Wednesday, January 26, 2022

Apple: Eastern District of Texas preferred over Western -- Ericsson: with pleasure IF you make a binding commitment to it -- Apple (deafening silence)

Apple has a serious problem with Ericsson having made all the right venue-related decisions so far: the ITC for potential U.S. import bans; the Eastern District of Texas for FRAND issues (where Ericsson won a landmark case against HTC); and the Western District of Texas for damages (companion complaints to import ban requests). Ericsson is also enforcing its rights in four other countries, with preliminary injunction requests pending in Brazil and the Netherlands. In Germany, Ericsson hedged its bets by filing cases with the three leading regional courts for patent cases. Munich and Mannheim are safe choices for plaintiffs, and Ericsson was so lucky as to have both of its cases assigned to Judge Dr. Daniel Voss ("Voß" in German), who is widely regarded as the plaintiff-friendliest of the three judges presiding over patent-specialized divisions (called "civil chambers") of the Dusseldorf Regional Court. Judge Dr. Voss is basically Dusseldorf's answer to the Munich and Mannheim judges.

Now Apple is jockeying for a better position. Part of that effort is a PTAB IPR campaign piggybacking on Samsung's 2021 challenges to many Ericsson patents, taking aim at patents Ericsson hasn't even asserted against Apple. And very surprisingly, almost shockingly, Apple proposed to have the whole dispute resolved by means of a rate-setting decision in the Eastern District of Texas, a venue Apple dreads so much that it even closed its stores there (Apple Stonebriar in Fisco, TX, and Apple Willow Bend in Plano, TX) after the Supreme Court's TC Heartland decision that made it a lot easier to get patent infringement cases moved out of a district unless the defendant has a permanent business presence there (as opposed to merely selling products or offering services nationwide).

Oh well, it now looks like Apple still doesn't really love the Eastern District of Texas...

A week ago, Apple filed a request for an early case management conference in the Eastern District and accused Ericsson of trying to undermine that court's jurisdictions through cases filed elsewhere (including overseas enforcement actions). The next day, Ericsson's counsel contacted Apple's counsel (PDF on Scribd), describing that "characterization [as] both misleading and ironic" as Ericsson "would have preferred to file its patent cases in the Eastern District of Texas, but [Ericsson's] filing in the Western District was necessitated by Apple’s highly publicized closing of all its retail stores in the Eastern District." And then Ericsson made Apple the following proposal:

"Nonetheless, Ericsson is willing to dismiss its Western District suits and refile in the Eastern District if Apple is willing to stipulate to venue in the Eastern District for this dispute and waive any objection under TC Heartland."

In other words: Ericsson is fine with either the Eastern (preferred) or Western District of Texas, but will move its case form the Western to the Eastern District provided that Apple promises not to request a venue transfer to the Northern District of California.

Apple can always bring such a request in the Western District of Texas as well, but it has a strong presence there with many thousands of employees, making a denial of a transfer motion pretty much a given.

The only thing Ericsson didn't want to do was to give Apple an opportunity to avoid Texas altogether.

Apple declined. While there's plenty of rhetoric in a reply (PDF on Scribd) Apple's counsel sent four days later, Apple simply isn't willing to make a binding commitment to the Eastern District of Texas. All that Apple really appears to love about the Eastern District is that it's a gateway to California because of TC Heartland.

On Monday, Ericsson filed its opposition to Apple's request for an early case management and, on that occasion, demonstrated to Chief Judge Gilstrap in the Eastern District of Texas that Apple doesn't truly want to litigate there if it can avoid it. Here's Ericsson's opposition filing, to which the documents I previously linked to serve as exhibits (this post continues below the document):

22-01-24 Ericsson Oppositio... by Florian Mueller

Ericsson's position on an early case management conference is that Apple should firstly specify the issues to be addressed and try to resolve them with Ericsson through meet-and-confer. Only if any issues remained, they could be raised with the court, and the court may not even consider a hearing necessary to resolve any motions resulting from procedural disagreements.

That Ericsson filing also mentions Apple's PTAB IPR campaign (the first five filings, and I've discovered two more that came after Ericsson's opposition brief).

For Judge Gilstrap it's now easy to see what Apple really wants: it wants no enforcement action to take place (which is unrealistic since a FRAND determination is only appropriate for SEPs, but Ericsson is also entitled to royalties on its non-SEPs), and at least not in the Eastern or Western District of Texas. When Ericsson's FRAND action in the Eastern District became known a few months ago, I already wrote that "[i]f Apple wants to go west, it will want to go much further west, i.e., to the Northern District of California, its home district." (emphasis in original)

In addition to the Eastern-Western-Northern thing, Apple and Ericsson also disagree sharply on how to treat the two competing FRAND actions in the Eastern District of Texas. In December, Apple moved to dismiss Ericsson's FRAND case and instead brought its own, which besides four FRAND claims also contains three declaratory-judgment claims against the following Ericsson 5G standard-essential patents (at a time when Ericsson wasn't even suing Apple over patents as a license agreement was still in force for about another month):

Declaratory Judgment Patents

  1. U.S. Patent No. 10,374,768 on "efficient SRS resource indication methods"

  2. U.S. Patent No. 10,644,724 on "shift values for quasi-cyclic LDPC codes

  3. U.S. Patent No. 11,039,312 on "handling of multiple authentication procedures in 5G"

Last week, Ericsson filed its opposition to Apple's motion to dismiss Ericsson's FRAND case (this post continues below the document):

22-01-19 Ericsson Oppositio... by Florian Mueller

Ericsson points to the fact that Apple's FRAND claims pretty much mirror Ericsson's, so Apple itself doesn't really seem to believe that those types of claims weren't justiciable. Also, Ericsson says the license agreement that was in force at the time of filing the complaint did not preclude Ericsson from bringing a FRAND action regarding a future license agreement.

Apple has already replied in support of its motion to dismiss, but that filing is sealed for now. (It also took me a while to find some of last week's filings, probably for the same reason.)

Not only does Ericsson defend its own FRAND case against Apple's motion to dismiss, but it is requesting the dismissal of Apple's FRAND claims or, in the alternative, the consolidation of those claims into Ericsson's case (this post continues below the document):

22-01-19 Ericsson Motion to... by Florian Mueller

Note that this motion to dismiss relates to Apple's FRAND claims, not to the three patent-specific declaratory-judgment claims listed above.

Ericsson argues that Apple's FRAND claims should have been brought as counterclaims to Ericsson's FRAND claims, i.e., they were compulsory counterclaims. The worst-case scenario for Apple would be that its decision to bring a separate complaint--instead of counterclaiming in a pending one, regardless of whether Apple moved to dismiss it--waived those claims. But Ericsson doesn't rely on that theory alone. As a fallback (and that may be the more realistic outcome), Ericsson proposed to sever those FRAND claims from the patent-specific declaratory-judgment claims and to consolidate them into Ericsson's earlier filed Texas FRAND case.

Given that the parties will ultimately have to work out the terms of a cross-license, it wouldn't make sense to have two parallel complaints. And they seem to agree on that, too: it's just that the most extreme position either party can take is that its own complaint should survive while the other should fall. But my guess is we'll see a single FRAND case in the Eastern District of Texas that will involve both parties' FRAND claims.

For the near term I expect to find out about more infringement countersuits by Apple such as the one in Mannheim, but the most interesting question will be whether Ericsson can land a "lucky punch" with its preliminary-injunction requests in Brazil and the Netherlands.

Yesterday, an Ericsson financial report gave an indication as to how much (or how little, if you will) Apple paid Ericsson under the expired license agreement.

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