Friday, May 24, 2019

Apple and Intel just dealt Qualcomm a post-settlement blow: EPO revokes patent underlying German fake injunction against iPhone 7 and 8

On the legal front, this week was the worst ever for Qualcomm in its corporate history, due to the FTC's sweeping victory in the Northern District of California on Tuesday shortly before midnight Pacific Time. Today, Friday, Qualcomm suffered another defeat--less impactful than the other one, yet significant: a three-examiner panel of the Ppposition Division of the European Patent Office (EPO) sided with Apple and Intel by revoking, as requested by those two Silicon Valley companies, European Patent EP2724461 on a low-voltage power-efficient envelope tracker, a patent that Qualcomm temporarily enforced to prevent Apple from selling the iPhone 7 and iPhone 8 (and the iPhone X, but Apple was no longer offering it anyway) in Germany, an attempt to put pressure on Apple for which Qualcomm had to make a $1.5 billion deposit.

Quite apparently, the recent Apple-Qualcomm settlement agreement, which resulted in the dismissal with prejudice of all infringement and antitrust/contract actions around the globe, did not and does not preclude Apple from continuing to challenge the validity of Qualcomm's EP'461 patent, which I just call the "Munich fake injunction patent" alluding to its enforcement history. (This is not the time and place to speculate on whether that agreement will have to be renegotiated; suffice it to say that a hedge fund manager with formal legal training said, as a guest speaker on a Susquehanna International Group conference call yesterday, that he couldn't find anything in the redacted version of the agreement that would suggest it couldn't possibly happen, and he explained why it's actually even hard to imagine that even the most creatively-crafted clause in the agreement could deprive Apple of whatever rights it might have as a beneficiary of the FTC case.)

On Tuesday, I was first to report and comment on Judge Lucy H. Koh's antitrust ruling; today I was the only third-party person in meeting room 128 of the EPO's main building in Munich. Qualcomm had dispatched a team of eight: four Quinn Emanuel lawyers (led by two partners: lead counsel Dr. Marcus Grosch and recently-named partner Jérôme Kommer), a German professor who served as their expert witness, and three Qualcomm employees from San Diego. Apple and Intel were represented by four patent attorneys from Samson & Partner (including the name partner himself, Dr. Wolfgang Lippich, Dr. Georg Jacoby, and Dr. Martin Vetter) as well as--in an advisory, non-pleading capacity today--Freshfields Bruckhaus Deringer partner Prince Wolrad of Waldeck and Pyrmont and principal associate Dr. Eva-Maria Herring, credited for numerous key court filings such as Apple's answers to several Qualcomm complaints.

Such a rock-star lineup on both sides--14 professionals in total--shows that today's hearing was hugely more important than one might have thought in light of the recent Apple-Qualcomm settlement as well as the Munich Higher Regional Court's decision to lift, pending the appeal (which was subsequently mooted by the settlement), the lower court's injunction because it came down for all the wrong reasons.

The relevance of today's ruling by the EPO's Opposition Division, which Qualcomm can and undoubtedly will appeal to a Technical Board of Appeal (TBA) of the EPO, transcends the scope of, and past and potential future harm caused by, this particular patent as the German federal government is preparing a patent reform package with a particular emphasis on access to injunctive relief. In fact, an "expert talk" (a spokeswoman for the ministry insisted it was not a "roundtable," though I think it was one by any other name) took place just earlier this week--and I'll encourage the officials in charge of drafting the bill to consider this case, which was arguably the highest-profile German patent injunction that ever came down. I'll also remind them of how German media giant Bertelsmann's Arvato services company lost a great deal of business from Microsoft earlier this decade because of the mere threat of a Mannheim injunction>.

Let's look at it this way: because of German patent law--and the way the courts apply it--effectively granting patent injunctions as an automatic conseqwuence of an infringement finding, and because defendants are deprived of a full invalidity defense (unlike in any other jurisdiction, though it's also a tall order to get U.S. juries to invalidate patents), two models of the commercially most successful high-tech product ever--the iPhone--were banned by the Munich I Regional Court even though

  • the appeals court found that the lower court erred in three ways, one of which is that the regional court should have reopened the record after the first trial instead of entering an injunction,

  • decisions in the U.S. (by the ITC and the United States District Court for the Southern District of California) very strongly suggested that Qorvo's envelope tracker chip simply doesn't infringe that patent, and

  • today we know that the patent shouldn't have been granted in the first place (though, again, Qualcomm can and presumably will appeal that holding).

It was a long day (from 9 AM to around 5 PM local time) at the EPO, and I'd rather go into details on the invalidity finding when the written decision is handed down. What I do wish to point out is that the opposition panel (chairman: Manuel Pavón Mayo; 1st examiner: Ali Hijazi; 2nd examiner: Thomas Agerbaek) chose a very well-structured and logical approach today that I really liked. They adopted Dr. Lippich's suggestion to start with claim construction (especially the pivotal term, "offset") so as not to put the cart before the horse (in the U.S., that's just normal; in Europe, it unfortunately isn't, but I hope it will be at some point); just before the lunch break, they determined that the patent was invalid as granted; thereafter, Qualcomm (whose lead counsel is generally very successful with claim amendments as I've seen on other occasions) brought what they call an "auxiliary request," which is an amended claim; Apple and Intel's first attack on the validity of the amended (narrowed) claim failed, but the second one, based on a different closest prior art reference, succeeded after extremely thorough analysis with a lot of back and forth and several breaks that were required to arrive at this well-considered decision (which I therefore believe stands an excellent chance of affirmance).

I also wish to thank the EPO's press office for their support, despite the fact that there were times when I was an enemy of the EPOnia state, though I have for several years now refrained from commenting on their internal matters. Today a highly competent and dedicated panel did some world-class work.

Finally, I'd like to get back to Judge Koh's ruling. On page 104, she also addressed this problem of Qualcomm using non-standard-essential patents such as EP'461 against Intel-powered Apple devices in order to bring Apple back into the Qualcomm fold:

"Once Apple started purchasing modem chips from Intel, Apple challenged Qualcomm’s royalty rates, as Tony Blevins (Apple Vice President of Procurement) testified at trial: 'There are court proceedings where we’re trying to establish what is a FRAND rate for royalty.' [...] In response, according to Blevins, Qualcomm sought patent injunctions around the world against Apple’s handsets: '[T]hey had filed injunctions against Apple and lawsuits on non-SEPs, again, to improve their position . . . on the SEPs.' [...]"

I remember, from watching the San Jose trial in January, how counsel for Qualcomm tried to get an FTC witness to say that Qualcomm's royalty demands would be validated by Qualcomm being able to shut Apple out of a major market like Germany. So much for that one.

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