Sunday, September 30, 2018

Qualcomm's Mannheim lawsuit against Apple over switch patent: Swedish patent office opinion published

On the German Qualcomm v. Apple patent litigation front, next week (the first week of October) will have the same schedule as last week: a Mannheim trial on Tuesday followed by a Munich trial on Thursday.

Last week's Mannheim patent--a switch patent--may not even be infringed, but at any rate it's rather unlikely to be valid. The opinion by the Swedish patent office--perfectly independent because Apple's lawyers couldn't communicate with the examiner and only got to submit two prior art references without any further explanation or documentation--that I mentioned last week is a clear thumbs-down for that patent. At last week's trial its key finding was summarized by counsel for Apple, and a German patent litigator who is not involved with those cases (last time I saw him, he was suing Apple over a SEP) told me that those opinions are private and don't appear in any patent register. However, someone in Sweden appears to have an inside track. My web traffic stats showed an inbound link from a Swedish-language website previously unknown to me, Feber. They obtained and published the opinion by the Swedish patent office (PRV = "Patent- och registreringsverket"), which was apparently written in English.

In order to make it easier for my readers, I've added the text to this blog post, and you can find it below (I didn't make any stylistic or punctuation corrections to the original text). That opinion is crystal clear. However, I wish to point out that Judge Dr. Holger Kircher and his Mannheim panel have to perform their own analysis and apply German law, which doesn't make it too easy for courts to stay patent infringement cases over validity concerns. Even in case they philosophically tend to agree with the conclusions of the Swedish patent examiner (and given their technical expertise, I even venture to guess they probably do), German courts stay patent infringement cases over novelty concerns (if a patent is more likely than not to be deemed anticipated by a single prior art reference) most of the time, and not too often on the basis of likely invalidation for lack of an inventive step. The Swedish patent examiner basically just looked at it as if someone had made a reexamination request.

That said, I still think this persuasive authority ups the ante for Qualcomm in that case. As I reported after the trial, the court came up with a very interesting approach to claim construction that might just result in a non-infringement holding. And then it's obvious that the patent has an obviousness issue, too. If Qualcomm prevailed and prematurely enforced an injunction, but if Apple won in the end, Apple would be entitled to wrongful-enforcement damages. Qualcomm's German counsel has his own experience with wrongful enforcement because Apple enforced injunctions against his client over patents that later died, and Motorola enforced a push notification patent that was later narrowed--but they settled prior to any litigation over wrongful-enforcement damages.

Here's the plain text of the opinion handed down by the Swedish patent office:

Written Opinion


Patent examiner: Jenny Wallner

Our ref: 1001510
Date: 23 August 2018
Your ref: A2379-037-DEIEPPr

Written Opinion

Enclosed you will find a written opinion based on relevant citations and made with regard to novelty, inventive step and industrial applicability.

The report has been established in view of Swedish and European patent practice, and where applicable the problem-solution approach has been used.

Statement with regard to novelty, inventive step and industrial applicability

Novelty - Yes

Inventive step - No

Industrial applicability - Yes

Citations and explanations

Claimed invention:

The invention concerns a switch used in a wireless communication device. The invention solves the problem of providing a switch with better isolation and reliability. The problem is solved by using a plurality of transistors coupled in a stacked configuration and a plurality of resistors connected to the gates of the transistors. An additional resistor, arranged to receive the control signal for the transistors, is coupled to the plurality of resistors. Further, a second set of plurality of resistors are coupled to the bulk nodes of the transistors and a second additional resistor is coupled to the second set of plurality of resistors and the bulk voltage.

Cited documents:

D1: A. Poh, Y. P. Zhang, "Design and Analysis of Transmit/Receive Switch in Triple-Well CMOS for MIMO Wireless Systems", IEEE Transactions on Microwave Theory and Techniques, Vol. 55, No. 3, March 2007

D2: US 20040051395 A1

D1 (see Section III, lines 1 - 56 and figure 3) describes the design and analysis of a switch for wireless systems where the insertion loss is reduced and the power handling is improved by using the techniques body floating and series connection of transistors. Series-connected transistors, i.e. transistors coupled in a stacked configuration, are used to increase the power handlng and, both the gate nodes the body nodes are biased using individual large resistors (RG, RB) which is necessary to prevent signal coupling between the series-connected transistors. Further, the individual body resistors (RB) serve to reduce the insertion loss by diminishing capacitive coupling losses through the body contact.

D2 (paragraphs [0011], [0060]-[0065] and figures 6a-c) describes an improved switch with the aim to control a current output at lower control voltages while providing the optimum balance of insertion loss, isolation, maximum power handling, harmonic generation suppression and leakage current in the control signal. The switch (500, 501, 502) comprises several series-connected transistors (510-535) where resistors (572-582) are introduced between each gate and the control voltage (545) to minimize the effect of leakage current. A second resistor (584) is included in series with each of the resistors (572-582) to increase the overall resistance, i.e. boost the resistance, between the control voltage input (545) and the gates (510-535) and thus reduce the control current applied to the gate.


Document D1 is considered as the closest prior art.

The invention according to claim 1 differs from the device disclosed by D1 in that a first additional resistor is arranged between the control signal input and the plurality of resistors coupled to the gates of the stacked transistors, and further, a second additional resistor is arranged between the bulk voltage node and the plurality of resistors coupled to the bulks of the stacked transistors.

Due to the feature of using the first additional resistor together with the plurality of the resistors coupled to the gates, a switch with better isolation and lower insertion loss is achieved since the impedance is boosted with the value of the first additional resistor. Further, the features of using the second additional resistor together with the plurality of the resistors coupled to the bulks provides similar benefits as those obtained by the resistors coupled to the gates.

With the background of D1, the skilled person is posed with the problem to design a device which achieves high isolation and low insertion loss.

A person skilled in the art would find a solution in D2, since D2 describes a switch where parameters as insertion loss and isolation are improved by using an additional resistor together with the plurality of resistors coupled to the gates (paragraphs [0064]-[0065] and figure 6c).

With the background of D1, the person skilled in the art posed with the problem of designing a switch with high isolation and low insertion loss would use an additional resistor coupled between the plurality of resistors coupled to the gates and the control input in order to increase the impedance as in D2. Further, a person skilled in the art of circuit design would, from his common knowledge, see the possibility of improving the switch performance by adding the same feature for the bulks, i.e. using a second additional resistor coupled to the plurality of resistors arranged at the bulks to also increase this impedance, and thereby arrive at the invention as in claim 1.

Therefore, the subject matter of claim 1 is not considered to differ significantly from what is known from D1 and D2. Accordingly, the invention according to claim 1 does not involve an inventive step.

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Saturday, September 29, 2018

ITC judge finds Qualcomm's anti-Intel patent assertion campaign against the public interest: Intel-powered iPhones shouldn't be banned

In what appears to have been the last Final Initial Determination of his career, Administrative Law Judge Thomas B. Pender of the United States International Trade Commission (USITC, or just ITC) has found that Intel-powered iPhones infringe one Qualcomm patent that wasn't proved to be invalid, but also held that Qualcomm should be denied the exclusion order it's seeking from the U.S. trade agency because such a U.S. import ban would be against the public interest (this post continues below the document):

18-09-28 ITC 337-TA-1065 Qu... by on Scribd

A Final Initial Determination is, as the self-contradictory name indicates, not truly final. It's a single judge's position, and subject to review by the Commission, the six-member decision-making body at the top of the trade agency. The truly final decision--which may also be a remand, and which could otherwise be appealed to the Federal Circuit--is presently due January 28, 2019 (PDF).

The above document is not the actual ruling, but a notice of its key results. It will take some time before a public redacted version of the determination itself becomes available and sheds light on the underlying rationale. It's unclear to me why Qualcomm failed to satisfy the technical prong of the ITC's domestic industry requirement. What's no secret is the nature of the public interest concerns in this case:

When the complaint was filed in July 2017, I already expressed skepticism regarding Qualcomm's strategy of targeting only Intel-powered--not Qualcomm-powered--iPhones. While a potential shortage of supply is a major factor in the ITC's analysis, Qualcomm basically traded one issue in for another. By targeting its only major baseband chipset competitor, Qualcomm exposed itself to allegations of anticompetitive behavior, especially since antitrust regulators around the globe had at the time of the complaint already held Qualcomm in violation of competition law because of, among other things, its refusal to grant standard-essential patent (SEP) licenses to Intel.

This issue was raised shortly after the complaint in public-interest statements by Apple, Intel, and two industry bodies (CCIA and ACT).

In the ongoing FTC v. Qualcomm (and, by way of consolidation of a class action into the FTC case, "Quarter-Billion U.S. Smartphone Purchasers v. Qualcomm") litigation, Qualcomm's exclusionary practices regarding Intel and other chipset makers (Samsung is also known to have requested--and to have been denied--a license for its Exynos chipset division) are front and center:

  • Qualcomm is fighting tooth and nail against an FTC motion for partial summary judgment that merely seeks to remind Qualcomm of self-imposed licensing obligations.

  • After an evidentiary hearing (the ITC equivalent of a trial) was held in this ITC investigation, the aforementioned consumer class plaintiffs asked Judge Lucy Koh for an antisuit (anti-enforcement in this case) injunction so Qualcomm wouldn't get to enforce a hypothetical U.S. import ban against Intel-powered iPhones. Judge Koh denied the motion without prejudice. She appeared sympathetic to the concerns raised, but unconvinced of timing, so she basically suggested that the consumers should try again if Qualcomm actually prevailed on the merits (on a preliminary basis, that has now happened with respect to one of the original six patents), was granted an exclusion order (in order to do so, Qualcomm now has to overcome the ALJ's recommended decision by persuading the Commission to review and modify the determination, which will in any event be appealable to the Federal Circuit), and President Trump didn't veto it. Judge Koh's wait-and-see approach has once again been validated. Anyway, the consumer's antisuit motion also focused on Qualcomm's anti-Intel tactics.

Apple, which based on filings in proceedings before the European Patent Office and the Federal Patent Court of Germany is working closely with Intel to fend off Qualcomm's German patent infringement lawsuits, has also made German courts aware of the fact that all of the devices targeted by Qualcomm's German complaints come with Intel--not Qualcomm-chips in the German market. Whether that antitrust defense will get traction in Germany, where the law of the land is basically that patents entitle their owners to injunctions as a matter of law with exceptions being very few and far between, remains to be seen. But there are parallels between Qualcomm's two ITC complaints explicitly saying that injunctive relief is sought against only Intel-powered iPhones and the German cases that don't say so but practically have the same objective. At this month's Munich trial, counsel for Qualcomm noted that there are some Chinese patent infringement cases that purportedly also target Qualcomm-powered iPhones, and maybe we'll learn more about that at a later procedural stage.

Earlier this month it became known that the Office of Unfair Import Investigations (OUII, often referred to as "the ITC staff"), which participates in many ITC investigations as a neutral party and whose recommendations aren't binding on judges but often adopted by them and, especially, the Commission later on, raised public-interest concerns in the investigation of Qualcomm's second ITC complaint against Apple. Same issue there: targeting only Intel-powered iPhones. Formally those are two separate investigations, and in the first investigation no such recommendation was given, but it may very well have had an impact on ALJ Pender's recommendation regarding remedies, and it will without a doubt bear considerable weight with the Commission in the months ahead.

The ITC rarely finds that the public interest weighs against an import ban, which is the agency's only patent infringement remedy. Normally the institutional interest appears to outweigh the public interest in this regard, but to be fair, public-interest concerns are often also raised without having even remotely as strong a case as Qualcomm's targeting of its only major wireless chipset competitor represents. This blog has often voiced skepticism of public-interest arguments in cases such as Apple v. HTC (where only a dissenting commissioner sided with the Taiwanese Android device maker). Samsung's aggressive SEP assertions against Apple did raise a serious issue, but it took a presidential veto for the public interest to prevail.

I actually think it is in the ITC's institutional interest not to allow abse of its Section 337 proceedings for anticompetitive purposes. Lawmakers on Capitol Hill have repeatedly (here's an example) expressed concern over the way the agency basically offers complainants an end-run around the eBay v. MercExchange injunction standard. If the ITC doesn't proceed with some degree of caution, legislative intervention may occur--and in that case it's not unlikely that the ITC would have to respect the eBay standard in the future...

Finally, I hope none of my readers are disappointed that it took me until the next day to comment on this Final Initial Determination, though I usually try to report sooner on major decisions, especially scheduled ones. Reuters and Bloomberg reported on the ITC ruling at about the time I commented on the certification of that huge class of plaintiffs. However, the relevant notice had not appeared yet on the docket of investigation 337-TA-1065. It did so only hours later, at a time (7:49 PM Eastern) when I had already given up on it for the day:

I don't know whether the ITC itself gives major news agency reporters a heads-up or whether Apple (which already provided a quote to the agencies) received it beforehand. I do understand that Bloomberg and Reuters receive preferential treatment, and this blog hasn't always been nice to Apple to be honest (I just agree with them on select issues such as standard-essential patents, minus their lawyers' occasional hyperbole), but I believe the ITC should ensure that all of us have the same access to such a notice that contains no confidential information whatsoever...

[Update] It could be that a time zone issue (1:49 PM Eastern being 7:49 PM Central European Time) prevented me from accessing the notice earlier. I just had a Twittersation with the CCIA's Josh Landau about it and will contact the ITC's technical support. [/Update]

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Friday, September 28, 2018

Qualcomm now facing 232.8 million to 250 million adversaries in the Northern District of California

The number of plaintiffs suing Qualcomm in the United States District Court for the Northern District of California has just increased by a factor of roughly a quarter billion--from one (the Federal Trade Commission) to approximately 250 million (the FTC plus all U.S. smartphone purchasers since February 11, 2011)--due to a single court order certifying a class with the following definition:

"All natural persons and entities in the United States who purchased, paid for, and/or provided reimbursement for some or all of the purchase price for all UMTS, CDMA (including CDMAone and cdma2000) and/or LTE cellular phones ('Relevant Cellular Phones') for their own use and not for resale from February 11, 2011, through the present (the 'Class Period') in the United States. This class excludes (a) Defendant, its officers, directors, management, employees, subsidiaries, and affiliates; (b) all federal and state governmental entities; (c) all persons or entities who purchased Relevant Cellular Phones for purposes of resale; and (d) any judges or justices involved in this action and any members of their immediate families or their staff."

If they were all just seeking a few cents per person, that would be much less of a problem. But they seek, besides injunctive relief against Qualcomm's conduct, to be compensated for having been overcharged whenever they bought a smartphone in the U.S. during the relevant period. A report by the plaintiffs' licensing expert "found that the incremental overcharge for each of these five OEMs ranged from 1.13% to 3.84% of the total cost of the device." Maybe some more specific numbers will become known during the further proceedings, but it already appears to be a safe assumption that this is about many billions of dollars (as is Apple's lawsuit in the Southern District of California).

Here's the order (this post continues below the document):

18-09-27 Order Granting Sma... by on Scribd

Qualcomm opposed class certification on different grounds. The fact that Qualcomm's opposition failed doesn't mean Qualcomm is more or less certain to lose on the merits. However, Judge Koh's order doesn't bode well for Qualcomm. There are some parallels between the above order and last year's order--by the same federal judge--denying Qualcomm's motion to dismiss the Federal Trade Commission's antitrust lawsuit; and last month's order denying without prejudice--and more or less an invitation to try again later, if necessary at all--a motion by these consumers seeking an antisuit (anti-enforcement) injunction against Qualcomm's pursuit of an ITC exclusion order (U.S. import ban). Coincidentally, a final initial determination by an Administrative Law Judge on Qualcomm's first ITC complaint against Apple is scheduled for today.

The way I read all three of those orders is that Judge Koh simply looks through all the smokescreens Qualcomm's world-class lawyers have produced so far. She'll hold a bench trial on ten days in January and thereafter she'll rule, but it's fair to say she's in the mainstream (among U.S. judges and also in the U.S. tech sector) with respect to the need to ensure access to standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms. On other occasions I've described Judge Koh as very patentee-friendly, at least in connection with invalidity questions. But there's no contradiction between generally favoring strong intellectual property rights and recognizing the risk of overleveraging and overcompensation when the value of a patent, or an entire portfolio, is not primarily in its contribution to the state of the art but in the market relevance of the industry standards at issue.

Qualcomm is currently opposing a summary judgment motion by the FTC that would have just the effect of opening up the wireless chipset market by reminding Qualcomm of obligations it once entered into when it made FRAND licensing declarations to two U.S. standard-setting bodies. The class certification order doesn't indicate how Judge Koh will rule on that one, but she does find that Qualcomm's overall behavior--a "grand evil scheme" according to German counsel for Apple--may entitle those class action plaintiffs (hundreds of millions of people) to damages payments. Here are some key quotes from the order that show the consumer class has a plausible case, starting with the extremely important issue of Qualcomm refusing to grant licenses to competing baseband chipset makers:

"[...] Plaintiffs set forth significant evidence that Qualcomm has adopted a uniform policy of refusing to offer exhaustive licenses for its cellular SEPs to competing modem chip manufacturers."

"[T]estimony and documents from both Apple and Intel confirm that, in the absence of Qualcomm's exclusivity payments, Apple likely would have started using Intel modem chips in Apple’s devices at an earlier date."

"[T]he extensive documentary evidence suggests that Qualcomm imposed an industry-wide above-FRAND royalty rate on OEMs."

The sheer size of the class that has now been certified raises the question of how a potential damages recovery could be handled in practice (should plaintiffs prevail, which presupposes at least some degree of success for the FTC at trial; the cases were consolidated). But Qualcomm's argument that it just wouldn't be manageable to make this work failed to convince Judge Koh. Class administrators estimate they can notify about 70% of all members of the class.

Interestingly, the laws of its home state of California are unfavorable to Qualcomm's interests. In many other states, indirect purchasers couldn't recover damages from an antitrust violator, and since Qualcomm doesn't sell directly to consumers, this here is about indirect damages (because of device makers passing Qualcomm's supra-FRAND prices and fees through, which Judge Koh finds plaintiffs may be able to prove at trial):

"[B]ased on the expert reports, the Court concludes that Plaintiffs have presented a methodology that supports a finding that evidence common to the class will be utilized in demonstrating impact to both direct and indirect purchasers."

If only 1% of all class action plaintiffs wanted to attend the January FTC v. Qualcomm trial, they could fill Stanford Stadium 50 times...

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Tuesday, September 25, 2018

Qualcomm says FTC motion aims to "radically reshape [standard-essential patent] licensing in the cellular industry"

The two most important motions for summary judgment that Qualcomm is facing at present (and one might even say has ever faced in its history) are the Federal Trade Commission's motion to hold that Qualcomm itself committed to extending standard-essential patent licenses to rival chipset makers such as Intel (a motion that has drawn broadbased support from industry) and a motion by Apple and four contract manufacturers to end Qualcomm's double-dipping practice (selling chipsets and additionally collecting patent license fees). This post is about Qualcomm's opposition in the Northern District of California to the former, but I'd also like to mention that Qualcomm is trying to duck the latter by means of a motion to dismiss all declaratory judgment claims relating to Qualcomm patents from the Apple (and contract manufacturers) v. Qualcomm case in the Southern District of California. When it turned out that its adversaries were going to insist on an adjudication of their patent exhaustion defense, Qualcomm requested expedited briefing, which Judge Gonzalo Curiel denied. The opposition brief to Qualcomm's attempt to chicken out is due by the end of next week.

Back to San Jose. Qualcomm's opposition to the FTC motion is underwhelming. It's unlikely that Judge Lucy Koh will agree with Qualcomm's positions on the core issues; at the most--and even that part is doubtful--the judge might find that some evidence needs to be discussed at trial.

Here's the opposition brief, and below the document I'll explain why I still believe the FTC motion is perfectly meritorious:

18-09-24 Qualcomm Oppositio... by on Scribd

In the first paragraph, Qualcomm acknowledges the importance of the issue the FTC motion is about:

"Under the guise of seeking merely to 'streamline the trial' [...], the FTC's Motion for Partial Summary Judgment requests a ruling that would radically reshape licensing in the cellular industry, not just for Qualcomm but for all cellular SEP holders that made FRAND commitments to ATIS or TIA. The FTC contends that those SEP holders have a clear and unambiguous contractual obligation to grant licenses to manufacture and sell modem chips."

Still on the first page, Qualcomm's brief accused the FTC of attempting "a complete reimagining of the industry."

Qualcomm points to the field-of-use limitation found in standard-essential patent (SEP) licensing commitments. The idea is that you can request a FRAND license only for the purpose of implementing the relevant standard. The reason is simply that one could otherwise request a license in order to use patents in a competing standard, or for non-compliant products. But Qualcomm claims that only "complete devices" can implement cellular standards. Qualcomm more or less concedes (or at least does not deny with specificity) that some SEP claims may be practiced by baseband chips. However, it argues that other components of a mobile device are also required. Examples that Qualcomm mentions in its discussion of standard-setting documents include "antennae" and "power-control chips."

There's no question that you need an antenna and electricity for mobile telephony. But that doesn't mean the mobile baseband chip--or "modem chip" in accordance with Qualcomm's brief--doesn't implement the standard simply because it's the central and decisive component. It's the mastermind (a term that is key to the analysis of an alleged "divided infringement" of a method claim and fits here, too). Once the importance of the mastermind component is downplayed, the ultimate consequence may be that not even a device infringes since electricity must be provided by a utility, which in turn needs some energy source somewhere.

In a 2014 case, GPNE Corp. v. Apple, Judge Koh herself held "as a matter of law that in [that] case, the baseband processor [was] the proper smallest salable patent-practicing unit." And in Judge Koh's court, a 2012 jury sided with Apple against Samsung on patent exhaustion, based on Samsung's license to Qualcomm and Apple's use of Qualcomm chips in certain products at issue back then. The same happened to Samsung in the Netherlands and France (where I attended a preliminary injunction hearing in 2011).

It's actually a cornerstone of Qualcomm's business model to position itself as a SEP clearinghouse. That's why Qualcomm's brief now seeks to resolve the inconsistency between what courts have found as a result of Qualcomm's licensing practices and what Qualcomm is claiming--and must claim--at this stage in its opposition to the FTC motion:

"Although Qualcomm has obtained inbound cross-licenses to the cellular SEPs of its licensees, those were to ensure that its licensees cannot sign a license for rights under Qualcomm's patents and then opportunistically assert their own patents against Qualcomm."

If Qualcomm's chips didn't implement those stnadards, how could other SEP holders "assert their own patents against Qualcomm" by suing device makers? Qualcomm then points to its practice of neither licensing nor suing rival chipset makers, but that doesn't mean anything. Just like Ericsson--the first company Qualcomm is pointing to in its opposition brief--Qualcomm simply does this for leverage. Almost five years ago I wrote about Ericsson's fairly honest concession of the whole rationale behind going after device makers, not chipset makers.

With regard to the ATIS and TIA FRAND promises at issue, Qualcomm claims that their non-discrimination requirements merely "prohibit an SEP holder from charging one licensee a 1% royalty while (all other terms being equal) charging a similarly situated licensee a 5% royalty." However, not extending a license at all--no matter the royalty rate--is the most extreme form of discrimination.

Qualcomm argues the ATIS and TIA FRAND declarations don't say what they say because those American standard-setting bodies must have patent licensing policies consistent with those of ANSI. The reason why this doesn't convince me at all is simple: Qualcomm signed those declarations and is bound to them regardless of whatever principles and obligations may govern the inter-association relationship between ATIS and TIA on one side and ANSI on the other side. If Qualcomm feels ATIS and/or TIA are out of compliance with ANSI's rules, it can ask ANSI to investigate and take whatever action as a result, but it doesn't alter the language of Qualcomm's declarations. Also, if the horse is out of the barn, that's it: even if ANSI didn't and doesn't require ATIS and TIA to ensure that all comers, including rival chipset makers, receive a FRAND license to certain SEPs, it doesn't mean ATIS and TIA couldn't do so, and all that the likes of Intel need is one valid and enforceable contractual basis. ANSI's policies don't say that it's against its policies to license chipset makers.

Qualcomm furthermore argues that the FTC's concession that the ETSI FRAND declaration can't be interpreted without considering evidence suggests the same applies to the ATIS and TIA declarations. But what makes the key difference here is that the ETSI declaration is under foreign (here, French) law. A Qualcomm expert report on ETSI is attach to the opposition brief as Exhibit 35. The PDF shown further above contains all public exhibits, such as this one.

Getting back to the question of whether baseband chips implemenet cellular standards: they do because they control the transport-layer communication between mobile devices and base stations. Qualcomm has its reasons (as do Ericsson and others) why it prefers not to license or sue chipset makers, but if it wanted to sue them, it could do so, and I believe it wouldn't even need to resort to indirect-infringement theories.

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Friday, September 21, 2018

iOS 12 seems to contain workaround: Qualcomm's Munich patent lawsuits against Apple's Spotlight search

Yesterday the Munich I Regional Court held a six-hour (including breaks, though) trial on Qualcomm's eight lawsuits asserting four different search user interface patents against Apple's Spotlight search, with two lawsuits per patents targeting a total of three different Apple entities. A first hearing had been held in early May.

That part of the wide-ranging, earth-spanning, multifaceted Apple-Qualcomm dispute is, however, strategically so unimportant that it's not worth multiple posts or anything. That set of eight cases is a total waste of court and party resources--sort of a tempest in a teacup--as these Munich Spotlight cases have been defanged in three important ways:

  • Presiding Judge Dr. Matthias Zigann made clear, and Qualcomm apparently failed to change his position, that some of those lawsuits will result in a non-infringement finding because they require a "standby" functionality where an app does not have to be started by the user by means of tapping on an icon. But even that is strategically not that important; it just has cost implications under Germany's "loser pays" rule.

  • Just like in the Mannheim case tried earlier this week, at least one of Apple's contract manufacturers, Pegatron, is licensed. Qualcomm conceded this, which may have cost implications as well. It could still obtain an injunction as Pegatron is not the only Apple CM, but theoretically Apple could just have Pegatron make whatever it wishes to sell in Germany after an injunction. For the patents asserted against Spotlight, even that logistical measure won't be necessary:

  • Qualcomm's lead counsel, Quinn Emanuel's Dr. Marcus Grosch, conceded that iOS 12, at least in Germany (though purportedly not in other places), "works differently" with respect to the accused feature. When asked by the court whether iOS 12 keeps clear of infringement, Dr. Grosch stopped short of admitting that much, but he did reiterate that it "works differently."

    That's a highly significant concession. Enforcement of an injunction is very similar in Germany to how it works in the U.S.: if you as a patentee identify an infringement despite an injunction being in force and effect, you have to file a contempt motion and get the infringer sanctioned. If the infringement involves new products, but is in technical terms materially the same, the old injunction applies (in the U.S. it's more important than in Germany to ensure that the language captures such future infringements). Otherwise, you need a new proceeding on the merits and a new injunction (as mentioned, for instance, in the Apple v. Samsung context). In Germany, the key term is "kerngleicher Verstoß" ("violation with identical core"). I can't see how Qualcomm could still make such a claim, should it obtain an injunction over older iOS versions, against iOS 12 with respect to the Spotlight patents.

For reasons previously explained, I don't believe there is an infringement here because the accused products lack a certain filter. But that aspect of the case wasn't rediscussed yesterday, and most of the time was spent on (in)validity issues, followed by a licensing (behind closed doors) and antitrust discussion.

In the validity part it was easy to see why iOS 12 is apparently in the clear: in connection with a search for ways to contact a person, Spotlight in iOS 12--purportedly just for Germany--displays text, but not icons, when distinguishing between a given contact's phone number, email address, and other contact data. Does this sound ridiculous to you? It sure does to me. But Qualcomm's last straw for getting at least some valid, but significantly narrowed, claims at the end of the ongoing nullity and revocation against rests on the icon/text distinction. I don't know whether one should laugh or cry. Anyway, this makes the presence of icons critical for the infringement theory as well, but iOS 12 simply doesn't show icons to German users in that particular context.

So if Qualcomm were to obtain a German injunction, it would only be symbolic, but commercially irrelevant.

Frankly, I can't even see how the patents will survive on that basis:

  • Judge Dr. Zigann raised the question of whether the use of icons instead of text meets the technicity requirement under the European Patent Convention. In order to do so, it needs to have a technical effect. He tossed out the possibility of saving memory, but as a software developer I know that even on low-resolution screens in the 1980s (long before the patents' priority date), even a small monochrome (!) icon already occupied more memory than a string like "email" or "phone". Nowadays, with higher resolutions and colors, icons are more memory-consuming by a large factor. Dr. Grosch said that whether an icon saves memory "depends on details of the execution," but that's simply not true. There is no way to make it more space-saving unless you store a text string, say, 1,000 times in memory instead of once. The other possible technical effect that was discussed was that an icon might save screen space. While that is true, I believe the mere replacement of a text with an icon still isn't technical enough to meet the technicity requirement: it's at the semantic level, and then you would also save screen space by replacing "telephone" with "phone", or German texts with English or Spanish ones (less verbose languages), none of which would seriously count as a technical contribution to a solution of a technical problem. Something technically more sophisticated would have to happen in the background.

  • While German courts are reluctant to stay infringement cases for doubting the validity of patents for lack of an inventive step, the use of icons instead of text is such a ridiculous thing that it's really easy to see it's common general knowledge of a person of ordinary (or even way less than ordinary) skill in the art--and would have been so not only at the time of the priority date but decades (!) before. I believe German courts just make a summary determination of the prospects of a validity challenge, but here they could bring in a court-appointed expert and resolve the question very quickly. All I can say is that I knew about icons in the early 1980s and would have known about them before if I had been born earlier.

  • But the suggestion to use icons instead of text is also in the prior art reference most of the (in)validity discussion focused on. Thankfully, Apple and Intel's opposition briefs (petitions for revocation) filed with the European Patent Office are publicly available. "Haitani" is a PCT patent application for a "user-interface for computing devices" (WO2007019481). If you run a full-text search in your browser for "icon" over the description, you find multiple explanations. So there wouldn't even be a need to combine Haitani with any other prior art reference. It's all there. However, Qualcomm tried to get mileage out of some suboptimal drawings.

Due to resource constraints I'll write about in a different post where I'll express concern over the future of Munich as a patent infringement venue, the three-judge panel didn't have the chance to confer prior to the trial. They'll do so afterwards, and maybe they'll then see that a stay is warranted. Or revisit infringement. But even if Qualcomm got an injunction, it would just be toothless, pointless, useless (apart from maybe decorating someone's wall).

As for antitrust, such a weak set of patents was the least interesting context for discussing Qualcomm's "grand evil scheme" (a term that was not reiterated yesterday, but the message was consistent). I would like to mention just three things that the judge asked, all of which were very valid questions:

  • How could Qualcomm enforce its intellectual property rights without violating antitrust law? Apple mentioned different aspects and criticized Qualcomm for the selectivity of its attacks. In my opinion, the single most important part is that Qualcomm would recognize the antitrust implications of its actions and would seek only monetary damages, not injunctive relief. That would not be unprecedented. It's been done in Germany (such as by IPCom against Apple, over a standard-essential patent); it's also been done in the U.S., where Nokia in its 2009 Delaware lawsuits (again against Apple) made a distinction between standard-essential patents, for which it merely sought to be compensated, and others (they called them "implementation patents"). I remember this very well because Nokia's differentiated approach made a lot of sense to me at the time. In late 2010 I compared Microsoft's FRAND lawsuit against Motorola to Apple's FRAND defense against Nokia. I would still say that's the way to go. Of course, seeking way supra-FRAND damages could also constitute a violation. But in Germany, the first step is usually just to get a ruling on the merits, with damages being addressed in a subsequent proceeding.

  • For how long should Qualcomm be barred from fully enforcing its patents against Apple? The answer was: as long as it's in a dominant position in the baseband chipset market.

  • Couldn't Qualcomm just work around it by means of privateering (selling patents to a troll who would then go after Apple)? This part wasn't addressed in much detail. But I've been campaigning against privateering on this blog for a few years and have looked into some of those typical patent "transfer" agreements, and I can provide the answer: it wouldn't work. In order for Qualcomm to leverage patent suits to force Apple to stop buying from Intel to and force it to return to buying baseband chips exclusively from Qualcomm again, Qualcomm would sooner or later have to tell Apple that certain troll lawsuits would also be withdrawn the moment Apple does so. So Qualcomm couldn't hide the fact. Then there are requirements for patent transfer agreements under U.S. law with a view to standing, and in the post-eBay era in the U.S., trolls hardly obtain injunctions. But even if they wanted to do it only for Germany, they'd have to sooner or later admit that they can call off the troll, and then the antitrust implications (in the event of a complaint subsequent to such admission, or to a settlement after which the troll lawsuit is magically withdrawn) would be the same.

A decision has been scheduled for December 20, 2018, which is partly attributable to leave granted to Apple for a post-trial brief (two weeks) but may mostly be due to the present resource constraints of the 7th civil chamber of the Munich I Regional Court.

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Wednesday, September 19, 2018

Apple: Qualcomm's 13 German patent assertions part of "grand evil scheme" to force Intel out of wireless chip market

This is my second post on the Qualcomm v. Apple patent infringement trial held by the Mannheim Regional Court yesterday. In the previous post I reported on the alleged (non-)infringement and (in)validity of the patent-in-suit, EP2460270 on a "switch with improved biasing". While the case is too close to call, this patent assertion may fail on the merits just like the first one that went to trial in Mannheim. But the court might also, contrary to what the non-asserted independent claim 16 implies for claim construction purposes and despite a finding by the Swedish patent office that the patent lacks a sufficient inventive step over prior art presented by Apple, hold Apple liable for infringement and decline to stay the case pending a parallel nullity action. In that case, Apple's affirmative defenses--antitrust and licensing--will be outcome-determinative at least with respect to the availability of injunctive relief.

For a long time, it was hard to fend off even standard-essential patent injunctions in Germany on antitrust grounds (with or without a FRAND commitment, which German courts wouldn't deem enforceable by third-party beneficiaries anyway). It was arguably hardest in Presiding Judge Dr. Kircher's court. The situation improved after the Court of Justice of the EU ruling in Huawei v. ZTE; in a way, it already got a little bit better after the European Commission took action against Samsung and Motorola. But very regrettably, the thinking of German patent judges is still, by and large, that antitrust defenses are just part of a throw-in-the-kitchen-sink tactic of infringers.

The patents Qualcomm is asserting in Germany--at least the ones that have been discussed in hearings or trials--aren't standard-essential, which ups the ante for Apple's antitrust defense. However, it's a fact that Qualcomm's conduct has been deemed anticompetitive by competition enforcers in multiple jurisdictions ("Antitrust Grand Slam").

Judge Dr. Kircher stressed that yesterday's discussion of the antitrust issues in the case was just meant to be a round of opening statements, far from a final decision. However, the court's preliminary inclination is that

  • Qualcomm's conduct does not constitute a violation of Art. 102 of the EU Treaty (the abuse-of-dominant-position paragraph) in its own right,

  • nor does the court tend to believe that its German patent assertions against Apple constitute a violation of the conduct the European Commission fined it for (exclusivity arrangements with Apple depriving Intel of a fair chance to compete on wireless baseband chipsets; the court feels this is just a fundamentally different type of behavior).

The judge said Art. 102 TFEU violations are typically identified where a company abuses a dominant market position in order to cement its monopoly, with cases involving "divergent markets" (the one in which the dominant position is held and the one that is affected) representing a less common scenario. Therefore, he feels an antitrust defense of that kind should succeed only under exceptional circumstances. Then he is concerned about the "subjective" nature of Apple's theory that Qualcomm's (non-standard-essential) patent assertions are meant to force Apple to drop Intel as a baseband chipset supplier. He also pointed to the fact that Qualcomm denied any such intention. Also, he noted that Apple couldn't infringe Qualcomm's patents with impunity even if Qualcomm pursued anticompetitive goals. Apple's counsel--the antitrust part was mostly argued by Freshfields Bruckhaus Deringer's Dr. Frank-Erich Hufnagel--was quick to clarify that Apple wasn't seeking a "free ride," but prepared to take a license on reasonable terms. Apple is seeking the dismissal of the complaint, but on other grounds; its antitrust defense is all about injunctive relief.

First, I don't think "divergent markets" are nearly as much of an exception as the court indicated. Even the famous EU Microsoft cases involved the leveraging of Microsoft's desktop operating system monopoly and its effects on the markets for workgroup servers and media player software products. Second, the overarching objective of competition enforcement, be it merger control or antitrust in a narrow sense, is to preserve competitive restraints, meaning that a company can't just command any price it wants (without having to pay much attention to its competitors' price points) or impose all sorts of other terms. Competition is never perfect as evidenced by the prices Apple can command for its new iPhones, but the difference between those products and high-end Android smartphones is only gradual, while Qualcomm can charge, for the combination of SEP royalties and chipsets, a multiple of what its competitors demand. It's obvious that Intel's deal with Apple goes a long way toward some competitive restraints on Qualcomm's business decisions, so it's not far-fetched to see the intention.

In his opening statement on antitrust, Dr. Hufnagel explained to the court that--and why--the analysis should be holistic, taking into consideration the entirety of Qualcomm's conduct, which he described--using this exact English term--as a "grand evil scheme" involving different actions and measures such as exclusivity rebates for customers/licensees, the refusal to license rival chipset makers, and a multiplicity of patent assertions in different jurisdictions, including (but not limited to) its ITC complaints targeting specifically Intel-powered iPhones (earlier this week, the ITC staff raised public-interest concerns over that litigation strategy) and the German cases, which in practical terms target only Intel-powered devices because all of the accused devices are sold with Intel baseband chips in Germany.

Dr. Hufnagel said Qualcomm was, by now, asserting a total of 13 patents against Intel-powered iPhones in Germany. Prior to that statement, I was aware of three patents asserted in Mannheim and seven (four of which are from the same family) in Munich. I'll try to find out about the three remaining assertions--and who knows how many other suits Qualcomm may file in the meantime.

Apple's counsel noted that Qualcomm could have simply sued the maker of the allegedly-infringing chipset (Avago/Broadcom), and said the "subjective"/"objective" distinction wasn't key under antitrust law: the focus should be on anticompetitive effects.

It was a powerful statement, but Judge Dr. Kircher took the (preliminary) position that the court had to focus on the patent-in-suit before it in the particular litigation. Dr. Hufnagel conceded that a single non-standard-essential patent assertion was not going to force Apple into submission and back into the Qualcomm fold all by itself. But the wider "grand evil scheme" would have that potential.

The discussion will continue on October 2 in a trial involving a different Qualcomm patent (EP3036768 on a "layout construction for addressing electromigration"). Without a holistic assessment of Qualcomm's overall conduct, Apple's antitrust defense is likely a lost cause except in a case where a patent couldn't be worked around within a reasonable time frame.

In the present case, it appears that Apple could just solve the problem by having its products for the German market made by Pegatron, one of its contract manufacturers. Pegatron was drawn into the litigation. Apple doesn't usually want to do so, but had to plead it into the case because of a lack of clarity regarding whether the patent-in-suit was covered by Pegatron's license deal with Qualcomm, which is subject to "capture periods" (presumably this means that patents applied for or granted during a certain period fall under a license agreement, a structure I've seen in the public redacted versions of settlement agreements). But Apple's primary contract manufacturer, Foxconn (Hon Hai), may not be licensed. Wistron was als mentioned. I believe Compal, for whatever reason, was not named.

The license-based affirmative defense was apparently raised at a relatively late stage. That discussion, too, may continue when other Qualcomm patents go to trial. But it's not as certain as the continuation of the "grand evil scheme" debate, which is actually raging around the globe.

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Qualcomm switch patent asserted against Apple in Germany should be invalidated, Swedish patent office says

Yesterday's Qualcomm v. Apple trial took twice as long as the average Mannheim patent trial. In fact, the ventilation system was switched off in the late afternoon, so for the last hour, two doors had to be kept open. The courtrooms at the Mannheim Regional Court, Europe's leading venue for wireless patents, are famously windowless.

Presiding Judge Dr. Holger Kircher forthcomingly stated at the outset that this case was, in my words, too close to call (unlike the one that Qualcomm agreed to stay in June), thus the court had to elaborate on all our of Apple's defenses: non-infringement, invalidity (which German district courts don't determine, but they can and often do stay cases pending a parallel nullity or revocation proceeding in another forum), abusive conduct (antitrust), and licensing (through one or more contract manufacturers). I'll address the first two--the traditional defenses to patent infringement--in this post, and the affirmative defenses (the remaining two) in a subsequent post since there's an abundance of interesting things to report and comment on.

The patent-in-suit, EP2460270 on a "switch with improved biasing" ("biasing" in this context basically meaning that one voltage gets to control another), is not standard-essential. Essentiality hasn't been alleged by any party to the German Qualcomm v. Apple cases that have been heard so far. Nor is it related to wireless baseband processors: it's a general circuity patent covering a type of switch. It was mentioned during yesterday's trial that the chip allegedly infringing on the patent is supplied to Apple by Avago/Broadcom. But all of the accused devices come with an Intel baseband chip, a fact that will be relevant to the antitrust part of the next post.

In the combination of Judge Dr. Kircher's summary of the issues in the case and what Qualcomm's German counsel, Quinn Emanuel's Dr. Marcus Grosch, said yesterday, it turned out that Apple originally didn't even deny infringement but focused on invalidity. Then, after Qualcomm's reply in support of its complaint, Apple presented a non-infringement theory in a sur-reply. It wasn't said whether Qualcomm's reply brief or a change of mind triggered this, but normally a defense has to be presented in the defendant's first pleading, so I would attribute this to something Qualcomm said. This much is certain: the non-infringement argument is effectively a disputed construction of a claim limitation, not a factual question concerning the accused products.

As far as I understood, Apple argued that the patent-in-suit covered a certain chipset architecture involving a constant bulk voltage, with ground also being constant. But Qualcomm disagreed, arguing that "AC ground" stood for only the AC part, not DC. In any event, the court appeared less inclined to agree with Apple. But... and this was something very special:

Judge Dr. Kircher, who unlike German criminal judges does not have a duty to "investigate," felt the parties had not focused enough on an inconsistency between claim 1 (an apparatus claim; Qualcomm is asserting one or more apparatus claims) and independent claim 16, a method claim that refers--unlike the apparatus claim(s)--to only "the" (a single) control signal in connection with what turns on the switch, resulting in an input signal being passed through a plurality of transistors. The accused chip, however, has two control signals and would therefore, at least potentially, fall outside the claim scope.

I was profoundly impressed and still am. Apple v. Qualcomm is the commercially biggest patent-related dispute ever (at a minimum, the biggest one in the history of the mobile device industry). This patent is just a limited part of the wider dispute, but still this (unlike what Judge Alsup once mislabeled Oracle v. Google) is truly the World Series of IP. Yesterday one could see sky-high piles of case documents behind the bench. Still, with all that had been written in the build up to the trial, the presiding judge identified an issue that has the potential to be outcome-determinative and had not received much if any, attention.

It's not just because of one demonstration of extraordinary competence and dedication that I couldn't imagine a future Unified Patent Court (UPC) without this judge, despite fundamental disagreements in the past and the present with respect to the bearing that antitrust issues should have on patent infringement cases.

Unsurprisingly, Qualcomm argued that the distinction between one or two control signals was an irrelevant labeling question. I lack the expertise in electrical engineering to form an opinion, but I've watched numerous patent cases in (mostly) two major jurisdictions and this is the typical difference between an accused product and a properly-construed patent claim that routinely becomes a defendant's "get out of jail free" card. In fact, the world is littered with complaints that have been dismissed for lesser reasons.

However, Judge Dr. Kircher said that case law and literature were inconclusive as to whether or not a parallel claim could help a court construe another claim. Apparently, reasonable and reputable people disagree on this legal question because it hasn't been resolved. Better late than never. Here, it's a given that Qualcomm would appeal a stay by "complaining" (that's the term used here) to the Karlsruhe Higher Regional Court.

For the development of German (and, by extension, European) patent case law it would actually be good if the Mannheim court was prepared to take the risk of being overruled on appeal. I have no idea how the appellate panel under Presiding Judge Dr. Andreas Voss ("Voß" in German), who previously presided over another patent infringement chamber in Mannheim, or, in the ultimate consequence, the Federal Court of Justice (both in the city of Karlsruhe) would decide. My guess is that neither would pronounce a bright-line rule declaring it categorically impermissible to get mileage out of something that is found in the patent document itself. Why rely on descriptions, which aren't even updated as the claims are narrowed (which is also a huge issue in this case, with Apple alleging that Qualcomm pointed to a drawing that relates to something that the original application covered but the actually-issued patent does not), but not on claims, which the examiners focus on? Much less on anything found outside the patent document? It would probably the most likely outcome that some weight (within reason) would be given to what can be inferred or deduced from parallel claims, and in a case that is too close to call, it doesn't take too much to tip the scales.

It's fair to stay that no one in the room appeared to have a better idea of the issues in the case and the evidence in the record, across the board, than Judge Dr. Kircher. But in connection with invalidity, something apparently entered the record rather late, and while the court initially showed an inclination not to grant Apple's motion to stay since it's based on lack of an inventive step, while German courts normally grant stays only if there's a strong case for anticipation. The aforementioned Judge Voss ("Voß") always reminded counsel that a stay required a prior art reference constituting a "photographic image" of the patent-in-suit.

That's because German patent infringement courts don't like to take a position on whether a person of ordinary skill in the art would be likely to combine two or more prior art references: they're jurists, not engineers, unlike patent examiners.

Yet the hurdle for getting German patent infringement cases has, fortunately, become lower and lower over the years, as the regional and higher regional courts saw all too many cases in which they issued injunctions and later the patent died or was defanged as its claims got narrowed.

The court agreed with Apple that a new prior art reference (with an Asian name I didn't fully understand, but I'll find out whenever I find the time to request access to the nullity file), coupled with one named "Brindel" or "Brindle" that had been considered by the examiner in connection, represented a relatively stronger case for invalidation than one that the examiner found wasn't likely to become part of a combination. Dr. Grosch's efforts to deny or downplay this didn't persuade the court.

Freshfields Bruckhaus Deringer's Prince Wolrad of Waldeck and Pyrmont argued Apple's invalidity contentions. Toward the end I got the impression that the court was potentially having second thoughts. Just potentially, but that means a lot in a case where the original position was that a stay would not be warranted here.

The potential silver bullet here is that Apple had submitted the original patent and its proposed combination of prior art references (which are, according to Apple, also at the heart of its German nullity complaint pending with the Munich-based Federal Patent Court) to the Swedish Patent & Registration Office ("PRV"), and received an expert opinion from an examiner according to which the patent-in-suit does lack an inventive step in light of the prior art.

I haven't been able to find that opinion on the website of the Swedish patent office yet, but I'll keep trying.

Judge Dr. Kircher asked a key question: how many sucb opinions had Apple requested before obtaining this one? Apple's counsel, under the usual obligation to speak the truth, said it was just this one, and stressed that Apple wanted a neutral opinion based on just the prior art and no interaction with the examiner himself. That's the way it works in Sweden according to Apple. The Austrian and Swiss patent offices were also mentioned as providers of such opinions, but one of them no longer offers that service and the other one lets the petitioner communicate a lot with the examiner, which Apple's lawyers didn't want to do because they have a stronger case based on an uninfluenced opinion.

Apple didn't say so, but I might add that Sweden is a country with a lot of expertise in this field of technology, especially because of Ericsson.

It was again no surprise that Qualcomm's counsel would be dismissive of Apple's position. Dr. Grosch said that it would obviously simplify all patent cases if one could just fill out a web form somewhere. And it's not like the court indicated a change of mind. But I got the impression that Judge Dr. Kircher may indeed take the independent Swedish evaluation seriously. Maybe--just maybe--this does constitute a basis on which the court would make one of those rare exceptions in which a patent infringement case is stayed over inventiveness, not novelty, concerns.

There'll be a formal post-trial brief for which Apple was granted leave, and a legal brief (no new facts) which Qualcomm announced. The court will announce a decision on December 4, 2018. That one could be a final ruling, a stay, or whatever other procedural order.

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Tuesday, September 18, 2018

Industry bodies support FTC's motion to require Qualcomm to license SEPs to rival chipset makers

It's a busy September on the FRAND front...

As I reported on the first of the month, the Federal Trade Commission brought a motion for partial summary judgment that may open up the wireless chipset market--by reminding Qualcomm of its self-imposed obligation to license rival chipset makers--even prior to the big antitrust trial in the Northern District of California.

It's odd that a mere reminder would be a potential game-changer, but that's the way it is because of Qualcomm's refusal to live up to the FRAND promise.

The strategic significance of the motion is underscored by an amicus curiae brief that two industry associations--ACT | The App Association and the Computer & Communications Industry Association (CCIA)--have asked Judge Lucy Koh to allow them to file (this post continues below the document):

18-09-17 ACT App Association & CCIA Amicus Brief by Florian Mueller on Scribd

The later the stage of proceeding, the more common it is for stakeholders to chime in. The summary judgment stage is definitely not where this typically happens. But the FTC's motion is special.

Also, I can't remember having seen a joint filing by those two organizations before.

There's a Mannheim trial today, so for logistical reasons I lack the time to comment on the brief in detail, but I did want to raise awareness. It's a good read, and if you do look at the PDF, please pay attention to what footnote 14 says about Europe (where a major wireless standard-setting organization, ETSI, is based) and Korea; and footnote 16, which quotes public statements by Qualcomm.

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Monday, September 17, 2018

ITC staff raises public-interest concerns over ban of Intel-powered iPhones sought by Qualcomm

This morning, opening statements were delivered at the start of the evidentiary hearing in the investigation of Qualcomm's second ITC complaint (request for U.S. import ban). The complaint was filed last December. An earlier complaint by Qualcomm against Apple is at a more advanced procedural stage: a final initial determination (a preliminary ruling by an Administrative Law Judge, which is however subject to Commission review) was originally due last Friday, but after the ALJ originally in charge retired, Chief ALJ Bullock took over and extended the deadline by two weeks. In that earlier case, the Office of Unfair Import Investigations (OUII, commonly referred to as "the ITC staff") recommended an infringement finding with respect to one patent. Staff recommendations are not binding on ALJs, and even ALJs don't make the final decision: the Commission itself does. But what the staff says is often adopted.

This morning's hearing in the U.S. trade agency with quasi-judicial authority didn't start the way Qualcomm would have liked it to. The staff just presented the following recommendations:

  • None of the three remaining patents-in-suit ('336, '356, '674) is invalid (good for Qualcomm), but none is infringed (a disaster for Qualcomm). The latter would dispose of Qualcomm's case all by itself, so the other findings will be potentially outcome-determinative only if the final determination by the U.S. International Trade Commission's top decision-making body (which in the case I watched has sided with the staff to an even greater extent than the ALJs did) disagreed and identified an infringement. But in light of the other case pending and, even more so, the public interest in fair competition in the wireless chipset market, they're important at any rate:

  • With regard to the '336 patent, Qualcomm failed to satisfy the domestic industry requirement (rather unusual, and another hurdle it would have to overcome in the further proceedings).

  • A U.S. import ban would adversely affect competition in the baseband processor market and may adversely affect the production of alternative baseband processors. In case anyone forgot, Qualcomm's two ITC complaints against Apple don't target all iPhones--but only Intel-powered ones. Actually, Qualcomm sought to avoid issues with the ITC's public-interest considerations by limiting its request for an exclusion order to Intel-powered iPhones. But the alternative would just be Qualcomm-powered iPhones. Given that Intel is the only major competition Qualcomm is now--at long last--facing in the baseband chip market, I felt all along that this litigation tactic didn't alleviate the public-interest concern. Arguably, it exacerbated the situation, also from an antitrust point of view.

As Bloomberg's patent (and especially ITC) expert Sue Decker wrote in a pre-hearing report, "Apple is trying to underplay its dominance in the baseband chip market by focusing on how an exclusion order would supposedly harm Intel" and its "public interest argument would create a dangerous precedent." The ITC staff apparently disagrees with Qualcomm on the allegedly dangerous precedent, and either disagrees or just doesn't care about whether Apple is, as Qualcomm basically claims, opportunistically hiding behind Intel.

All of this is a surprise. Qualcomm has a huge patent portfolio and some of the best IP lawyers in the United States--firms that also have a tremendous track record at the ITC. I wouldn't have expected the ITC staff to clear Apple (and, by extension, Intel) of infringement of all three remaining patents-in-suit. But the ITC staff doesn't have a track record of being very sympathetic to public-interest arguments weighing against import bans. In this case, however, the anticompetitive effects of a hypothetical U.S. import ban have apparently been shown to be fairly serious.

Apple and Intel received far less support from the ITC staff in the other ITC investigation. It's impossible to know from the outside whether the ITC staff has become more open-minded about competition-centric considerations or whether this is attributable to a different body of evidence. But the importance of having Intel compete with Qualcomm in the baseband chipset market has been recognized, and there should be no difference between those cases in terms of the ultimate outcome. That's why today's staff recommendations pose a huge problem for Qualcomm with respect not only to the case heard this week but also to the earlier-filed one.

On the other coast, in the Northern District of California, Judge Lucy H. Koh can now realistically hope that she may never have to adjudicate a consumer motion (which was denied without prejudice, thus could be refiled later) to bar Qualcomm from the enforcement of a potential U.S. import ban against Intel-powered iPhones. The way things are going now validates her wait-and-see approach. And who knows, maybe the ITC staff read her decision and agreed with some of the concerns over Qualcomm's conduct that she raised in last month's order.

Jurisdictional differences exist, but the European Commission, which is preliminarily investigating an Apple complaint over Qualcomm's anti-Intel lawsuits targeting German iPhones, and the Mannheim and Munich courts may also take note of the findings in Washington, DC.

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Coerced FRAND arbitration is Huawei's Trojan Horse in appeal of Samsung's anti-enforcement injunction

Huawei's lawyers have beaten my expectations with their reply brief in the Ninth Circuit antisuit (anti-enforcement) injunction appeal pending before the Federal Circuit. Reply briefs are often largely repetitive reinforcements of points previously stressed, and in this case it's practically already the second appeal as Huawei had (unsuccessfully) asked Judge William H. Orrick of the United States District Court for the Northern District of California to reconsider his decision to bar Huawei from enforcing a couple of Chinese patent injunctions prior to a San Francisco trial. But the Sidley team representing Huawei has filed something that will make the Federal Circuit hearing (date TBD) more interesting than I would have previously thought (this post continues below the document):

18-09-06 Huawei Reply Brief (Antisuit Appeal) by Florian Mueller on Scribd

I still doubt that the argument about whether the Ninth Circuit Gallo test replaces all of the Supreme Court's Winter preliminary-injunction criteria or only the irreparable-harm factor will be outcome-determinative: when upholding the injunction, Judge Orrick addressed the other Winter factors anyway.

With respect to international comity, Huawei is right that antisuit injunctions "virtually always" enjoin private parties, not courts, yet comity is always part of the consideration; in the international context one can even strike "virtually" because no U.S. court holds power over any foreign court. The truth is in the middle: there undoubtedly is a risk of alienating foreign judges if their rulings cannot be enforced, or if parties have to stay or withdraw suits in their courts, because of a U.S. injunction, but the degree of alienation is obviously nowhere near what it would be if a U.S. court based its decision on a principle such as the general primacy of U.S. law over the laws of all other countries.

With respect to China, let's face one thing: every U.S. judge knows that the rule of law, just like democracy, works differently in China. Huawei's lawyers portray the Chinese proceedings at 100% fair and comprehensive. Samsung's counsel obviously didn't suggest that the proceedings were unfair, nor did Judge Orrick say so in his order. The Federal Circuit will be diplomatic, too. But that doesn't mean that the appellate judges won't have their private and unspoken opinion anyway.

The strategic issue here is the one I mentioned in the headline: coerced FRAND rate-setting arbitration. In order to distinguish Huawei v. Samsung from Microsoft v. Motorola (with Samsung being the new Microsoft and Huawei being the new Motorola), Huawei points out that Microsoft said it would accept a court-determined FRAND rate without insisting on adjucation of all the defenses that Samsung is pursuing (though Judge Robart actually did hold some Motorola patents invalid anyway). But beyond differences between Huawei and Microsoft regarding the preconditions for rate-settings (which I simply attribute to the fact that the standards at issue in Microsoft v. Motorola were not nearly as critical to Microsoft's business as the ones in Huawei v. Samsung are to Samsung's core business, thus Microsoft was prepared to pay for invalid and non-infringed patents and exclusively concerned about injunctive relief), Huawei must deny that it is an unwilling licensor (not in the sense of unwillingness to extend a license, but to do so on FRAND terms) engaging in hold-up and instead argue that Samsung is an unwilling licensee engaging in hold-out. The one key issue in that context that comes up in different places in Huawei's appellate reply brief--one might also call it a red herring--is that Huawei seeks to leverage its proposal to have an arbitration panel set binding FRAND rates:

  • Huawei denies any accusations of hold-up by claiming that Samsung could avoid the enforcement of an injunction by simply agreeing to binding arbitration.

  • Huawei portrays Samsung as an unwilling licensee merely because of its reluctance, at this stage, to submit to arbitration.

Huawei points out that Samsung made a similar unwilling-licensee argument against Apple in that (in)famous ITC case that resulted in a presidential veto. That's historically accurate, and no one criticized Samsung (and the ITC majority at the time) more harshly than this blog did. What was wrong back then is still wrong today.

This blog has equally consistently opposed coerced arbitration over the years. There's nothing wrong with parties' consent to arbitration, except that it deprives courts of an opportunity to augment their body of FRAND case law (though they like to see their caseload reduced). What is highly problematic and often just hold-up by any other name is when a party that would rather have key determinations (on essentiality, infringement, validity, and on FRAND rates) made by courts of law faces enormous pressure to arbitrate. Coerced arbitration is a terrible thing and raises more issues than I can address in a single post, but let me highlight some that appear particularly relevant to the Huawei-Samsung situation:

While courts do hand down "sharp rulings" (as Apple called it in a filing five or six years ago), such as the FRAND determinations made by Judges Robart and Holderman that were way closer to zero than to the original royalty demands, arbitration tends to gravitate toward the middle. This means that a patentee can often achieve a supra-FRAND outcome by, which is an oversimplification but essentially correct, demanding twice that supra-FRAND rate. The willing licensee can't do more than argue a next-to-zero royalty (and even that is difficult without losing credibility with the panel). Simply put, the licensee can't counterbalance a multiple of a FRAND royalty by proposing a negative royalty.

In its reply brief, Huawei denies that it's adamant about receiving a 1.5% royalty, but it doesn't specify what else it is seeking, making it impossible from the outside to determine who's right. The Federal Circuit has access to the full record below and will form its opinion.

No less important is the following difference: while there is some room for forum-shopping, courts of law will simply decide a case based on its facts, statutes, and applicable case law, but arbitration is a much more free-form kind of dispute resolution and everything depends on the parameters. At the most, there are some arbitration courts that have certain procedural rules in place. But even on the procedural side the first fundamental disagreement may already arise when the licensee side would like to start with some validity, essentiality, and infringement determinations (such as of an exemplary set of asserted patents). Also, should one arbitration panel make such determinations, including rate-setting, for foreign jurisdictions or just for its local one? It's the parameters, stupid.

Coerced arbitration can disadvantage licensees in two ways. Either there's frightening uncertainty for a lack of parameters (which again means that a patent holder making unreasonably supra-FRAND demands has pretty good chances of getting a supra-FRAND outcome) or the parameters may outright disadvantage the would-be licensee.

If parties voluntarily submit to binding arbitration, after negotiating without undue pressure the procedural and substantive parameters, arbitration can be fair. But with the threat of enforcing an injunction that puts someone temporarily out of business, the parameters most probably won't be fair.

Hopefully the Federal Circuit won't adopt a proposal that would be tantamount to a de facto primacy of arbitration panels over courts of law when it comes to FRAND determinations.

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Qualcomm keeps escalating patent dispute with Apple: new German lawsuit(s) filed

With a view to a Qualcomm v. Apple patent infringement trial in Munich on Thursday I contacted the Munich I Regional Court to check on the time. As for the biggest issue in that case, may I refer you to my recent post on how thin air can "practice" claim limitations unless the name of the game is the claim.

On the same occasion, I inquired about any Qualcomm v. Apple first hearings that might come up in the near term. Unlike other German courts, the Munich court holds a first hearing, not as formally focused on claim construction as a U.S. Markman hearing, prior to patent trials. A spokeswoman for the court kindly informed me that a first hearing in two parallel cases, targeting different Apple entities, has been scheduled for March 28, 2019.

The patent-in-suit in both cases is EP1988602 on a "mobile terminal with a monopole[-]like antenna."

Knowing the usual Munich timelines, it appears that the new complaints have only been filed recently. I guess just before the main summer vacation season here, or at least not long before.

I've also tried to find out from the Mannheim Regional Court (the other German Qualcomm v. Apple venue, where a trial will be held tomorrow in fact). The Mannheim court cannot announce new trial dates yet, and it doesn't hold first hearings. However, Qualcomm previously asserted the same number of patents in either venue, so there might also be a new Mannheim case, just that there's no official confirmation yet.

Qualcomm doesn't make phones, so it doesn't actually want the iPhone banned. Seeking injunctions against Apple is, however, a means to the end of forcing rival chipset makers, particularly Intel, out of the market, a strategic objective that has provoked an EU antitrust complaint by Apple, which the European Commission is investigating on a preliminary basis, and raises serious public-interest issues in the two ITC investigations of Qualcomm's requests for U.S. import bans. An evidentiary hearing (basically, a trial before an Administrative Law Judge) in the second one of those cases commences today, and I'll try hard to find out as soon as possible (last time I was slow) about the recommendations made by the Office of Unfair Import Investigations (OUII, commonly referred to as "ITC staff") and whatever the ALJ may indicate today or later this week.

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