Sunday, June 30, 2013

Preliminary ITC ruling against InterDigital involves four patents separately asserted against Samsung

On Friday Administrative Law Judge David Shaw published a summary of his initial determination (preliminary ruling) in the ITC investigation of InterDigital's mid-2011 complaint against Nokia, Huawei, and ZTE. Six of the seven patents-in-suit were held not to be infringed at all (not a single claim); some of the asserted claims from the seventh patent were found infringed, but this patent and two of the non-infringed patents were deemed invalid. Therefore, Judge Shaw identified no violation. The announcement also says that "Respondents have not prevailed on any equitable or FRAND defense".

I've been an InterDigital skeptic for some time. Its litigation results don't support its claims of a supervaluable portfolio. I'm concerned about its tactics (1, 2). I don't believe the world needs InterDigital to develop cellular standards. According to its annual report, it spent $68 million on "development" in 2012 -- but it generated $277 million in patent licensing royalties and spent almost twice as much on "patent administration and licensing" as on R&D. It would make more sense for companies that build real products to hire InterDigital's engineers and to license the related patents as part of larger portfolios with economies of scale benefitting licensees. And -- which is not specific to InterDigital -- a lot of patenting around standardization has more to do with obtaining patents on what standard-setting committees discuss or what someone anticipates may become part of a standard, so some of this activity is just about securing rights to what would be created anyway.

Judge Shaw's initial determination will almost certainly be reviewed by the Commission, the six-member decision-making body at the top of the U.S. trade agency. The reversal rate in such reviews is relatively high. There are seven patents-in-suit, so the final outcome could be different with respect to one or two patents. But there could also be modifications to the preliminary ruling that aren't outcome-determinative. For example, a patent that the judge didn't find infringed might be deemed infringed, but if it's then found invalid, the outcome remains the same.

At the start of this year, InterDigital filed yet another ITC complaint (and instigated mirror litigation in the District of Delaware). The January 2013 complaint primarily targets Samsung, against which all of the patents-in-suit in that investigation are asserted, while Nokia, Huawei and ZTE have to defend themselves against fewer patents because they were previously sued over some of the patents.

Four of the patents asserted against Samsung have now come to judgment in the 2011 Nokia/Huawei/ZTE case. The '830, '686 and '406 patents were not found infringed. The '970 patent, which Judge Shaw held infringed in part but invalid in its entirety, is also at issue in the Samsung case. And InterDigital amended its 2013 complaints to assert a continuation patent from the '970 patent.

While a patent could be infringed by Samsung even if it's not infringed by Nokia, Huawei and ZTE, a finding of non-infringement in a case like this would mean that the patent isn't truly essential. Also, the baseband chipsets at issue may be the same (Qualcomm).

Samsung is going to follow the Commission review in the Nokia/Huawei/ZTE case with great interest and keep its fingers crossed for Nokia, Huawei and ZTE with respect to the infringement and validity issues. On FRAND questions Samsung is unfortunately, at least in part, aligned with InterDigital because of its own strategic interests (its use of SEPs against Apple and Ericsson has also drawn criticism).

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