Thursday, December 13, 2018

ITC decides to review initial determination that Intel-powered iPhones infringe one Qualcomm patent

Yesterday afternoon the United States International Trade Commission ("USITC" or just "ITC"), a U.S. trade agency with quasi-judicial powers, issued a determination to review meanwhile-retired Administrative Law Judge (ALJ) Thomas B. Pender's initial determination according to which Intel-powered iPhones infringe one Qualcomm patent (U.S. Patent No. 9,535,490 on "power[-]saving techniques in computing devices").

A headline I read this morning suggested that this is a "second shot" for Qualcomm to prevail, which may be attributable to spin doctoring and is fake news just like a story according to which Apple CEO Tim Cook was preparing a 2020 presidential run (paid for by Qualcomm, presumably in an effort to adversely impact Mr. Cook's relationship with President Trump). The determination to conduct a review is actually a setback--not progress--for Qualcomm if, which gained nothing whatsoever yesterday if one analyzes carefully what the ITC actually decided and compares it to what it could have decided in the alternative.

First, as I explained on November 2, a fundamental distinction must be made between an initial determation (ID) on the merits (whether a valid patent is infringed) and a recommended determination (RD) on remedy and bond. The ALJ issues both simultaneously, but the ID (or any given part of it) becomes the final Commission determination if the Commission--the six-member decision-making body at the top of the organization--decides not to review it, while the RD is just what its name says (a recommendation) and the Commission must make a determination on those questions whether or not anyone files a petition (in fact, it's not even possible to formally "petition" for a "review" of the RD because only decisions, not recommendations, can be "reviewed"; a recommendation can, at best, be adopted).

The public-interest inquiry is only relevant to the remedy part:

  • Yes, ALJ Pender recommended not to order an import ban over the patent he deemed infringed, as he viewed Qualcomm's related ITC complaint as part of an anti-Intel campaign with serious anticompetitive implications (for a closer look at his findings, see this post).

  • Yes, the Commission yesterday requested answers to five public-interest questions (vs. nine related to the merits), and it's procedurally possible that the Commission ultimately reaches a different conclusion than ALJ Pender.

  • But no, this does not mean that the Commission has taken a procedural decision in Qualcomm's favor (such as by granting a petition to review) or identified any potential reasons to disagree with ALJ Pender. As I've explained repeatedly, and as yesterday's document actually also states (though not as clearly as this post), the Commission must evaluate the statutory public-interest factors. It couldn't just say: "we affirm the ALJ". Even if the Commission wholeheartedly agreed with the recommendation, it would have to make its own determination, and would have to request input from stakeholders.

While the parties couldn't even petition for a "review" of the RD on remedy and bond, the Commission requested public interest statements in the build-up to yesterday's determination. The implications of an anti-Intel ban on U.S. competitiveness in 5G were put front and center by Apple's submission, and yesterday's public-interest question D also refers to "the alleged exit of Apple's chipset supplier from the market for 5G technology."

What remains to be seen now is whether the public-interest questions will even be reached by the Commission. Unless Qualcomm prevails on at least one patent claim, there obviously won't be a remedy.

With respect to the merits, the Commission

  • granted Apple's petition to review the liability finding with respect to the '490 patent, with Apple now getting the proverbial second bite at the apple to defeat the complaint (in fact, a second round of three bites: the Commission's nine questions involve infringement, liability, and domestic industry, any one of which would be a "get out of jail free" card for Apple on its own), but

  • denied Qualcomm's (conditional) petition to review the holdings that Apple did not infringe the other two patents ALJ Pender ruled on.

One key difference here is that Apple's petition for review was unconditional (Apple definitively asked the Commission to overrule ALJ Pender on liability), while Qualcomm's petition was conditional. Qualcomm wanted the Commission to adopt the ALJ's initial determination on the merits, but also wanted second bites at the apple (in this case, at "the" Apple with a capital A) if a review was going to take place. What has happened now is that the ITC decided to review the part that is good for Qualcomm (and can only get worse for Qualcomm, not better), but declined to review the parts where Qualcomm could have made further headway.

This also means that the Commission won't review the ALJ's finding that a certain Qorvo chip in Intel-powered iPhones doesn't infringe a Qualcomm patent that has a European "sibling" that is at issue in a case the Munich court will decide on next week.

Obviously, Qualcomm's conditional petition for review looked weak from the start. A party that believes there's a good chance of prevailing on one or two additional patents simply requests a review on an unconditional basis. Many other ITC complainants have sought to widen, broaden and deepen their ITC wins, and in all the cases I saw, except for this Qualcomm case, those petitions were unconditional. Theoretically, a party's desire to save time and rather get one bird quickly than two or three birds later could result in a conditional petition for review even if the case was strong. However, we're just talking about a couple of months here that Qualcomm could have saved in the best case--not much given that this dispute started almost two years ago. The Commission determination has been scheduled for February 19, 2019.

So by now, there's only one patent in the case, and Apple has four different chances to avoid an import ban, and needs to prevail on just one while Qualcomm must overcome all four hurdles:

  1. infringement (a matter of claim construction, and the Commission is interested in claim construction arguments),

  2. validity (the Commission appears particularly interested in one prior art reference, but also in a second one that might be relevant to an obviousness analysis),

  3. domestic industry (here, claim construction also comes into play), and

  4. the public interest in thwarting a market monopolization campaign.

Meanwhile, media reports suggest there's a bitter enforcement fight raging in China, where Qualcomm just secured two preliminary injunctions against Apple (from what I hear, there had only been two other patent PIs in Chinese history before these two), but Apple argues that iOS 12, which the court didn't look at, doesn't infringe. The patents in that case are software patents, and iOS 12 contains at least one other workaround related to a Qualcomm patent-in-suit. As Apple's and Microsoft's patent enforcement efforts against Android devices showed years ago, it's very hard to find a software patent that is broad enough so it can't just be worked around easily (and in ways that end users often don't even notice), yet not so broad that it would be held invalid. Anyway, I only have indirect information (media reports) on the Chinese situation and will continue to focus on jurisdictions in which I can conduct primary research (analyzing documents and attending hearings/trials/announcements).

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