Friday, November 11, 2011

Samsung could win German injunction(s) against Apple's 3G-capable products in late January -- enforceability would be clarified later

Today I attended a trial in the Mannheim Regional Court relating to two Samsung lawsuits over 3G-related patents. Formally the court had scheduled a doubleheader, but in recognition of non-negligible overlap between the two cases, today's three-hour session addressed all claims and defenses brought in both of them. (For the sake of accuracy, Samsung is asserting a third patent in a litigation that will go to trial on December 16.)

This is the same court that entered, one week ago, a default judgment against Apple Inc. in a litigation brought by Motorola.

The presiding judge indicated preliminary positions and inclinations that suggest the two German litigations tried today pose considerable risk to Apple but won't necessarily result in rulings that Samsung can effectively enforce against Apple's core products. The most important -- but not the only -- uncertainty in this regard is whether any ruling on the present litigations would or would not be enforceable against the iPhone 4S, which Apple notes was launched long after Samsung's April 21 complaints and which Apple says raises new technical as well as licensing issues with respect to the patents-in-suit. Apple's position ("until recently, even we didn't know what the product's technical characteristics and name were going to be") was viewed very skeptically by the judge at the start, but Apple still has the formal chance to persuade him on this.

Rulings on the two cases tried today have been scheduled for January 20 and 27, 2012. Assuming that Samsung wins one or two infringement rulings, which is anything but unlikely at this stage, the judge appears inclined to leave some important questions to subsequent enforcement disputes. Apple's lawyers propose to have as much as possible clarified in the ongoing litigations while Samsung wants to proceed one step at a time. The judge appears to understand that injunctions would almost inevitably result in enforcement disputes and a need for future (post-injunction) court hearings, but unless Apple's lawyers come up with very compelling legal arguments in their post-hearing brief (to be filed on or before December 23, with the exclusion of the iPhone 4S probably being Apple's number one priority), the judge will probably rule on Samsung's original prayers for relief as they stand.

According to what was said, Samsung is demanding, within the territory of the Federal Republic of Germany,

  • a permanent injunction against the distribution,

  • damages (and information required to calculate them) relating to past sales,

  • a recall from the retail channel, and

  • the destruction

of all 3G-capable Apple products (iPhones and iPads), not only the ones Apple was selling by the time of Samsung's complaints but also future ones, including the iPhone 4S.

The patents-in-suit

The two patents asserted in today's litigations are

  • EP1005726 on a "turbo encoding/decoding device and method for processing frame data according to QoS", and

  • EP1114528 on an "apparatus and method for controlling a demultiplexer and a multiplexer used for rate matching in a mobile communication system".

Samsung's third German complaint against Apple, which wasn't at issue today, relates to EP1188269 on an "apparatus for encoding a transformat format combination indicator for a communication system".

According to an Apple filing with a United States District Court, all three of those patents have been declared essential to the 3G (UMTS) standard. In today's hearing, it was stated that the first patent relates to the 3G standard and the second one to its implementation, but for the time being I assume that both have been declared essential.

Issues discussed at today's hearing

Most of the court session was about claim construction (the interpretation of key terms on which the scope of a patent depends), which U.S. courts and the ITC clarify well ahead of trial by means of separate orders. The judge raised questions about one disputed term concerning the first patent and a couple of issues relating to the second patent:

  • For the first patent, the key issue was whether the patent disclosed a sufficiently clear "nexus" between the type of service (voice call, data connection etc.) and the way in which data are packaged. The court raised a question about this, and half-way into the discussion one of the judges told Samsung that it had not yet rebutted Apple's related objections, but toward the end it looked like Samsung can still win on this count. Apple's most recent pleading addressing this issue was received by Samsung's counsel only on November 2. and Samsung wants to reply. Without access to the documents it's difficult to say where this one stands, but the presiding judge appeared a little more inclined to agree with Samsung, on a preliminary basis.

  • For the second patent, one claim construction issue is whether a wording that refers to three data channels can also be infringed by a technology using four channels. On this one, the judge said quite clearly that the presence of additional elements beyond the ones disclosed by a patent usually does not trigger a finding of non-infringement. Apple may find other ways to prevent a finding of infringement, especially since the judge started with a skeptical question concerning Samsung's contentions, but the mere presence of a fourth channel likely won't help.

    The reference to a demultiplexer raises issues that appear to have wider-ranging implications. Apple would like the court to interpret that one rather narrowly in order to escape an infringement finding. The narrow definition proposed by Apple is that there must be a demultiplexer hardware component (given that this is an apparatus patent), but Samsung argues that demultiplexing was typically implemented by software even on the priority date of that patent (the filing date of the original Korean patent application). But a patent attorney advising Apple raised some good questions, especially since it seems that the European patent application is different in this regard from the Korean one, which could affect the priority date and, as a result, possibly persuade the court that the patent isn't valid. The judge acknowledged that the same claim construction would have to be applied to the assessments of the presumed validity and the alleged infringement of the patent. However, he pointed out that only a "high probability" of invalidity would be outcome-determinative in Apple's favor.

As the above summary shows, it's not impossible that Apple might fend off both patent infringement suits, but Samsung is more likely to win on at least one of those counts.

Apple's lead counsel stated that his client was, at least potentially but apparently quite seriously, willing to sign a cease-and-desist declaration with respect to those patents to the extent that Apple is not licensed based on the chips it purchases. While the devil is in the details when it comes to the wording of such covenants, meaning that Apple perhaps wouldn't accept to enter into anything truly useful to Samsung, I tend to take this gesture as another indication of Apple having realized that the technical infringement analysis is difficult (even if not impossible) to win.

The final part -- approximately the final third -- of the meeting covered Apple's equitable defenses. One of them is related to the question of patent exhaustion, and the other one to FRAND-based standards:

  • The question of patent exhaustion depends on what Samsung's license agreements with Infineon and Intel say. Apple complained that Samsung refused to provide detail, and that it obtained a copy of the Intel agreement only in late September following a discovery motion in California. The judge appeared inclined not to hold against Apple that it presented such material relatively late in the game. However, he probably prefers to address licensing questions at the enforcement stage following a possible injunction or two (or three if we take into account the third ongoing Samsung v. Apple litigation in Mannheim).

    A pivotal date in this regard is January 31, 2011. Until that date, Apple bought is baseband chips from Infineon, and thereafter, from Intel (which acquired Infineon's mobile technologies division). It's possible that Intel's contract with Samsung is different from the one Infineon had. And for the iPhone 4S, Apple's baseband chip vendor is Qualcomm.

    Unless the court changes mind and looks into patent exhaustion at this stage, there will be some interesting future discussions.

  • The presiding judge was not particularly receptive to Apple's FRAND defense. Unlike the Dutch judge who told Samsung that there was no case for an injunction since it failed to make an offer to Apple on FRAND terms, the Mannheim judge cited the Orange Book decision of The Federal Court of Justice of Germany and stressed that a party requiring a license to standards-essential patents is responsible for obtaining one, and has to make an offer to the patent holder.

    Apple presented a German article (published by Wirtschaftswoche the country's leading business weekly) that says Samsung sells components worth between 7 and 8 billion dollars to Apple on an annual basis. Apple wasn't allowed to reveal the actual figure due to confidentiality obligations and therefore pointed to an article. The judge acknowledge that the two companies are doing business. But he didn't take a clear position on Apple's argument that its obligation to procure a license would have to be viewed in light of that ongoing business relationship and the fact that Samsung didn't claim, or even hint at possible claims of, patent infringement until it decided to retaliate for Apple's assertions of non-standards-related patents.

    The Mannheim court generally has a reputation of not being particularly receptive to FRAND defenses. Given that Samsung asserts such FRAND-pledged patents against Apple in nine countries, it's not impossible that Samsung will prevail in some courts, but if Apple cannot fend off Samsung's assertions of standards-related patents in the courts (at least in all major markets, which undoubtedly include Germany), the outcome of this dispute could depend in no small part on the European Commission's inquiry into Samsung's use of such patents (which is now at the stage of a preliminary investigation). In a way, the situation Apple is facing may provide the European Commission with an opportunity to strengthen the rights of implementers of FRAND standards on a Europe-wide basis, countering developments in certain jurisdictions (such as Germany).

No live tweet coverage allowed

At the beginning of the hearing, the judge emphasized that he does not allow live reporting from his court sessions. He said such hearings are public, but not in terms of a media event, and he said that the use of mobile phones in the courtroom is not allowed. In this context he mentioned that this week he had read on a blog about the intent to live tweet from his hearings. Chances are he was referring to what I said at the end of this recent blog post (relating to a different dispute -- Motorola Mobility v. Apple -- but the same court).

Due to the judge's introductory warning, I didn't do any tweet during the actual hearing. However, about a half-hour into the session, the court's press spokesman (a judge himself) entered and walked up to the bench. The judge then said that a tweet from inside the courtroom had already triggered the first inquiry from a foreign reporter, and he wanted to ensure that no more messages would go out. As a result, everyone except for the parties' own representatives, employees and consultants had to leave the room and store their mobile devices outside (in lockers).

I don't intend to pursue this any further, but I believe sooner or later the German Federal Constitutional Court will have to clarify whether the use of wireless devices in silent mode for text messages can be prohibited by judges. Given that tweets and other text messages don't amount to broadcasts or recordings, I think such communication should be permitted, but that battle isn't mine to fight.

Two dozen attendees including Apple's VP of litigation

Besides the parties' counsel (five lawyers for Apple from the firms of Freshfields Bruckhaus Deringer and Hoffmann Eitle, and four Rospatt lawyers for Samsung, in each case including patent attorneys), there were about two dozen attendees. Most of those were employees of and consultants to the parties, most notably Apple's Vice President of Litigation, Noreen Krall.I also saw several observers from Asia in the room, presumably Koreans. Simultaneous translation to English was provided via headsets.

But I couldn't spot any journalists in the room. That will be very different at the various upcoming Mannheim hearings. Mannheim is now going to be a key venue in the worldwide disputes between Apple and Samsung on the one hand, and Apple and Motorola on the other hand. The German market is the largest one in Europe. The Mannheim Regional Court is positioning itself as a rocket docket (today's trial related to a lawsuit filed less than seven months ago). And German courts are, as Samsung knows, relatively willing to grant injunctive relief.

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