Apple: Eastern District of Texas preferred over Western -- Ericsson: with pleasure IF you make a binding commitment to it -- Apple (deafening silence)

Apple has a serious problem with Ericsson having made all the right venue-related decisions so far: the ITC for potential U.S. import bans; the Eastern District of Texas for FRAND issues (where Ericsson won a landmark case against HTC); and the Western District of Texas for damages (companion complaints to import ban requests). Ericsson is also enforcing its rights in four other countries, with preliminary injunction requests pending in Brazil and the Netherlands. In Germany, Ericsson hedged its bets by filing cases with the three leading regional courts for patent cases. Munich and Mannheim are safe choices for plaintiffs, and Ericsson was so lucky as to have both of its cases assigned to Judge Dr. Daniel Voss ("Voß" in German), who is widely regarded as the plaintiff-friendliest of the three judges presiding over patent-specialized divisions (called "civil chambers") of the Dusseldorf Regional Court. Judge Dr. Voss is basically Dusseldorf's answer to the Munich and Mannheim judges.

Now Apple is jockeying for a better position. Part of that effort is a PTAB IPR campaign piggybacking on Samsung's 2021 challenges to many Ericsson patents, taking aim at patents Ericsson hasn't even asserted against Apple. And very surprisingly, almost shockingly, Apple proposed to have the whole dispute resolved by means of a rate-setting decision in the Eastern District of Texas, a venue Apple dreads so much that it even closed its stores there (Apple Stonebriar in Fisco, TX, and Apple Willow Bend in Plano, TX) after the Supreme Court's TC Heartland decision that made it a lot easier to get patent infringement cases moved out of a district unless the defendant has a permanent business presence there (as opposed to merely selling products or offering services nationwide).

Oh well, it now looks like Apple still doesn't really love the Eastern District of Texas...

A week ago, Apple filed a request for an early case management conference in the Eastern District and accused Ericsson of trying to undermine that court's jurisdictions through cases filed elsewhere (including overseas enforcement actions). The next day, Ericsson's counsel contacted Apple's counsel (PDF on Scribd), describing that "characterization [as] both misleading and ironic" as Ericsson "would have preferred to file its patent cases in the Eastern District of Texas, but [Ericsson's] filing in the Western District was necessitated by Apple’s highly publicized closing of all its retail stores in the Eastern District." And then Ericsson made Apple the following proposal:

"Nonetheless, Ericsson is willing to dismiss its Western District suits and refile in the Eastern District if Apple is willing to stipulate to venue in the Eastern District for this dispute and waive any objection under TC Heartland."

In other words: Ericsson is fine with either the Eastern (preferred) or Western District of Texas, but will move its case form the Western to the Eastern District provided that Apple promises not to request a venue transfer to the Northern District of California.

Apple can always bring such a request in the Western District of Texas as well, but it has a strong presence there with many thousands of employees, making a denial of a transfer motion pretty much a given.

The only thing Ericsson didn't want to do was to give Apple an opportunity to avoid Texas altogether.

Apple declined. While there's plenty of rhetoric in a reply (PDF on Scribd) Apple's counsel sent four days later, Apple simply isn't willing to make a binding commitment to the Eastern District of Texas. All that Apple really appears to love about the Eastern District is that it's a gateway to California because of TC Heartland.

On Monday, Ericsson filed its opposition to Apple's request for an early case management and, on that occasion, demonstrated to Chief Judge Gilstrap in the Eastern District of Texas that Apple doesn't truly want to litigate there if it can avoid it. Here's Ericsson's opposition filing, to which the documents I previously linked to serve as exhibits (this post continues below the document):

22-01-24 Ericsson Oppositio... by Florian Mueller

Ericsson's position on an early case management conference is that Apple should firstly specify the issues to be addressed and try to resolve them with Ericsson through meet-and-confer. Only if any issues remained, they could be raised with the court, and the court may not even consider a hearing necessary to resolve any motions resulting from procedural disagreements.

That Ericsson filing also mentions Apple's PTAB IPR campaign (the first five filings, and I've discovered two more that came after Ericsson's opposition brief).

For Judge Gilstrap it's now easy to see what Apple really wants: it wants no enforcement action to take place (which is unrealistic since a FRAND determination is only appropriate for SEPs, but Ericsson is also entitled to royalties on its non-SEPs), and at least not in the Eastern or Western District of Texas. When Ericsson's FRAND action in the Eastern District became known a few months ago, I already wrote that "[i]f Apple wants to go west, it will want to go much further west, i.e., to the Northern District of California, its home district." (emphasis in original)

In addition to the Eastern-Western-Northern thing, Apple and Ericsson also disagree sharply on how to treat the two competing FRAND actions in the Eastern District of Texas. In December, Apple moved to dismiss Ericsson's FRAND case and instead brought its own, which besides four FRAND claims also contains three declaratory-judgment claims against the following Ericsson 5G standard-essential patents (at a time when Ericsson wasn't even suing Apple over patents as a license agreement was still in force for about another month):

Declaratory Judgment Patents

1. U.S. Patent No. 10,374,768 on "efficient SRS resource indication methods"

2. U.S. Patent No. 10,644,724 on "shift values for quasi-cyclic LDPC codes

3. U.S. Patent No. 11,039,312 on "handling of multiple authentication procedures in 5G"

Last week, Ericsson filed its opposition to Apple's motion to dismiss Ericsson's FRAND case (this post continues below the document):

22-01-19 Ericsson Oppositio... by Florian Mueller

Ericsson points to the fact that Apple's FRAND claims pretty much mirror Ericsson's, so Apple itself doesn't really seem to believe that those types of claims weren't justiciable. Also, Ericsson says the license agreement that was in force at the time of filing the complaint did not preclude Ericsson from bringing a FRAND action regarding a future license agreement.

Apple has already replied in support of its motion to dismiss, but that filing is sealed for now. (It also took me a while to find some of last week's filings, probably for the same reason.)

Not only does Ericsson defend its own FRAND case against Apple's motion to dismiss, but it is requesting the dismissal of Apple's FRAND claims or, in the alternative, the consolidation of those claims into Ericsson's case (this post continues below the document):

22-01-19 Ericsson Motion to... by Florian Mueller

Note that this motion to dismiss relates to Apple's FRAND claims, not to the three patent-specific declaratory-judgment claims listed above.

Ericsson argues that Apple's FRAND claims should have been brought as counterclaims to Ericsson's FRAND claims, i.e., they were compulsory counterclaims. The worst-case scenario for Apple would be that its decision to bring a separate complaint--instead of counterclaiming in a pending one, regardless of whether Apple moved to dismiss it--waived those claims. But Ericsson doesn't rely on that theory alone. As a fallback (and that may be the more realistic outcome), Ericsson proposed to sever those FRAND claims from the patent-specific declaratory-judgment claims and to consolidate them into Ericsson's earlier filed Texas FRAND case.

Given that the parties will ultimately have to work out the terms of a cross-license, it wouldn't make sense to have two parallel complaints. And they seem to agree on that, too: it's just that the most extreme position either party can take is that its own complaint should survive while the other should fall. But my guess is we'll see a single FRAND case in the Eastern District of Texas that will involve both parties' FRAND claims.

For the near term I expect to find out about more infringement countersuits by Apple such as the one in Mannheim, but the most interesting question will be whether Ericsson can land a "lucky punch" with its preliminary-injunction requests in Brazil and the Netherlands.

Yesterday, an Ericsson financial report gave an indication as to how much (or how little, if you will) Apple paid Ericsson under the expired license agreement.

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Judge Albright's popularity among patent trolls: an unsustainable situation for the Western District of Texas and the Austin area economy

ValueWalk, a website for financial investors, mentioned a potential scientific explanation for why trees don't grow to the sky: "[T]heir height is limited by their ability to pull water from the roots to the leaves." Gravity is a reality not only in biology, but also in patent litigation. Even in Waco, TX, gravity is a force.

The patent docket of the Western District of Texas has grown eight-fold in only about two years. As Lex Machina reports, 793 new patent infringement cases were assigned to Judge Alan D. Albright of the United States District Court for the Western District of Texas in the year 2020--19.5% of all U.S. patent cases filed that year, and more than three times as many as to Judge J. Rodney Gilstrap in the Eastern District of Texas. For example, eight patent complaints were filed yesterday with Judge Albright's court, versus 18 in all other (roughly 100) federal judiciary districts combined.

A local newspaper article quotes Judge Albright as saying that "[t]here is nothing [he] enjoy[s] more than working on patent cases" (he was a patent litigator before being appointed to the bench) because "the lawyers are exceptional and the issues before me are always intellectually challenging." And he feels "unbelievably lucky" about this institutionalized excess.

The recent record patent damages verdict in VLSI v. Intel ($2.175 billion) may attract even more patent holders to the Western District. Whether it's Caltech suing Microsoft or a newly-founded patent assertion entity claiming Samsung infringes its LED patents, they all contribute to the Western District's "market leadership" because they seek windfall profits from Judge Albright's exceedingly patentee-friendly rules and decisions.

But is this case load really a good thing for the court and for the region?

It can't go on like that. With just half as many new filings, Judge Albright would still be the undisputed number one U.S. trial judge in terms of the number of patent cases on his docket. But what's happening at the moment is a frenzy to put it mildly, or simply an insanity. In a short while, Judge Albright's reputation may be ruined, the local economy seriously harmed, and ultimately that won't even be positive for the W.D. Tex. patent docket.

Even if Judge Albright tried to be a bit more balanced, the fact that many major technology companies have a presence in his district would ensure a steady stream of patent filings. However, the current explosion is going to backfire in multiple ways:

1. If the Federal Circuit receives an appeal of a billion-dollar verdict from that district pretty much every month, the appellate judges won't be impressed. Much less overwhelmed. Instead, they'll stop taking that lower court seriously, and they'll overrule Judge Albright time and time again, occasionally with scathing remarks on what they believe he got wrong. It would take time, but after a certain number of reversals, that would even discourage plaintiffs from suing there.

2. The judiciary is independent, but some of the technology companies with a significant presence in the Austin area may decide to leave the region only because their executives decide those wacko verdicts are far above the ordinary cost of doing business. Once a major company announces such a decision, killing thousands of jobs in the region, local media may take a very critical perspective on Judge Albright's passion for patent litigation.

3. Many patent cases are settled ahead of trial, but still, some must be tried. There comes a point at which Judge Albright won't be able to guarantee the short time to trial that helped make his court so popular. And once he has to push back trial dates, the USPTO's Patent Trial and Appeal Board will accept more petitions challenging W.D. Tex patents-in-suit as opposed to denying them on a discretionary basis under NHK Fintiv.

4. § 1400(b) isn't the only requirement for keeping a patent case in the district in which it was filed. There were at least two high-profile Federal Circuit decisions last year--one involving Apple and another Adobe--in which Judge Albright was held to have abused his discretion by denying transfers of cases out of his district to more convenient fora. In one case, the appeals court basically added insult to injury by deciding that the work performed by Judge Albright (such as claim construction, which is normally considered a key milestone) didn't count: the judge had simply given "undue priority" to the proceedings on the merits over Apple's motion to send the case to California.

   It is obviously not an official criterion for an appeals court in the venue transfer context whether the lower court reasonably manages and decides its patent cases. But the Federal Circuit judges are very much concerned with the quality of the U.S. patent judiciary. At some point they won't merely give Judge Albright a slap on the wrist, but some of them might be sympathetic to defendants moving for a venue transfer.

Judge Albright has gone too far. It's time for the pendulum to swing in the other direction. Otherwise this is going to be nothing short of a disaster. I'll pay close attention to new filings and decisions, and major trials, in that district.

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BlackBerry afraid of transfer of its trollish patent lawsuit against Facebook to Northern California

The company that used to be called Research In Motion is now named BlackBerry. It has always had the wrong kind of name at the given time: Research In Motion would be a typical name for a patent troll (second-best to "Innovations in Motion", more often than not with a demonym such as "American" placed in front) as those organizations try to position themselves as innovative, research-centric businesses with a view to jury trials when in reality they usually aren't. But it had that name when it was making those BlackBerry devices. Now that it has the name of the product, it's no longer making phones and becoming ever more of a patent troll. Admittedly, if I could go back in time, this blog here would have a different name, too: I didn't initially envision it to become so focused on smartphone patent and competition issues, whether or not they involve open-source software ("FOSS" stands for "Free and Open Source Software"). This blog may undergo a name change later this year or next.

BlackBerry has filed a patent infringement complaint against Facebook and its Instagram and WhatsApp subsidiaries (this post continues below the document):

BlackBerry v Facebook by Russell Brandom on Scribd

For the patents-in-suit, let me refer you to Ars Technica's article. I agree with Timothy B. Lee that the patents are extremely broad. In fact, they're so abstract and generic that many or even all of them might die an Alice death before the case even goes to trial.

I have an observation to share that other commentators don't seem to have focused on so far. The "jurisdiction and venue" section (paragraphs 25 to 36) is unusually long. In many other patent complaints it spans only a very few--and especially short--paragraphs. Here, it's almost epic.

Without a scintilla of doubt, the reason for BlackBerry's preemptive defense of its venue choice--the Central District of California (that's Greater L.A.), while Facebook is headquartered in the Northern District--is last year's Supreme Court recent decision in TC Heartland vs. Kraft Foods, which reinstated an earlier ruling (thereby overruling many years of Federal Circuit precedent) according to which "[a]s applied to domestic corporations, 'reside[nce]' in §1400(b) refers only to the State of incorporation" despite potentially broader definitions of "residency" in §1391. TC Heartland was viewed as a blow to the Eastern District of Texas, where patent trolls usually prefer to sue: it's easier now for defendants to get cases transferred out of that district.

BlackBerry's lawyers from Quinn Emanuel--a great firm though it has very much positionied itself as an anti-Apple firm (representing not only legitimate Android device makers but also antitrust violators and trolls against Apple) and apparently now also as an anti-Facebook firm (it already represented Yahoo against Facebook)--go to unusual lengths to justify the venue choice. Paragraph 34 of the complaint points to a 35,000 sq. ft. L.A. office as a "regular and established place of business" (though Facebook's new Northern California headquarters will have 1.75 million sq. ft.), and footnote 4 says there are at least 17 LinkedIn profiles of "people in this District that are dually employed by both Facebook and one of WhatsApp or Instagram." The complaint also points to "network effects" between Facebook's various services in order to establish as close a connection as possible between that L.A. Facebook office and the two Facebook subsidaries accused of infringement alongside their patent company.

BlackBerry also lists an Orange Country address for an in-house counsel, but it's actually a Canadian company and traditionally had most of its U.S. employees in Texas, though this may have changed.

It's all too obvious that BlackBerry doesn't want the case to be transferred to the Northern District of California. It appears to be realistic that it won't be a cakewalk to keep it in Southern California, but at least it wants to try. So it tries to satisfy the second part of §1400b:

"(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business."

It doesn't appear that Facebook filed a declaratory judgment action in the Northern District of California before BlackBerry brought its offensive assertions. But Facebook will still try to get the case transferred to San Jose, and that's where the question of whether Instagram and WhatsApp have a "regular and established place of business" in L.A. or whether it's just Facebook (the parent company)--and whether the parent company's presence is sufficient and whether there are dually-employeed people etc.-- will come up. I'm sure that any relevant witnesses on the Facebook/Instagram/WhatsApp side will be based in Northern California.

Why is BlackBerry afraid of Northern California? Obviously, for the troll that the company increasingly is, the Eastern District of Texas would have been an obvious choice. But presumably BlackBerry didn't want to try such a long shot in light of TC Heartland. I can think of three reasons for which BlackBerry would like to stay out of the Northern District:

1. Juries in that district tend to be rather tech-savvy. They might be underwhelmed by BlackBerry's abstract patents (unless those are held invalid under Alice as a matter of law) and be more inclined to identify overlaps between those "inventions" and the prior art.

2. Relative to its economic and societal stature, Facebook has relatively few employees, but still enough that Northern California jurors may know Facebook employees.

3. Paul Grewal. The former U.S. Magistrate Judge from the Northern District of California (whose opinions were always extremely well-written, not just in my opinion but that of other litigation watchers, too) became Facebook's deputy general counsel in charge of litigation. He's also quoted in Facebook's response, according to which the social network company intends to fight back (I very much hope so: please, Facebook, don't feed the troll even if you can cheaply get rid of the case!). BlackBerry may be afraid of Mr. Grewal still having a unique relationship with some of the judges in that district.

Just one other observation. BlackBerry is seeking an injunction. RIM (as it was called at the time) faced the prospect of an injunction in 2005 when it was being sued by a patent troll named NTP, and had to cough up hundreds of millions of dollars. The following year, the Supreme Court's famous eBay v. MercExchange ruling on patent injunctions came down. Under eBay, irreparable harm is key, and whatever little of an operating business (security software) BlackBerry has left is not really in a competitive relationship with Facebook, Instagram, and WhatsApp. Also, remedies will only have to be discussed if and when BlackBerry prevails on the merits, and that's a big "if."

BlackBerry's approach to patent injunctions has changed. I remember a meeting with them between their almost-shutdown and eBay. One of their in-house counsel told me that they would only pursue an injunction in extreme situations such as an employee leaving the company and stealing some of their code. None of that is at issue now. They've simply become more of a troll themselves.

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