Wednesday, February 2, 2022

Apple opposes Ericsson motion to amend FRAND complaint in Eastern District of Texas, says its own FRAND case was first properly filed one

The procedural tussle between Ericsson and Apple in the Eastern District of Texas over whether and how to go forward with their mutual complaints continues. There's even a meta-procedural question--relating to procedures related to defining the actual procedures--they disagree on: whether Judge Rodney S. Gilstrap should hold an early case management conference, which Apple insists on.

It's interesting and a first achievement for Ericsson (owing to its strategy of forging ahead in the fall with a first FRAND action) that the discussion is all about the structure of their litigation in the Eastern District of Texas--as opposed to the usual venue fight over whether that district court has jurisdiction over any case targeting Apple, which even closed its local Apple Stores to have a stronger case for a transfer. If not for Ericsson's early filing, Apple would already have requested a transfer to the Northern District of California.

While the trial venue is not in dispute, there still are two important questions:

Let's run a comparison of what each party would consider the ideal structure because this will make it very easy to see why Apple opposes Ericsson's January 2022 motion to amend its October 2021 FRAND complaint (and, in a document that is sealed for now, Ericsson's motion to dismiss Apple's complaint):

Claim/IssueEricssonApple
Ericsson's request for declaration of its own FRAND complianceEricsson is plaintiff under its October 2021 complaintEricsson defendant to Apple's December 2021 lawsuit alleging breach
Ericsson's allegation that Apple breached FRANDclaims added to Ericsson's case as first amendment(at best) counterclaims to Apple's FRAND case
Apple's allegation that Ericsson breached FRANDcounterclaims to Ericsson's caseApple plaintiff thanks to its December 2021 lawsuit
Apple's request for global FRAND determinationEricsson presumably just wants its conduct blessed, no rate-setting, much less globalparties should withdraw all (or at least all SEP) infringement actions, let Texas court set rate
Apple's patent-specific declaratory-judgment claimssevered from FRAND case, can then be appealed separately to Fed. Cir.part of FRAND case, thus giving Fed. Cir. appellate jurisdiction over entire case

The path to the ideal structure

  • for Apple is to get Ericsson's case dismissed and to prevent Ericsson from amending its October 2021 complaint (because even if the original claims were to be dismissed, it would still be the earlier-filed case) and to dissuade the court from severing the patent-specific DJ claims, while

  • for Ericsson it is to keep its earlier-filed case alive (even if only the parts added by way of the first amended complaint survived), thereby forcing Apple to bring its own claims as counterclaims to Ericsson's case, or for particular claims (like the global rate-setting decision, which can hardly happen without Ericsson's consent) to be dismissed, and to get the patent-specific DJ claims severed, thereby giving the Fifth Circuit appellate jurisdiction.

    Of course, Ericsson might at some point also benefit from an injunction coming down in a jurisdiction like Germany because of Apple being deemed an unwilling licensee (unless Apple accepts Ericsson's terms).

A not-too-unlikely mixed outcome would be if Ericsson remained the plaintiff but if the Federal Circuit had appellate jurisdiction. That would happen if Ericsson's original case was not dismissed, but Apple was allowed to bring patent-specific DJ counterclaims to Ericsson's complaint (as opposed to having to bring them in a separate action). In that mixed scenario, Ericsson would be in the driver's seat in some ways with a view to the Texas proceedings, but Apple would get its preferred appellate venue. Considering that most of these disputes settle before an appeals court decides, and that Ericsson does not dread the Federal Circuit while Apple never really liked the Eastern District of Texas, it would be an 80-20 mix in Ericsson's favor.

So for Apple it's "mission critical" to defeat Ericsson's earlier-filed complaint. On Tuesday, Apple filed its aforementioned opposition to Ericsson's motion for leave to amend its complaint (this post continues below the document):

22-02-01 Cv376 Apple Opp to... by Florian Mueller

Apple makes a must dismiss and a can deny argument:

  • Apple points to other cases in which an amendment to a complaint was not allowed because the original complaint could only be dismissed for lack of jurisdiction.

  • Alternatively, Apple tells Judge Gilstrap he has the option of a discretionary denial. Here, Apple points to Ericsson saying that it wasn't able to bring those new claims while the license agreement that just expired two weeks ago was in force: under that one, neither party could accuse the other of violating its FRAND obligations. That's why Ericsson merely sought a blessing of its own FRAND conduct. Apple actually did allegate a breach in December while the agreement was in force, but told the court in a footnote of it scomplaint that it brought those claims only in the event that the Texas court "disagrees with Apple and concludes that such claims can be pursued during the term of the license." The fact that Apple equates its own FRAND claims (including a global rate-setting request) to Ericsson's is more than debatable. If Apple had really wanted to bring just a mirror claim to Ericsson's case, it would have had to limit its complaint to asking the Texas court to bless Apple's FRAND conduct.

    It is imaginable that the court would hold that Ericsson's October 2021 "I acted FRANDly" complaint was not disallowed by the license agreement while determining at the same time that Apple's December 2021 complaint raised "You did not act FRANDly" issues the agreement does clearly bar a party from raising. Apple would argue that if it (Apple) is barred from alleging a FRAND breach, Ericsson has no justiciable controversy to point to when asking the court to bless its FRAND compliance. Without knowing the exact language of all relevant parts of the license agreement, it's impossible to take a firm position on this question.

What can be said with certainty is that Apple faces more hurdles to get its preferred procedural outcome than Ericsson does. If Ericsson's original "I acted FRANDly" claim survives, it is the plaintiff; if its "You did not act FRANDly" amendment is allowed, Ericsson is the plaintiff, too. With Ericsson--presumably--being considered the plaintiff, it would probably be a bit harder for Apple to inject its DJ claims (which are just about appellate forum-shopping) into the case and to keep them in that case than if Apple's December 2021 complaint was--as it is according to Apple--the first properly filed FRAND action between the two parties.

It probably won't be long before Judge Gilstrap invites the parties to his courtroom to address those motions to dismiss. Apple's request for an early case management conference may just have been a means of urging Judge Gilstrap to hold the motion-to-dismiss hearings as soon as possible.

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