Tuesday, March 5, 2019

The Qualcomm v. Apple patent jury (selected yesterday in San Diego) won't get these simple, brutally honest instructions

Yesterday (Monday, March 4, 2019) a Qualcomm v. Apple patent infringement trial kicked off in San Diego (Southern District of California). This article by Reuters' Stephen Nellis summarizes what became known on the first trial day. A funny tidbit, reported by MLex's Mike Swift, is that a software engineer wasn't allowed to become a juror after expressing his despise of software patents, which is how the vast majority of software developers simply feel:

Obviously, the jury will get nonjudgmental instructions in accordance with the law from Judge Dana M. Sabraw. But on this blog I can take some liberties, and now I'll tell you the story the way I think it should actually be told to the jury upfront. It's an alternative-universe approach, but actually, it's a lot closer to the facts than any official instructions could ever be.

Dear Jurors,

I'm so sorry for you because you now have to spend about two weeks or more in court, getting less than minimum wage and probably horrible food, and while it's your civic duty, it's actually pointless in this case.

This is about one yuuuge company, Qualcomm, suing another yuuuuuuuge company, Apple, theoretically over tens of millions of dollars, on a basis on which it's pretty much lost another case before. So let me walk you through this dispute chronologically:

Qualcomm's original entrepreneurial story of successfully swimming against the tide with code division multiple access (CDMA) is absolutely admirable. But that was a long time ago, and just like any other company in its position, Qualcomm engaged in rent-seeking: it wanted, and still wants, to get as much as possible, and for as long as possible, out of its great accomplishment of decades ago.

Where lawmakers and courts draw the lines is when a company's rent-seeking efforts turn out to be anticompetitive schemes. In America, we generally believe in market forces. Supply and demand--and may the best product or the most competitively-priced product win. But when a company doesn't compete on a fair basis, antitrust comes into play. Even prior to this decade, competitors and customers alleged that Qualcomm violated the antitrust laws. For a long time, nothing serious happened because everything got settled somehow. Then they got fined in South Korea and China, but what Qualcomm has been facing since the last week of December 2016 is an antitrust nightmare. First the Korea Fair Trade Commission (KFTC) imposed a billion-dollar fine; then our United States Federal Trade Commission (FTC) sued Qualcomm a one-hour flight up north from here in January 2017; and a few months later, the Taiwan Fair Trade Commission and the European Commission followed suit, again with billion-dollar fines (just roughly).

Shortly after the aforementioned FTC complaint was filed in San Jose, and still in January 2017, Apple brought an antitrust and contract lawsuit of its own against Qualcomm. In this patent infringement case, Apple is the defendant (and it has some counterclaims of Qualcomm allegedly infringing Apple patents, but those will only go to trial in July because we didn't want to keep you guys here for too long). But in the antitrust and contract case, Apple is the plaintiff and alleges massive wrongdoing by Qualcomm. Between what Apple and its contract manufacturers (companies like Foxconn that manufacture the iPhone in China) are seeking, Qualcomm might have to pay tens of billions of dollars (though Qualcomm says it should work like that the other way round).

Five months after Apple's lawsuit, Qualcomm started suing Apple for the alleged infringement of six patents. Anyone could easily see that Qualcomm wanted to distract from its antitrust worries, and that Qualcomm sought and is still seeking to portray Apple as a thief of its intellectual property. That's why Qualcomm published an infographic, which we'll talk about--and from today's perspective laugh about--a little later.

Qualcomm asserted the same six patents in two so-called fora: the complaint we're now dealing with here was just a mirror, more commonly called a "companion" complaint. Companion to what? To a complaint with the United States International Trade Commission (ITC). The ITC is sort of a court. Actually, it's a trade agency, but you can ask them to impose an import ban on products that you believe violate your patents. When companies sue, at least when large ones do so, they typically bring a companion complaint in a federal district court like this one here. That's because the ITC can only ban products, but it can't order a defendant to pay the complainant any money. Remember I said the ITC is "sort of a court"? That's why--there are things, such as damage awards, that only so-called Article III courts can do. So if you want everything--an import ban as well as some money--you need two complaints, not just one. An import ban is typically considered the grand prize because it sometimes gives a patent holder great leverage over the other party, while damages are the consolation prize.

The ITC doesn't need, want or have juries. Everything gets decided by professional judges. They're called Administrative Law Judges, or ALJs. Just like you, or most of you, they don't have a technical background, but unlike you, they're legally trained and they do this all the time, so after a while they know patent law inside out and they get a pretty good idea of how to apply the law to technology products. Nobody is perfect, but let's put it this way: there's a lot of things that the average jury struggles to understand that an ALJ simply knows or figures out.

ITC investigations are much faster than the average patent case that is put before a federal jury. In our case, the ALJ already made his so-called initial determination last year. We'll get to his findings in a moment.

Before the ALJ even made his preliminary decision, Qualcomm had already dropped three of the six patents-in-suit. The ITC urges complainants to narrow their case in order to save time, but most of the time a patent gets dropped because it simply isn't likely to be held infringed or valid at the end of the day.

So the ALJ looked at the three remaining patents, and sided with Qualcomm on only one of the three, but not the other two. In fact, the reason you don't have to look at six patents now is because this court here in San Diego found one of them to be so clearly not infringed that there was no point in letting you look at it--which happens rather rarely because normally juries get to decide on all the facts.

Even with respect to the patent the ALJ in Washington, DC deemed valid and infringed, he concluded Qualcomm wasn't entitled to an import ban because it was just trying to cause anticompetitive harm. But that's another story.

The ALJ's decision is called initial determination because it's not final. Technically, nothing is ever final in a judicial proceeding as long as someone can appeal, but an initial determination is particularly non-final because the parties get to petition the Commission, the six people at the top of the ITC, to review any findings adverse to their interests--and the Commission then makes the final determination (which can be appealed to a higher court just like a district court ruling).

Both Apple and Qualcomm filed such petitions. Apple's petition succeeded (to the extent it could at the procedural stage we're talking about), while Qualcomm's failed. This means the ITC's decision is final with respect to two patents (plus Qualcomm had given up on three of them earlier on): Qualcomm asked the ITC to take a look at those failed patents again should Apple be granted a review, and as I just said, Apple's petition was granted, but Qualcomm's contingent petition went nowhere.

The ITC has yet to make a final decision with respect to the last one of those patents--the '490 patent. The ITC raised nine technical questions, every single one of the first eight of which has the potential to make Qualcomm lose the entire case. But even if Qualcomm overcame all those technical hurdles, and even if the Commission disagreed with the ALJ on the question of whether an import ban raises public-interest issues (for competition-related reasons), it wouldn't matter because Apple has already worked around that patent. To work around a patent means that you modify your product so it no longer practices the invention claimed by the patent. It's like you have version 5 of a product that infringed, but then there's a version 6 and it no longer infringes, so the ban doesn't apply to it.

So the whole ITC case has been a major disappointment for Qualcomm. Three patents dropped, two patents not infringed, and the sixth one may or may not be infringed, but it doesn't really matter anymore because of that workaround. I mentioned Qualcomm's infographic earlier on. Let me show it to you, but with some manual corrections that reflect what happened during the course of the ITC proceedings (click on the image to enlarge; this post continues below the document):

Now you know that the case in front of you is just a mirror of another case that failed to impress a professional judge and his six bosses. It will be a total failure if even the sixth patent is thrown out there (Apple would just have to prevail on any one of those first eight technical questions), or alternatively "only" a near-total disaster should there be an import ban over a patent that's no longer relevant to the iPhone because of a change made to iOS.

Yes, the only reason you have to waste time in this windowless courtroom is that Qualcomm wants a second bite at the Apple. It's because Qualcomm decided not to accept what the professionals in Washington, DC determined. Qualcomm could have withdrawn this complaint, either in whole or at least for the most part. But instead, Qualcomm still hopes that you are more impressionable than the ITC and will buy what its high-paid lawyers and witnesses are going to tell you now.

You obviously have every right to form your own opinion regardless of what happened in our nation's capital. Of course, it's theoretically possible that you'll get something right that the ITC got wrong. But if you had to bet money, would you rather bet on eight laypeople or on one professional judge plus his six bosses? The answer is clear. And it's even more obvious that you'd hardly bet money on patents that Qualcomm itself withdrew from that other case. If Qualcomm had prevailed on its final three patents, then maybe the three dropped patents would also have been interesting, but they decided to accelerate the proceedings. However, even the final three patent infringement claims turned out pretty weak, so it's hard to imagine that the three patents Qualcomm itself elected to drop from the ITC case would be particularly strong...

Let's be realistic. Qualcomm just wants to get a headline that Apple infringes at least one of its patents. Compared to the big Apple & Contract Manufacturers v. Qualcomm case going to trial next month, over tens of billions of dollars, this here is too small to be a prelude. It's a sideshow, and even the word "sideshow" sounds a whole lot more important than this case really is.

Lest I forget to tell you, some lawyers filed a lawsuit two years ago against Qualcomm on your behalf. Not specifically yours, but yes, you were most likely included because I guess you bought at least one smartphone in the relevant period (which starts in March 2011). They're trying to get a payout for up to 250 million Americans: an average amount of $20 per person. But whether and when that case will go to trial depends on some other decisions to be made by some other judges in the meantime. What it does show you, though, is that you're looking at a tiny piece of the puzzle. Let me show you a "battlemap" that will give you an idea of all the claims brought against Qualcomm lately, as well as Qualcomm's retaliatory sideshows (click on the image to enlarge; this post continues below the image):

Qualcomm isn't going to solve any of its real problems with the lawsuit before you. No matter what you decide, it won't move the needle--and it won't change a thing about what all those governmental competition watchdogs in the U.S., Europe and Asia are concerned about. But it's your civic duty to listen to the lawyers and the witnesses, and to reach a consensus on a decision. Again, sorry for this. For the five bucks an hour and for the food. Good luck!

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