Wednesday, January 11, 2012

Samsung wants to show Apple's contracts and correspondence with Qualcomm to courts in 8 countries

This week, Samsung filed a discovery motion with the United States District Court for the Southern District of California (Qualcomm's home court) and added a "notice of related case" today, reminding the court of the fact that it granted (in October 2011) an Apple motion to obtain documents concerning Samsung's patent license agreement with Qualcomm in order to show such material to courts in other countries. Now Samsung wants to see -- and show to courts in eight countries -- any contracts and correspondence between Apple and Qualcomm related to the supply of Qualcomm baseband chipsets "that were manufactured by Qualcomm and incorporated into the Apple iPhone 4S". In essence, Samsung is telling the court that "what's good for the goose is good for the gander".

Apple has clearly benefited from its Southern California discovery of the Samsung-Qualcomm relationship. Samsung's motion for a preliminary injunction against the iPhone 4S in France failed because a Paris-based court concluded that Samsung's patent rights are exhausted and it couldn't legally terminate its patent license agreement with Qualcomm with respect to Apple. Last week, an Italian court also denied such a motion, and also based its decision in no small part on the Qualcomm agreement. And in December, Samsung backtracked in one of its various Mannheim actions against Apple as far as the iPhone 4S is concerned, though it kept its options open and may attack the iPhone 4S in Germany over the same patent, or other patents, anytime.

Samsung now hopes that access to documents relating to the Apple-Qualcomm relationship will enable it to prove that Apple is not a "Qualcomm Customer" as that term is defined in the Samsung-Qualcomm agreements. Samsung's position is that if Apple does not meet the definition of a "Qualcomm Customer", it is not "entitled to use the chipsets at issue". In Samsung's opinion, Apple can only be considered a "Qualcomm Customer under the 2004 Samsung/Qualcomm license agreement" if Apple has "purchased the chipsets at issue from Qualcomm and integrated them into the devices it sell to the public". Therefore, Samsung wants to find out about "the chain of distribution from Qualcomm to Apple", which it considers as "central issue" in this dispute. The following sentence (from a different part of the motion) outlines the two possible conclusions that may ultimately be drawn from the requested documents:

"Resolution of this issue likely will depend, in large part, on whether Apple purchased the chipsets at issue directly from Qualcomm and integrated them into its consumer devices or, alternatively, whether Apple received consumer devices from an intermediary that received the chipsets from Qualcomm and integrated them into Apple's consumer devices."

If the court grants Samsung's motion, it plans to present the documents to be obtained in three actions in Mannheim, Germany; two in Tokyo, Japan; three in The Hague, Netherlands; one in Seoul, South Korea; two in Paris, France; two in Milan, Italy; one in London, UK; and one in Sydney, Australia.

To me, Samsung's request appears perfectly reasonable unless Apple can show to the court that Samsung's patent rights will be exhausted just because Apple uses Qualcomm chips, irrespectively of whether there are any intermediaries in play between Apple and Qualcomm. If the supply chain doesn't matter at any rate, then there's no point in bothering Qualcomm and giving Samsung's lawyers access to confidential material belonging to other companies.

Patent exhaustion usually isn't affected by intermediaries, but this depends on what Samsung's patent license agreement with Qualcomm says. The French and Italian court decisions make reference to some of its terms, and there are indications that Samsung entered into a covenant not to sue -- as opposed to a straightforward license -- with respect to Qualcomm's customers. It can't be ruled out that the way the covenant not to sue is worded makes a distinction between customers supplied directly by Qualcomm and those who buy Qualcomm baseband chips from or through third parties.

In Italy, Samsung raised this issue but couldn't show to the court that it had a point. It's probably not a coincidence that Samsung makes this discovery request in Southern California the week after the denial of its preliminary injunction motion in Italy. Samsung could still win the main proceedings even in countries in which it lost a bid for a preliminary injunction if it presents game-changing evidence. It's actually surprising that Samsung didn't ask for information on Apple's baseband chip supply chain earlier on, but all of the companies embroiled in the current wireless patent wars -- all of them, without even one exception -- are going over a learning curve.

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