I still believe Ericsson will win its patent dispute with Apple and get a per-iPhone royalty that will be a lot closer to Qualcomm's (which benefits from the company's chipset market power) than before. It's a now-or-never opportunity for Ericsson. But I'm now somewhat skeptical that the third and smallest Ericsson v. Apple complaint with the United States International Trade Commission (USITC, or just ITC)--a trade agency with quasi-judicial powers, particularly the authority to impose U.S. import bans--will give the Swedish wireless innovator leverage. Decisive leverage will come soon, but in other venues--particularly Mannheim and Munich. Also, Ericsson is already enforcing a preliminary 5G patent injunction in Colombia. And it may very well win an import ban in one or two other ITC cases that are pending.
The case in question is ITC investigation no. 337-TA-1301 (presiding judge: Administrative Law Judge (ALJ) Cameron Elliot), and the trial (called evidentiary hearing) will begin tomorrow (Friday, November 4). Ericsson asserted only three of its 15 U.S. patents-in-suit in that complaint. It was the third complaint Ericsson filed against Apple with the ITC, and the smallest one. Also, none of the patents-in-suit in the 1301 investigation was declared essential to an industry standard.
Three months ago, that small case shrunk as Ericsson--in response to a partly unfavorable claim construction order--dropped one patent-in-suit in its entirety and withdrew six of the eight asserted claims of another patent. One patent, however, fared pretty well in claim construction: U.S. Patent No. 8,792,454 on "secure and seamless WAN-LAN [wide area network, local area network] roaming." But after a decision that ALJ Elliot entered yesterday, Apple is rather likely to defend against that one.
This means that the two surviving claims of U.S. Patent No. 8,472,999 on a "method and system for enabling dual standby state in a wireless communication system" are now the only promising part left in Ericsson's smallest case. Should the two claims of the '999 patent that survived be Ericsson's best claims anyway, then the trial can still get interesting. But if the strongest claims were among the six that Ericsson felt forced to withdraw, then the trial starting tomorrow is not going to be interesting.
Here's what happened:
On Friday (October 28), the Patent Trial and Appeal Board (PTAB) of the United States Patent & Trademark Office (USPTO) instituted--further to an Apple petition--an inter partes review of the '454 patent (the one from which Ericsson had not dropped a single claim). Here's the PTAB order according to which Apple "has established a reasonable likelihood of prevailing":
Decision Granting Institution of Inter Partes Review of U.S. Patent No. 8,792,454 B2
Apple is challenging claims 1-9, a superset of the claims Ericsson is asserting (1, 4, 6, and 8). As always, what's particularly important is the fate of the independent claims (claims 2-9 are derived from independent claim 1).
Apple is attacking Ericsson's asserted claims with the combination of two prior art references (and throws in a third to tackle the non-asserted claims, which could be relevant in other litigation as the companion federal lawsuit, but are irrelevant for the purposes of the ITC trial starting tomorrow). The two prior art references Apple uses against the asserted claims are
"Luo": Integrating wireless LAN and cellular data for the enterprise, a nine-page article published in the March/April 2003 edition of IEEE Internet Computing; and
"Zhang": Efficient mobility management for vertical handoff between WWAN and WLAN, an article published in the IEEE Communications Magazine in November 2003.
The PTAB concluded on Friday that "the information presented in [Apple's] Petition demonstrates a reasonable likelihood that [Apple] will prevail in establishing that claims 1, 4, 6, and 8 are unpatentable under 35 U.S.C. § 103 over the combination of Luo and Zhang."
This is just a preliminary assessment, and it is not formally binding on ALJ Elliot. But there is, of course, a very high likelihood now that he is just going to concur with the three administrative patent judges' assessment and, therefore, won't impose an import ban on Apple over the '454 patent. As I wrote further above, the two remaining claims of the '999 patent now appear more interesting than the asserted claims of the '454 patent.
The problem here has to do with procedure, not substance.
As I discussed on Thursday, Apple had actually promised not to rely on the Luo prior art reference in the ITC case. That is why Ericsson brought a motion in limine seeking to enforce an earlier pledge by Apple. However, ALJ Elliot denied that motion yesterday, and as I'll discuss below, that decision does not appear well-reasoned or fair:
ITC Inv. No. 337-TA-1301: Order No. 34 Denying Complainant Ericsson's Motion in Limine No. 6
For the details, let me refer you again to my commentary on the motion. Here I'll just assume you know all of that already and explain why I disagree with ALJ Elliot's decision.
His decision reads as if he hadn't understood--or, more likely, decided that it was better for him (even though unfair vis-à-vis Ericsson) to pretend not to understand--what Ericsson really said in its motion. I could easily see his decision overruled later, either by the Commission (the ITC's top-level decision-making body) or the Federal Circuit, but in the meantime the PTAB will decide anyway. There are still scenarios in which Ericsson could enforce that patent before its mid-2024 expiration, but statistically Apple is now likely to fend off that one.
ALJ Elliot says Ericsson should simply have prepared for dealing with Apple's Luo-based invalidity contentions since Apple had disclosed that prior art reference in the ITC case, and even if Apple had honored its PTAB stipulation, the PTAB could have denied the petition and then Ericsson would have had to address Luo. That part misses the key point: based on Apple's stipulation, the Luo prior art reference was going to be
either strong but out of the ITC case
or still in the ITC case, but weak as a result of a negative PTAB decision.
It undoubtedly makes sense for a litigant not to focus in pretrial depositions and discovery on a prior art reference that couldn't be simultaneously strong and relevant.
Given strict time and page limits, it makes no sense to just say "you might have had to address it anyway." Apple was gaslighting Ericsson.
ALJ Elliot also misstates what Ericsson was seeking:
"It may be that the Commission has the power to give legal effect to a stipulation filed with another adjudicative tribunal and then withdrawn in accordance with that tribunal’s rules, but Ericsson offers no authority on point."
In formal terms, Apple had stipulated before the PTAB that it would not rely on Luo in the ITC. Under the old Fintiv rule, that was key or Apple's petition would likely have been denied on a discretionary basis. But in the end, the executive branch of the U.S. federal government is indivisible, and all too obviously the purpose of a pledge like that to the PTAB is not just to tell the PTAB a story, but to have an actual effect on a parallel litigation in another venue. One could have a debate over that if Apple had, in a hypothetical scenario, made that promise to a foreign court. The ITC and the USPTO are not only sister agencies, but both concerned with patent litigation.
Anyway, the question is not whether the ITC can "give legal effect" to that stipulation after Apple withdrew it; Ericsson's motion said nothing like that. It's all about whether Apple should be rewarded for its tactics of not withdrawing that stipulation until a few minutes after Ericsson brought it up in an expert deposition. Ericsson didn't ask the ALJ to hold that Apple's stipulation was still intact. It was all about the ALJ's discretion to find that Apple's overall conduct--of which Apple's undue delay of the withdrawal of that stipulation is an indispensable part--warranted an order granting a motion in limine with respect to that particular prior art reference. The net effect for the purposes of the ITC litigation would be the same as if the withdrawal of the stipulation wasn't recognized, but that doesn't mean that the only way for the judge to grant Ericsson's motion would have been to "give legal effect" to the stipulation.
It looks really weak that ALJ Elliot does not address two key aspects of Ericsson's motion--the fact that the patent was going to be either out of the case or otherwise irrelevant (it would then simply have focused on the PTAB decision at the trial) and Apple's delayed withdrawal of the stipulation. When a judge doesn't even touch on the real issues, the decision may not be well-reasoned. And this one, indeed, isn't. It's a red herring to say "[i]f Ericsson did not conduct such discovery, that oversight was entirely its own fault."
It's wrong and unfair, and I would normally say that it sets a troubling precedent, but this fact pattern is highly unlikely to reoccur as USPTO Director Vidal changed the PTAB's policy with a view to petitions targeting patents that are being asserted in parallel ITC investigations.
We'll never know if the same decision had come down if its beneficiary had not been Apple. That said, for the first time in this dispute, Apple has now outmaneuvered Ericsson, even though it was lucky to find a judge who sidestepped the actual issues.
The ITC decision won't make a difference if Ericsson prevails in Germany. On Tuesday, there'll be an interesting Ericsson v. Apple SEP trial in Mannheim--before a judge who also has a very special style that some litigants like a little less than others (sometimes plaintiffs are unhappy, sometimes defendants), but whom I've never seen ignore the points a party actually made.
