Friday, February 11, 2022

Ericsson accuses Apple of having wasted court and party resources in Eastern District of Texas 'by forcing unnecessary litigation on two fronts'

Before the U.S. part of the litigation between Ericsson and Apple can begin in earnest, some procedural questions need to be sorted out. If we want to liken this to a chess match, we can say that the opening is coming to an end:

  • The simplest part is a formality that Judge Alan Albright in the Western District of Texas signed off on: the two Ericsson v. Apple cases pending there have been stayed pending the resolution of the related ITC complaints (one of the two W.D. Tex. complaints relates to two separate ITC complaints). This is standard routine, and Ericsson didn't oppose the stay as it would have been futile.

  • Apple does not appear to consider it a priority to seek damages over its three ITC patents-in-suit in district court. Any such complaint would have been stayed at Ericsson's request anyway. The unit volumes of the accused products are so asymmetrical that Apple would have to demand an absurd per-unit royalty to claim any noteworthy amount of damages, which could then be held against it when trying to bring down Ericsson's potential future damages claims. Also, Apple would have to make a venue choice, which would either be disadvantageous for Apple's offensive or defensive purposes and/or expose the inconsistency of its position on forum conveniens, which is already a problem because Apple pretends to favor the Eastern District of Texas until it really has to make a commitment to that venue. So for Apple it makes sense to just wait before bringing (if ever) a companion lawsuit in federal court.

  • It's a safe assumption that the ITC will soon institute all four investigations requested. Apple is fine with the public-interest questions related to its countercomplaint against Ericsson being delegated to the Administrative Law Judge (ALJ) who will be put in charge. With respect to FRAND-related public-interest considerations, Ericsson got support from former U.S. standards czar Walter Copan (PDF on Scribd) and four U.S. law professors (PDF on Scribd). Both these submissions were replies, and the filers had not previously commented on the public interest in that case. The ITC rejected those submissions for the time being, for timing not substance, but noted that after a final initial determination by the ALJ, there will (unless no violation is found) be another opportunity to make such submissions. While neither the ALJ nor the Commission (the U.S. trade agency's top-level decision-making body) can formally cite to rejected submissions, Ericsson may benefit from them psychologically at any rate.

    While I don't blame the ITC for generously allowing ACT | The App(le) Association to correct a font size and refile slightly out of time (only a clerical error--unprofessional but not a big deal), I remain concerned about the failure of those "Apploturfers" to make it clear that Apple pays them while there is no evidence or indication of any of those 5,000 purportedly small app developers and (alternatingly) IoT device makers ever having paid a cent.

    The opening of the ITC proceedings goes slightly beyond the formal institution of an investigation. It's possible that Apple will seek the consolidation of two or three Ericsson cases into one investigation, and the ALJ(s) will have to rule on such a procedural request early on.

  • We will soon know the framework for the adjudication of the parties' dueling FRAND claims in the Eastern District of Texas and Apple's three declaratory-judgment claims taking aim at Ericsson 5G SEPs. Let me point you to my most recent analysis of the procedural maneuvering in the Eastern District (which also involves the question of appellate jurisdiction) and provide an update below.

At an abstract level, Apple needs to overcome each of several hurdles to impose its preferred procedural framework, while Ericsson has more than one path to its desired outcome or at least a result that would be pretty close to it. One of those opportunities for Ericsson to simplify everything and thwart Apple's procedural strategy is its motion to amend its October 2021 FRAND complaint by adding--on top of the original DJ claim that the court should bless Ericsson's FRAND compliance--claims of Apple having breached its FRAND obligation. On Wednesday, Ericsson filed a reply in support of its motion to amend its complaint, and uploaded a redacted version on Thursday (this post continues below the document):

22-02-10 Ericsson Riso Moti... by Florian Mueller

There's a table near the bottom of page 2 of that Ericsson filing that shows how Apple tried to mislead Judge Rodney Gilstrap as to the case law. I will now also juxtapose how Apple quoted a precedent (left column) and what the original decision actually said:

Apple's quotationActual holding (omissions emphasized)
"[W]here a plaintiff never had standing to assert a claim against the defendants, it does not have standing to amend the complaint and control the litigation""Rather, we hold only that where a plaintiff never had standing to assert a claim against the defendants, it does not have standing to amend the complaint and control the litigation by substituting new plaintiffs, a new class, and a new cause of action."

Why are those omissions so deceitful? Because the out-of-context quote on the left side makes it sound like Ericsson couldn't amend its complaint if the original version of the complaint has to be dismissed because Apple alleges Ericsson was barred from bringing such claims at the time by a clause in the meanwhile-expired cross-license agreement. Even if Apple was right about the effect of that contract, that would not be a jurisdictional question according to Ericsson--and Apple itself brought claims in December that almost certainly weren't allowed under that license agreement unless Ericsson's October complaint was also permissible.

The right side of that table, however, shows that Apple's purported "authority" is inapposite because Ericsson, unlike the plaintiff in that precedent, didn't substitute a new plaintiff--and bringing in a new plaintiff when the court didn't have jurisdiction over the original one is where courts in the Fifth Circuit have consistently rejected amendments to fatally-deficient complaints.

Coming from the assumption that its own FRAND case, at least in the amended form, can go forward, Ericsson reiterates in a reply brief that Apple's FRAND claims would have to be brought as counterclaims to Ericsson's case (this post continues below the document):

22-02-10 Ericsson Riso Mtd ... by Florian Mueller

Ericsson blames Apple for wasting everyone's time and money:

"Apple’s decision to file its FRAND claims in this suit, rather than in the First-Filed Action, wasted the Court’s and the parties’ resources by forcing unnecessary litigation on two fronts. That is why courts often short-circuit the process and dismiss or transfer a second-filed action while a motion to dismiss the first suit is still pending."

In a footnote, Ericsson suggests that the Texas court could even have thrown out Apple's later-filed FRAND case at its own initiative (sua sponte):

"To avoid wasting judicial resources on second-filed actions like Apple’s, courts dismiss or transfer later-filed cases even in the absence of any motion by the parties. See Meganathan v. Signal Int’l L.L.C., No. 1:13-CV-497, 2015 WL 13906343, at *2 (E.D. Tex. June 17, 2015) ('The application or propriety of transfer under the first-to-file rule may be raised sua sponte.')."

There are some redacted passages in that document. I'm unable to deduce from the publicly accessible parts what the redacted parts might say, but they appear to be related to the exact language of the 2015 cross-license agreement and possibly also some kind of licensing offer made by Apple a few months ago involving its own SEPs.

Ericsson also reinforces its proposal that Apple's DJ actions against three Ericsson 5G SEPs be kept separate from the FRAND issues to avoid "unnecessary complexity in what would otherwise be a FRAND case." Ericsson argues that the FRAND case won't benefit from a determination regarding the essentiality of three patents out of 300 with respect to which Ericsson provided claim charts to Apple during their failed negotiations.

The logical next step is now for Judge Gilstrap to rule on the parties' motions. There may stil be two cases in the end, but Apple's case might be reduced to just the three patent-specific DJ claims, and Ericsson's case would then be the sole FRAND case.

As for Apple attacking Ericsson patents, I have an update. Last month I noted that Apple was piggybacking on Samsung's 2021 campaign to get some Ericsson patents invalidated, regardless of whether Ericsson is actually asserting them against Apple at the moment. I first discovered seven such petitions, and then found another three. This month, Apple has added another nine petitions. I'll wait a bit because it seems Apple continues to make filings, and will provide an updated and complete list on another occasion. At first sight, Apple is still just recycling Samsung's 2021 petitions.

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