On Monday, December 19, 2011, the ITC will hand its final ruling on Apple's first complaint against HTC. Another postponement is unlikely since this target date was already extended twice. While that decision could have important implications, the process isn't over with respect to HTC's first counter-complaint.
On October 17, 2011, an Administrative Law Judge (ALJ) at the ITC recommended the complete dismissal of HTC's first complaint against Apple, and on Friday, December 16, the Commission (the six-member decision-making body at the top of the ITC) announced that the investigation is definitively terminated with respect to all but one of HTC's asserted patents.
The short version is that HTC is not very likely to prevail on that one patent, and even if it did, this is not the kind of patent that would force Apple into a cross-licensing agreement. It's not hard to steer clear of infringement.
Initially, HTC asserted five patents. It dropped one of those during the course of the investigation, leaving four patents for the ALJ to rule on. He deemed all of the asserted claims of those patents valid, but none of them infringed.
HTC asked the Commission to review the ALJ's findings. Apple only filed a contingent petition for review, which means that Apple suggested accepting the ALJ's outcome (which was obviously perfect for Apple's purposes) but wanted to raise some issues in the event there is a review. I didn't see any indication of the ITC staff (the Office of Unfair Import Investigations) asking for a review. It merely responded to HTC's and Apple's filings.
Even today, more than two months after the ALJ's initial determination, it's still hard to find out much detail. Neither the detailed version of the initial determination nor the parties' and the ITC staff's briefs are in the public record. Such documents must always be redacted, and at some point Apple was granted a one-day extension to submit its proposed redactions. But so far, none of those documents has become available in a redacted version for the public.
The Commission's review notice indicates that a large number of issues were raised by the parties. The Commission decided to review the ALJ's determination and looked into issues relating to three different patents. But the Commission decided quickly, even prior to asking further questions, on an issue relating to two patents and determined not to take a position on that one. The review notice doesn't say why the Commission didn't want to take a position, but it either felt that the related finding was within the ALJ's discretion or thought that the answer wasn't going to be outcome-determinative. As a result, the Commission declared the investigation terminated with respect to three of the four patents on which the ALJ decided.
The sole remaining patent: a power management patent
The sole remaining patent is U.S. Patent No. 6,999,800 on a "method for power management of a smart phone".
The idea underlying the claimed invention is that traditional power management switches off an entire handset when battery power is running low, but it would make sense to make separate determinations for the basic telephone functionality and for the more advanced computing functionality (referred to as a "PDA subsystem"; PDA stands for Personal Digital Assistant).
The ALJ concluded that the '800 patent was neither infringed by Apple's iPhones nor put to use by HTC's own products. In an ITC investigation, it's not enough for a patent to be valid and infringed: there must also be a "domestic industry" for that patent.
This means that in order to prevail on this patent, HTC would have to convince the Commission that the ALJ erred both on the question of whether the iPhone infringes the patent and the one of whether HTC itself practices the claimed invention. At the same time, HTC would have to fend off Apple's continuing challenge to the validity of that patent.
The Commission raised nine questions -- quite a large number for only one patent. Despite the limited amount of information that is available to the public, the questions do indicate that there's a steep challenge for HTC since it would have to win on each of those counts:
Question 5 relates to validity. If Apple won that one, it would win the entire remainder of the case.
Question 9 is a procedural question that could also enable Apple to prevail just based on the notion of HTC having waived its right to make a certain kind of argument at the current stage (Commission review). This didn't discourage the Commission from deciding to conduct a review, but it still wants to know if HTC has indeed waived any such right.
Question 3 raises a claim construction issue that might affect both the infringement and the domestic industry findings. It could be related to a claim construction issue on which the ALJ and the OUII agreed with HTC. If Apple convinced the Commission that the ALJ and the ITC staff were wrong, this might win the day for Apple.
Questions 1, 2, 6 and 8 relate to the question of whether the iPhone infringes. For Apple it would be enough to prove that there's only one limitation (an element of a claim) that is not present in its products.
Questions 4 and 7 relate to what HTC's phones do. HTC can't satisfy the domestic industry requirement without winning on these two counts.
Even if HTC succeeded here, Apple would have many ways of working around the patent. A victory would certainly help HTC symbolically: it would show that Apple also infringes on something that HTC owns. But commercially, this is not the kind of patent that would force Apple into a cross-license deal.
It's remarkable that some analysts talk about "mutually assured destruction" in connection with Apple and HTC. At this stage, no one's destroying anyone in that dispute. Sooner or later, Apple will probably get to a point at which it can force HTC to hobble its products. But HTC's first round of countersuits against Apple hasn't gone anywhere. In the meantime, HTC has acquired patents from different sources, including Google, and brought a round of new complaints against Apple a few months ago. Those assertions are potentially stronger than the light artillery HTC brought into position in the spring of 2010 in response to Apple's first round of lawsuits. But for now I don't see "mutually assured destruction" on the horizon between those two litigants. This will go on for a while, no matter how the ITC will rule tomorrow on Apple's first complaint (and no matter how the Commission review of HTC's first complaint, limited to the '800 patent, will end).
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