Sunday, February 10, 2019

District court's pretrial ruling on damages and ITC scheduling order: no good news for Qualcomm in Apple dispute

A few months after Apple sued Qualcomm two years ago, the chipmaker started a patent enforcement campaign in three jurisdictions (U.S., Germany, and China). Almost two years have passed, but Qualcomm has yet to prove two thirds of its enterprise value (that's what the company's patent licensing business accounts for as was stated repeatedly during last month's FTC antitrust trial) in litigation. If one focused on only a few mainstream media headlines, one might be (mis)led to believe that Qualcomm gained serious leverage in China and Germany, and had a decent chance of achieving the same in the U.S., but headlines can answer only some of the world's most important questions. Patent enforcement isn't one of them.

It's one thing to obtain a favorable ruling. It's another to obtain a favorable and impactful ruling on a lasting basis. As fast-paced as this industry undoubtedly is, ephemeral results don't get major disputes settled.

There's no indication (otherwise the stock market would know) of Qualcomm's Chinese injunctions having had an impact on Apple's ability to sell or make products there. At least for the time being it appears that software updates have indeed solved the problem, which is plausible since that's what usually happens when non-standard-essential software patents are enforced. I've been interested in this subject since my NoSoftwarePatents campaign, which I started in 2004, and I've never seen a case where a software patent killed an entire product. The response has always been a software update. There's no reason to assume it shouldn't work in China.

Patent injunctions ban products that come with a particular set of technical characteristics. They don't ban products just based on their name regardless of what's inside. That would be the domain of trademark law.

As for Germany, most of Qualcomm's lawsuits there have been a failure even in strictly formal terms. The one injunction (technically, a pair of injunctions over the same patent but enjoining different Apple entities) Qualcomm obtained there

Guess how many of the mainstream media--even if one includes high-traffic IT-specialized websites--that reported on the German injunction cared to publish a follow-up on one of those three developments, or (which would make the most sense) the combination of all three?

None. At least I can't google anything. What I've been able to google, however, is that they all got the amount of the required deposit wrong until Qualcomm announced that it had, as only this blog had said from the beginning, laid down approximately $1.5 billion (all other media had previously stated only half of that figure).

Forget mainstream media headlines. Seriously, forget them when it comes to patent litigation. The general public will pay attention to a product "ban" even if it's more or less inconsequential. Some reporters struggle with legal procedures, but even those who are familiar with litigation in general often miss the specific procedural aspects of patent infringement and invalidation proceedings--or at least the technical aspects, but the economic relevance of a patent injunction depends on technical implications.

The beauty of the Internet is that those who really care to know what's going on have more choices than ever, and somewhere one may find the actual facts, as opposed to fake news. The workaround for that German injunction is a great example: an indie website,, found out about it from retailers. The news agencies didn't. Nor did the major IT news networks. But the latter all reported on the "ban."

Getting back to the actual subject. Qualcomm has apparently had zero impact in China (other than headlines) and next to zero impact in Germany (again, other than headlines). What about the U.S.?

  • Qualcomm's first ITC complaint against Apple is down to one patent, and the Commission (the six-member decision-making body at the top of the U.S. trade agency) asked nine questions, any one of which could be answered in a way to dispose of whatever little is left of that case. In that case, the public interest (with a view to which an Administrative Law Judge advised against an import ban regardless of the merits of the infringement allegations) won't even have to be analyzed. Apple and Qualcomm submitted comments on the aforementioned nine technical questions and the public interest last week, but they are are still sealed.

  • In mid-September, an evidentiary hearing (= trial) was held in the investigation of Qualcomm's second ITC complaint against Apple. No violation was found, and ITC staff spoke out against an import ban, though rumor has it that the staff has changed its position on the public interest.

    On Tuesday, ALJ MaryJoan McNamara entered a scheduling order. While she'd have preferred to add only 35 days (= the length of the recent government shutdown) to the due dates in that case, she experienced "ripple effects [from the shutdown] across most of [her] [i]nvestigations,"< so she had to add more time. As a result, the target date for her initial determination on the merits (ID) and recommended determination on remedy (RD) has had to be pushed back from January 22 to March 26. The target date for the final Commission decision is always four months after the ID/RD, i.e., July 26.

    It's not over yet for Qualcomm, but there's a relatively high likelihood now of both investigations ending without a finding of a violation, which--should it play out that way--would be a total disaster for Qualcomm's lawyers.

  • When I first commented on the summary judgment that came down in the Southern District of California companion case to Qualcomm's first ITC complaint against Apple, I focused on the holding that the U.S. equivalent of the German injunction patent wasn't infringed. It's also worth noting that the same order granted an Apple motion to preclude Qualcomm from seeking pre-suit damages. This means that even if Qualcomm prevailed on the merits of any of the patents-in-suit in that San Diego action, the damages period would begin in the spring of 2017. As a result, that case (which will go to trial soon) is about a small amount of money--I'm wondering whether it's even going to be enough to cover, in the best case for Qualcomm, the litigation costs.

    For the sake of complete coverage, the summary judgment order agreed with Qualcomm that Apple could not hold one particular prior art reference against one of the patents-in-suit. However, Qualcomm's motion with respect to another prior art reference targeting the same patent was denied, so the patent might still be deemed invalid--and with all the progress Apple and Intel have made with their petitions for PTAB IPRs (inter partes reviews), Qualcomm's patent invalidity worries are huge.

It's easier to make patent royalty demands, or to propose arbitration, on the basis of owning 130,000 patents than to prove that a single one of those patents

  • is actually infringed,

  • is valid,

  • is not licensed,

  • is not exhausted, and

  • can't just be worked around with a software update or minor hardware modification.

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