Friday, April 25, 2014

Appeals court deals Apple's current case against Samsung a massive blow: key patent devalued

There's an amazing development with respect to the ongoing Apple v. Samsung trial that suggests to me the court should drop Apple's '647 "quick links" patent from the verdict form before jury deliberations begin on Monday. [Update] The patent won't be dropped, but there will be new testimony next week, see Update 3 further below. [/Update]

Basically, before Samsung even got to file an appeal, it has already won its appeal against the patent that Apple considered to be the most valuable one in the current trial (or, more precisely, Google's Motorola Mobility has won that part of the appeal, but Samsung benefits -- and Samsung and Google's Motorola are being represented against Apple by the same firm, Quinn Emanuel).

As recently as on April 11 (in a motion for judgment as a matter of law that Judge Koh denied), Samsung told Judge Koh that "Apple is bound by these [Judge Posner's] constructions by collateral estoppel". On March 27, Samsung had brought a motion to include Judge Posner's constructions in the jurybooks, which Judge Koh denied the following day.

Judge Koh was wrong and Samsung was right. Judge Koh allowed Apple to base its infringement arguments on a claim construction of the '647 patent that was too broad, and on that basis, Apple demanded 20 times more money from Samsung in the ongoing trial ($12.49 per unit for this patent alone, more than 30% of a total claim of $40 per device) than from Motorola Mobility ($.60) in Chicago. Samsung's counsel had argued all along that Apple should be bound to Judge Posner's 2012 claim construction in Apple v. Motorola. Judge Koh again and again disagreed. Now she has a problem, and the only reasonable solution I can see is that the '647 patent be withdrawn from the current case because Apple's infringement argument and its damages claim, both erroneously supported by Judge Koh, were based on a wrong claim construction.

This would also mean that Apple's damages claim would have to be reduced by about a third.

7.5 months after the hearing, the United States Court of Appeals for the Federal Circuit finally handed down its opinion (95 pages including the dissenting opinions) on the "Posner appeal". The Chicago trial that was canceled in 2012 will take place, Judge Posner's denial of an injunction over a FRAND-pledged standard-essential patent (SEP) was affirmed by the majority of the panel (though Chief Judge Rader disagreed), and there are other interesting effects. Also, I think it's quite likely that an en banc rehearing will be requested on some of the issues, and one or more issues might even go all the way up to the Supreme Court. But for now, the key thing is that the Federal Circuit has affirmed Judge Posner's construction of the '647 "quick links" (I usually called it "data tapping") patent:

"Apple's '647 Patent

Regarding Apple's '647 patent, the parties dispute the meaning of the claim terms 'analyzer server' and 'linking actions to the detected structures.' The district court construed 'analyzer server' as 'a server routine separate from a client that receives data having structures from the client' and 'linking actions to the detected structures' as 'creating a specified connection between each detected structure and at least one computer subroutine that causes the CPU to perform a sequence of operations on that detected structure.' Apple argues that both constructions are erroneous. We disagree with Apple and affirm the district court's claim construction.


Based on Judge Posner's claim construction, even Apple itself only demanded 60 cents per device from Motorola Mobility because it was forced to recognize that the patent was cheap and easy to work around. Even the 60-cent amount was too high in Judge Posner's opinion. The Federal Circuit has now allowed Apple to present that damages claim to a jury. Apple can also seek an injunction, but the patent, as construed by Judge Posner and affirmed by the Federal Circuit, will be easy to work around, so the impact of an injunction will be negligible.

There's a lot of good stuff in today's appellate ruling for Apple with respect to its dispute with Google/Motorola Mobility. But with a view to the ongoing Samsung trial, this is the worst thing that possibly could have happened to Apple's case.

Earlier today I wrote that Apple won't get any serious value out of a patent ruling based on patent claims of a sub-feature scope. Apple's slide-to-unlock patent doesn't cover all slide-to-unlock. Three other patent claims-in-suit are not even practiced by Apple's current products. Only with respect to the '647 patent I wrote that "it may take some time before the scope of the '647 patent is really clear, but even in a best-case scenario for Apple, this patent (of which I haven't found any international equivalent) can only give Apple some limited leverage in the U.S. market, which is not enough to settle a global dispute". It didn't take long. Only a few hours after that post of mine, the Federal Circuit has devalued the patent that Apple itself considered the commercially most valuable one in the ongoing California trial.

Here's what Judge Posner wrote two years ago about how easy and cheap it is to work around the patent based on his claim construction (which now also governs, after the Federal Circuit ruling, the California case):

"[...] or by inventing around, such as inventing around the '263 [a different patent in the "Posner case"], which, because of the deficiencies of Napper's expert report, I cannot conclude would be expensive, or inventing around the '647 patent by reprogramming Motorola’s smartphones to avoid at least one claim limitation, for example by simply creating copies of the code that performs structure detection and linking for each particular program rather than using a common code module for all programs, because if there is no common code there is no 'analyzer server,' as required by the patent claim."

The "server" is the key thing that now affects the California case. And if the patent can be worked around at a rather limited cost, then Apple can't seek $12.49 per device in past damages, and it can't get serious leverage out of an injunction. This patent has just been defanged and devalued.

The timing of the appeals court's decision -- so shortly before jury deliberations -- makes this all the more interesting. I'm sure the Federal Circuit was aware of the ongoing California litigation over the '647 patent. Samsung had urged Judge Koh to use Judge Posner's claim construction. Now she doesn't have any choice anymore, and a lot of time and money was literally wasted at the ongoing trial on this patent because Judge Koh didn't construe it the way she should have.

I will also blog about the other parts of the decision in the "Posner appeal". But this part here is the one that has the most immediate effect.

[Update] Shortly after this post I saw tweets from the courtroom in San Jose that counsel was discussing this issue with Judge Koh. According to CNET's Shara Tibken, "[Judge] Koh says she's frustrated because this could 'potentially blow up what we've already done with this jury for a month.'" MLex's Mike Swift reports that the '647 patent will apparently stay in the case, but new testimony may be necessary on Monday. And Martyn Williams of the IDG News Service wrote on Twitter that closing arguments, originally scheduled for Monday, "could slip to Tuesday as a result of [the appeals court's decision on the '647 patent]". [/Update]

[Update 2] It looks like there will just be some further testimony regarding the '647 patent, but it will be considered by the jury. In that event, however, I believe the jury should be told that Apple itself demanded only 60 cents per device from Motorola based on the correct claim construction. [/Update 2]

[Update 3] CNET's Shara Tibken has reported on this issue and, as she also said on Twitter, "[b]oth sides will get more time Monday to present expert witness testimony." [/Update 3]

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