Thursday, April 4, 2019

After recent San Diego jury verdict, Apple and Qualcomm disagree on scope and procedural basis of judgment

Apart from PR, the mid-March verdict that a San Diego jury rendered in Qualcomm's favor over three patents isn't overly useful to Qualcomm in its own right as the damages award of §31 million is insignificant compared to what's really at stake between the patent-leveraging chipmaker and Apple (with the big showdown scheduled for April 15). It's just a companion case over a complaint mirroring a request for a U.S. import ban that went nowhere in the ITC--though Qualcomm can, of course, appeal the ITC decision to the Federal Circuit and is taking the unusual previous step to ask the U.S. trade agency to reconsider its patent invalidity finding.

On March 26, Judge Dana M. Sabraw of the United States District Court for the Southern District of California requested briefing on whether a Rule 54(b) judgment--final (thus appealable), but with respect to a subset of the claims in the case--should be entered or not. Apple's motion for judgment as a matter of law (JMOL) is pending anyway, but the court could rule on it in the short term so as to conclude the part involving Qualcomm's offensive claims at the earliest opportunity, or it could await the outcome of the second trial (scheduled for mid July), where Apple's offensive counterclaims (i.e., Apple alleging that Qualcomm infringes some of its patents) will be put before another jury.

Neither party favors Rule 54(b), but for disparate reasons. Qualcomm's position is that the court should sever Apple's offensive claims and enter a final judgment. In terms of appealability and enforceability, I can't see what different it would make, so I believe Qualcomm just feels the court has more discretion to sever the remainder of the case (as it already decided to bifurcate the case). For Qualcomm, Rule 54(b) is at least the second-best choice, while Apple proposes to wait until its own offensive claims have been tried.

The statute requires a determination by the court "that there is no just reason for delay," and Ninth Circuit case law requires a "pressing reason" for a Rule 54(b) judgment.

Even though Apple may have brought its offensive claims relatively late (about six months after Qualcomm's original complaint), I think Apple was disadvantaged by bifurcation. The whole Apple-Qualcomm dispute was never about Apple seeking money from Qualcomm, but the other way round. Therefore, Apple's offensive counterclaims were actually a defensive measure: I'm convinced they just wanted to have a more symmetrical situation in front of the jury. It's not just that the trial would have been more balanced in terms of Apple also accusing Qualcomm of some infringements, but Qualcomm's lawyers would have had to make some of the same defensive arguments that Apple had to make. Also, Apple could have played the game that Samsung played in the 2014 trial of the second Apple v. Samsung case in the Northern District of California, where Samsung sought a relatively modest amount of damages, which may very well have influenced the jury's perspective (indeed, the jury's damages award ended up being only about 5% of what Apple was seeking).

I can think of only one high-profile case where a party with a defensive motivation didn't benefit from its offensive counterclaims: the first Apple v. Samsung trial in the Northern District of California. In that case, Apple asserted a mix of some non-technical, purely visual intellectual property rights (design patents, trade dress) and software patents covering visual, even iconic features, while Samsung counterclaimed over rather technical (partly standard-essential) patents that are harder for a jury to figure out (and was rather aggressive on damages). But in that Qualcomm v. Apple case in San Diego, both parties' patents-in-suit would have been similarly technical in nature, so there would have been a very high degree of symmetry.

With respect to Apple and Qualcomm's disagreement on what type of judgment should come down now and on what basis, it's unsurprising that Qualcomm wants a San Diego judgment on those three patent assertions at the earliest opportunity, given that two of those three assertions overlap with two of the three patents at issue in the ITC case (in either case, Qualcomm asserted the same six, but withdrew three per case, with two in each case overlapping). The overlap between the San Diego case and the ITC investigation, however, is not mentioned at all in Qualcomm's filing, and Apple refers to it in only a footnote:

"In the parallel ITC investigation, the ITC issued a Final Determination finding the single asserted claim of the '490 patent invalid. Qualcomm has publicly stated that it 'will seek reconsideration by [the] Commission in view of the jury verdict' here, which it claims is 'inconsistent.' ALJ Rules in Favor of Qualcomm in Patent Infringement Case Against Apple at the U.S. International Trade Commission, Mar. 26, 2019, available at Of course, there is no inconsistency between the Commission's invalidity determination and the jury's verdict, which did not even consider validity for the '490 patent. Even so, adhering to the normal policy of entering judgment in this case only after all claims are resolved may help deter Qualcomm from attempting to leverage a partial final judgment to improperly attack the ITC's Final Determination."

But the ITC-San Diego overlap is a fairly important part of what this is about. San Diego is just a PR thing and potential consolation prize for Qualcomm (and it remains to be seen what will happen at the JMOL stage). The ITC exclusion order (U.S. import ban) is what Qualcomm really wanted, and the motion for reconsideration will most likely be denied by the ITC, so Qualcomm needs a successful appeal to the Federal Circuit.

Time is not on Qualcomm's side in another regard: Apple has been quite successful petitioning the Patent Trial & Appeal Board (PTAB) of the United States Patent & Trademark Office (USPTO) for the institution of inter partes reviews of various Qualcomm patents-in-suit. That fact is also why I believe Apple elected not to pursue its invalidity arguments (other than inventorship in connection with the '949 patent) in San Diego at some point: "[M]idway through trial, Apple announced that it had elected not to pursue any art-based invalidity defenses." Juries rarely invalidate patents, so Apple presumably determined it made more sense to have the PTAB rule on (in)validity. That will take time, but the longer things take (including a potential delay resulting from a final judgment having to wait until after the trial of Apple's offensive counterclaims), the more likely Apple is to get some favorable PTAB decisions that will bolster its appeal.

Toward the end of its Rule 54(b) briefing, Apple points to testimony by Qualcomm's own damages expert that may make it quite easy for Judge Sabraw to just hold off on any judgment here: "Both large profitable companies. Really high credit ratings, good balance sheets. Nobody needs cash, right."

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