Thursday, June 30, 2022

Continental and its counsel risk abuse-of-procedure sanctions from weary Fifth Circuit if they file another petition for rehearing: Continental v. Avanci et al.

Automotive supplier Continental's unreasonableness is getting worse by the day.

I started the headline of yesterday's Continental v. Avanci et al. post by describing Conti as impervious to reason. Meanwhile, Circuit Judge Stewart--a member of the panel that has already twice determined that Conti has no case--has denied Conti's motion for a 30-day extension for its second petition for rehearing. The court announced that the mandate would issue on July 13. So what did Conti do? They brought a new unopposed motion seeking a 14-day extension. The previous motion had already said that Avanci and its co-defendants (Nokia, Sharp, Optis) wouldn't oppose a two-week extension.

While Judge Stewart's order ("[Conti's] opposed motion for an extension of 30 days, or, to and including August 4, 2022, to file its petition for rehearing/petition for rehearing en banc is DENIED.") didn't specifically address the possibility of a 14-day extension, Conti should finally see the writing on the wall: the appeals court is tired of the tire maker.

It's worth recalling that Conti didn't even manage to file its original petition for rehearing in accordance with the Fifth Circuit's published rules. Some elements, such as a statement of facts, were missing, and Conti had to refile.

People at Conti have to pull the plug on this. While Conti apparently didn't care to read the Fifth Circuit Rules (PDF) before filing the first (and failed) petition, I have taken a look at those rules. What I found shows that Conti and its counsel are taking a risk. They should accept the panel decision 2.0 as the final resolution of the case by the Fifth Circuit. Otherwise they may be sanctioned for manifest abuse of procedure:

"35.1 Caution. Counsel are reminded that in every case the duty of counsel is fully discharged without filing a petition for rehearing en banc unless the case meets the rigid standards of FED. R. APP. P. 35(a). As is noted in FED. R. APP. P. 35, en banc hearing or rehearing is not favored. Among the reasons is that each request for en banc consideration must be studied by every active judge of the court and is a serious call on limited judicial resources. Counsel have a duty to the court commensurate with that owed their clients to read with attention and observe with restraint the standards of FED. R. APP. P. 35(b)(1). The court takes the view that, given the extraordinary nature of petitions for en banc consideration, it is fully justified in imposing sanctions on its own initiative under, inter alia, FED. R. APP. P. 38 and 28 U.S.C. § 1927, upon the person who signed the petitions, the represented party, or both, for manifest abuse of the procedure." (original in italics; emphases added)

Let's start with "the rigid standards" of Fed. R. App. P. 35(a), which envisions only two circumstances under which an en banc may be appropriate:

  1. en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or

  2. the proceeding involves a question of exceptional importance.

If Conti and its counsel know that their petition doesn't meet at least one of those criteria, they have to refrain from bringing yet another rehearing petition lest they be potentially sanctioned.

The first criterion cannot possibly be fulfilled: an unpublished and non-precedential decision is inherently not capable of endangering the uniformity of the Fifth Circuit's decisions. Also, the panel opinion 2.0 is limited to only the Sherman Act Section 1 and 2 claims, i.e., couldn't be more narrowly case-specific at this stage.

Whatever Conti may say in its petition can't reasonably meet the second criterion either. Yes, to those Conti guys and their counsel the case may be of exceptional importance. But at this stage we're talking about an unpublished and non-precedential decision, which weighs against its importance--and a narrow decision on the specific defects of Conti's complaint. Furthermore, while the panel withdrew its holdings on Article III standing and didn't take a position on the district court's conclusion that Conti lacked antitrust standing, this here is still a case of no injury. Conti is not being sued over cellular standard-essential patents by any Avanci licensors (Avanci itself couldn't sue for lack of owning those patents). Conti is not being sued by a customer for indemnification. There is simply no harm that Conti has established, other than that it was denied a license it never really needed.

In light of all of that, this case falls far short of the exceptional and important case that warrants a rehearing en banc. Conti is not going to get that rehearing. There's no realistic upside, but a potential downside of being sanctioned.

If Conti and/or its lawyers signing the petition get sanctioned, they can't blame the Fifth Circuit for not having made it clear beforehand that this could happen. Here's another passage from the Fifth Circuit Rules:

"THE MOST ABUSED PREROGATIVE - PETITIONS FOR REHEARING EN BANC ARE THE MOST ABUSED PREROGATIVE OF APPELLATE ADVOCATES IN THE FIFTH CIRCUIT. FEWER THAN 1% OF THE CASES DECIDED BY THE COURT ON THE MERITS ARE REHEARD EN BANC; AND FREQUENTLY THOSE REHEARINGS GRANTED RESULT FROM A REQUEST FOR EN BANC RECONSIDERATION BY A JUDGE OF THE COURT RATHER THAN A PETITION BY THE PARTIES." (emphasis in original)

"The most abused prerogative"--for which we may now see one of the clearest cases ever of a manifest abuse of procedure. Conti and its counsel must finally understand that the Fifth Circuit also has other appeals, motions, and petitions to decide. It's utterly unreasonable and disrespectful for Conti to seek the attention of every active judge--all 26 of whom are listed on the appeals court's website--for a second time.

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Wednesday, June 29, 2022

Lessons from rejection of Apple's cert petition against Qualcomm: PTAB IPR can backfire depending on specific terms of patent license

The Supreme Court denies petitions for writ of certiorari without stating the reasons. It has more important things to do. In the Apple v. Qualcomm case--where the Federal Circuit held that Apple lacked standing to appeal decisions by the Patent Trial and Appeal Board (PTAB) of the United States Patent & Trademark Office (USPTO) due to a portfolio license it had taken from Qualcomm in 2019--we at least know what the Department of Justice (DOJ) thought. The Supreme Court had asked for the views (PDF) of the Solicitor General of the United States, Elizabeth Prelogar.

Central to that remnant from what could have become one of the biggest and longest-running patent spats ever is an inconsistency between standing requirements for PTAB Inter Partes Review (IPR) petitions and any appeals thereof to the Federal Circuit. Once you're past the PTAB, the appellant needs to satisfy Article III standing requirements (but not before). On appeal, the same standing questions as with respect to a declaratory judgment action in district court will be asked.

Article III standing involves the questions of injury, causation, and redressability. If you want to appeal a PTAB decision just to stick a decision invalidating the patent on a wall as a hunter's trophy, that doesn't count. Nor do you satisfy standing requirements if there's just a hypothetical possibility of being sued over the same patent(s) somewhere down the road, subject to circumstances that you may consider foreseeable but which can't be predicted with (near-)certainty.

What we know is that Apple's current license agreement with Qualcomm will expire either in 2025 or in 2027 (if a renewal option is exercised), while the two (non-standard-essential, by the way) patents at issue will expire only in August 2029 (U.S. Patent No. 7,844,037 on a "method and device for enabling message responses to incoming phone calls"; originally obtained by Palm) and, respectively, 2030 (U.S. Patent 8,683,362 on a "card metaphor for activities in a computing device"). So even if Apple didn't just breach its obligations under the existing agreement--though, if you ask Qualcomm, that's what it did with respect to the previous agreement, it might face infringement lawsuits over those patents simply as a result of the parties not being able to agree on the terms of a new license.

It's a very significant win for BakerBotts on Qualcomm's behalf, but Apple's arguments for standing (and for why the Supreme Court should have considered the matter worthy of review) weren't all that weak. In fact, compared to what I've recently seen from Apple in the 5G patent dispute with Ericsson or various antitrust contexts, Apple's arguments were pretty strong.

I even consider it quite possible that this--I mean the part on standing without taking a position on patent (in)validity--might have gone differently if Apple had bluntly stated the situation the way it is, but it probably had business as well as litigation-tactical reasons not to tell the whole story.

The peace that Apple and Qualcomm made a little over three years ago was attributable to one--and only one--factor: Apple considered Qualcomm the only reliable vendor from whom to source its 5G chips. Apple didn't see Intel on the right track. A few months prior to that agreement, Tim Cook had categorically ruled out a settlement. In a television interview earlier that year, he said Qualcomm's business model was unlawful, and Apple was going to fight it all the way.

Apple gets away with being a bit behind hardware innnovation. It was still doing extremely well with relatively small screens when comparable Android devices were much larger. It still doesn't have a foldable iPhone, though it's finally getting there. Apple is all about luxury brand image and lock-in. Two L's are the key enablers of a market cap of a couple trillion dollars. But even Apple couldn't have risked falling behind too much with 5G phones. I don't want to get into the question of whether smartphone users really have a major benefit from 5G, or whether those making most of the money from 5G should have to pay more to those making the largest investment (Politico reported on a potential EU initiative). The answer of whether smartphone users really need 5G isn't as clear as it is with respect to connected vehicles (where lower latency plays a role, as was recently discussed in an OPPO v. Nokia case). Regardless, Apple had to fear a loss of market share, and settled.

Cravath had done an incredible job defending Qualcomm against Apple and the FTC. Practically, Apple and the FTC constituted a public-private partnership. It became know that they had a common interest agreement in place. Qualcomm defeated the FTC all the way. Now, if Apple had not settled, it would have continued to support the FTC's case in different ways, and things might have turned out differently. But if the FTC case had ended identically, Apple would have lost its Qualcomm case big-time and might have owed tens of billions in enhanced damages.

The Qualcomm v. Apple infringement cases (for which Qualcomm relied on Quinn Emanuel in the U.S. and Germany) were only a sideshow at that stage and of totally negligible relevance compared to Apple's need for 5G chips, though over time pressure from that front might have piled up on Apple.

The fallout from the Apple-Qualcomm settlement was Intel's exit from the cellular baseband chipset business, with Apple first buying Intel's mobile chip division and then most of Intel's cellular SEPs (a transaction with respect to which Ericsson would now like to conduct discovery, but Apple opposes it). Apple is getting closer to using its own baseband chips. Whether it would at that point make sense for Apple to breach the existing agreement with Qualcomm and stop making royalty payments depends on the undisclosed terms of the contract(s) between them. I doubt it. I'd have doubted it anyway, but even more so now that the two Qualcomm patents at issue here are more formidable than before. What might happen, however, is that the agreement ends regularly in 2025 or 2027, and the parties might then be far apart on patent valuation questions.

Qualcomm's "No License, No Chips" policy has been cleared by the Ninth Circuit, and the FTC didn't even try to appeal it to the Supreme Court. So I'm not implying anything unlawful here. It's just a commercial reality that Qualcomm is in a privileged position among SEP licensors. It rarely ever has to sue to get paid. It has about three times as many licensees as Ericsson or Nokia, as there is a "long tail" of small implementers that wouldn't be worth suing. And from the big ones like Apple, Qualcomm can collect a lot more. The Ninth Circuit basically said that it's up to Qualcomm whether it labels a part of its chip price as a patent royalty.

Once Apple doesn't depend on Qualcomm's chips anymore, that's it for "No License, No Chips" with respect to the most important implementer. And then Qualcomm may have to enforce its patents--SEPs (which it avoided last time) as well as non-SEPs (like in 2017-2019).

In a hypothetical 2025 or 2027 Qualcomm v. Apple infringement litigation, the two above-mentioned patents would most likely be asserted again. Frankly, I'd be surprised if they weren't. The PTAB rejected Apple's validity challenge, and Apple's appeal went nowhere due to a lack of standing. Unless Apple can dig up some previously undiscovered prior art of enormous strength, those patents are going to be hard to challenge. If Qualcomm got to enforce them, especially through injunctive relief (which could also take the form an ITC import ban; indeed, Qualcomm was asserting some other patents against Apple in the ITC), that might put some pressure on Apple. The '037 patent broadly covers a well-known feature: instead of taking a voice call, you can send a (typically predefined) message to the caller to explain your unavailability. The '362 patent may--I'd have to look at it more closely to be sure--read on how one switches between apps on the iPhone.

With the ITC, the effect would be more psychological: it would be quite hard to persuade an Administrative Law Judge--or the Commission, i.e., the five people who make the agency's final decision--to deem those patents invalid. In district court, the problem is that juries rarely consider patents invalid, so you depend on a stay pending a parallel PTAB IPR proceeding.

But how would Apple get a PTAB IPR instituted? First, the most fundamental question has not been--and could not reasonably have been--addressed in the case that was just tossed: estoppel. Apple may simply be estopped from challenging those patents with essentially the same arguments again because it tried and lost. Apple would argue that the previous challenge was somewhat incomplete: Apple lacked standing to appeal. Qualcomm's positions on this are a bit inconsistent: in a parallel case, Qualcomm's counsel argued that Apple was estopped; in this one, Qualcomm said that this was a question of first impression that the Federal Circuit hasn't addressed, and given that the Supreme Court is a court of final appeal, one can't ask the Supreme Court to resolve that question as a prerequisite to addressing the question of whether Apple had standing. The DOJ agreed with Qualcomm that the Supreme Court shouldn't have to take a matter of first impression.

Second, even if Apple wasn't estopped, the PTAB would be fairly likely to decline to institute an IPR, simply because it would doubt the petitioner's chances to prevail.

What could or should Apple have done differently? And what should other licensees and litigants learn from this?

What Apple could have done--but presumably elected not to do--would have been to declare and potentially proffer evidence with respect to the risks it expects to face from those patents in the future. Apple essentially contented itself with saying that Qualcomm had already picked those patents from a portfolio of tens of thousands of patents, and would likely pick them again. Even if Apple believes (as it very well may) that those patents are commercially essential, that they're still going to be relevant a few years down the road, and that it won't be possible then to worked around them without a temporary quality degradation of its products, it can't say so because it would weaken its position too much. Apple at least wants to have a chance to dispute infringement in the future, possibly after making some technical changes ahead of any renewed litigation with Qualcomm.

Apple also couldn't say now that it was certain the parties wouldn't agree on a new license agreement in 2025 or 2027. Apple's and Qualcomm's positions on what patent royalties are reasonable have historically been far apart. They're not going to close the gap in the coming three or five years. But how could Apple have made those points then without saying here and now that it would simply be infringing those patents in a few years?

So, Apple faced a dilemma, and probably made the right choice. At least Apple has achieved one thing: Qualcomm--in this litigation, though not in another--and the DOJ stated that Apple wasn't necessarily estopped from renewing its validity challenges later. That's better than nothing.

At least with the benefit of 20/20 hindsight, it's clear, however, that it was a bad idea for Apple to pursue those PTAB IPRs post-settlement.

It seems Apple was overreliant on the MedImmune precedent in which a party licensed two patents, and royalties were patent-specific, with the net effect of the invalidation of even a single patent being that obligations to pay royalties were reduced or eliminated. By contrast, it can be inferred from the Apple v. Qualcomm documents that Apple wouldn't have saved a cent if the two patents at issue had been invalidated. That distinction also persuaded the DOJ.

What would make most sense to do then?

  • If a party has enough leverage in litigation, and enough of a desire to keep challenging certain patents, it should insist on a clause according to which the outcome of--at least pending--validity challenges will entitle it to an adjustment of the royalty rate. How material that adjustment would have to be to establish standing is then another question that would have to be considered. But even a minor injury is better than none at all.

    While we're talking about non-SEPs here, this situation reminds me of something Presiding Judge Dr. Matthias Zigann (Munich I Regional Court, Seventh Civil Chamber) was contemplating in connection with SEP license deals resulting from a Huawei v. ZTE negotation. He had potential adjustments in mind. In Huawei v. ZTE, the European Court of Justice did place some importance on an implementer's ability to challenge patents.

  • Otherwise, one should withdraw all challenges. That's also what Qualcomm and the DOJ told the Supreme Court Apple should have done. If Apple had withdrawn its petitions prior to a PTAB IPR decision, there would have been nothing to appeal.

From a policy point of view, one may indeed question the wisdom of not allowing a PTAB petitioner to appeal an adverse decision. In that regard, I understand Apple's course of action.

It's interesting to look at what the Federal Circuit decided (PDF) in parallel Intel v. Qualcomm case:

"This is not the first time this court has addressed this standing issue between these parties. In two prior cases, we found Intel had standing on appeal based on the fact that Qualcomm sued Apple Inc. for infringement of the patent at issue, and that a main component of the accused products identified in Qualcomm’s infringement contentions was manufactured by Intel.[...] We see no reason to find otherwise in this appeal. As such, Intel has demonstrated a non-speculative risk of being sued by Qualcomm for infringement and therefore has standing to bring this appeal."

Let that sink in:

Apple was indeed sued by Qualcomm. Intel was only indirectly affected (customer suit). Apple is still in the same business as before (and expanding into more and more businesses), while Intel has exited the business in question.

Still, Intel "has demonstrated a non-speculative risk of being sued by Qualcomm for infringement" but Apple does not--because Apple has a license at this stage, though it will for sure expire before those patents do. One doesn't have to find the combination of these two outcomes perfectly logical.

In the end, what might have played a role here is that Apple v. Qualcomm was simply--as Qualcomm said--a poor vehicle for asking the Supreme Court to address on how to apply MedImmune to portfolio licenses. This here had a lot to do with legal technicalities, and psychologically Apple's primary problem may have been that the Federal Circuit, the DOJ, and ultimately the Supreme Court just couldn't see a pressing and legitimate reason for which Apple kept challenging those patents after the 2019 settlement instead of leaving Qualcomm and its patents alone.

This has been a counterproductive exercise for Apple, and Qualcomm is going to feel even stronger when the parties discuss their next patent license agreement.

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Impervious to reason, Continental again wants full Fifth Circuit to consider its 'antitrust' case against Avanci, Nokia, others over automotive patent licensing

The tireless, tiresome tire maker is still in a state of denial and filed a motion yesterday with the United States Court of Appeals for the Fifth Circuit for a 30-day extension of time to file its second petition for rehearing en banc (full-court review) of the dismissal of Continental v. Avanci et al.. A week earlier, a three-judge panel had reached the same conclusion as in February--that Conti's case shouldn't go forward--just on a narrower and non-precedential basis.

A litigant's right to exhaust all appeals is a cornerstone of the rule of law. But that does not always make it reasonable to appeal. I remember a case in which Samsung appealed an order to the Federal Circuit--it was about Apple collecting hundreds of millions in patent infringement damages--and Judge Koh (now on the Ninth Circuit) called the appeal "frivolous." She was outraged.

I'm not outraged by Continental's latest procedural move because I'm merely watching its "antitrust case" against the Avanci patent pool firm and some of its licensors (Nokia, Sharp, Optis). I'm just convinced that this is a Dead Lawsuit Walking. Even if Conti could establish standing (in the absence of injury), bring actionable Sherman Act claims, and proceed with discovery, these are still the facts:

  • No Avanci licensor has sued Conti over cellular standard-essential patents (SEPs).

  • Avanci itself can't sue anyone over SEPs because the patents belong to its licensors.

  • Avanci's licensors remain free to sign bilateral license deals with automakers or their suppliers, as several of them are known to have (and only a minority of patent license deals are ever announced).

What could Conti realistically show in a hypothetical trial a few years down the road? A fishing expedition won't help because there simply are Avanci licensors who have consistently declined to license component makers, and who did so long before Avanci was even an idea. Any patent pool or joint licensing program can only offer to the market what the actual patent holders can agree on. It's a consensus-building process, and with respect to the licensing level in the supply chain, the outcome is then the lowest common denominator.

The evidence would show that car makers in the U.S. and in large parts of Europe have come to accept that they must take licenses at the end-product level. Component-level licensing isn't dead--Huawei (which is not an Avanci licensor at this stage) just granted such a license to IoT chipmaker Nordic Semiconductor--but no one can deprive patent holders of their right to demand that a license be taken by the maker of the end product.

Conti now intends to file yet another petition for rehearing en banc, even though no one--including its various amici pursuing the devaluation, and seeking to complicate the enforcement, of SEPs--can argue anymore that an important issue is at stake. The panel took control over the case again by treating Conti's previous petition for rehearing en banc as a petition for rehearing by the same panel,a and without a hearing per se issued a new version of the decision, which is designated unpublished and non-precedential. Also, the decision was made on the most case-specific basis possible: no Sherman Act claims. I think the panel should simply have affirmed the district court's decision all the way (by additionally holding that Conti lacked antitrust standing), and the panel didn't overrule the district court either. At any rate, last week's decision was as narrow as it could be, and as non-influential as possible (because it's now an unpublished and non-precedential opinion, i.e., it was just meant to put that case to rest).

Not only is Conti's forthcoming petition unreasonable under those circumstances but so is the request for a 30-day extension (this post continues below the document):

https://www.documentcloud.org/documents/22074061-22-06-28-conti-m4eot-next-petition4rehearing

As the petition acknowledges, Avanci, Nokia et al. "do not oppose a 14-day extension, [but] they do oppose a 30-day extension." They won't file an opposition brief because--I assume--they feel this case is enough of a waste of time for the Fifth Circuit already. Last time, Conti got that extension already, and that was OK. But now the situation is different: the panel opinion 2.0 doesn't address the substance of the case at all. It merely affirms the district court--unanimously--with respect to the dismissal of Conti's Sherman Act Section 1 and 2 claims. So there's nothing new for Conti to digest. The district court judgment came down almost two years ago--and they've had to appeal that part of the decision all along. It doesn't make sense.

The fact that the defendants oppose the extension Conti is seeking speaks volumes. In the vast majority of cases, it's actually the plaintiffs who want their complaint to be adjudicated as swiftly as possible. Here, the defendants apparently consider the case a meritless distraction (can't blame them, really) and want this annoyance to end sooner rather than later.

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Tuesday, June 28, 2022

Stats suggest Apple's browser engine monopoly poses threat to national security--at minimum, anti-competitive rule is unjustified by security concerns

This is a follow-up to yesterday's post on Apple's browser monopoly abuse, Anti-innovative effects of Apple's Orwellian prohibition of alternative browser engines finally being discussed and investigated. After that post I spotted a top-notch Twitter thread by the Open Web Advocacy group:

Note that they subsequently clarified that the 70 billion figure for App Store Revenue is greater than Apple's income from the "app tax" (usually 30%; exceptions apply, but only to a small portion of App Store-related revenues). Also, for the avoidance of doubt, what Open Web Advocacy means is that Apple disallows alternative browser engines (Chrome or Firefox on iOS aren't truly Chrome or Firefox--they're just Safari with a slightly different UI, but with WebKit--Safari's engine--under the hood) in order to (a) ensure that the user experience of web apps is too bad to seriously challenge native apps (on which Apple imposes its app tax and over which Apple acts as a tyrannical censor) and (b) to be able to collect huge amounts of money--around $15B per year--from Google for making it the default search engine on the iPhone (alternative browser engines could have other defaults--or even no default at all).

According to its website, Open Web Advocacy is "a group of software engineers from all over the world who have come together to advocate for the future of the open web by providing regulators, legislators and policy makers the intricate technical details that they need to understand the major anti-competitive issues in our industry and how to solve them." (emphasis in original)

Based on the material they've put as well as a brief chat I had with them via Twitter direct message, I can attest to their in-depth technical understanding. They are actual software developers, which is more than certain folks defending Apple's anticompetitive conduct can say. For more background on Open Web Advocacy, I recommend this Register article by Thomas Claburn, Web devs rally to challenge Apple App Store browser rules.

When lobbying against such initiatives as the Open App Markets Act, Apple emphasizes two pet pretexts: privacy and security--and in order to give the term security more gravitas, Apple--and all sorts of people beholden to it--stress that it's about national security. What no one can deny is that Apple is the market leader in the U.S. smartphone business, so security issues affecting the iPhone are, by extension, an issue of concern to the country as a whole. But at the heart of Apple's national security argument resides a total non sequitur:

Apple considers it an axiom that whatever Apple does is inherently secure, and whatever anyone else does is inherently insecure. It's Apple's version of what's called infallibility in connection with various religions.

Against that backdrop, it's impossible not to ask the question of how Apple's browser security stacks up against other browser technologies. Open Web Advocacy (OWA) says that the UK Competition & Market Authority (CMA) has found--at the preliminary investigation stage--that Apple's prohibition of browser engine competition fails to serve the interests of security, and may even compromise security.

Competition is one of the most powerful forces in the technology universe. One of the benefits--we may call it a consumer surplus--that robust competition can bring is that different vendors have to compete with each other on security. In the absence of competition, companies will be tempted to engage in rent-seeking. They get lazy.

While the district judge presiding over Epic Games v. Apple got the law, the economics, and the technology terribly wrong in connection with (at least) market definition, she did say some great things throughout the trial, culminating in how she effectively got Tim Cook to admit that Apple's C suite doesn't give a damn about developer satisfaction. The single best thing she said (weeks before Tim Cook's deposition) was that competition could also be desirable from a security point of view.

What I find so interesting about the OWA's work (by the way, here's a link to their response to the UK CMA's interim report) is that they've compiled information that throws into doubt Apple's conclusory claim of monopolistic behavior being in the interest of (national) security.

I encourage you to read the OWA's Twitter thread. I'm going to be following the UK investigation with great interest, and I guess there'll be more opportunities to discuss the OWA's--as well as other organizations'--material related to the iOS browser engine monopoly issue. For the purposes of this post, I'd just like to show you the four charts shown at the start of the OWA's Twitter thread.

First, there are two charts according to which in the years 2014-2021 Apple's Safari (again, WebKit is the engine that all other iOS browsers are forced to use) was responsible for twice as many browser code execution vulnerabilities--that's the worst stuff because it means that a security issue arises only because of someone visiting a website containing malicious code--as Chrome and Firefox combined (click on an image to enlarge):

2024-2021 is an eight-year timespan. How did things change? Unfortunately, another chart suggests it's getting worse, with Safari's browser code execution vulnerabilities more recently (particularly in 2020 and 2021) having dwarfed those of the other two browsers, as the high red columns (compared to the low blue and yellow ones) in the following chart indicate:

The other important metric--besides the number of vulnerabilities--is how swiftly an issue is resolved. Security isn't static: issues will arise, so it takes an ongoing effort to solve the problem. It's about closing the window of opportunity for those seeking to exploit a vulnerability, and this is all the more critical when a security issue is widely known.

In that regard, the OWA also sees Apple underperforming its hamstrung-on-iOS rivals:

Here's how to interpret that chart, called a histogram: the Y axis (height of columns) shows the percentage of all security issues that got fixed during the relevant period (number of days on the X axis). Again, the red columns relate to Apple's WebKit browser engine, the yellow ones to Firefox, and the blue ones to Chrome. Columns can overlap. Apple has a small percentage (4) of fixes that shipped at the earliest point (0). But there's no red on the next several columns, which indicate bugfixes shipped within 5 to 25 days--only Chrome and Firefox play int hat league. Starting at 30 days, you can see some red columns again, and toward the end (80, 85, and 91+ days), Apple is alone because the other browser engines have long fixed their problems.

Another chart shows for the year 2021 that Apple (blue line) on average had far longer intervals between updates than Google, and it looks like things didn't get better at all during the second half of the year:

It does look like competitive constraints on Apple are needed, not only but also in the browser engine context, to make a better, more secure browser engine, and to work harder to fix any issues that arise. There should be far fewer issues, and Apple should address them much faster.

May other studies yield different results? Well, a company with such vast resources can even fund (through a third party) a poll according to which 71% of "American voters" say "it's extremely / very important for manufacturers to be able to license standard-essential patents [SEPs] in a way that is fair, reasonable, and non-discriminatory, just 23 percent say it's only somewhat or not too important." In reality, it would be hard to find even 0.071% of the U.S. electorate that even knows what a SEP is...

Apple's maintenance of its iOS browser engine monopoly is a serious issue. Google presumably doesn't like it either (otherwise it would do the same on Android, though there is a risk of Google adopting some of Apple's anticompetitive schemes unless regulators take action). But as long as Google can just pay Apple $15 billion or so per year to remain the default browser engine, Google can live with the status quo. The same company that always claims competition to its search engine is just one click away prefers to create an additional entrance barrier, as other search engines simply couldn't afford to outbid Google.

Apple's neo-absolutism is not in the interest of (national) security. The UK CMA is now ahead of other competition enforcement agencies to tackle the issue. Others will--hopefully--follow.

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Apple's tactical games in 5G patent dispute with Ericsson remain fruitless: ITC staff disagrees with new claim construction proposal

There was a time when Apple was an aggressive but mostly very reasonable litigant, while Apple's adversaries took extreme positions. It was the time when Qualcomm was seeking a preliminary injunction over standard-essential patent (SEP) royalty payments, and prior to that, when Samsung brought "me too" motions just hoping that Judge Koh (then in the Northern District of California) would grant them to avoid accusations of protectionism (though Apple's motion had far more substance), or when HTC was stalling patent cases on both sides of the Atlantic.

Times have changed. I am now watching with growing bewilderment Apple's behavior in the ongoing 5G SEP and non-SEP dispute with Ericsson--and keeping an eye on the organizations it uses to create the impression of third-party support.

Apple sought the dismissal of Ericsson's original FRAND complaint in the Eastern District of Texas and wanted to put itself into the plaintiff's position with a later-field action. Apple sought to deprive the Fifth Circuit of appellate jurisdiction by throwing in three declaratory-judgment claims. When Judge Gilstrap declined to let Apple restructure the litigation and, among other things, severed the three SEP claims from the FRAND part, Apple suddenly moved for a stay of the three-SEP case. That hot-then-cold about-face left the judge puzzled--and the case is going forward.

Over at the ITC, a similar pattern is becoming discernible, with Apple first omitting a prior art reference (likely intentionally as Ericsson believes), only to later request its admission out of time based on one demonstrably false claim (regarding Ericsson's position on a priority date) and one highly dubious one (inadvertent omission). In the meantime, new USPTO Director Kathi Vidal has narrowed the circumstances under which discretionary denials of PTAB IPR petitions can issue, and that may be a factor here.

In the SEP case (Inv. No. 337-TA-1299) among the three investigations of complaints brought by Ericsson, Apple faced a problem when the Office of Unfair Import Investigations (often referred to as "the ITC staff") disagreed with the entirety of Apple's proposed claim constructions. So what did Apple do? It asked for an additional term to be construed by the Administrative Law Judge (ALJ) at the Markman stage. The case is now before ALJ Bryan Moore, whose patent-related expertise is second-to-none among ITC judges (arguably even the strongest background of any person ever to have been appointed to this role).

In a way, it's not even "additional term" that Apple wants construed. In reality, it's a term from U.S. Patent No. 8,102,805 that appears in a longer passage that Apple would like to be deemed a means-plus-function term:

"a receiver subsystem in a spatial multiplexing Wireless communications system configured to … use the second disambiguation data to determine whether the re-transmitted transport block is scheduled for retransmission on the first data substream or the second data substream during the second transmission interval" (emphasis added)

Apple proposes that the highlighted passage be interpreted as "using the second data to resolve an ambiguity to determine." But once again, the Staff and Ericsson agree that Apple is wrong. They say the term should just be given its plain and ordinary meaning, which one of ordinary skill in the relevant art understands to be: "using the second data which signals transport-block-to substream mapping to determine ..."

Let's take a quick look at the state of play in the Eastern District of Texas. By order of June 13, Judge Rodney S. Gilstrap set an in-person motion hearing for Wednesday, July 6, regarding Ericsson's two motions to compel:

  1. a May 27 motion to compel Apple to identify witnesses with respect to certain issues (such as Apple's App Store terms), which I published toward the end of a June 4 post, and

  2. a June 10 motion t compel Apple to produce documents with respect to topics such as (again) the App Store, Apple's 5G launch, Apple's SEP devaluation efforts, Apple's acquisition of SEPs from Intel, and Apple's payments to component suppliers who also license SEPs to Apple.

Ericsson has now given notice that "on June 9, 2022, nearly two weeks after Ericsson filed its Motion, Apple made a written supplementation identifying further ESI custodians and mooting [the first of the two motions to compel]."

I guess the motion-to-compel hearing will still be necessary as Apple will likely to try to keep all--or at least some--of the topics raised by the second motion to compel out of this FRAND case.

It's hard to see what benefit Apple got out of firstly refusing to identify fact witnesses, only to do so after Ericsson brought its motion. Apple itself originally wanted that Texas FRAND case to be put on the most ambitious schedule possible, and that was pretty much the only wish Judge Gilstrap has granted Apple so far. I can't help but suspect that Apple would now rather see the Texas FRAND trial date pushed back, and should that impression be correct, the reason may very well be that Apple is worried about the potential impact of the Texas FRAND decision on its FRAND-related affirmative defenses--all but one of which the ITC Staff believes should already be thrown out at this early stage--the ITC SEP case.

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Monday, June 27, 2022

Anti-innovative effects of Apple's Orwellian prohibition of alternative browser engines finally being discussed and investigated

Today I wish to draw some additional attention to long-time web browser developer Alex Russell's new post, Apple Is Not Defending Browser Engine Choice. On other recent occasions I've mentioned the UK Competition & Market Authority's market investigation into mobile browsers and cloud gaming. The fact that Apple allows only one browser engine on iOS--even Chrome for iOS is not really Chrome, but merely Safari in disguise, as it must be based on Apple's WebKit engine--is a serious problem, especially because Apple argues in the App Store context that developers should simply make web apps, while doing everything to ensure that those web apps won't be a practical alternative to native apps. It's like Apple--the tyrant--telling developers: "heads I win, tails you lose."

The argument with which Apple apologists seek to defend the Webkit engine monopoly is that Chrome and other browsers based on the Chromium engine would otherwise take over and turn the web into a browser monoculture. Apple would have plenty of resources--and resource allocation is at the heart of Alex Russell's concerns--to compete on the merits. It's just more profitable and more comfortable to abuse a typical aftermarket monopoly.

The suggestion that a browser monoculture on iOS is needed to prevent a browser monoculture on the Internet as a whole is a "fight fire with fire" argument. Apple is the gatekeeper standing between the technology industry at large and one billion users--by some describes as the world's richest billion people, which is not completely off base, though fortunately even some rich people prefer Android.

Far be it from me to deny that the concentration of power in Google's hands with its search engine, ad network, Android, and Chrome raises concerns. However, apart from Android, where Google leverages the Power of Default, Chrome actually managed to compete on the merits. OK, some antitrust enforcement accelerated its adoption--but that's precisely what is needed against Apple's single-browser-engine policy now.

The 2020 United States et al. v. Google antitrust complaint mentions Chrome, but only in contexts where Google leverages its power over Chrome to maintain its search engine monopoly. Only on Android does Google leverage its market power in another field to strengthen Chrome.

If you let Apple and Google compete on the merits, such as on Windows where neither Apple nor Google benefits from the Power of Default or simply disallows competition, Google will win. Safari never made it big on Windows, while Chrome did.

Alex Russell is right that "Apple has foundationally imperilled the web ecosystem by destroying the utility of a diverse population of browsers and engines." And CNET's Stephen Shankland interestingly noted that web developers are asking lots of questions about where Apple stands on new web standards, i.e., whether and how WebKit will implement them:

In closing, just like Alex Russell, let me, too, amplify Stuart Langridge's call to "help the [UK] CMA help the Web" by providing input to the CMA (deadline: July 22).

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Saturday, June 25, 2022

Apple wants ITC to admit prior art reference out of time based on demonstrably false claim about Ericsson's position on priority date of patent-in-suit

In the Eastern District of Texas, Apple already has a federal judge "puzzled by [its] hot-then-cold positions." And its lobbyists advocating the devaluation of SEPs and opposing the demonopolization of app distribution claim to represent 5,000 small app developers but on their website just list about three dozen companies, roughly half of which are service providers and only a very few of which have actually published apps.

No reasonable person would claim that Apple doesn't have the right to advocate its positions. But it should maintain a certain minimum quality standard for the points it makes--be it in policy debates or in litigation.

On Thursday (June 23), Ericsson filed its opposition to an Apple motion in the investigation of Ericsson's third ITC complaint (one of two non-SEP cases; interestingly, the SEP case was just reassigned to ALJ Moore).

Rarely have I seen an opposition brief that exposed the shortcomings of the related motion as clearly as this one. The ITC is known for its speedy adjudication of complaints, and that's why the parties to an investigation have to respect deadlines. Sometimes respondents are allowed to add prior art references belatedly, but the standard is "good cause." The way Apple's June 14 motion tries to meet that standard with respect to 13 pages from an IEEE document titled Handoff in Hybrid Mobile Data Networks (a prior art reference named "Pahlavan" after its author) is remarkable:

  • Apple says its army of lawyers "inadvertently did note cite Pahlavan" in Apple's May 13 notice of prior art.

  • Apple can't deny that it knew the Pahlavan document long before May 13: its PTAB IPR petition targeting the same patent (U.S. Patent 8,792,454 on "secure and seamless WAN-LAN roaming") was filed six weeks earlier--on April 1--and listed it as Exhibit 1011:

  • There is a dispute--and it may be legitimate per se--between Ericsson and Apple over the priority date. As Apple notes, "the ’454 patent claims priority to a non-provisional application filed on July 21, 2004, and a provisional application filed on July 22, 2003." Apple is within its rights to take the position that "the provisional application does not describe the purported invention of the ’454 patent." According to Apple, "the provisional application from 2003 does not mention a mobile device connected to an internal network monitoring signal strength, let alone one that detects when such signal strength is below a threshold and then transitions to the external network based on that signal strength." If that was both true and relevant (I have no opinion on that for now), the priority date would indeed be the July 2004--not 2003--one.

    With a 2004 priority date, the Pahlaven prior art reference might not be first choice: some younger material might then work better. In the case of the earlier (2003) date, Pahlaven now appears to be relevant to Apple's invalidity defense.

  • But it's crazy to argue that Ericsson took the position that 2003 is the correct prioriy date "for the first time in its May 12, 2022 supplemental interrogatory responses." That's because Ericsson's relevant ITC complaint, which was filed in January, states the following in its paragraph 17:

    "The ’454 patent issued from Application No. 13/554,711, filed on July 20, 2012, and claiming priority to non-provisional Application No. 10/895,411, filed on July 21, 2004, and provisional Application No. 60/488,809, filed on July 22, 2003." (emphases added)

    So what Apple describes as a new position taken by Ericsson for the first time on May 12 was in reality merely consistent with what Ericsson wrote almost four months earlier in its complaint.

If under that set of circumstances the ITC concluded that Apple has shown "good cause" for an amended notice of prior art, other parties would also have to be granted leave to amend their prior art notices, in which case the deadline for presenting prior art would be much less meaningful.

Ericsson's lawyers believe "Apple’s omission of Pahlavan from its NOPA and from its invalidity contentions until now appears to be gamesmanship, rather than a clerical mistake." The reason they believe Apple did so is that under the Fintiv rule governing discretionary denials, the PTAB can reject a petition just based on an overlap between the petition and the invalidity contentions in the parallel infringement litigation. Ericsson doesn't believe in coincidence here because Apple's notice of prior art to the ITC contained--with respect to just this one patent--70 prior art references, only six (less than 10%) of which are underlying Apple's IPR petition. "By presenting Pahlavan to the PTAB and not including Pahlavan in its NOPA or invalidity contentions, Apple created a scenario in which the six prior art references being considered by the PTAB, if it decided to institute an IPR, would not be identical and therefore not completely 'overlap' within with the list of prior art being considered at the ITC," Ericsson says.

Given that Apple had to be particularly selective about the prior art references used in its PTAB petition, it's a safe assumption that Pahlaven always seemed important to Apple, which makes a clerical error unlikely.

The opposition brief argues that granting Apple's motion would be prejudicial to Ericsson:

"The injection of newly disclosed prior art and previously undisclosed invalidity contentions now, almost a month after the [Notice of Prior Art] deadline and long after the Markman proceedings, unfairly disadvantages Ericsson and would encourage avalanche and ambush, i.e., providing the patentee with a list of 70 references in the NOPA while holding back the primary reference that the patent challenger actually intends to rely on for invalidity."

In the Eastern District of Texas, Judge Gilstrap took issue with "Apple's hot-then-cold positions" (note the plural). The Pahlaven prior art reference is now a case of "cold-then-hot positions." I just don't understand why Apple makes that demonstrably false claim about Ericsson's position on the priority date. Ericsson's ITC complaint left no doubt about that one.

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ACT | The App(le) Association claims to represent thousands of small developers, but in Twitter debates they are supported only by employees, service providers, other pro-Apple lobbyists

From time to time it's unfortunately necessary to expose astroturfers. As someone who has published apps, and has a new one (a productivity app) in the works, the kind of astroturfing that offends me more than any other is when lobbyists for Apple and/or Google claim to defend our interests.

I'm sure many Ukrainians would be offended if a bunch of lobbyists funded by Russia were running around in D.C. and Brussels, claiming to be representing the Ukrainian population at large while arguing that Ukraine drew first blood and has no right to exist other than as a Russian oblast or in the form of a few "autonomous" regions with close ties to Russia, and saying that Ukrainian citizens want the West to let Russia get its way because it will be better for ordinary citizens. The outrageous part about that would not (only) be the messaging, but the false representation of masquerading as representatives of victims.

Masquerading as representatives of victims is at the heart of the kind of astroturfing we see happening in connection with initiatives to open up app markets. The story is that whether it's Apple's (or Google's) app tax or heavy-handedness, it's all in the best interest of the little guys.

A significantly less appalling--but equally untrustworthy--ploy is to lobby for the devaluation of standard-essential patents (SEPs) based on false claims that small app developers struggle to deal with SEP licensing or litigation. That's like saying that low-income workers have a problem with regulation relating to private jets: they're not affected, so the claim makes no sense, but at least they aren't victims of those funding the campaign. They're being used, but not against their own interests--just for someone else's interests of a kind that doesn't matter to them.

A few months ago I had a conversation with a policy officer of one of the other large corporations supporting ACT. By now it seems it really is mostly Apple who's footing the bill and setting the agenda, but they're not alone (yet). When ACT came up, I criticized that company for supporting an organization that claims to speak on small app developers' behalf while actually working against them (and for Apple). The excuse was this: "But in the SEP policy debate we are faced with all those professors who are funded by Qualcomm." Qualcomm does fund a lot of academic research--very transparently so. What has not been shown is that it leads professors to agree with Qualcomm: they may harbor those views anyway, and Qualcomm just enables them to do more work on the subject of SEPs. But the fundamental difference is that those professors speak for themselves as researchers, as do others who agree with Apple and its SEP devaluation friends. Those professors don't claim to have a mandate from other stakeholders, much less from the victims of a digital tyranny.

This week there's been some Twitter debate between ACT | The App Association--more appropriately called ACT | The Apple Association--and Epic Games CEO Tim Sweeney, who picked up an ACT tweet attacking the Epic-founded Coalition for App Fairness (CAF) based on a quote from an Epic Games v. Apple court document:

Is the pot calling the kettle black and vice versa? Not really. ACT has no more legitimacy for the claim to speak on small developers' behalf than Apple itself would have. The CAF, however, does represent actual app developers, all of whom are listed on the organization's website and--as far as I know--every single one of whom pays membership dues, which is more than ACT can say. It's true that some Epic-internal documents surfaced in the Epic Games v. Apple dispute that I never liked. For instance, the plan was for the CAF to raise App Store issues whether real or "manufactured." However, the CAF has now been around for about two years, and even though I'm reading their messages on Twitter, LinkedIn, and their website, I haven't spotted a single "manufactured" issue.

There's a host of real (and serious) issues surrounding app store governance--no need to make up any additional ones. That's why I would attribute the questionable passages of those 2020 documents to a lack of experience coupled with an excess of zeal. Whatever the intentions behind the creation of the CAF may have been, let's judge the entity by its track record of now approximately two years. As long as the CAF continues to truly advocate the interests of developers of all sizes, and raises actual (rather than manufactured) issues, it doesn't matter what someone at Epic may have written two years ago--and falls far short of what would create a situation of the pot calling the kettle black.

Mr. Sweeney effortlessly ratioed (click for an explanation of the term)--sometimes also spelled "ratio'd"--ACT. His tweet got a couple hundred likes vs. ACT's (by the time I write this line) 35 likes, a high percentage of which came from ACT employees and other pro-Apple lobbyists.

One of the 35 likes of ACT's tweet and an immediate response to Mr. Sweeney came from an account named "Chris Sims is Agile" (@chris_is_agile):

"Bless your poor little billionaire heart. You’re supporting legislation and policies that are fundamentally toxic to the safety of the American free market. I’ve been connected with @actonline for sometime [sic] and they have done far more to make a better world than you!"

Mr. Sweeney's billionaire status is unrelated to the merits of his positions on mobile app distribution as long as the positions he takes benefit developers of all sizes, which has been the case so far. It's a transparent distraction from the real issues, and consistent with what ACT's president Morgan Reed told Mr. Sweeney:

It's just absurd to argue that legislation like the EU's Digital Markets Act (which is soon going to be adopted) or the Open App Markets Act, for which there is ever more support among Capitol Hill lawmakers, makes Epic richer at the expense of small developers. No developer can have an interest in being taxed by the world's richest corporation, or in apps being rejected by Apple for reasons other than being malware or out of compliance with applicable local laws.

So, @chris_is_agile basically echoes ACT's "argument" in different words. Mr. Sweeney, for good reason, mocked @chris_is_agile as follows:

A fact check shows Mr. Sweeney is right and @chris_is_agile doesn't make ACT's claim to represent small app developers any more credible. If ACT really did represent approximately 5,000 small app developers, we'd see true developers (who've actually published apps) supporting ACT and its leadership.

"Chris Is Agile" has a website, which links to other pages. His YouTube channel has--lo and behold--32 subscribers (as we speak). The "Upcoming Classes" link appears broken (404 error; I tried more than once). SIGAO Studios is a service provider ("Our team specializes in breaking down business problems, identifying high value targets, and creating technology solutions that meet the needs of our customers"). And Mr. Sweeney is right about the content of Mr. Sims's Twitter feed. I just checked on the Tweets & Replies page of his profile, and at this point (approximately 8:30 AM EDT on June 25), the most recent 50+ tweets are related to the debate with Mr. Sweeney that I just mentioned; then a couple of retweets of ACT's Morgan Reed's statements on app distribution; and so it goes. Then, finally, I could find a few tweets (including retweets) related to Scrum training (Scrum is a means of managing software development projects in an "agile" fashion), followed by--again--various tweets over the course of the previous month relating to ACT's work, mostly its opposition to the American Innovation and Choice Online Act.

It's interesting to see that those standing up for ACT are typically service providers, not actually organizations publishing their own apps. Even in the SEP context, the app developer ACT's Save Our Standards campaign presented was just a contract developer for others. And now there's this @chris_is_agile account, which apparently belongs to someone who works as a consultant and trainer in the Scrum context.

I'm not going to believe ACT that they truly represent small app developers (or IoT companies, which they claim in connection with SEP licensing) until they start taking positions against Apple on at least some important issues where doing so is in the interest of developers. There is no indication whatsoever of those "members" paying any membership dues--they may just have filled out a web form to subscribe to a newsletter, which is the closest thing to a membership application process.

Only recently have I found such a thing as a membership directory on ACT's website--but there's no reason to believe ACT's claim that they represent 5,000 small app developers. All one can find right now on the "Members" page of ACT's website is 38 company logos, and a number of them describe themselves as service providers:

Accedia ("Services: Consulting, Applications, Operations, Outsourcing"); innovify ("we build your #Web3 products for your business"); synesthesia (they create marketing campaigns); appsgarden ("software development ... We will make your ideas work!"); Concentric Sky ("product design and realization", "we excel in building end-to-end solutions"); SheerID ("collect customer data you can trust and create bold campaigns with SheerID's Identity Marketing platform"; Dogtown Media (app development for hire); Project Hosts ("providing Cloud Compliance-as-a-Service on Microsoft Azure for the US Federal government, healthcare organizations, and ISVs"); Colorado Technology Consultants, Inc; MotionMobs (yes, the contract developer who incredibly claimed to have a SEP licensing problem); SouthernDNA ("Atlanta-based digital agency"); devscale ("we build your software"); BadVR (immersive analytics platform); CannedSpinach ("we supercharge businesses to tackle their problems using strategy, technology, & design"); SentryOne ("provider of database performance monitoring and DataOps solutions"); 1564B (Marketing, Content development Speaking & Writing); bridge the gaps (digital education); TelemetryDeck ("a service that helps app and web developers improve their product by supplying immediate, accurate analytics data"); Nebula Labs ("we deliver top quality digital solutions"); Layers ("Layers helps its clients design and develop their brands and products"); and LoopCycle ("we help commercial equipment manufacturers and operators trace, manage and recover physical assets").

ACT has no reasonable basis to claim to speak for a $143 billion ecosystem.

By contrast, the CAF's membership includes companies whose apps everyone knows, such as Epic (Fortnite), Spotify, Match (Tinder etc.), and Tile. And they don't claim to represent 5,000 others without listing them.

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Thursday, June 23, 2022

USITC reassigns Ericsson v. Apple 5G standard-essential patent case to Administrative Law Judge Bryan F. Moore: extremely experienced though recently appointed ALJ

Yesterday, Chief Administrative Law Judge Clark S. Cheney of the United States International Trade Commission (USITC, or just ITC) gave notice that the investigation of Ericsson's complaint over Apple's alleged infringement of cellular standard-essential patents (SEPs)--with Ericsson seeking a limited exclusion order against certain Apple gadgets and Apple arguing that an import ban over SEPs gives rise to an "unclean hands" defense--has been reassigned to Administrative Law Judge Bryan F. Moore. Previously, ALJ David P. Shaw was presiding over the investigation.

The apparent reason for which this reassignment occurred is that ALJ Moore started in his new role last month, and the ITC is now assigning a mix of new and previously-pending matters to him.

When I saw the date of his appointment, I was--only for a moment--puzzled. It didn't make sense to me that the most important one of those Ericsson-Apple ITC cases (Ericsson also brought two additional complaints over non-SEPs, and Apple filed one non-SEP complaint relating to mmWave technology) should be handled by a "novice." But ALJ Moore is the opposite of a novice. His background is truly impressive:

  • He already worked for the ITC from 2005 to 2012 ad an investigative attorney in the OFfice of Unfair Import Investigations (OUII, frequently referred to as "the [ITC] Staff"). In that role, he participated in numerous investigations of patent infringement complaints.

  • He spent the ten years after his first role with the ITC at the USPTO as an Administrative Patent Judge (APJ), serving on the Patent Trial and Appeal Board (PTAB), where he heard appeals of decisions by patent examiners and presided over inter-partes review (IPR) proceedings.

  • Earlier on in his career, he was a lawyer in private practice and "prosecuted patent applications before the USPTO related to electronic communications systems and financial services inventions."

  • In addition to a J.D. from Georgetown, he holds an electrical engineering degree from Stanford (that's as good as it gets).

While he presumably didn't have to deal with SEP licensing issues over the course of the last ten years, this case is now a splendid opportunity for him to hear FRAND arguments from two world-class litigants. It will be interesting to see how this investigation unfolds under his auspices. For now, all I can say is that I'm profoundly impressed with his background. Some ALJs came to the ITC from the social security system or the military (two other major fields in which you find ALJs) and quickly learned about patent law. But given the high percentage of patent infringement cases among Section 337 complaints, it's a smart decision to appoint judges with a strong patent law background.

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Wednesday, June 22, 2022

Munich I Regional Court reports new record number of patent infringement actions in 2021: 262, an increase of 30% over 2020 (202 cases)

There has been some confusion out there, but thanks to canonical information from the Munich I Regional Court's press office I'm able to report that 262 patent infringement cases were filed with the Landgericht München I last year, marking a steep increase (by almost precisely 30%) over the previous year (202 cases).

In response to that trend, the Munich court created a third patent law division last year. I attended the 44th Civil Chamber's inaugural hearing. There have meanwhile been various reassignments.

Dusseldorf still has a larger caseload, a very significant part of which is attributable to cases involving small and medium-sized enterprises (such as cigarette paper manufacturers), while the courts in Munich and Mannheim are particularly popular for patent--quite often standard-essential patent (SEP)--assertions against large companies (smartphone makers, car makers, telecommunications carriers, game publishers, and so forth).

Codec (encoder/decoder) caes are one category of SEP matters for which Dusseldorf has traditionally been popular. Currently, some MPEG LA licensors are suing Samsung there. VoiceAge EVS, however, has achieved a 100% hit rate in Mannheim and Munich.

Hamburg is a distant fourth with but a fraction of Mannheim's caseload, but occasionally also gets interesting cases. The remaining German patent infringement venues (Berlin, Braunschweig, Frankfurt, and Nuremberg) are, at best, "also-rans" for the time being. Unlike in the United States, where patent cases can be filed with any of the 94 federal district courts (and can then be heard by any federal judge), only seven German courts handle patent infringement actions in the first instance (with specialized divisions focusing on patent law).

All in all, Germany's share of European patent cases still appears to be growing. In my personal observation, that makes a whole lot of sense, though I would encourage patent holders looking for additional enforcement venues in Europe to give consideration to Spain, particularly the Juzgado de lo mercantil no. 5 in Barcelona (Barcelona Commercial Court V), which is a rocket docket and where the standard applied to requests for injunctive relief is comparable to Germany (without the so-called injunction gap, as infringement and validity are adjudicated at the same time). Nokia and InterDigital have already brought lawsuits there.

Europe as a whole is likely to experience significant growth in the number of patent infringement cases when the Unified Patent Court (UPC) commences its operation next year. Judicial appointments should become known fairly soon. If the UPC appointed a number of German judges proportionate to the jurisdiction's current popularity with patent plaintiffs, that would yield the best results for the new patent judiciary, which during a multi-year transitional period "competes" with national courts (patent holders can even opt out of the UPC system for certain patents). But with Germany being so overwhelmingly strong in this field, chances are that a disproportionate number of UPC judges will hail from other countries--a price to pay to get a pan-European off the ground. Plaintiffs will likely prefer German venues for their UPC cases as well, as the judicial philosophy of German UPC courts of first instance will likely be fairly consistent with that of the country's regional courts.

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In Ericsson 5G case, ITC staff says pursuit of import ban over standard-essential patents may give rise to 'unclean hands' defense, but Apple failed to plead equitable estoppel, waiver, patent misuse

Here's some Ericsson v. Apple news again (the previous development there was that Ericsson filed infringement actions against Apple in the UK).

Ever since the 2013 Presidential veto in a Samsung-Apple case, the question of whether it is appropriate for standard-essential patent (SEP) holders to ask the United States International Trade Commission (USITC, or just ITC) for a limited exclusion order (import ban) has been hotly debated. The 2013 veto didn't discourage SEP holders from trying their luck. Samsung itself had to fear a SEP-based U.S. import ban not long after that episode, owing to an ITC complaint by InterDigital.

From the perspective of patent holders, U.S. district courts are great for damages claims (especially the Western District of Texas), but it takes many years before (if ever) someone gets paid. The ITC is the only U.S. forum in which a patent holder can quickly obtain decisive leverage over an infringer. Other than that, patent holders have to--as they're already doing--go abroad, with even relatively small American non-practicing entities such as Longhorn IP filing infringement lawsuits in foreign venues, with Munich being the most popular hotspot.

Only Congress could categorically rule out ITC import bans over SEPs, but the Biden Administration's recent decision not to adopt any position on SEP enforcement suggests that it's up to the judges to continue to shape U.S. SEP-related law.

Earlier this month, the Federal Circuit held a Thales v. Philips hearing. It's possible that the patent-specialized appeals court will find a basis--such as absence of irreparable harm--to throw out that appeal (of a denial of a preliminary injunction) without having to reach the question of whether SEP holders should have access to the ITC and its Section 337 Unfair Import Investigations. The circuit judges did, however, voice some concerns over whether an import ban would be appropriate against a willing licensee--which inevitably leads to the question of what constitutes willingness. Parties to ITC SEP cases may ultimately draw inspiration from German case law. No other jurisdiction has a similarly rich and elaborate--and still rapidly-evolving--body of case law in place when it comes to the minimum requirements a SEP implementer has to meet in order to have any chance of prevailing on a FRAND defense. Not only are various Munich, Mannheim, and Dusseldorf decisions instructive but so are, additionally, many of the arguments raised by SEP holders and implementers in open court.

In its response to Ericsson's 2022 SEP complaint with the ITC, Apple raised various affirmative defenses based on SEP-specific arguments and theories. Two weeks ago, Ericsson brought a motion to strike Apple's Ninth (unclean hands), Twelfth (unenforceability based on equitable estoppel and waiver), and Thirteenth (patent misuse) Affirmative Defenses, which are related to SEP enforcement through injunctive relief, and Apple's Sixteenth Affirmative Defense (non-joinder of co-owners), which is also SEP-related but not specific to injunctive relief: it's about Apple arguing that other participants in the standard-setting process should have been named as co-inventors.

In the same investigation (337-TA-1299), the Office of Unfair Import Investigations (OUII, commonly referred to as "ITC staff") recently concurred with Ericsson on some claim construction proposals. Note that Administrative Law Judge David P. Shaw has allowed amendments in that regard, so the claim construction battle isn't over yet. Now, with respect to those of Apple's affirmative defenses that Ericsson wanted to be stricken at this early stage of proceeding, the ITC staff largely--but not completely--agrees with Ericsson. The Staff does agree with Ericsson that Apple has failed to plead equitable estoppel, waiver, and patent misuse, and points to earlier ITC decisions. Furthermore, the Staff notes that the issues Apple raises about the alleged right of some other people (employees of other companies, such as Qualcomm, Samsung, and Philips) to be named as co--inventors don't raise a standing issue for the ITC's purposes, much less so because the ITC--unlike the patent office or a district court--can't add any additional inventors' names to the list by way of amending the patent.

However, the Staff believes Apple's "unclean hands" defense is not ripe for dismissal. So let's look at what Apple's defense says (according to the Staff's submission):

"On information and belief, Ericsson’s claims as they relate to the Asserted Patents are barred in whole or in part by reason of equitable doctrine of unclean hands. Ericsson comes to the Investigation with unclean hands because it has engaged in a continuing anticompetitive scheme, evidenced by Ericsson improperly seeking to invoke the Commission’s authority to exclude the allegedly infringing Apple products from the United States."

In connection with some other defenses, Apple specifically claims it made multiple proposals to Ericsson for having a rate set by a third party, which is similar to what Thales says in the Philips case I mentioned further above. But let's be clear and realistic: there must be more requirements than just a willingness to participate in a rate-setting process. As Judge Gilstrap (Eastern District of Texas) noted last month, even if his court declared a rate to be FRAND, Apple would still be free not to take a license. So a per se rule, an unqualified safe harbor, would clearly go too far. It would enable and encourage unfettered and endless hold-out.

The ITC staff says that the following factual allegations laid out by Apple--whether true or not, as we're just looking at the pleadings--are sufficient:

  • Apple says Ericsson has shown "utter disregard of its commitments to license on terms that are fair, reasonable, and non-discriminatory ('FRAND')—and not to use as weapons to seek injunctive relief—its patents declared essential to cellular standards ('SEPs') promulgated by the European Telecommunications Standards Institute ('ETSI')."

  • Apple accuses Ericsson of seeking to "gain negotiation leverage and extract from Apple exorbitant, supra-FRAND licensing terms."

  • Just like Thales, Apple says "the [ITC's] exclusionary remedies are not appropriate for this dispute, and the award of an exclusion order here would be inconsistent with the statutory public interest factors."

Apart from asserting factual deficiencies, Ericsson also belives Apple's unclean hands defense is legally groundless. Here, the Staff says that the filing of an ITC complaint wouldn't constitute unclean hands all by itself, but "as part of an anticompetitive effort to extract super-FRAND royalty rates" it might be improper.

What I find a bit weak about the Staff's position is that it cites a couple of district court decisions, one of which (from the Eastern District of Texas) is unpublished and the other (Broadcom v. Qualcomm) is part of a dispute in which the Third Circuit also took some SEP-related positions that have not really gotten traction in any other circuit.

It's not like the Staff and Apple have really strong case law--especially appellate case law--to show. They just argue that the allegation of someone trying to leverage an ITC import ban in order to extract supra-FRAND royalties meets the pleading standard for an unclean hands defense.

That position is inconsistent with the above-mentioned Samsung-Apple case, in which that question was addressed as part of the public-interest analysis.

I think the ITC staff proposes a bar that is too low. An unclean hands defense requires a more substantive basis in my view than just having two parties who disagree on what is FRAND, with one bringing an ITC complaint over SEPs.

ALJ Shaw may or may not agree with the Staff on the unclean hands defense. We'll have the answer soon.

Also, in the specific case here, the question may be addressed by the United States District Court for the Eastern District of Texas--which has a FRAND trial scheduled for December, though I'm not sure Apple still wants to keep that schedule--before the ITC would decide its Ericsson-Apple SEP case. And at some point, Ericsson may simply obtain and enforce injunctions in other jurisdictions anyway.

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