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Skilled in the Art: ITC Can Run But Can't Hide From Qualcomm Quandary + Who Says Diagnostics Patents Don't Have Value?

Welcome to Skilled in the Art. Remember the Saturday Night Live skits that would end with a confused Gilda Radner saying, "Never mind!" I feel like that's what we got from the International Trade Commission today. After an array of political heavyweights weighed in on Qualcomm, Apple and the public interest, the ITC got around the issue by declaring a patent invalid. But an administrative law judge ensured that they'll be confronted with the issue again, as soon as this summer. I've also got some thoughts on the latest patent suit involving medical diagnostics, and the European Parliament's bold step on copyright law. As always you can email me your thoughts and follow me on Twitter.


ITC Dodges Qualcomm Public Interest Issue—For Now

The International Trade Commission on Tuesday sidestepped the political hot potato of Qualcomm's licensing practices and its effect on the public interest.

But an administrative law judge just tossed it another one.

Apple, Intel and Qualcomm have been jousting before the commission for the last three months over whether a ban on infringing iPhone XS models would serve or disserve the public. Qualcomm accuses Apple of trampling on its IP rights to the detriment of innovation. Apple and Intel say Qualcomm is setting itself up to monopolize the critical American market for 5G connectivity.

More than 25 members of Congress, plus law professors, economists, tech companies, think tanks and a former chief judge of the Federal Circuit weighed in on the public's interest in the case.

On Tuesday the commission said never mind all that. Instead, it disagrees with Administrative Law Judge Thomas Pender about the validity of the sole remaining patent claim in the case—the commission finds it invalid as obvious. So that's the end of Investigation No. 337-TA-1065.

But now we're going to do it all over again because, also on Tuesday, Administrative Law Judge MaryJoan McNamara found another single Qualcomm patent claim valid and infringed, in No. 337-TA-1093.

Apple made the same pitch to her on the public interest: that Qualcomm has engaged in anti-competitive conduct, leaving itself and Intel as the only potential modem chip suppliers for Apple's phones; that an exclusion order would “almost certainly” cause Intel to exit the market; and that without meaningful competition, 5G innovation will suffer.

Qualcomm replies that respecting IP rights is what will drive innovation by paying for R&D, and that consumers could still buy phones made by Samsung or Google that are “comparable, or even superior, to the accused devices.”

We don't know her reasons yet, but—unlike Pender—McNamara sided with Qualcomm on the public interest. “It should be noted that I will be recommending that a limited exclusion order together with a cease and desist order … issue against Apple,” she wrote in a three-page order announcing her forthcoming determination.

So today the scoreboard reads Apple 1, Qualcomm 1. Though I'd say this is slightly better for Apple because it pushes the timeline for any possible exclusion order to at least the summer. That means U.S. District Judge Lucy Koh, who presided over the FTC's antitrust case in January, is more likely to speak first on Qualcomm's licensing practices.

In the meantime, Josh Landau of the Computer and Communications Industry Association points out that the Patent Trial and Appeal Board has already found the patent claims before both Pender and McNamara are “more likely than not” invalid. But, he notes, we probably won't have a final written decision from the PTAB until January. And the ITC does not always wait for definitive guidance from the PTAB before issuing exclusion orders.

Apple is represented at the ITC by Fish & Richardson and Wilmer Cutler Pickering Hale and Dorr; Qualcomm is represented by Quinn Emanuel Urquhart & Sullivan; Adduci, Mastriani & Schaumberg; Cravath, Swaine & Moore; Norton Rose Fulbright; and Wiggin and Dana.

Muddled Patent Law Isn't Slowing Down These Diagnostics Companies

It is taken as gospel. Without patent protection, health care companies won't attract the investment needed to bring cutting-edge medical products to market.

The problem is especially acute in the diagnostics field, where the Supreme Court has left patent eligibility law unsettled. “I remain concerned current law disincentivizes critical areas of innovation: artificial intelligence, medical diagnostics, personalized medicine,” Sen. Chris Coons said at a Senate subcommitee hearingearlier this month.

Yet here I am writing today about CareDx, a publicly traded diagnostics company that has seen its market cap increase 25-fold in the last two years. The investors who've poured $1.5 billion into the company over the last two years seem plenty incentivized.

Maybe they just feel especially good about CareDx's patents. They'd better, now that CareDx and Stanford University have asserted them against diagnostics competitor Natera. (Natera's stock is up only a lousy 100 percent in the last year—thanks for nothing, U.S. Supreme Court!)

CareDx says it's revolutionized the care of transplant recipients by developing a blood test that can determine whether a transplanted organ is being accepted or rejected. The test involves analyzing the cell-free DNA that's derived from the organ donor, or ddcfDNA.

This sounded a little to me like the Sequenom patents on a method for analyzing paternally inherited cell-free fetal DNA to determine the presence of genetic defects. The Federal Circuit ruled in 2015 that this was a genuine breakthrough discovery in the field of diagnostics, but under Supreme Court caselaw it was not patent eligible because it was directed to a law of nature. Ariosa Diagnostics and Natera were the winners in that case.

The Federal Circuit backed off that ruling last year in Vanda Pharmaceuticals v West-Ward Pharmaceuticals, and now the Supreme Court has asked the solicitor general's office for its views on Vanda. So at the risk of severe understatement, this area of law is in a state of flux.

Judging from Natera's response, it doesn't sound as if the eligibility of CareDx's patents, which were developed by rock star Stanford researchers, will be the focus of its defense. Instead, Natera sounded more focused on non-infringement.

“We are not surprised that CareDx would attempt to disrupt the imminent commercialization of Natera’s innovative organ transplant rejection test, which does not require donor genotyping, and will compete with CareDx’s older test,” Natera said in an emailed statement. “In recently published analytical and clinical validation studies, Natera’s test demonstrated industry-leading performance.”

CareDx says it's clear from the clinical studies that Natera is infringing. “Years after Stanford researchers and CareDx put in the research and development work to invent this new method and bring it to the clinical setting, Natera uses CareDx’s licensed technology without permission in violation of the patent laws,” Reines writes in his complaint.

The litigation has achieved one unexpected result so far: Both companies' stock actually dropped slightly Tuesday. CareDx was down 1 percent, Natera 1.5 percent.


Yo-Ho-Ho and a Bottle of Copyright Infringement

Europe has a new copyright law. The European Parliament voted 348 to 274 to strengthen the negotiating position of owners of digital content such as films and music with digital platforms such as YouTube and Facebook, my ALM colleague Simon Taylor reports.

“Today’s vote ensures the right balance between the interests of all players—users, creators, authors, press—while putting in place proportionate obligations on online platforms,” the European Commission, which produced the first draft of the rules, said in a statement.

Google said the reforms would hurt the bloc’s creative and digital economies. “The details matter, and we look forward to working with policymakers, publishers, creators and rights holders as EU member states move to implement these new rules,” the company said.

The Verge quotes Julia Reda, a member of parliament for the German Pirate Party who led much of the opposition to the directive, as saying it was a “dark day for internet freedom.”

OK, so maybe the Pirate Party isn't the greatest branding? I mean, where would the American internet be today if the Electronic Frontier Foundation had called itself the Electronic Piracy Foundation?

High Court Boxes Out Nike Copyright Case

On Friday I noted that the Supreme Court was taking an extra long look at a copyright case brought against Nike by the photographer who shot an iconic image of Michael Jordan.

After relisting Rentmeester v. Nike for its Friday conference, the justices announced Monday they had denied certiorari, preserving Nike's win at the Ninth Circuit.

It's another nice result for Dale Cendali and Kirkland & Ellis' Copyright, Trademark, Internet and Advertising team. The same group recently forced several performers to withdraw copyright claims over dance emotes, at least for now, against Epic Gamesand Take-Two Interactive. I'll have more about Cendali's team next week.

That's all from Skilled in the Art for today. I'll see you all again on Friday.