Wednesday, June 8, 2022

Ericsson-Apple mediation effort in Eastern District of Texas unsuccessful, multi-jurisdictional 5G patent litigation continues

While Ericsson and Apple easily agreed upon David Folsom, former Chief Judge of the United States District Court for the Eastern District of Texas, as their mediator, the dispute isn't ripe for settlement. Retired Judge Folsom informed his successor Chief Judge Rodney S. Gilstrap, who is presiding over two Ericsson v. Apple cases, of the failure of efforts to reach an agreement (this post continues below the document):

22-06-07 EDTX Mediation Uns... by Florian Mueller

As a result, they will continue to litigate in three U.S. venues (E.D. Tex., USITC, and W.D. Tex., though the Western District cases have been stayed pending the ITC investigations involving the same patents) and at least four other jurisdictions (Germany, Netherlands, Brazil, and Colombia).

My most popular write-up in recent months has been my blog post of last Saturday on Qualcomm saying Apple coerced "low-ball agreements" with standard-essential patent (SEP) holders, and Qualcomm, Nokia, and Ericsson taking aim at Apple's SEP devaluation efforts (Qualcomm and Nokia through submissions to the European Commission in a policy-making context, and Ericsson by way of a motion to compel Apple to identify fact witnesses, with Apple appearing uneasy to answer questions about its SEP devaluation campaign as well as its highly controversial App Store policies and strategies). In that post I mentioned Apple's reputation for squeezing suppliers, with licensors technically also being suppliers (in a non-material sense, though patent licensing is a purchasing function form any corporation's perspective). There are signs that some of the companies who got squeezed in the past are not prepared to underprice their assets now, much less in light of how much Apple is paying Qualcomm, which has great patents but whose portfolio isn't stronger than Ericsson's.

At present, there's only one other major SEP infringement dispute involving Apple: the one brought by Optis, which resulted in a jury verdict in the hundreds of millions and the UK part of which is about to proceed to a FRAND trial in London. Others also find it hard to agree with Apple. There are industry rumors of Apple having narrowly avoided last year what would have been a major litigation campaign at a level with Ericsson's, but no renewals of Apple's soon-to-expire license agreements with Nokia and InterDigital are known. I predicted last August, in light of a major Ericsson win in the Fifth Circuit, that SEP royalties were set to rise. The trend reversal has occurred, and Apple can't stop it, but it obviously keeps trying to slow it down and minimize its impact.

Patent counts: not the perfect metric, yet more reliable than unempirical opinion pieces

On Friday I commented on certain patent filing statistics by the European Patent Office and the German Patent and Trademark Office. Huawei and Ericsson were ahead of everyone else in the digital communications category, and Apple not in the top 10 (unlike smartphone makers Samsung, OPPO, and Vivo). There is no legal obligation--though perhaps a moral one--for Apple as the company that makes far more money from smartphones than anyone else to contribute substantially to wireless standards, and not only with respect to handset-side functionality but also the technology that powers the (costly) infrastructure. But one legal obligation is beyond doubt: to pay fair, reasonable, and non-discriminatory royalties. Paying more to Qualcomm than to all other SEP holders combined is neither fair nor reasonable, and from the perspective of other SEP holders it's discriminatory (against them).

My post triggered a reaction from an economist--whose business it is to testify as an expert witness in patent trials, which is a very important task, of course--because he published a paper that essentially says (in many words, but without serious substance) that patent filings by Chinese companies have increased in recent years, so the only explanation is that average per-patent quality is low). If he had reached that conclusion based on the analysis of how Chinese companies' patents perform in litigation, it would be worth taking a look. If technical experts had analyzed a representative sample of such patents, as did Amplified and GreyB (who found Huawei had a super-high essentiality rate), we could also have an interesting discussion. But everything that is just based on input (R&D relative to GDP) vs. output is simply circular logic as it's possible that Chinese companies could already have filed more patents in the past.

To argue that the ratio of grants versus rejections isn't meaningful is not just circular logic but downright illogical: there is a certain threshold for the inventive step, so if a given company or group of companies filed patents of fundamentally lower value, they'd inevitably fail to surmount that hurdle far more often than filers with higher-quality patent applications. The unempirical argument that economist makes is that if you have five time more patent filings on the same level of R&D spend, the average quality is one fifth. But that wouldn't mean five times more rejections: it could even mean a disproportionately higher rejection rate. Think of a bell curve and a horizontal line representing the hurdle, with the line potentially being near the peak of the curve if the average quality of a portfolio really was low. Rejection rates would be detached from quality only if one assumed that the hurdle for patentability is next to nil, in which case one would wonder what all those patent examiners are doing all day long...

There can be reasons for which a smaller patent portfolio is more valuable than a larger one, but whoever makes that claim has the burden of proof, and--let's face it--it's an extremely onerous one. It is not met by an economist essentially substituting his own opinion for hard facts, and obfuscating the bankruptcy of his argument. And it is particularly not met by such an economist who doesn't even look at one patent when at least one serious effort (the one by Amplified and GreyB that I mentioned) has been undertaken to perform essentiality checks on large numbers of patents.

What I mean to say here is that the limited reliability of patent counts is old news, but the only reliable alternative is when the rubber hits the road, when push comes to shove, and that is when patents are actually getting litigated--such as in Ericsson v. Apple. That's perfectly empirical--the opposite of an economist filling many pages without even analyzing a single patent.

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