Friday, July 7, 2017

Qualcomm seeking U.S. import ban against iPhones with Intel (or other non-Qualcomm) chips

[Update on July 8, 2017] added ITC complaint, mentioned routinely request for public interest statements, domestic industry infringement claim charts [/Update]

Yesterday evening, Qualcomm did something it had already indicated a couple of months ago and finally announced the filing of an ITC complaint (request for an exclusion order, i.e., import ban by the United States International Trade Commission) against Apple (this post continues below the document):

17-07-06 Qualcomm v. Apple ITC Complaint by Florian Mueller on Scribd

The announcement also mentioned a companion complaint filed with the United States District Court for the Southern District of California in San Diego (this post continues below the document):

17-07-06 Qualcomm v. Apple Patent Infringement Complaint by Florian Mueller on Scribd

Qualcomm also published an infographic on the six patents-in-suit (PDF), which stresses a point made in the press release: the six patents Qualcomm is asserting are, according to its holder, not essential to an industry standard. About four years ago, the Obama Administration vetoed an import ban Samsung had obtained against Apple over a standard-essential patent (SEP), a decision that upped the ante for anyone trying to obtain an ITC import ban over a FRAND-pledged SEP.

Let's believe Qualcomm that those patents--hardware and software patents relating to energy efficiency--aren't standard-essential (a claim that is perfectly credible given the subject matter of those patents). Before any remedies can be ordered, Qualcomm firstly needs to prevail on the merits. I haven't watched the ITC in recent years, but I was watching it for several years during which it was a monumental smartphone patent graveyard. Unlike in district court, where juries rarely invalidate patents, ITC judges are pretty receptive to invalidity arguments, and they aren't easily persuaded of an infringement allegation either. Quite often, complainants run into a situation in which a patent claim can be construed more narrowly or a bit more broadly, and in one case it isn't infringed while in the other event it isn't valid.

Qualcomm highlights that all six patents issued in the last four years. While an exclusion order, should Qualcomm obtain one, could then stay in effect for longer than it could over very old patents, youth isn't a virtue with respect to validity. It means that there must be a whole lot of prior art out there that also deals with saving battery power when a mobile device performs certain operations. The (claimed) priority dates of all of those patents but one are from this decade, and the sixth one claims priority from a 2008 application. Many other companies in the industry were working on power-saving techniques at the time--and long before.

The non-standard-essentiality of those patents, while avoiding one major obstacle to ITC exclusion orders and (in federal court) injunctive relief, is a major limitation on the infringement side. Other major patent holders had very limited success with non-SEP infringement assertions. Typically, even where infringement was established, defendants usually came up with pretty good workarounds, often of the kind that consumers didn't even notice. However, workarounds are more complicated when patents claim certain hardware features/configurations, as some of Qualcomm's patents-in-suit do. Still, should Qualcomm prevail on the merits, the ITC has previously granted rather generous transitional periods during which defendants were able to modify their products so as to steer clear of further infringement.

Qualcomm is clearly worried about the public interest analysis that the ITC will have to perform (and that the Trump Administration may additionally perform). Its choice of asserting non-SEPs (despite the challenge this represents on the infringement side) is only one indication. In a Wall Street Journal interview, Qualcomm's top lawyer explained that the request for an import ban relates only to iPhones with non-Qualcomm (practically, that would simply mean Intel) baseband processors because of the public interest factor: Qualcomm argues that it would be OK to block some iPhones from importation into the U.S. while others (those using Qualcomm chips) would remain available. In other words: Qualcomm says that blocking all iPhones might run counter to the public interest, but blocking some (especially then the latest models at the time) would not.

Whenever an injunction (here, it's called an exclusion order, but the effect is the same) is sought, courts are potentially more willing to grant it if it's narrowly-tailored than if it appears overreaching. But Qualcomm told the Wall Street Journal that it doesn't want to "affect in unecessary ways competitive conditions in the U.S. economy." When I read that sentence, I can't help but wonder whether Qualcomm has forgotten about all those competition authorities the world over who are concerned about its exclusionary practices with respect to other chipset makers. Now Qualcomm is saying that it's better for competition if it excludes devices that come with Intel chips than excluding its own.

Is Qualcomm concerned about patent exhaustion in light of the Supreme Court's Lexmark ruling? That depends on which components of a smartphone practice the asserted patents. To its ITC complaint, Qualcomm attached domestic industry claim charts, i.e., its theories as to why its own products practice the patent technologies (that's the best way to satisfy the ITC's domestic industry requirement). So if the iPhones included those products, exhaustion would apply. In any event, the connection with the public interest context is clear, and "only" banning iPhones with Intel chips would raise serious issues. We're well over a year away from the earliest point at which the ITC would make a final initial determination and, if that preliminary ruling suggested an import ban, would request the most important round of public interest submissions (the complaint also triggered a request for input, but the most important submissions would likely be made at a later stage). Nevertheless it's easy to imagine what concerns the FTC--and even Apple's fiercest competitors--as well as industry bodies and public-interest advocacy groups would express at that stage...

What Qualcomm hopes to achieve is obvious: it hopes to gain leverage over Apple that would result in a comprehensive settlement. In that case, some of the antitrust and exhaustion issues raised by Apple in its complaint(s) against Qualcomm wouldn't get adjudicated. But the rest of the industry is presumably hoping that Apple's initiatives bring clarity and force Qualcomm to change its practices. That's why I just said that even Apple's fiercest competitors would oppose an iPhone ban in this case, even though they could theoretically hope to gain market share. Also, other smartphone device makers don't want to see their own devices banned.

It's another battle in a wide-ranging war, but once again it comes down to Qualcomm vs. device makers and other chipset makers. Apple is doing all of this proactively, but the way to look at this is that Apple is also a proxy here for the likes of Samsung, Intel, Huawei... you name them.

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