would be mooted by Qualcomm's Super Sack covenant.

Qualcomm almost instantly voiced its opposition to this new motion, and asked the court for more time to respond.

In their motion, Apple and the contract manufacturers say "Qualcomm is desperate to avoid judicial review of its illegal business practices which include forced licenses of exhausted patents." Legality or illegality will have to be determined in court (antitrust authorities have already taken pretty clear positions). Any observer can already see that Qualcomm is trying to hide and and run from the question of patent exhaustion.

In this case, following high-stakes commercial litigation almost feels like watching a cartoon...

In the next post (later today) I'll show you a new infographic I created today to show the web of patent and antitrust disputes involving the likes of Apple, Samsung, Qualcomm, and Huawei.

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Saturday, October 13, 2018

Qualcomm files appeal to avoid potential $5 billion payout to 250 million American smartphone buyers (1.2 billion transactions)

On Thursday I thought Munich, where Qualcomm just lost a case against Apple (and, by extension, Intel), was going to be the venue where the cellular chipset maker would file its first appeal in a litigation between private parties that is part of the current globe-spanning host of lawsuits. But it turns out that on the same day Qualcomm filed a petition to the Ninth Circuit appealing Judge Lucy H. Koh's recent class certification (this post continues below the document):

18-10-11 Qualcomm Petition ... by on Scribd

In its third question presented for review, Qualcomm describes this consumer class that was certified in the Northern District of California--up to 250 million people and, according to Qualcomm's estimate, approximately 1.2 billion claims (since people, on average, bought multiple smartphones during the roughly 8-year period the claims relate to)--as "quite likely the biggest class action in history."

That may be true with respect to membership size. It certainly isn't in economic terms since the $4.99 billion demand Qualcomm is facing ('s Scott Graham found out) is dwarfed by the $206 billion tobacco settlement in 1998 or the $20 billion Gulf of Mexico oil spill settlement in 2016. Still, $5 billion is a very significant number, which would amount to approximately $20, on average, per class member. The exact amount per member would obviously depend on the particular smartphone purchases made by each consumer. It would be the amount of each buyer's overpayment due to Qualcomm's practices (which regulators on three continents have already held to be anticompetitive), possibly enhanced by a factor of up to three. Just imagine how many people--outside of its own organization and apart from its shareholders--Qualcomm would make happy with such an involuntary gift...

One of the reasons for which Qualcomm wants the United States Court of Appeal for the Ninth Circuit to overturn Judge Koh's class certification is plain feasibility. Qualcomm argues, as it did (unsuccessfully) in San Jose, that the consumer plaintiffs "provided no plan whatsoever to process, verify, and administer more than one billion claims—a herculean task for any claims administrator." However, Qualcomm does mention that an attorney declaration submitted to the district court said that effective notice could be provided to 70% of all members of the class (approximately 175 million people).

My answer to this has two parts, neither of which Qualcomm will want to hear:

  • A $5 billion payout justifies, and effectively pays for, a whole lot of administrative effort.

  • Technology--Qualcomm knows a thing or two about it--can work wonders. In the Internet Age you can handle classes that appeared unmanageable decades ago. That's a major reason for which I'm underwhelmed by Qualcomm's citation to a 1983 Second Circuit decision. Times have changed since then. That was in the middle of Ronald Reagan's first presidential term, and most of us used to listen to vinyl records since the compact disc had just been released the year before (and nowadays music is streamed and downloaded for the most part).

    The Ninth Circuit is particularly aware of technological progress due to the cases it gets.

But manageability is not the first point Qualcomm raises. Its petition argues that Judge Koh shouldn't have applied California law to this decision since two dozen other states don't allow indirect purchaser claims on antitrust grounds; it also takes aim at the consumer plaintiffs' damages model; and argues that "large numbers of consumers" are included in the class definition but, in Qualcomm's view, "suffered no antitrust impact."

I'll wait for plaintiffs' responsive brief before looking more closely at those issues. At first sight it appears that Judge Koh had taken everything into account.

On the subject of Judge Koh's decision-making, she's just decided to take under submission (decide in writing without an oral hearing) all pretrial motions pending in FTC v. Qualcomm, including the FTC's motion for partial summary judgment regarding Qualcomm's obligation to extend FRAND licenses to rival chipset makers.

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Friday, October 12, 2018

Federal Trade Commission makes important clarifications in reply to Nokia's amicus brief supporting Qualcomm

While Qualcomm's patent infringement lawsuits against Apple (and, by extension Intel) are merely a sideshow to the antitrust matters pending on three continents, let's start with a brief follow-up to yesterday's Munich judgment. The court has meanwhile, thankfully, provided a redacted copy of the decision. I've read it, and the most interesting part is that Qualcomm had submitted two expert reports in support of its claim construction, while Apple had provided only one, but the deficiencies of Qualcomm's reports were massive while Apple's expert provided instructive, helpful information. I'll publish a translation of the relevant passages soon.

Meanwhile, Judge Lucy H. Koh of the United States District Court for the Northern District of California has granted the Federal Trade Commission of the United States permission to file a reply to Nokia's recent amicus curiae brief in support of Qualcomm with respect to the FTC's motion for partial summary judgment regarding Qualcomm's obligation to extend FRAND licenses to its cellular standard-essential patents (SEPs) to rival chipset makers. In its reply brief in support of its motion (that post also contained a link to Nokia's brief), the FTC had already reserved the right to request leave to file such a reply since Nokia's brief was filed just on the eve of the FTC's reply to Qualcomm's opposition.

The FTC's reply must not be misperceived as an implicit concession that Nokia's brief contained anything that has the potential to be outcome-determinative in Qualcomm's favor. The legal question for Judge Koh to resolve is purely one of contract interpretation, and the FTC notes at the very start of its reply brief that Nokia "does not present any argument regarding the plain language of the two IPR policies that are the subject of the FTC's motion for partial summary judgment." Nokia's brief does not even present parol evidence (which would be irrelevant anyway under California law unless the whole industry had consistently taken a certain perspective on SEP licensing). Finally, Nokia's credibility is minimal in this context since Nokia itself told the European Commission in a February 13, 2006 complaint that Qualcomm breached its FRAND duty by terminating a license deal with a chipset maker (Texas Instruments).

The reason why the FTC elected to submit a reply--and which appeared significant enough to me to warrant a follow-up post--is simply that the FTC doesn't want the actual scope of its summary judgment motion to be blown out of proportion. The FTC states once again that "[its] motion [for partial summary judgment] asks the Court to interpret the plain language of Qualcomm's commitments under the IPR policies as written, pursuant to California contract law, not to determine what FRAND means in the abstract or to declare how SSOs ought to draft their IPR policies."

In the second paragraph, the FTC makes a point that is incredibly important in connection with FRAND licensing obligations (in this case and far beyond): it's one thing whether certain obligations (here, to extend licenses to chipset makers upon their request) exist, but another what the market will ultimately make of those obligations: "If Qualcomm's anticompetitive conduct is addressed and remedied, market forces will decide whether modem-chip or handset-level licensing (or some combination of the two) is most efficient."

There's a parallel here to an argument made by Huawei in its defense against (Pan)Optis Wireless in the Eastern District of Texas. In that dispute, Huawei accurately argues that a SEP holder shouldn't be able to choose one venue (here, the Eastern District) for a global FRAND rate-setting process, but in practical terms, global license agreements may very well be the most common result of free negotiations between parties. (Huawei takes the opposite position in its dispute with Samsung in the Northern District of California, but schizophrenia doesn't render its point in Texas any less well-taken.)

The FTC just wants to achieve judicial clarification that Qualcomm itself made FRAND licensing promises that also extend to rival chipset makers should they seek a license (which applies to a company like Intel). If no one made such a request, or if Qualcomm extended FRAND licenses to all device makers, then there would simply be no demand. It's a hypothetical scenario because there obviously is demand; but the bottom line is that the FTC wants to set market forces free as opposed to using an antitrust litigation in order to restrict anyone's freedom (apart from Qualcomm's freedom not extending to anticompetitive, exclusionary conduct, of course).

Again, an analogy: Huawei's opposition to a global FRAND determination in the Eastern District of Texas (a venue that has a reputation for being particularly sympathetic to patent holders, particularly non-practicing entities) doesn't mean that Huawei and (Pan)Optis might not ultimately agree on a global license. While it's always possible that parties reach a settlement in one jurisdiction (or set of jurisdictions), such as when InterDigital settled some European cases but litigation kept going in the United States or when Samsung and Apple withdrew all ex-U.S. lawsuits (but not the ones pending before Judge Koh), most negotiations will result in a global license for convenience. But it should be the result of free choice, not of undue leverage (such as from injunctive relief) or forum-shopping.

I found a couple of gems in the footnotes:

  • "Qualcomm has claimed that modem-chip-level licensing is efficient--at least when the licensee is Qualcomm itself. [...] If Qualcomm’s efficiency claims are valid, similar efficiencies may arise from other modem-chip suppliers licensing Qualcomm's cellular SEPs on FRAND terms."

  • "The FTC does not concede that construing the ATIS and TIA policies according to their plain language would create any inconsistency among relevant IPR policies."

    As I explained in my commentary on the FTC's motion, it's just that the FTC would like to streamline and simplify the Northern California case by obviating the need for an interpretation of the ETSI FRAND declaration since it's governed by French law. To me it's always been clear that the FTC's position is that Qualcomm has to extend licenses to rival chipset makers even just under ETSI's rules, but when you're litigating an issue in the United States and have two FRAND declaration texts under U.S. law (ATIS and TIA) based on which you can prevail, why make an intercontinental detour that just wastes court, federal government and private party resources?

Finally, here's the FTC's brief:

18-10-11 FTC Reply to Nokia Amicus Brief in Qualcomm Case by Florian Mueller on Scribd

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Thursday, October 11, 2018

Munich I Regional Court throws out Qualcomm patent infringement lawsuit against Apple: no infringement

The Munich I Regional Court ("Landgericht München I" in German) just announced the first final judgment on a Qualcomm v. Apple patent infringement complaint anywhere in the world. Apple (and, by extension, Intel) fended off one of various Qualcomm patent infringement lawsuits.The court agreed with Apple's claim construction.

A few months after the Federal Trade Commission of the United States and, in a separate case, Apple sued Qualcomm over antitrust and contract-related matters in January 2017, the San Diego-based company that dominates the market for cellular baseband chips started a patent infringement lawsuit campaign against the iPhone maker in the U.S., Germany, and China. Qualcomm wanted to kick off the German "rulings season" with a Mannheim injunction--and got a Munich rejection.

A three-judge panel--composed of Judge Dr. Schoen ("Schön" in German), who filled in for Presiding Judge Dr. Zigann at last week's trial, and Judges Klein and Schmitz--held that Apple's iPhone 7 and iPhone 7 Plus do not infringe Qualcomm's European patent EP1199750 on a "post[-]passivation interconnection scheme on top of [an] IC chip."

I missed last week's trial, but attended the first hearing in May. Freshfields Bruckhaus Deringer's Prince Wolrad of Waldeck and Pyrmont was Apple's lead counsel with respect to its (now victorious) non-infringement contentions then and presumably also last week. He's a familiar face at German Apple patent hearings and trials, as are several other attorneys at law and patent attorneys. The patent attorneys also represent Intel in parallel nullity and opposition proceedings before the Federal Patent Court and European Patent Office, respectively. Qualcomm is represented in Germany by a team of Quinn Emanuel lawyers led by Dr. Marcus Grosch. He's a tremendous fighter in every sense of the word and will probably appeal this decision to the Munich Higher Regional Court ("Oberlandesgericht München" in German). However, the fact that the ruling came down just one week after trial--normally it takes several weeks, and in complex cases even months--suggests that Apple had a non-infringement argument that made this a very clear case once all the facts and theories were on the table, so chances are that Prince of Waldeck will be able to defend his victory on appeal. Also, the patent may be considerably closer to invalidation by the time of an appellate hearing.

Qualcomm is increasingly unlikely to gain leverage over Apple in the near term:

Qualcomm has meanwhile filed additional patent infringement complaints in Germany. It will keep trying, but realistically it won't be able to force Apple into a settlement before some key antitrust, contract and patent exhaustion questions are resolved in the United States.

I will soon write in a separate post about Munich as a patent litigation venue. The court is still very efficient (as evidenced by the speed with which it resolved the case decided today), but facing resource constraints stakeholders should be concerned about.

I've asked the court's press office for a redacted copy of today's judgment and may go into more detail--in a follow-up post to this one--if and when I've obtained it. I prepared only for this scenario (non-infringement) and a stay (over validity concerns) in light of the short time between trial and decision--simply too short to resolve all defenses including antitrust. That assumption was right and enabled me to publish this post right after the announcement (though without technical detail).

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