Thursday, December 20, 2018

Qualcomm wins envelope tracker patent case against Apple in Munich, but will the injunction ever be enforced?

BREAKING NEWS: Presiding Judge Dr. Matthias Zigann of the Munich I Regional Court ("Landgericht München I") just announced his panel's decisions on, technically, ten Qualcomm v. Apple patent infringement complaints. The key question is now whether a ban of Intel-powered iPhones up to the iPhone X (but not the latest models) will actually be enforced. The court based the infringement holding merely on an allegedly insufficiently-substantiated denial by Apple, not on actual clarification of how the accused chips operate . It's all because Qualcomm alleged.something and Apple couldn't deny it without violating Qorvo's secrets.

For details on what was/is at issue please check out yesterday's preview post. Here's a brief summary of the decisions announced today:

  • The eight complaints in which Qualcomm targeted Apple's Spotlight search will be adjudicated in late January, but given that iOS 12 almost certainly steers clear of infringement, the injunctive relief Qualcomm may or may not obtain them simply won't have any commercial impact--and damages, if ultimately due, would be very limited.

  • In the two cases over a patent on a power-efficient envelope tracker chip design, the court relied on the fact that the court-appointed expert, like the three judges on the panel, couldn't see (given Qorvo's insistence on confidentiality) how the accused chips operate if not the way Qualcomm alleges, and on that basis the court handed down an injunction. This surprises me in light of what Qorvo had told me (and what I found credible and plausible).

    I have no idea how Qorvo's envelope tracker chip achieves the power-saving effect at issue (its inner workings may or may not infringe Qualcomm's patent-in-suit), but it does bear a lot of weight with me that the ITC did not hold a different claim from the same patent family infringed, after evaluating the chipset schematics (which Qualcomm's lawyers prevented from being analyzed in the Munich proceedings) and hearing the testimony of Mike Kay, the designer of the accused chip. I am shocked that Qualcomm's procedural gamesmanship--firstly conducting discovery in the U.S. for the stated purpose of presenting chipset schematics in the Munich court, then making an about-face and asking the German court to rule, and the court-appointed expert to opine, on a basis that's lacking and wanting--has been rewarded. If they have the law and the facts on their side, they deserve to win, but here they wanted--and disconcertingly obtained--a ruling on a basis that I've previously called "evidentiary minimalism" and which would be totally unimaginable in the United States with its far-reaching discovery regime.

    What Qorvo also found unfortunate is that counsel for the formal defendants (with Qorvo being a de facto defendant) didn't have the chance to respond to the court-appointed expert's opinion after further deliberation, though this is (as I know from my own experience here) normally part and parcel of German proceedings involving court-appointed experts. It raises questions regarding the constitutional right to be heard.

    I'm unaware of any commentator who would have expressed greater admiration for the work performed by Quinn Emanuel's Dr. Marcus Grosch. As I predicted, QE Germany has since made it really big. However, I'm just not yet prepared to congratulate them on this shady and fishy win, for two reasons. One, the discrepancy between the outcome at the ITC (based on a robust body of evidence) and the one in Munich makes it quite a possibility that Munich reached the wrong conclusion. Two, because of the way things went wrong here, I wouldn't hold my breath that this injunction will ever get enforced (for more than maybe a negligibly short period of time) as the appeals court--the Munich Higher Regional Court--won't necessarily agree with the court below that a patent holder should be rewarded for not enabling the court and the court-appointed expert to get the benefit of seeing the actual chipset schematics.

    Efficiency is a virtue, and it's often considered a German virtue--but when the interests of justice are disregarded the way it happened here, it's more of a vice. The right balance needs to be struck, and a litigant who starts a discovery proceeding in the U.S., for the stated purpose of obtaining key evidence for a proceeding in Germany, and negotiates a protective order, should not benefit from his counsel making an about-face shortly before trial and declining to accept the terms of that protective order. That's just too much maneuvering. Judge Zigann said today that Qualcomm never promised anything, but it does appear to me that particularly Qorvo reasonably relied on confidentiality. The court says a defendant simply choose: reveal your secrets to deny with specificity an infringement accusation or lose the case.

    I fundamentally--but also respectfully--disagree with the court's procedural approach here, and hope it will be overturned soon. This is way too patentee-friendly, especially when there is a procedural solution through U,S, discovery (best of both worlds).

    Apart from the procedural-evidentiary concern here, there's also the possibility of a U.S. antisuit injunction (first a temporary restraining order) coming down. While the Munich court disagreed with the antitrust-based affirmative defense and ordered an injunction regardless of Qualcomm, the superdominant baseband chipset maker, specifically targeting Intel-powered iPhones, the U.S. district courts with pending Qualcomm antitrust cases (Northern District of California: FTC and consumers v. Qualcomm; Southern District of California: Apple and contract manufacturers v. Qualcomm) may thwart Qualcomm's plan and prevent enforcement of the injunction until the overarching competition issues have been adjudicated in the (earlier-filed) U.S. cases.

    It also remains to be seen whether the European Commission, which launched preliminary investigations into Qualcomm's quest for leverage in Germany, will take this lightly or pressure Qualcomm not to enforce any injunction for now.

Qualcomm brought infringement cases against Apple in the U.S. (primarily betting on the ITC for quick leverage, though that part isn't necessarily working out), Germany, and China. But what started the whole dispute was antitrust enforcement against Qualcomm by regulatory agencies and, through litigation, Apple. We'll still hear news about those infringement cases next year, but what really matters is competition in the baseband chipset market and access to standard-essential patent licenses on FRAND terms. Antitrust enforcement may ultimately even cut through duct tape, and no matter how many infringement cases Qualcomm might win, the competition issues are still the same (if not worse).

Qualcomm's other German lawsuits aren't in good shape. In this post I described the Mannheim situation as a stuttering steamroller, and in October the Munich court threw out another case because it didn't identify an infringement.

But several more German Qualcomm v. Apple cases are pending, with a first hearing in one of them scheduled for late March 2019.

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