Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Well, Appleand Qualcomm made it past the courthouse steps Tuesday morning, but then settled their patent and antitrust dispute after spending probably an extra $50,000 or so to put on opening statements in San Diego federal court. I've got some initial reaction. Also, American Indian tribal immunity at the PTAB went out with a whimper at the U.S. Supreme Court Monday. And (mostly) the same justices who blithely OK'd the trademark registration of racial slurs in 2017 are now getting all squeamish about doing the same for generic dirty words. As always you can email me your thoughts and follow me on Twitter.
Photo illustration by Jason Doiy
Apple, Qualcomm Settle in the Courthouse Foyer
Did someone forget to tell Evan Chesler and Ruffin Cordell that their clients were on the verge of settling a multibillion-dollar IP trial Tuesday morning?
The two certainly didn't pull any punches as Apple, Qualcomm and Apple's contract manufacturers kicked off what was expected to be a 10-day patent and antitrust trial before U.S. District Judge Gonzalo Curiel.
Apple's lead trial attorney, Cordell of Fish & Richardson, told the jurors that Qualcomm never intended to honor its commitment to license patents on fair, reasonable and non-discriminatory terms. Qualcomm's counsel, Chesler of Cravath Swaine & Moore, replied that Apple had been scheming for five years to cheat Qualcomm out of the full value of its IP, using its contract manufacturers as pawns in the sordid drama.
If we learned anything during openings, it was that these are two companies that can't be trusted to keep their word. But then, in the blink of Judge Curiel's eye, the parties struck a deal for Apple to buy modem chips from Qualcomm for six years and take a license for an unspecified multi-year period. After having just won a pretrial ruling worth $1 billion Apple will now have to make an unspecified payment to Qualcomm.
Qualcomm said in a securities filing that the deal is worth about $2 in earnings per share. It's stock price, which has been hammered since Apple filed suit two years ago, jumped 23 percent. Back of the envelope math on Twitter estimated the value of the new royalty at around $10 or $11 per phone, down from the $13 Chesler said Apple was previously paying.
The agreement ends all litigation between the two companies, including actions at the International Trade Commission and in European and Chinese courts. It also puts to rest Qualcomm's litigation with Apple's contract manufacturers—Foxconn, Pegatron, Wistron and Compal Electronics—though as Chesler stressed Tuesday, it was being underwritten by Apple anyway.
The Federal Trade Commission's antitrust suit against Qualcomm, which was tried in January before U.S. District Judge Lucy Koh, remains pending, as does the $5 billion consumer class action against Qualcomm, so it may not be time for Qualcomm to uncork the champagne just yet.
After watching openings Tuesday, I have to say I think Qualcomm was in a strong position to defend its practices. A hometown jury wasn't ever going to destroy Qualcomm's business model, not the way Chesler was presenting it.
“They're the best packagers and marketers in the world,” he said of Apple. “But what makes the phone work is what the people up the road in La Jolla are doing. It costs $13. And they're not paying.”
Curiel had ruled before trial that Qualcomm could tell jurors about the indemnification agreement Apple had with its contract manufacturers. He also ruled that if Apple brought up Qualcomm's refusal to supply its newest iPhones, then Qualcomm could raise its concerns about Apple stealing its trade secrets (concerns that evaporated with Tuesday's settlement). Chesler used both rulings to Qualcomm's advantage during openings. “They're sitting at separate tables and they're telling you they've got separate claims, but look at the proof!” Chesler bellowed. Once Apple told the contract manufacturers to stop paying royalties, “like that,” Chesler said, snapping his fingers, “all four stopped paying at the same time.”
“In the two years where they didn't pay us anything, they sold $300 billion worth of iPhones,” he added.
Of course, Curiel—and not the jurywould have made the call on the antitrust issues. But maybe Apple figured it's just as well off with the FTC making that case to Judge Koh. Josh Landau of the Computer, and Communications Industry Association writes on his blog that Koh's upcoming decision now becomes more important than ever.
Unless, of course, the FTC and Qualcomm suddenly announce a settlement.
Tribal Immunity at the PTAB Fizzles Out
After generating national headlines, congressional hearings and a failed interlocutory appeal to the Federal Circuit, Allergan and the Saint Regis Mohawk Tribe's bid to invoke tribal sovereign immunity at the Patent Trial and Appeal Board ended quietly Monday. The Supreme Court denied Allergan and the Saint Regis Mohawk tribe's petition for certiorari of Judge Kimberly Moore's Federal Circuit decision.
Although 14 states threw their support behind Allergan and the tribe at the Federal Circuit, none supported their cert petition. No doubt the states are looking ahead to Regents of the University of Minnesota v. LSI, argued last month, in which the Federal Circuit will decide whether states can invoke their immunity when public university patents face administrative challenge.
As I wrote last month, those arguments didn't sound promising for the states, either. But if the case ends up at the Supreme Court, it could theoretically make good law for the states and the tribes.
Chalk up the win on tribal immunity to Perkins Coie and Wilson Sonsini Goodrich & Rosati for PTAB petitioner Mylan Pharmaceuticals; Sterne, Kessler, Goldstein & Fox for petitioner Teva Pharmaceuticals USA; and Sughrue Mion for petitioner Akorn. But score a partial win for Shore Chan DePumpo, whose theory of tribal immunity extended the IPR by more than a year, arguably adding valuable time to Allergan's lucrative Restasis patents.
No Dirty Words in High Court FUCT Arguments
Well, FCUK me. John Sommer and the Supreme Court made it through Iancu v. Brunetti without uttering a profane four-letter word.
At issue Monday was Erik Brunetti's line of FUCT clothing and merchandise. The U.S. Patent and Trademark Office is trying to ban it based on the Lanham Act prohibition on immoral or scandalous registrations. But they're stuck with the Supreme Court's 2017 decision Matal v. Tam, which struck down a related provision of the Lanham Act that prohibits disparagement of people or groups.
The Supreme Court let it be known before argument that the word FUCT, or any sound-alike, would not be spoken during arguments. Deputy Solicitor General Malcolm Stewart complied by referring to “the past participle form of the paradigmatic profane word in our culture,” my ALM colleague Tony Mauro reports.
Brunetti's counsel Sommer, spelled out similar words like FVCK and FCUK that have earned protection at the PTO.
Scotusblog's Mark Walsh noted that Brunetti himself was in the courtroom for Monday's arguments. “If he is wearing one of his infamous T-shirts, it isn’t evident,” Walsh wrote.
Mauro and Walsh reported that several justices seemed to be searching for a line that could be drawn to deny registration to some offensive words without running afoul of the First Amendment. Federal Circuit Judge Timothy Dyk offered up such a line in his concurring opinion in In re Brunetti: speech that is legally obscene.
Something I didn't know before today: Stewart told the court that, despite Tam, the PTO has continued to block attempts to register the N-word, on the ground that the slur would violate the "scandalous" provision.
That's it for Skilled in the Art today. I will be back with more on Friday.