Four Qualcomm patent suits against Apple dismissed by Munich court, four others in zombie mode

This last day of January 2019 dealt another setback--technically, a set of setbacks--to Qualcomm as half of its patent infringement lawsuits against Apple's Spotlight search in Munich have been tossed and the other half is going down the tubes. On the legal front, this month as a whole has gone, for the most part, as if Qualcomm had set out to prove Murphy's law. A summary will be provided further below.

The Munich I Regional Court thankfully published a press release on its website (in German) regarding the decisions the 7th Civil Chamber under Presiding Judge Dr. Matthias Zigann announced today in Qualcomm's eight Spotlight cases.

It was already clear before today's announcement that some of those lawsuits were bound to be dismissed because there was no doubt at the hearing that a claim limitation (a "standby" feature for apps) wasn't practiced. I reported that fact after the trial and mentioned it again in my most recent post relating to this set of cases, which I wrote after the European Patent Office sided, in a preliminary opinion, with Apple and Intel (I should even say Intel and Apple because Intel was first to challenge those patents), represented by the patent attorneys of the Samson & Partner firm (which consistently delivers great work, and was on the winning side in another case today--involving totally different parties--as I'll mention at the end of this post).

These are eight cases because there are two cases for each of the four patents, always one against Apple Inc.--the U.S. HQ--and one against two European Apple entities. The older ones of the four patents-in-suit (too old to be challenged before the European Patent Office post-grant, but they are being challenged in the Federal Patent Court of Germany), EP1956806 and EP1955529, are not infringed--for the aforementioned reason (no "standby"). That disposes of four of the eight cases. Qualcomm can appeal, but the "standby" question appears to be an insurmountable hurdle for Qualcomm, and the EPO opinion on the other two patents, while neither final nor binding on the Federal Patent Court of Germany, strongly suggests that the entire patent family is doomed to be invalidated.

Non-infringement was successfully argued for Apple by Freshfields Bruckhaus Deringer's Prince Wolrad of Waldeck and Pyrmont.

Instead of outright ordering a stay of the other four cases (over the two younger patents the EPO deems invalid on a preliminary basis), the court made the procedural decision to give Qualcomm a chance---by way of a reopening of the proceedings--to respond to the EPO's preliminary findings of invalidity. That's because the EPO opinion came in so shortly (just about a week) before today's ruling date in the infringement cases.

Obviously the cases will be decided by the court, not by a blog, but I really view those four cases as "zombie cases": a quartet of dead men walking. No matter what Qualcomm will say (and Quinn Emanuel's Dr. Marcus Grosch won't leave a stone unturned; after all, he even salvaged a narrowed version of Motorola's infamous push notification patent by creatively crafting a cascade of amended claims), the EPO's preliminary position on revocation will bear enormous weight with the court unless a very clear legal error were to be identified. That's because the courts of law hearing infringement cases in Germany recognize that the EPO (which also applies to the Federal Patent Court of Germany) not only spends a lot of time evaluating validity challenges but also has technical expertise on board.

Also, the EPO's opposition hearings will take place later this year, so if the Munich I Regional Court allowed enforcement (which wouldn't matter because iOS 12 contains a workaround) but the EPO issued a final (though appealable) revocation decision later, it wouldn't look good, while the EPO's preliminary opinion justifies a stay of those four cases (short of a silver bullet on Qualcomm's part), and should the EPO change mind, Qualcomm wouldn't have lost much time for enforcement.

Getting back to the reference to Murphy's law further above, this is a summary of legal developments for Qualcomm during this month (it may read as if this had been authored by those shortsellers, but it's simply the way it is:

• The FTC v. Qualcomm antitrust trial in San Jose (Northern District of California) obviously towers above all other events. Closing arguments are rarely a surprise. The FTC's case was validated by testimony from the industry at large (American companies, companies from ally nations, and others). Qualcomm only had 2.5 companies on its side--Nokia (a failure in the handset business), Ericsson (another handset failure, and they just count as 0.5 here because they attacked the value of Qualcomm's patents and its practices, siding with Qualcomm only on the question of chipset-level licensing), and InterDigiTroll.

  Qualcomm's lead counsel delivered a very strong performance on Tuesday, but Judge Koh was looking almost exclusively at her documents, the real-time transcript, and her notes, so all the rhetoric and gestures bounced off of her like a tennis ball thrown incessantly at a stone wall.

• On January 15, the Mannheim Regional Court threw out a Qualcomm suit because it held that the iPhone doesn't infringe under a proper claim construction.

• Starting that same day (January 15), the Patent Trial and Appeal Board (PTAB) of the United States Patent & Trademark Office (USPTO) initiated inter partes reviews of 21 (twenty-one!) Qualcomm patents challenged by Apple. Such reviews are initiated only if a reasonably serious issue is raised.

• Then came the EPO opinion on two patents and, a week later, the related Munich decisions discussed above.

All that bad news is not counterbalanced by the symbolical victory that is a preliminary injunction in Germany, barring Apple from saying that the iPhone 7 and 8, against which Qualcomm secured a pair of injunctions in December (with the court ordering remedies while being agnostic as to the merits), remains available at more than 4,000 points of sale. But whether or not Apple is allowed to say it, there really doesn't appear to be an availability problem. On the Internet, those devices are just one Google search away from Apple's German online shop, and in the real world, I doubt there's any Apple Store from which people couldn't find the next point of sale (where those devices continue to be sold) in walking distance--in many cases, it will be like just crossing a street.

Headed for an antitrust defeat and failing to gain leverage from patent infringement actions against Apple and Intel, Qualcomm is trying to influence its fate out of court.

In other news, totally unrelated to Qualcomm, the Munich I Regional Court today rejected a complaint by Netlist against HP and SK hynix because it found no infringement. That case involves a standard-essential utility model, which is why I got interested in it. In my trial report I had already expressed my view that a rejection or stay appeared more likely than a victory for Netlist. I've already told some Qualcomm-aligned Twitter trolls that, in other words, my highest priority is to have a strong prediction record.

The utility model case was won by a Bardehle team led by Professor Peter Chrozciel and Dr. Anna Giedke as well as patent attorneys Dr. Georg Jacoby and Dr. Robert Baier from the Samson firm (mentioned further above for its accomplishments before the EPO against Qualcomm's Spotlight patents). In the United States, SK hynix is represented by Sidley Austin against Netlist. Sidley and Professor Chrocziel (at the time, with Freshfields) already worked together very successfully when representing Microsoft in the United States and Germany.

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When defending against standard-essential patents, beware of standard-essential utility models

While "standard-essential patents" (SEPs) is one of the most common terms in the tech sector, it would sometimes be more accurate and inclusive to refer to "standard-essential intellectual property rights" (SEIPRs). That collective term would include both SEPs and SEUMs: standard-essential utility models. Utility models are a German specialty, basically a second-class type of patent with a shorter term but instant registration (no substantive examination). This blog covered a utility model case years ago when Apple asserted a slide-to-unlock utility model against Samsung in Germany; that case got stayed over validity concerns and never went anywhere. Beyond German utility models, the collective term "SEIPRs" would cover any other IPRs that may exist in other jurisdictions and are like patents, but aren't called patents.

Yesterday I went to the Munich I Regional Court to watch a standard-essential utility model case, Netlist v. SK Hynix and HP, over German utility model no. DE2020100185017, which was derived last year, in preparation of this lawsuit as counsel for Netlist explained, from a pending European patent application, EP2454735 on a "system and method utilizing distributed byte-wise buffers on a memory module." From what I've been able to find out, this patent was declared essential to a JEDEC memory standard.

An EPO patent examiner rejected the application, though Netlist is still trying to persuade the EPO to grant a patent. But in parallel to that effort, they quickly took out a utility model, with claim language drafted specifically for the purposes of the lawsuit against SK Hynix and HP, and sued in Munich.

The previous Munich trial I reported on took 12 hours; yesterday's trial took only about four. No would-be witness was sitting on the hard wooden seats outside.

Netlist's counsel in this action, Fieldfisher's Benjamin Grzimek, was mentioned on this blog about five years ago when Unwired Planet, an Ericsson privateer, sued a bunch of mobile device makers. A filing made by SK Hynix with the ITC suggests Netlist is also a patent assertion entity (unsurprising after I had noticed the extent to which they emphasize their patent infringement cases on their corporate website):

"Netlist does not design or manufacture JEDEC compliant DDR4 RDIMM or LRDIMM, and it never has. It does not compete with Respondents. And, Netlist freely admits that it made no technical contribution to any JEDEC standard. Others contributed the technologies JEDEC adopted into its standards, which JEDEC compliant products implement. Indeed, in years past when Netlist designed and sold memory modules, its business model was to sell non-JEDEC compliant memory modules; these are the products, according to Netlist, from which the patents arose. Tellingly, despite having litigated the patents and defended IPRs, Netlist did not even disclose four of the five patents asserted at the [ITC] hearing to JEDEC as potentially essential to the standard until years after the patents issued, and just months before filing its [ITC] complaint. All of this reflects a shift in Netlist's overall strategy. After operating at a loss for all but one year of its existence, Netlist now touts that '[t]he Company is focused on monetizing its patent portfolio' and that it 'plans to pursue an intellectual property-based licensing business in which it would generate revenue by selling or licensing its technology, and it intends to vigorously enforce its patent rights against infringers of such rights.'"

"Consistent with this strategy, Netlist has secured third-party funding for its litigation campaign against SK hynix, which is by no means limited to the two investigations in the ITC. Netlist recently announced that it 'obtained outside investment to finance the legal fees and costs of its legal action against SK hynix” from TR Global Funding V, LLC."

The defendants in the Munich utility model are represented by IP and antitrust litigators from Bardehle Pagenberg led by Professor Peter Chrocziel (who has been named German IP litigator of the year twice and was mentioned numerous times on this blog because of his past work for Microsoft and Apple), with rising star Dr. Anna Giedke arguing non-infringement for the most part. Interestingly, even though Bardehle has many patent attorneys itself, including some of the most well-known ones in Europe, two patent attorneys from Samson & Partner (another top-notch firm I mentioned often because of its work on behalf of Nokia and, such as in the pending Qualcomm cases, Apple) represented SK Hynix and HP yesterday: Dr. Georg Jacoby and Dr. Robert Baier. The involvement of Samson's patent attorneys doesn't imply anything negative for Bardehle's great patent attorneys; if anything, it speaks to the strength of Bardehle's litigation team.

The court will announce a decision at the end of January, and Presding Judge Dr. Matthias Zigann said at the end of the trial that he can't indicate an inclination before a post-trial conference with his two side judges. If I had to make a guess, I'd expect the case to be dismissed or stayed. Defendants made a pretty good "squeeze" case, where the asserted claim would either have to be construed too narrowly to support an infringement finding or, in the alternative, the claim would be too broad to be valid. A patent attorney from the Bosch Jehle firm, representing Netlist, showed a computer animation meant to distinguish the claimed invention from the prior art, but patent attorney Dr. Baier dismissed its core--the idea of taking CAS latency into account-as a "triviality" and, while Judge Dr. Zigann didn't say what he thought of it, I wouldn't bet on Netlist's chances here.

Judge Dr. Zigann noted at the start of the trial that the utility model and its underlying patent specification lack clarity. He explained that "the upside for you is that counsel can read anything into it; the downside is that so can the Court."

There are two important lessons to be learned:

1. Reference was made to a U.S. case in which one or more defendants sought or even obtained (at some point, however, that case got stayed by stipulation) a U.S. antisuit injunction barring Netlist from the enforcement of injunctive relief over SEPs--but if Netlist prevailed in the case tried by the Munich court yesterday, there would be an argument over whether an SEUM falls within the scope of that injunction. I believe SK Hynix and/or HP would have a strong case, given that this SEUM was simply derived from a pending SEP application. But there could be an enforcement dispute, and there would be a risk of a court saying that if they wanted to preclude Netlist from enforcing utility models, they should have requested a differently-worded antisuit injunction. And that could give Netlist leverage, even if perhaps only for a short period.

2. While utility models don't enjoy any presumption of validity (for lack of substantive examination), there can be situations in which a (final or non-final) rejection of the underlying patent application by the EPO actually suggests to a German court that the utility model is likely valid. In yesterday's case, that doesn't appear to be an issue. But there have been utility model cases in Germany in which an EPO examiner based a rejection on a theory that doesn't apply to German utility models. The differences between the two jurisdictions are limited and sometimes subtle, but there are some and they can prove outcome-determinative, resulting in a utility-model injunction while a patent couldn't be enforced.

Implementers of standards should always bear the additional risks arising from utility models in mind, especially when there is a threat of litigation, or already an ongoing one. You need an invalidation strategy that will not only work against a European patent or patent application, but also take down a utility model. And you shouldn't forget about utility models when crafting antisuit injunction motions.

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