Friday, April 16, 2021

VLSI Technology v. Intel: patents from a portfolio valued at $7 million allegedly created $3 billion in value--will the jury buy that?

Another post, another dispute involving a non-practicing entity (NPE) financed by Fortress Investment. The previous post was about a couple of additional VoiceAge EVS v. Apple cases I just learned about. While Munich is the world's #1 patent injunction venue, at least for the tech sector, the Western District of Texas is where parties go to seek Texas-size damage awards, such as in the second VLSI Technology v. Intel trial in Waco before Judge Alan Albright. That trial will continue on Monday.

It seems to me that many technology industry and patent professionals have sympathy for Intel because it already suffered so much last month when the first VLSI trial ended in a $2.2 billion damages award. At the same time, hardly anyone expects that first VLSI award to be upheld, simply because appeals courts typically reverse such decisions (sometimes reducing damages to zero by finding no infringement or holding the asserted patents invalid). For example, just yesterday Apple--Intel's ally against Fortress Investment--convinced a Texas judge (Eastern District in that case) to order a retrial, setting aside a $506 million jury verdict. The only thing that is unusual about that decision in Optis Wireless v. Apple is that a judge from a plaintiff-friendly federal district in Texas did so. Most of the time, those decisions are made by the United States Court of Appeals for the Federal Circuit.

On Monday, the parties' lawyers delivered their opening arguments. In the meantime I have occasionally dialed in to listen to the proceedings. What I found very helpful and informative is a series of podcasts by Winston & Strawn's WacoWatch blog.

I learned from the podcast that VLSI and Intel both act similarly to their previous courtroom clash, but obviously a number of facts are specific to this case. Different patents, different issues, and an even larger damages claim: $3 billion.

Jury trials are extremely hard to predict. A lot depends on whom (whose lawyers, whose witnesses) jurors trust. Patent cases are tough for juries though they are fun for some judges. Judge Albright is so eager to attract patent cases to Waco that he makes it very hard for companies like Intel to defend themselves. On Twitter, Mike Masnick (who also comments on tech law) pointed out that Judge Albright brags about the many patent cases he gets to preside over:

Mike Masnick doesn#t mince words. On Tuesday, he published an article about Judge Albright with the following title: Patent Loving Judge Keeps Pissing Off Patent Appeals Court, But Doesn't Seem To Care Very Much (I'm just quoting--not endorsing--that language)

Jury duty is anything but rewarding, and jurors are really out of luck when they are selected for a patent case. Every time Judge Albright has fun, jurors lose precious time, for which they get paid so little it's not even worth mentioning. A waste of time for jurors, whether or not their verdicts get overturned, but Judge Albright thoroughly enjoys those trials...

Intel has non-infringement as well as invalidity arguments, and VLSI can't even count on the inventors of the patents-in-suit. The fact that the claimed inventions were originally made for an entirely different purpose may make jurors skeptical of the allegation that Intel started infringing those patents a decade later.

Not because I would predict it to happen, but because it might, the jury may have to think about the damages figure should it find one or both of these patents to be valid and infringed. VLSI's damages expert arrived at a $3 billion amount. He basically concluded that the infringing products generated $4 billion, and then apportioned less than a quarter of that total value to Intel's own work. Intel has tried--and will continue to try on Monday--to convince the jury that its own engineers created the products in question. If I were on the jury, I definitely wouldn't conclude that almost 80% of the value is in those patents. Intel pointed out that one of the temporary owners of those patents valued that entire Freescale portfolio (which includes the two patents VLSI is asserting now, but also many others) at $7 million.

Just like in the previous VLSI trial, the plaintiff's damages expert arrived at a huge claim based on what is called hedonic regression. Intel's lead counsel, WilmerHale's Bill Lee, asked VLSI's damages expert a number of questions relating to the Georgia-Pacific factors, a framework for reasonable royalty-type patent damages determinations that isn't absolutely mandatory, but it's the safest approach with a view to appeals. It's possible that the jury itself will attach importance to certain Georgia-Pacific factors. If not, the Federal Circuit might hold that Intel's Daubert motion had merit.

Having watched how some other U.S. district courts handle patent infringement cases, I have serious doubt that VLSI would have been cleared by a judge to present its $3 billion claim to a jury in, for example, the Northern District of California.

For Intel, failure is not an option. For VLSI, this here is a gamble where the cost of suing Intel is a tiny fraction of the potential reward. I don't mean to doubt that Fortress is very good at what it does, and my commentary here on VoiceAge EVS's cases shows that I don't generally discount anything Fortress does--one has to look at the issues dispute by dispute, case by case. But the prior owners of the VLSI v. Intel patents-in-suit were also very sophisticated organizations who were prepared to enforce their intellectual property rights through litigation. They didn't sue Intel, much less did they believe Intel owed them billions.

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Two more VoiceAge EVS v. Apple patent infringement cases pending in Munich

On Tuesday I listed a number of standard-essential patent (SEP) infringement cases brought by VoiceAge EVS against Apple, Lenovo, Motorola Mobility, and Nokia trademark licensee HMD in Munich. Two of the patents-in-suit have been asserted against all those parties, but there are also three cases against Apple over different patents. Those three cases will all be decided by the 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier).

I had already mentioned that a first hearing in case no. 21 O 13503/20 would take place on April 28 unless the COVID pandemic necessitates a postponement. I've meanwhile learned from the court that the patent-in-suit in that case is EP2707687 on a "transform-domain codeblock in a CELP coder and decoder." CELP stands for code-excited linear prediction, a linear predictive speech coding algorithm.

Case no. 21 O 13505/20 had an even earlier first-hearing date: April 21. This one may already have been pushed back, but I will try to find out again next week. In that case, VoiceAge EVS is asserting EP2162880 on a "method and device for estimating the tonality of a sound signal."

The fifth patent over which VoiceAge EVS is suing Apple in Munich is EP1509903 on a "method and device for efficient frame erasure concealment in predictive based speech codecs." The case no. is 21 O 13504/20, and the court scheduled a hearing for May 12.

VoiceAge EVS is also enforcing patents in the United States, such as against Xiaomi. According to an RPX Insight report, VoiceAge faces challenges to its standing in its U.S. cases. That's just a non-issue in Munich.

VoiceAge EVS generally appears better and stronger than Uniloc, which is the most infamous patent licensing firm funded by Fortress Investment because it countless complaints.

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DOJ downgrades Delrahim letter to IEEE on standard-essential patents: inter-agency rapprochement with FTC on SEP enforcement?

The language of diplomacy and other governmental communications is very nuanced, like the British Queen's spokespersons saying she's "not amused" when she's actually outraged. The Antitrust Division of the United States Department of Justice ("DOJ-ATR") has taken this concept to a higher level. In what could be described as a digital form of body language, the Biden Administration's DOJ has unequivocally dissociated itself from the Trump Administration's position on standard-essential patent (SEP) enforcement without saying or writing a single word: just by relegating a link to a document (with the PDF remaining in the same place as before) to a long list of links that is, for the most part, merely an archive. Parts of that archive are little more than the dustbin of DOJ-ATR history.

Look at it this way: if a colleague of yours had a picture of her sweetheart on his desk, but all of a sudden decided to put it into a dark storage room, wouldn't that tell you something?

On September 10, 2020, less than two months before the election Donald Trump lost, Qualcomm-aligned Antitrust Assistant Attorney General Makan Delrahim tried to use his remaining time in office--he was going to leave anyway, and he knew what the polls said--tried to deal one final blow to net licensees of SEPs. He supplemented, updated, and appended the DOJ-ATR's 2015 Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineers (IEEE). An IEEE standard all of us use in our everyday lives is WiFi (IEEE 802.11). IEEE has been a strategically important forum at the forefront of how standard-setting organizations could set more specific rules governing SEP enforcement than, for example, ETSI, whose FRAND pledges (which must be interpreted under French law wherever in the world they are enforced) come with a lack of clarity that is fully intended (though some interpretations are still clearly less reasonable than others).

Mr. Delrahim's BRL 2.0 was meant to make the IEEE change course by giving companies like Qualcomm--which in all fairness is a tremendous WiFi innovator--ammunition for IEEE-internal discussions. Qualcomm executives publicly predicted on various occasions that the IEEE was going to make its rules more patentee-friendly under pressure from the federal government. Last month, MLex's Khushita Vasant reported on a recent clash between Qualcomm, Apple, Huawei, and other companies at an IEEE patent policy meeting. It was a clash between the progressives like Apple--who wanted to continue on the path of setting implementer-friendly rules--and those seeking a revision, led by Qualcomm.

What I mentioned at the start of this post obviously doesn't apply to the Trump Administration. Mr. Delrahim's letter to IEEE suggested that the Obama Administration's 2015 BRL to IEEE had been misinterpreted. But Mr. Delrahim also disparaged his predecessor's work by claiming that "[t]he Department's assessment in 2015 of the 'direction' of U.S. law interpreting FRAND commitments on royalty rates and damages assessments was not well-supported and has not proven accurate."

In late March, I was wondering whether the DOJ and the FTC would continue to fundamentally disagree on the application of antitrust law to SEP abuse, given that the FTC didn't seek a Supreme Court review of the Ninth Circuit's FTC v. Qualcomm ruling and mentioned its coordination with the DOJ. But that was just a question, not speculation. Also, the Solicitor General would have had to represent the FTC before the Supreme court, not DOJ-ATR.

Apparently, the Biden Administration is inclined to undo at least some of Mr. Delrahim's SEP policy initiatives. The full extent will become clearer with time. But it's already certain that change has come to DOJ-ATR.

Currently, DOJ-ATR is being run by Acting Assistant Attorney General Richard Powers. Just like we've recently seen quadruple-antisuit injunctions, which I abbreviate as A4SIs and others as AAAASIs, Mr. Powers has a quadruple-A title: he's the Antitrust Acting Assistant Attorney General. What an alphabet soup.

Mr. Powers could have done his own "update" to the 2020 Delrahim letter. That update could simply have stated that the 2020 letter was an aberration, and the 2015 letter was in full force and effect again. But doing so would have required a communication style closer to that of the Trump Administration.

That's where the hierarchical structure of the DOJ-ATR website came in handy. There's one section where one can find the currently valid BRLs. From that one, Mr. Delrahim's letter has been silently removed. His letter to the Avanci patent pool is still there, and it remains to be seen what--if anything--will change in that context. But the 2020 IEEE letter is no longer there. The 2015 BRL to IEEE can still be found on that page. That makes it the one that currently counts.

The original and now-restored BRL tends to strengthen those favoring component-level SEP licensing.

The Delrahim letter to IEEE is now on the page listing "comments to state and other organizations". That page is hidden deep down in the hierarchical structure of the DOJ-ATR website. The dark storage room I mentioned further above.

This move has been clearly interpreted by the tech industry. Cisco's Senior Director, Antitrust and Competition, Gil Ohana, replied to a tweet of mine that this marked the "end of an error":

A nice wordplay. Few people in California would refer to the Trump years as an "era" not only because #45's reelection bid failed but also for substantive reasons.

But let's also be realistic that there'll be a lof of wrangling over SEP issue now. The downgrade of the Delrahim letter to IEEE is a significant first step.

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Thursday, April 15, 2021

Discussion of Apple's alleged need to redesign iPhone to support third-party app stores continued--and expanded into why web apps don't help

This is a follow-up to yesterday's posts on Epic Games v. Apple, especially the third one (Apple expert incorrectly claims Apple would need to "redesign" iPhone hardware and software to allow alternative app stores ), which Apple Insider picked up.

That article drew additional attention to the discussion. A New Zealand-based developer, @hishnash, gave his explanation of what Apple's witness meant by a need to redesign even the iPhone's hardware. Epic Games founder and CEO Tim Sweeney then pointed to the fact that Apple's Enterprise program works on current iPhones:

We then discussed the technical aspects of installing and running apps on iPhones that are not installed via the App Store (but via the Enterprise Program, TestFlight, or Microsoft App Center). @hishnash noted that there are certain feature sets, such as CarPlay, that require special permission. My understanding of everything said up to that point was that it was "all just about Apple lifting lifting restrictions (some contractual, some technical) as opposed to really having to take its architecture to a higher level."

This here hinges on how one would reasonably understand the verb "to redesign" in connection with "software and hardware." There is another key term in this dispute--commission--that Apple clearly redefines in ways that no dictionary supports. In the case of to redesign, they also mislabel something, but one needs to consider the context:

"The duty upon Apple is more than the usual duty to deal; it would include a duty to redesign its hardware and software [...]" (emphases added)

The duty-to-deal case in U.S. antitrust law is Aspen Skiing, which must nowadays be understood in light of the warning in Trinko not to go too far, but Trinko didn't affect the part that is relevant in this redesign context. The Aspen outcome was that a larger ski resort had to (again) offer multi-area tickets together with its smaller competitor, which might otherwise have been forced out of the market.

So when Apple's expert says Epic wants more than the Aspen plaintiff and points to a "redesign" of hardware and software protected by intellectual property rights, the question is: is Epic really asking for (fundamentally) more? If yes, then "redesign" would mean Apple would have to make a huge architectural effort, and that wouldn't be fatal to Epic's case, but certainly involve a higher hurdle. Unlike Apple's witness, I don't see a structural difference. Here's why:

Epic's case, just like Aspen Skiing, is at the core about lifting restrictions, not about creating something new. The ski resorts didn't have to create a new skiing area. They just had to provide a ticket that gave customers access to both companies' existing areas. Apple doesn't have to invent something new: all those arguments about APIs, certificates, credentials etc. don't change the simple fact that Apple artificially put up barriers with a Gods may do what cattle may not attitude.

Apple's expert makes it sound like the Aspen Skiing defendant didn't have any obligation under antitrust law beyond signing a contract. But it definitely took more to implement the court-mandated cooperation. Even if you had a duty to sell someone potatoes, you'd have to do something to make it happen. Aspen Skiing was about issuing (in that case, printing) tickets, and about validating them (manually or electronically). Interestingly, the security architecture that ensures only authorized apps can access, for example, the CarPlay APIs is also about issuing "tickets" (in that case, digital certificates) and about validating them (@hishnash mentioned "root certificate chain validation" in connection with "the Entitlement system"). Also, even those ski resort tickets involved intellectual property (copyrights, trademarks)--plus real property.

It's a different jurisdiction, but when the European Commission obligated Microsoft to give developers of competing network servers (like the Samba open source project) fair access, Microsoft not only argued that it shouldn't have to grant a license but additionally complained about having to provide technical documentation. Then-competition commissioner Neelie Kroes "[found] it difficult to imagine that a company like Microsoft does not understand the principles of how to document protocols in order to achieve interoperability" and fined Microsoft for its (temporary) refusal.

Unlike the question of whether a "commission" is a "rebate" (it's a clear Boolean "false"), this here is one of degree. I stand by my criticism of the verb "to redesign" in this context because lifting unreasonable restrictions just means to fix a problem, not to take some technology to a higher level as "redesign" implies.

In particular, I'm unaware of Epic Games demanding access to Car Play at this stage. The types of apps one finds on the Epic Games Store don't need APIs that are subject to specific restrictions. In light of that, I summarized my understanding as follows:

Of course, even the second part (access to those other systems) could involve duties to deal. But it would be a first step to at least allow games like Fortnite to be installed via third-party app stores.

@hishnash acknowledged that "apps that could be replaced with PWAs (aka apps that do not use any key system apis could be installed through a third party apps store." (PWAs = HTML5-based Progressive Web Apps). In other words, the Epic Games Store could install Fortnite because--performance and other issues apart--Fortnite doesn't need to access APIs like CarPlay and could therefore be a web app (it wouldn't be playable, but again, no API access issue). Thereafter, the discussion was more about whether third-party app stores would be an effective remedy as developers would still need to use some of Apple's SDKs etc., and whether PWAs would be a workable or potentially even superior alternative.

Epic's proposed findings of fact and conclusions of law list a number of shortcomings that PWAs have. Mr. Sweeney described Apple's pointing to PWAs as "disingenuous" because Apple limits those APIs and doesn't allow third parties to fix the issues though they technically could. In addition, what I know from one of my own projects is that major ad networks don't even support in-app advertising in WebGL apps. So there are usability issues including but not limited to performance, and monetization issues. Mr. Sweeney noted that Apple itself tells developers to build native apps:

And in my favorite @TimSweeneyEpic tweet to date, he explained iOS is "an intermediation trap":

@hishnash thought Epic wanted exposure on the App Store and would therefore not even accept a workable PWA solution. He inferred this from Epic's decision to offer Fortnite via the Google Play Store despite sideloading being possible. Let's focus on Apple here, so I'll just note that sideloading on Android doesn't really work for consumer software in its current form: my own company even experienced problems because beta testers didn't manage to install our stuff via Microsoft App Center. As for Apple, I pointed @hishnash (whom I commend for his thoughtfulness and constructive attitude) to the fact that Epic Games v. Apple is not just a Fortnite case but the central issue is third-party app stores like the Epic Games Store (even though the early stage of the dispute was very much about #FreeFortnite).

The remainder of the remedies discussion basically was about weighing the pros and cons of two remedies--PWAs and third-party app stores. @hishnash thought that if Apple--in what I consider an alternative universe--sincerely made an effort to provide a great user experience for PWAs, developers would then at least be independent, while apps distributed via alternative app stores would still depend on some kind of IP license from Apple:

In other words, we were then talking about two different dependencies:

  • With PWAs, @hishnash assumed there was no licensing issue (and for simplicity's sake, I don't want to digress into the related IP questions here), and if usability issues came up, the solution would be to hold Apple to a hypothetical commitment to comply with a certain technical standard.

  • For apps distributed via third-party app stores, @hishnash assumed there was a need to take a license from Apple (which I again won't discuss from an IP perspective, though I'd be tempted to talk about the recent Android-Java API Supreme Court decision), and the terms might be unreasonable (as he suggested in the above tweet).

It's not that @hishnash would necessarily oppose both better PWAs and competing stores. At least on videogame consoles (which are an important topic, but can't talk about them or this post will never come to an end), he might even like the idea of going down both avenues. And he clarified he didn't mean to say that PWAs "worked well right now."

To make a long story short, the reason I don't believe PWAs could lead to a practicable and reasonably enforceable remedy is because user experience happens in users' minds. What's pretty doable (not trivial, but manageable) is to ensure compliance with a standardized protocol like 5G. What's already a lot harder is to measure purely technical performance: there are different benchmark programs for CPUs, for example. But what's absolutely impossible--except perhaps with 26th-century artificial intelligence--is to objectively quantify the user experience, especially of entertainment products like games. So even if Apple theoretically promised to do a better job on PWAs, or just made an announcement to that effect without a formal legal obligation, developers wouldn't have a reliable--i.e., justiciable--assurance of being able to compete outside Apple's App Store.

By contrast, if Apple clearly had to allow the distribution of apps via third-party stores that use the same APIs as those distributed via the App Store, the remaining area of potential dispute would come down to license fees for SDKs, for developer tools, for documentation etc.--which can be worked out. The EU solved that problem in the Microsoft network server protocol case. I follow standard-essential patent royalty disputes all the time (this blog has written more about them than about any other topic so far). Even if something went wrong, we could all develop, innovate, compete--and seek a refund later. Right now, Apple just says "no" and that's the end of the story (and of this post).

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Wednesday, April 14, 2021

Apple expert incorrectly claims Apple would need to "redesign" iPhone hardware and software to allow alternative app stores

Sooner than I'd have thought, here's my first follow-up to the publication of the summaries of Apple's expert witness reports in the Epic Games v. Apple App Store antitrust case.

When I read those summaries for the first time, I tweeted about some of the statements I found in them. This is my tweet about the claim that Apple couldn't support alternative app stores without not only software but even hardware changes:

The quote was from the following paragraph of Dr. Rubinfeld's rebuttal report:

"19. The duty upon Apple is more than the usual duty to deal; it would include a duty to redesign its hardware and software—both of which are covered by Apple’s intellectual property—to make the iPhone interoperable with alternative app stores and with apps that would not qualify under Apple’s app-review guidelines for distribution through the App Store."

My tweet prompted a strong reaction from Tim Sweeney, the founder and CEO of Epic Games:

(The term "baloney" relates to what that expert said, and fortunately not to my own comments.)

The people who have already liked Mr. Sweeney's tweet include many developers, among them the father of JavaScript.

I added another alternative way of installing apps on iOS devices that clearly works--without requiring new hardware--and is just made unnecessarily cumbersome by Apple:

UDIDs are unique device IDs. In order to find out one's UDID, one has to connect an iPhone or iPad to a MacBook with a USB cable and open the iTunes app; copy the UDID; paste it into a message to the developer; and the developer then has to actually integrate it into the app package. That's obviously not an option for large-scale distribution. Also, some functionality cannot be tested that way: one needs to build a "store app" and distribute it via Apple's TestFlight system. TestFlight comes with other limitations.

I have my doubts that the court will buy Apple's spurious argument about "a duty to redesign its hardware and software."

Similarly underwhelming is the following statement I found in another Apple expert report (authored by Ocean Tomo's Mr. Malackowski):

"The App Store itself is referenced in more than 250 U.S. patents and applications."

That is just meaningless. The fact that the App Store is "referenced" doesn't indicate that the App Store itself is protected by any patents. Apple has to deal with standard-essential patent (SEP) portfolio valuation all the time, where the question of essentiality (i.e., whether a patent covers a technique one needs to implement in order to comply with the specification of the standard) comes up. No one would seriously argue that a patent in which 5G is "referenced" is necessarily a 5G patent, much less that it is a 5G SEP.

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Apple submits summaries of expert reports seeking to rebut Epic Games' expert reports

A few weeks ago, Epic Games filed (in a publicly accessible form) summaries of its expert witnesses' reports in the App Store antitrust case against Apple. I wrote two blog posts discussing what I learned from those documents:

This morning Apple has also filed summaries of its expert witness reports. I need a bit of time to digest them, and fully intend to share observations on them as well. But for those who'd like to read those summaries now, I'm providing the documents below.

Dr. Aviel D. Rubin:

450-1 Rubin Rebuttal by Florian Mueller on Scribd

Dr. Daniel L. Rubinfeld:

450-3 Rubinfeld Rebuttal by Florian Mueller on Scribd

Dr. Dominique Hanssens:

450-5 Hanssens Rebuttal by Florian Mueller on Scribd

Dr. Francine Lafontaine:

450-7 Lafontaine Rebuttal by Florian Mueller on Scribd

Dr. Lorin Hitt:

450-9 Hitt Rebuttal by Florian Mueller on Scribd

Dr. Richard Schmalensee:

450-11 Schmalensee Rebuttal by Florian Mueller on Scribd

James Malackowski (Ocean Tomo):

450-13 Malackowski Rebuttal by Florian Mueller on Scribd

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Epic Games and Apple submit exhibit lists to U.S. court in preparation of May antitrust trial

Epic Games and Apple just submitted to the United States District Court for the Northern District of California their exhibit lists for next month's App Store antitrust trial. There are two lists per party: an exhibit list (text documents, such as emails), and an audiovisual exhibit list.

At the moment I don't have any particular comment, but with so many people being interested in the case, I just wanted to publish those lists here.

Epic's (non-audiovisual) exhibit list:

21-04-14 Epic Exhibit List by Florian Mueller

Epic's audiovisual exhibit list:

21-04-14 Epic Audio Visual ... by Florian Mueller

Apple's (non-audiovisual) exhibit list:

21-04-14 Apple Exhibit List by Florian Mueller

Apple's audiovisual exhibit list:

21-04-14 Apple Audio Visual... by Florian Mueller

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Tuesday, April 13, 2021

New battleground up north: serious challenge to Apple's App Store model must be brewing in Canada as Cupertino is in full defense mode

There are complaints over Apple's abuse of its App Store monopoly around the globe. When I made my own filings with regulatory authorities in January, they contained three pages that merely listed other complaints, investigations, and pending litigation. Less than three months later, I would now have to add a page just to update that list.

Yesterday it became known that Apple's and Google's abuse of their app distribution monopolies even impedes governmental efforts to control the COVID-19 pandemic, as both companies rejected an update to the UK's official contact-tracing app that would have been extremely useful.

I have no idea what's going on in Canada, but Apple must be very afraid of something...

Matthew Ball, a Canadian investor, authored a very comprehensive analysis of the App Store situation (and beyond) in February. That article is definitely one of the most informative and insightful writings on the subject. Yesterday he wrote on Twitter that Tim Cook's interview with the Toronto Star newspaper "suggests significant ongoing concerns" on Apple's part:

It's not just about privacy and Apple's plan to deal major damage the in-app advertising business (in order to force app developers to rely on subscriptions, in-app purchasing, and download fees--the types of revenues on which Apple imposes a tax). On the same day that Tim Cook's Canadian interview appeared, Apple posted a Canada-centric defense of its App Store business model to its website: Apple's iOS app economy drives economic growth and opportunity across Canada

The story mentions some smaller Canadian apps and app development companies: Sago Mini, Ground News, TRU LUV, FILM3D. Apple connects those success stories to Canada's economic recovery from the COVID-19 pandemic: "Canada’s dynamic app economy stands poised to be a competitive and powerful force for job growth as the country recovers from the COVID-19 recession."

What Apple does not say, of course, is that the Canadian app economy would do even better if #OpentheAppStore became a reality. Developers of all sizes would find more and greater opportunities that way. I can't think of anybody who would doubt that the app economy is huge and growing. But I also don't know a single developer who likes to be at Apple's (and Google's) mercy.

It is a bit out of character for Apple to publish a piece like that. Normally, Apple's lobbying takes place behind closed doors. But Apple has come under pressure in so many places--including app store bills in certain U.S. state legislatures--that it's now engaging in the public debate over its App Store model. That fact, in and of itself, shows how muc headway companies like Spotify and Epic Games have made in recent years.

After I saw Apple's Canadian App Store press release, I replied to Matthew Ball: "The combination of the interview AND that press release (see attached tweet) makes it pretty clear they expect one or more challenges to the App Store model in Canada." Mr. Ball apparently agrees with my interpretation of Apple's Canadian campaign (as he liked my reply).

Michael Acton, a San Francisco-based reporter for MLex (one of the leading sources of antitrust news), replied to my tweet on Apple's press release, and I completely agree with him on this:

I guess we'll know soon. Maybe not that soon, but I have a hunch that Canada will become an App Store battleground before the end of the year.

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Fortress-funded VoiceAge suing Apple, Lenovo, Motorola Mobility, HMD in Munich over standard-essential patents: next hearing scheduled for April 28 (Apple)

Intel is currently defending itself against another case brought by a Fortress-funded non-practicing entity (NPE) in the Western District of Texas, and last month the chipset maker filed a second amended antitrust complaint against Fortress in the Northern District of California. There's one particular Fortress entity that brought (literally) dozens of patent infringement complaints against Apple: Uniloc, whose former CEO is now running WSOU (doing business as Brazos), an entity that brought about 200 patent lawsuits last year in the U.S. alone (plus an unknown but likely staggering number in other jurisdictions). Whatever policy positions I've expressed on the NPE business model doesn't prevent me from recognizing that Fortress Investment has financed a number of different NPEs, and they aren't all like Uniloc.

I've done some research on NPE activity in Germany, and found out that VoiceAge EVS--which has offices in Newport Beach as well as Ratingen (near Dusseldorf)--is a big fan of the Munich I Regional Court (Landgericht M√ľnchen I). Munich has become the best forum choice for patent plaintiffs seeking injunctions.

The patents VoiceAge is asserting in Munich are

  • EP2102619 on a "method and device for coding transition frames in speech signals" and

  • EP3132443 on "methods, encoder and decoder for predictive encoding and decoding of sound signals upon transition between frames having different sampling rates."

Both have been declared essential to 3GPP TS (technical specification) 26.445, Codec for Enhanced Voice Services (EVS) (thus the "EVS" at the end of VoiceAge's company name).

Last June, the Munich court held an early first hearing in two cases (case nos. 7 O 14091/19 and 7 O 15350/19) against HMD, a company that makes phones with a Nokia trademark license (but is otherwise independent from Nokia). Rumor in the German patent litigation community has it that it went pretty well for VoiceAge. The second hearing--the actual trial--will be held on June 24. HMD has raised a FRAND defense.

On the same day, the court's 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) will also hear VoiceAge's cases over the same patents against Apple, Lenovo, and Motorola Mobility (which Lenovo acquired from Google). The case numbers are 7 O 8369/20, 7 O 11111/20, 7 O 7366/20, 7 O 8367/20, 7 O 10318/20, and 7 O 8368/20).

The court's 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier) scheduled an early first hearing in a VoiceAge v. Apple case (case no. 21 O 13503/20). It remains to be seen whether that hearing can be held. The Munich court postponed at least one other case scheduled for the week before that VoiceAge hearing (as you might have guessed, due to the pandemic). Whether it is responsible to go forward with patent hearings and trials depends on a number of factors. I'm far more concerned about automotive patent cases like Nokia v. Daimler, as they typically involve numerous suppliers and really have the potential to become superspreader events. If the room is large enough, ventilation is ensured, and people have to wear N95 masks, a hearing like VoiceAge EVS v. Apple might be possible.

Wildanger represents VoiceAge in Germany (see Juve Patent). I heard that Freshfields Bruckhaus Deringer represents Apple (Freshfields is Apple's go-to patent litigation firm in Germany).

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Judge denies Apple motion for pretrial sanctions against Epic Games, won't exclude Microsoft and Facebook witnesses

On Friday, Apple brought a motion for pretrial sanctions against Epic Games. I only tweeted about that motion as it didn't allege any particular wrongdoing on Epic's part (just "procedural gamesmanship" according to Apple) and, all in all, fell short of what would have warranted a blog post:

What Apple wanted was for the court to preclude three witnesses--Vivek Sharma of Facebook, Lori Wright of Microsoft, and Benjamin Simon of a five-people company named Yoga Buddhi--"from testifying unless they agree to make sufficient productions four business days in advance of their depositions."

Given that this was merely a sideshow I didn't blog about Epic's oppposition brief either. What I do find pretty interesting, however, is how Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California has just ruled on the motion (this post continues below the document):

21-04-12 Order Denying Appl... by Florian Mueller

I don't know if I'll agree with Judge Gonzalez Rogers's future decisions, but her rulings last summer on Epic's TRO and PI motions were definitely balanced, her dismissal of the Pistacchio action over Apple Arcade was unsurprising to me as I also considered that complaint deficient despite being concerned about Apple Arcade, and the above order on Apple's motion for pretrial sanctions is--without overstating the significance of the resolved motion--Solomonic:

  • Based on the record, Epic "promptly disclosed the individual entitites" of those witnesses to Apple.

  • The court agres with Epic that even if Apple had been right and there had been a violation, the remedy would simply have been to let Apple depose those witnesses, which Apple is going to be able to do now anyway. (In fact, Apple's motion was meant to up the pressure on those parties ahead of the depositions.) In other words, the judge declined to give Apple what it wasn't entitled to at any rate.

  • But Judge Gonzalez Rogers won't accept surprise at trial time and "will weigh [any] failure [to make a sufficient production of relevant documents to both parties] against the credibility of the testifying witness." Therefore, she recommends to those witnesses "that they adequately and timely [no later than three days prior to the date of the deposition] produce such documents in advance of their depositions."

    In all fairness, Apple itself apparently didn't expect those witnesses to be precluded from testifying, but Apple wanted the court "to sanction Epic under Rule 37 by precluding these three individuals from testifying unless they agree to make sufficient productions four business days in advance of their depositions." Such a decision might have given rise to further debate over whether those witnesses should or should not be excluded. What the court has now decided ensures that the deposition will happen, and the question is limited to whether witnesses will lose some of their credibility if they withhold relevant material. That gives the court much more flexibility than a binary question.

  • What I also like is that the court makes a clear distinction between trillion-dollar market cap players like Microsoft and Facebook on the one hand and a tiny company named Yoga Buddhi on the other hand:

    "The Court provides a specific comment with regard to Mr. Simon and Yoga Buddhi based on the record and the parties’ briefing. It is hard for the Court to determine what, if any, documents are left for Mr. Simon of Yoga Buddhi to produce where Yoga Buddhi has previously already produced documents to Apple in this litigation. Unlike either Microsoft or Facebook, Yoga Buddhi is a company of five people, and, per Epic Games’ representations to the Court, every single one of the documents already produced either involves Mr. Simon or relates to a part of an operation that Mr. Simon controls. [...] Apple could have already anticipated and then requested relevant documents for Mr. Simon given the small size of Yoga Buddhi, and it is unclear what further documents Apple needs at this point that it could not have previously and timely requested."

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Samsung replies to Ericsson's response to its Federal Circuit anti-antisuit injunction appeal only three days after amicus curiae briefs

The lawyers representing Samsung in the U.S. part of its patent dispute with Ericsson must have had a very busy weekend. On Friday, five amicus curiae briefs were filed in support of Ericsson's responsive brief, one of which was a joint filing by Senator Thom Tillis (R-N.C.), former Federal Circuit Chief Judge Paul Michel, and the Trump Administration's USPTO Director Andrei Iancu. But around mignight Eastern Time on Monday, Samsung already filed its reply brief (this post continues below the document):

21-04-12 Samsung Reply Brief by Florian Mueller

Other than sharpy disagreeing with a couple of aspects of one amicus brief, I have yet to comment on the merits of Ericsson's and its amici's arguments. Antisuit injunctions are one of my favorite topics, and I've been invited by one of the world's leading political institutions to speak about that topic next month (can't announce the details yet, but will do so on this blog well ahead of the event). I fully intend to share my opinions sooner or later, but I've been largely nonjudgmental so far and may need a few more weeks to reflect.

The preliminary injunction that Samsung is appealing here is a narrowed version of a temporary restraining order. I considered parts of the TRO completely out of line, a position that Judge Rodney Gilstrap in the Eastern District of Texas validated by denying the related parts of Ericsson's PI motion.

The remaining questions are not that clear-cut. I've recently spoken with two U.S. lawyers whose positions on standard-essential patent (SEP) enforcement I consider to be pretty balanced. They've made some points that I need to think about, and they relate to situations in which antisuit injunctions from other jurisdictions (not necessarily China) could disadvantage net licensees (like Samsung) even though in this case, a net licensor (Ericsson) obtained the anti-antisuit injunction at issue. And it's interesting that only one company has filed an amicus brief: InterDigital supports Ericsson, but InterDigital may have nothing to lose in China and is presently embroiled in litigation with Xiaomi, which obtained an antisuit injunction like the one Samsung got against Ericsson. Other companies and their industry bodies prefer not to alienate any particular jurisdiction, at least for the time being, and/or they're afraid of situations in which the shoe will be on the other foot and whatever they'd say now would be held against them.

What makes the situation so complicated is that in one way, China and the U.S. have something in common (a multifactorial antisuit injunction framework, which a jurisdiction like Germany lacks (and in my view should develop)--but at the same time, there's an asymmetry because Chinese courts are prepared to determine global FRAND rates even without the non-moving party's consent, while U.S. courts will make decisions on foreign patents only if both parties agree (and even in at least one such case that I heard of, a U.S. court has declined to do so). The root cause of the whole multi-antisuit mess is territorial overreach, particularly the UK Supreme Court's Unwired Planet ruling and the similar practice by German courts (allowing the enforcement of injunctions unless the defendant takes a global portfolio license). If you wish to share your thoughts on this, please contact me, and I'll be sure to keep your input confidential.

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Monday, April 12, 2021

Apple and Google abuse their app store monopolies to obstruct governmental COVID pandemic control efforts in the UK (not even for the first time)

For a long time I gave Apple and Google the benefit of the doubt with respect to app store policies. When my own app development company got affected by the utterly unreasonable COVID app rules those monopolists had promulgated more than a year ago, I couldn't help but conclude that the situation was unsustainable. And brought my own antitrust complaints against those companies in multiple jurisdictions (including the UK) though I continue to agree with those companies in some other areas, particularly patent policy.

It's bad enough that private companies like the Coronavirus Reporter team and mine were prevented from making our little contributions to the fight against COVID-19. But what's really unfathomable is that Apple and Google's hubris even impedes governmental pandemic control efforts.

This must be a wake-up call for lawmakers, regulators, and courts. Alternative third-party app stores for iOS and Android are absolutely needed. Even governments need such alternatives in a situation like this.

The BBC's technology desk editor Leo Kelion reported today that "[a]n update to England and Wales's contact tracing app has been blocked for breaking the terms of an agreement made with Apple and Google." Yes, this is about the official contact-tracing app provided by the National Health Service (NHS).

With UK shops, restaurants and pubs reopening today thanks to a relaxation of COVID prevention rules, it was actually a very smart idea for the NHS COVID-19 app to ask users to scan QR codes when entering such places, thereby enabling the system to inform people if they had been in a virus hotspot at a critical moment.

In the Western world, contact tracing has failed to make a noteworthy positive impact. In parts of Asia, however, those apps made a huge contribution because people were not even allowed to enter restaurants unless the contact-tracing apps on their smartphones greenlighted them (meaning they had not recently been near an infected person for a certain period). It made a whole lot of sense for the UK to adopt what worked in Asia.

But Apple and Google are not susceptible to reason in the COVID context. They shamelessly distribute (partly for free, partly for money) material that promotes bogus medications and treatments. Such material may not explicitly mention COVID-19, but stuff like Homeopathy for Epidemics discusses pandemics at a general level and certainly talks about COVID symptoms (even without mentioning COVID). Such material raises false hopes that what has been proven over and over to be fake medicine could solve the problem. Homeopathy is essentially about putting tiny white sugarballs in your ear and you'll be fine without masks, without vaccination, and don't have to see a doctor if you show symptoms of COVID-19 because your body, with the help of bogus medicine, will cope with everything all by itself.

While the U.S. Department of Justice brought enforcement action against a "chiropractor" promoting fake COVID-19 treatment, Apple and Google get away with the distribution of disinformation.

Apple and Google abuse their app store monopolies in many ways. As the BBC notes, "[u]nder the terms that all health authorities signed up to in order to use Apple and Google's privacy-centric contact-tracing tech, they had to agree not to collect any location data via the software." And on that basis, the latest update to the UK's COVID-19 app was rejected.

Pacta sunt servanda--contracts must be fulfilled--but not when abusive monopolists unilaterally impose unfair and unreasonable terms. Epic Games was absolutely right last summer to refuse to comply with Apple's and Google's in-app payment rules, and the UK government shouldn't be bound to illegal terms either.

There already is an ongoing UK investigation of Apple's suspected anticompetitive conduct in connection with the App Store. On March 30, Epic complained to the UK's Competition & Markets Authority. Competition enforcers in the UK should say "enough is enough."

About a year ago, Nature reported on contact tracing apps and mentioned that an earlier version of the NHS app was tested, "[b]ut because this app eschews Apple and Google’s protocol, it will not be able to run in the background on iPhones." An expert called this "a nail in the coffin." Obviously, contact tracing is of little use if you actually have to have the contact tracing app running in the foreground all the time.

So the UK has been hit by Apple's abusive conduct for the second time. Nature mentioned that "[t]he United Kingdom and France [we]re still pursuing centralized options." By now we know that contact tracing apps have been next to useless in those countries.

Even the contact tracing apps developed by several U.S. states, such as Utah and the two Dakotas, ran into the problem that "Apple and Google will not let apps that record location data use their APIs."

As the BBC's Rory Cellan-Jones accurately notes:

"What this underlines is that governments around the world have been forced to frame part of their response to the global pandemic according to rules set down by giant unelected corporations.

"At a time when the power of the tech giants is under the microscope as never before, that will leave many people feeling uncomfortable."

Apple uses privacy as a sword and a shield, and Google has recently discovered privacy as a means of cementing its monopoly with a technique it calls FLoC. Apple's credibility in the privacy and security contexts will be among the issues to be discussed in court next month, and Apple appears to be profoundly worried--so much so that Apple didn't event want to justify its App Store abuse at a United States Senate hearing, but after a letter from Senators Klobuchar (D-Minn.) and Lee (R-Utah) reconsidered.

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Intel emphasizes its independent research and development in second VLSI Technology v. Intel patent trial in Western District of Texas

As I reported on Saturday, Waco-based Judge Alan Albright of the United States District Court for the Western District of Texas denied an Intel motion to transfer or postpone the second VLSI v. Intel patent trial. Intel understandably expressed concern over the possibility of jurors having learned in the local media about the very recent $2.175 billion verdict in another case involving the same parties but unrelated patents. That verdict would be the first of that magnitude to be upheld by the appeals court. Normally, those damages awards don't stand. The final damages award is zero if the patent turns out on appeal never to have been infringed, or to be invalid; and even if the decision on the merits stands, the amount very often turns out to be excessive. But jurors may take that earlier verdict at face value--and may not fully understand that the outcome of one case over different patents doesn't mean anything for the case before them, just like the outcome of a hockey game between a team from New York and one from L.A. doesn't predetermine the result of a football game between teams from the same two cities.

Today I was one of more than 60 people to dial in and listen to opening arguments. In an order, Judge Albright had stated an incorrect meeting code, but friendly court staff provided the correct one when I contacted them about it. I missed VLSI's opening statement for that reason, but was just about in time for Intel's response.

The patents-in-suit are U.S. Patent No. 6,633,318 on a "method and apparatus for enabling a stand[-]alone inegrated circuit" and U.S. Patent No. 6,366,522 on a "method and apparatus for controlling power consumption of an integrated circuit." Those patents were originally filed in 2000 by a company named SigmaTel and ultimately acquired by VLSI, a non-practicing entity (NPE) set up specifically for the purpose of buying those patents as Intel noted. One of them has already expired, and the other will expire next month.

VLSI is again seeking a billion-dollar verdict. Rather than go into full detail on technical arguments as to why those patents are neither infringed nor valid, Intel's attorney placed the emphasis on Intel being a true innovator that has been making successful products for more than 50 years, setting his client apart from the current patent holder, who never built or sold a product.

Here are some examples of what Intel's lawyer said:

  • "These Intel engineers operated indepenently, did their work independently."

  • They "spent years developing [the accused products] without ever having known these patents."

  • Intel agrees with VLSI's counsel that intellectual property matters, but "does not infringe the other side's patents."

  • Prior owners included companies like NXP, who do enforce their patents when they have to, but none of them accused Intel of infringement until VSLI bought these patents a few years ago.

  • "Intel has not used--not today, not before--either patent."

  • "Ideas developed in 2000 don't make sense for the modern microprocessor." He got back to this point later and said: "Each of you, you know how much life has changed over 20 years."

  • Intel's products are "the result of engineers working together, had work, team work."

  • "Our microprocessor industry in America is one of the greatest industries in our country." It's "a critical part of our economy, critical for our national security."

  • Intel was started in 1986 by two engineeers. Intel's lawyer then explained Moore's Law and said it "still drives the computer industry today."

  • Intel is "headquartered in America" and its "research and development is centered here."

  • "Intel microprocessors power laptops, desktops, servers, [and other products]." In this context he also specificially mentioned military applications and again referenced national security.

  • Intel's lawyer was very respectful. He stressed that he was "not criticizing VLSI" and sharing his perspective "just to give you a sense, you're drawing your own conclusion." But "they don't make any products, VLSI doesn't sell any products, doesn't conduct any research, doesn't conduct any development." It has never filed for a patent itself.

  • "VLSI purchased those patents nearly 13 years after they had issued along with hundreds of other patents," then filed this lawsuit though prior owners never sued Intel.

  • According to the lawyer, "VLSI never called Intel or sent a letter or email before filing this lawsuit--nothing--filed a lawsuit with no notice at all."

None of what Intel says VLSI did is illegal. Patents are tradable assets. The acquirer can sue. There's no formal requirement to notify an alleged infringer prior to filing suit. And there's obviously no requirement to practice one's patents by making products that incorporate those claimed inventions. But Intel's lawyer encouraged the jury to "bring [their] collective wisdom and common sense." A lot will depend on whether the jury gets Intel's message about the difference between a company that makes products and one that doesn't; between a company that employs large numbers of engineers and one that doesn't.

For VLSI, this trial is a second bite at the apple. It also has a third trial coming up in the summer. With another billion-dollar win, it would shock the technology industry at large. Many companies might have to think hard about whether they want to have a presence in the Austin area at all as it exposes them to patent infringement litigation in a court that makes it easier for patent holders to prevail than almost any other in the United States.

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European Court of Justice assigned case numbers to preliminary references in Nokia v. Daimler and Phoenix Contact v. Harting patent cases

In November, the Dusseldorf Regional Court decided to refer to the European Court of Justice certain questions of component-level licensing of standard-essential patents (SEPs) as well as questions regarding the application of the Huawei v. ZTE SEP injunction framework. In February, Nokia withdrew its interlocutory appeal of that order.

In January, the Munich I Regional Court's 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier) identified a different patent-related question that it would like the top EU court to answer. The Munich court, which is clearly the most popular patent injunction venue in the world by now, would like to enjoy broader discretion in preliminary injunction decisions than its appeals court (which decides patent PI cases consistently with the appeals courts in Dusseldorf and Karlsruhe) allows. I translated that order.

Both preliminary references have been assigned case numbers by the CJEU:

  • C-44/21 for the preliminary injunction matter (Phoenix Contact v. Harting, Munich case no. 21 O 16782/20), and

  • C-182/21 for the SEP case (Nokia v. Daimler, Dusseldorf case no. 4c O 17/19).

It may seem counterintuitive that the earlier preliminary reference (the one from Dusseldorf) has a significantly higher case number than the later-filed one (the one from Munich). I've asked the Dusseldorf Regional Court's press office, and that court actually sent the preliminary reference to Luxembourg on November 26, 2020--about two months before the Munich court's preliminary reference. But apparently the CJEU, in an effort to avoid a potential waste of time, firstly awaited what would come out of Nokia's interlocutory appeal.

From what I heard, the translations in the automotive case will be sent to the governments of the EU member states and the parties later this month, with a likely deadline for the European Commission's, the EU Member States' and the parties' observation in early to mid August. I have not been able to find out about the timeline in the preliminary injunction case.

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