Tuesday, October 1, 2013

Overview of the impact of the U.S. government shutdown on smartphone patent disputes

Congress could not agree on a budget extension by midnight Eastern Time, so the U.S. government will have to shut down CNN.com article). Here's a quick overview of what this means for the ongoing smartphone patent disputes:

  • While the U.S. is still the jurisdiction in which most smartphone-related patent litigation takes place, most of the major disputes are global (at least intercontinental) battles. For example, Apple and Samsung have litigation pending in ten other countries. In smartphone patent-related antitrust investigations, Europe is no less active (and may prove more determined to address certain issues) than the United States. Yesterday the European Commission held a hearing on Google subsidiary Motorola Mobility's assertions of standard-essential patents against Apple.

  • Federal courts remain open and parties can still make electronic filings. But depending on how long the shutdown takes, delays could occur. Criminal cases and certain other civil cases will be considered more essential to the functioning of the country than patent infringement actions. If there are litigations that the presiding judges would like to reschedule anyway, then at some point they may use the shutdown as an excuse.

  • The United States International Trade Commission (USITC, or just ITC) has quasi-judicial authority, but it's not a court. It's a government agency, which has to shut down now, and all of its Section 337 (unfair import) investigations will be automatically delayed by the number of the days of the shutdown. Parties that face a near-term filing deadline (for example, HTC will want to request a review of a preliminary ruling in Nokia's favor) may actually welcome these automatic extensions -- but since no one knows when the government can go back to work, the delay is less beneficial in practical terms than if they were granted extensions of a known extent beforehand.

    The ITC has lost popularity among some (but not all) industry players as a smartphone patent litigation forum because the drop-out rate of asserted patents is very high, and those high-profile cases have often been delayed considerably beyond the ITC's usual timelines (not only, but especially, due to remands by the Commission to the Adminstrative Law Judges). There are no ongoing ITC investigations of complaints brought by Apple (though its case against Google's Motorola Mobility will probably be remanded to the ITC soon), HTC, Motorola Mobility, or Microsoft. There's a two-way ITC patent spat going on between Ericsson and Samsung. Ericsson's complaint went to trial last month. Samsung's complaint was scheduled to be tried this week, which won't happen now. While this has the same technical effect on the target date of either investigation, it could benefit Ericsson because the ALJ can make use of the additional time to make up his mind with a view to his initial determination, which is not possible in the other case because the trial has not been held yet. And Nokia has two cases pending at the ITC against HTC. I mentioned the first one above; the second investigation started a few months ago, so it's at a procedural stage now (discovery) at which a few days of delay won't make much of a practical difference (except that discovery disputes can't be resolved during the shutdown).

  • The shutdown of the ITC also affects Federal Circuit appeals of ITC rulings. A few days ago the ITC already told the appeals court, Apple and Google (Motorola Mobility) that this could delay the resolution of Google's appeal of (part of) the trade agency's dismissal of Motorola's complaint against Apple. In other appeals of ITC rulings, delays will depend on whether any submissions (or participations in hearings, including rehearings) by the ITC are needed. If the government shutdown falls within a company's filing deadline or if the court is working on its opinion after a hearing (such as in Microsoft's appeal of certain unfavorable parts of the ITC ruling on its complaint against Google's Motorola Mobility), then the ITC's shutdown will have no impact.

  • The ITC submitted an amicus curiae brief urging the dismissal of Microsoft's lawsuit against certain governmental entities. The defendants in that action, in which Microsoft alleges arbitrary and capricious handling of the enforcement an import ban it won last year against Motorola's Android-based devices, include the Department of Homeland Security and the United States Bureau of Customs and Border Protection. While the enforcement activities of those agencies are absolutely critical, the shutdown could affect their participation in this litigation at some point. By the way, Microsoft yesterday filed its opposition to the Government's motion to dismiss its case, which I've uploaded to Scribd and which is recommended reading for those interested in that enforcement dispute.

  • Reexaminations of patents-in-suit by the United States Patent and Trademark Office also play a significant role in certain smartphone patent disputes (particularly Apple's federal and ITC complaints against Samsung). The USPTO has said it "will remain open, using prior year reserve fee collections to operate as usual for approximately four weeks".

  • The most time-sensitive part of antitrust regulation is merger review. If regulators miss the related deadlines to block mergers, they effectively approve (they could still challenge a deal later, but they couldn't block it before it takes place, and subsequent challenges are far harder). Merger reviews (such as the Microsoft-Nokia transaction, which is clearly pro-competitive) will continue on time. But the FTC has already said that "all non-merger investigations will be suspended during the pendency of a shutdown". The just-launched inquiry into the "patent troll" industry (officially, the scope of the investigation is defined as "patent assertion entities") is an example of a totally non-urgent investigation. Right now the FTC is just waiting for public comment on its proposed questionnaire anyway.

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