Tuesday, June 14, 2022

Apple under pressure: lost patent appeal against Optis--and Optis v. Apple FRAND injunction trial is underway in England & Wales High Court of Justice

Patent licensing firm Optis, which is part of a group that also includes PanOptis and Unwired Planet, is inching closer to the major liquidity moment that a royalty payment (including back-royalties) from Apple will represent. Yesterday, the England & Wales Court of Appeal (Lord Justices Arnold, Phillips, and Birss) affirmed an Optis win over a cellular standard-essential patent (SEP): EP2229744 on a "method and arrangement in a wireless communication network". Apple appealed the June 25, 2021 judgment by the High Court of Justice according to which that patent is valid and standard-essential, but in vain.

In the UK, a single SEP that is held to be valid and infringed is all the owner of a SEP portfolio needs to seek a "FRAND injunction": an injunction that becomes enforceable unless the implementer takes a license at the royalty rate determined by the High Court of Justice to be FRAND. And that license will have to be a global portfolio license even though the technical merits are established only with a view to a UK patent (typically, the UK part of a patent granted by the European Patent Office) and the injunction bans the accused product(s) only from the UK market. That is the law of the land there since Unwired Planet v. Huawei.

The aforementioned FRAND determination is made subsequently to a FRAND trial. And the Optis v. Apple FRAND trial started yesterday before Mr. Justice Marucs Smith. It is obviously no coincidence that the appeals court rendered its opinion on the same day, though time wasn't of the essence as Optis has prevailed on two other patents: EP2187549 and EP2690810, both on a "radio communication device and response signal spreading method (they from the same family, of which EP'744--the patent underlying yesterday's appellate decision--is not a member). A March 15, 2022 judgment by the High Court of Justice considered those patents valid in an amended form, and still standard-essential.

So Optis has overfulfilled the requirements for a UK FRAND trial, though it didn't win across the board (with the unique exception of VoiceAge EVS, I'm not aware of any SEP holder that wins each and every case). There was one case in which a former LG patent asserted by Optis was declared invalid (November 25, 2021 judgment), and another in which Optis prevailed in the High Court of Justice (October 16, 2020 judgment over EP1230818 on a "method for improving handovers between mobile communication systems"), but the appeals court overturned the decision in a November 10, 2021 decision.

Here's an overview of the six (A-F) UK parts of the Optis v. Apple dispute:

  • Trial A (EP'818): Optis won in High Court but Apple's appeal succeeded

  • Trial B (EP'744): Optis won both rounds

  • Trial C: former LG patent deemed invalid

  • Trial D (EP'549 and EP'810): valid in amended form, and infringed; Apple can still pursue an appeal

  • Trial E: the FRAND injunction trial that started yesterday

  • Trial F: Optis was denied an unqualified injunction (September 27, 2021 judgment), which would have been an extraordinary remedy in a UK SEP case, where a conditional FRAND injunction is now the norm

Optis has also won a U.S. retrial against Apple, with a $300 million damages award, and Judge Rodney Gilstrap of the United States District Court for the Eastern District of Texas affirmed that decision last month. But in the U.S. it's hard to actually get to the point of enforcing a damages award against a deep-pocketed defendant--and even more so against Apple, which according to Qualcomm has a history of coercing "low-ball agreements" with SEP holders. What Apple (and its allies) just failed to achieve, however, was the reinstatement of a 2013 U.S. government SEP policy position. And in U.S. SEP cases it's increasingly going to have to respond to allegations of hypocrisy given how its positions on App Store access fees contradict its own arguments for bringing down SEP royalties. Apple has already lost a fair amount of credibility in the 5G SEP dispute with Ericsson. I don't know if Optis will try to make any App Store-related arguments in its dispute with Apple. UK patent judges may be aware of the issues, even more so now that their country's antitrust agency, the Competition & Markets Authority (CMA), announced a market investigation into Apple's (and Google's, but primarily Apple's) strangehold on mobile browsers and cloud gaming.

By originally threatening to leave the UK market if the High Court of Justice were to set a royalty rate Apple wouldn't want to pay (a position from which Apple backtracked), Apple made itself no friends in the UK patent judiciary. The decisions there will still be fair and correct, but Apple can't expect

Apple unlikely to benefit from protracted UK litigation with Optis

The current FRAND trial will last weeks; a subsequent decision may take many months; and Apple hasn't exhausted all appeals yet. But the Optis v. Apple dispute has reached a stage at which Apple might want to settle, and here's why I think so:

As a litigation watcher who already followed Unwired v. Huawei (not every step of the way, but I did watch the entire UK Supreme Court hearing), I believe Apple is unlikely to achieve much on appeal--other than delaying the inevitable, of course. Not only is it going to be hard for Apple to get a better deal with Optis (which is not known for leaving money on the table, let's put it that way) but there is a clear and present danger of further case law--be it the High Court's FRAND determination or any further appellate decisions--cementing the principles governing SEP cases in London and exposing Apple as an unwilling licensee. That could prove costly in other cases targeting Apple, which might be brought by companies with much larger portfolios (and thus far greater royalty amounts at stake), such as Nokia and InterDigital. (As I just mentioned InterDigital, they recently had a FRAND trial against Lenovo, and a decision will come down soon.)

Lord Justice Colin Birss--before being promoted to the Court of Appeal--wrote the original Unwired v. Huawei opinion, which got affirmed by the Court of Appeal and the UK Supreme Court. He is now serving on the Court of Appeal, and would presumably be particularly influential if any new FRAND case goes up there. Since the Unwired v. Huawei/Conversant v. ZTE pair of caes that reached the UK Supreme Court, no actual FRAND determination has been made in London. In a scenario in which InterDigital and Lenovo settle, Optis v. Apple could be the first such decision since that seminal pair of cases to be appealed.

Even the UK Supreme Court--which like the top courts of other jurisdictions doesn't have an obligation to hear each and every appeal--would be unlikely to come to Apple's aid. I remember all too well how Lord Justice Kitchin gave a speech at Munich's Ludwig Maximilian University in early 2019 which was essentially just a defense of his own Unwired v. Huawei appellate opinion. By the time of that speech, he had been promoted the UK Supreme Court. He wasn't a member of the five-judge panel that heard the final appeal (it would have been awkward--and maybe not even permissible--for him to deal with the same case again at a different level of the judiciary), but he might have lobbied his Supreme Court colleagues, and he almost certainly would hear an Optis-Apple case. His views on SEP enforcement are fundamentally at odds with Apple's.

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