07.24.17

Qualcomm-Apple Dispute Escalates Further (Lawsuits Come to Europe) With the Cost of Linux-Powered Devices Also at Stake

Posted in Antitrust, Apple, Courtroom, Patents at 2:57 am by Dr. Roy Schestowitz

The latest twist is, Qualcomm ended up suing Apple — using rather dubious patents — in Munich and in Mannheim

Mannheim, Germany
Mannheim, Germany

Summary: Another catchup with a high-profile case (complaints and lawsuits ad infinitum) that will help determine one’s ability to leverage patents in bulk — including software patents — against phone-making OEMs

THE summertime has been full of news about Qualcomm, a company we wrote quite a lot about in relation to its abusive patent litigation campaign and the growing number of complaints against that. The subject is important to those who are interested in patents on phones, including software patents. Aren’t they far too expensive already?

“The subject is important to those who are interested in patents on phones, including software patents.”Last month, for example, Qualcomm’s actions culminated in attempts to block iPhone imports. It affects Linux too, by extension. Here is Simon Phipps writing about this one patent aggressor going after another, Apple (which attacks Android/Linux). It was also covered by Florian Müller, Android sites, hardware sites, financial sites, press releases, and technical press. CNET focused on how it might affect iPhone users.

As usual, any story that involves “Apple” tends to attract more coverage than something about an Android OEM. We hypothesised about the reasons for that in the distant past.

“As usual, any story that involves “Apple” tends to attract more coverage than something about an Android OEM.”Qualcomm’s actions were a reaction to Apple’s complaint. Citing Lexmark (SCOTUS), for example, Müller recently wrote about the FTC complaint. He said this: “I believe Qualcomm is trying to nuance its corporate structure here because it will try to somehow argue (which is going to be a tall order and I doubt it will persuade Judge Koh) that the Supreme Court’s recent Lexmark ruling on patent exhaustion wouldn’t apply to Qualcomm’s situation.

“Most of Qualcomm’s nine defenses (stated at the end of the document) are legal theories that are identical or related to what didn’t persuade Judge Koh in connection with the motion to dismiss, plus theories according to which whatever may appear anticompetitive is actually good for consumers (or, conversely, whatever remedy might appear procompetitive would ultimately harm consumers). Considering how much I, as a consumer, believe to have indirectly paid to Qualcomm over the years (vs. what other patent holders presumably collected), I disagree. In particular, the consumer-friendliest remedy would be to enforce Qualcomm’s “to all comers” FRAND licensing obligation so that Intel, Samsung and others could sell baseband chips to device makers that come with a license to Qualcomm’s standard-essential patents.”

“Qualcomm has preyed on Android OEMs, so an Apple win would be beneficial to Linux in this case.”Writing in late June he said there were “many billions at stake” and the mainstream press covered that too. Qualcomm had attempted to produce a so-called ‘study’, but Apple kept refuting it. Even CCIA, in the form of Patent Progress, wrote about that at the time. Wall Street media chose the headline “Apple Alleges ‘Mounting Evidence’ Against Qualcomm”, noting that:

Apple found “continuing — and mounting — evidence of Qualcomm’s perpetuation of an illegal business model that burdens innovation,” according to the filing. It claims some of the patents that Qualcomm wants to get paid for are invalid and that Qualcomm hasn’t fulfilled its obligation to charge fair and reasonable rates on patents related to industry standards.

As a reminder, we actually support Apple in this dispute. Qualcomm has preyed on Android OEMs, so an Apple win would be beneficial to Linux in this case. It would also harm Microsoft’s ability to shake down Android OEMs (Qualcomm’s recent threats to Microsoft and Intel notwithstanding). Precedence matters here.

Back in June the media recalled Qualcomm concessions/defeat, noting that “Qualcomm’s Refund to BlackBerry Swells to $940 Million”…

“BlackBerry is no ally here, but its ability to extract money (back) from Qualcomm is actually a good thing.”That was a deep and profound loss for patent maximalists – yet again!

BlackBerry’s devices now run Android, but BlackBerry may be getting out of that business and become a classic patent troll. The Canadian firm has already resorted to using software patents in the Eastern District of Texas against the competition. Bloomberg said a month ago that “BlackBerry Falls Most in Two Years as Software Sales Falter”. Well, the Bloomberg article has spread since [1, 2] and this was covered elsewhere.

BlackBerry is no ally here, but its ability to extract money (back) from Qualcomm is actually a good thing.

“…now it’s Qualcomm that’s coming under critical review from the European Commission.”“The final check that San Diego’s Qualcomm must write to smartphone maker BlackBerry for overpayment of patent royalties is $940 million,” said this article and Müller spoke of another pain for Qualcomm, namely the barrier to its NXP deal. “More than five years ago,” he recalled, “Google’s acquisition of Motorola Mobility was delayed significantly by merger reviews on both sides of the Atlantic and U.S. regulatory approval was subject to certain promises related to patent enforcement. At the time, Motorola Mobility (the acquisition target) was aggressively asserting FRAND-pledged standard-essential patents against Apple and Microsoft. Against that background of blatant FRAND abuse, competition enforcers weren’t prepared to grant fast-track approval.”

Well, now it’s Qualcomm that’s coming under critical review from the European Commission.

In patent extremists’ view, Qualcomm is doing nothing wrong. They don’t care about innovation and competition, only about maximal patent tax. IAM selectively covered this, choosing to defend standard essential patents (SEP) as follows:

While patent owners in the US in recent years have become accustomed to change in the legal environment courtesy of the Supreme Court and Congress, some have also had to contend with the much broader application of competition laws by local antitrust authorities. The Federal Trade Commission (FTC) has taken a lead role in actively policing the licensing activities of standard essential patent (SEP) holders, starting with Rambus in the mid-2000s and most recently with its investigation into Qualcomm’s licensing practices.

In contrast to this, Müller cited Judge Lucy Koh. Here is the relevant portion:

Qualcomm tried hard, but unsuccessfully, to get the FTC’s antitrust lawsuit in the Northern District of California dismissed. Maybe Qualcomm hoped, more realistically, the FTC would have to amend the complaint in some important ways, possibly complicating the case to the point where the U.S. competition agency would find it hard(er) to justify using the resources required for pressing on. The reason I suspected the latter is because, based on hearsay from about seven years ago, the European Commission’s investigation of Qualcomm’s practices with a focus on Nokia (now more of a Qualcomm friend than foe), essentially got derailed by scare of conducting a resource-intensive, complex and somewhat subjective (thus more likely to be overruled) rate-setting exercise. In the FTC case here, the presently-Acting Chair of the FTC, Maureen Ohlhausen, opposed the decision authorizing the complaint, and might have been the first decision-maker to argue that the case should be dropped or settled (the latter without any useful remedies) due to litigation economics. Industry concern over such a decision by the FTC was and remains real, as an open letter to President Trump showed in April.

This was also covered in [1, 2, 3]. The FTC lawsuit isn’t going to stop any time soon.

“…many of the patents at hand are on software and likely not patent-eligible/valid under Alice.”Not too long afterwards Apple was joined by its hardware partners and Müller framed it as follows: “In April, Qualcomm (in its counterclaims to Apple’s Southern California complaint) already alleged that Apple had interfered with Qualcomm’s contractual relationships with the contract manufacturers, which is why the related royalty payments ground to a halt a few months ago. Therefore, it really never made sense to me in the first place that Qualcomm brought a separate action against the contract manufacturers (in which it has meanwhile requested a preliminary injunction): the thing to do, in my view, would have been for Qualcomm to add the contract manufacturers to the case as third-party counterclaim defendants.”

“Apple and its contract manufacturers present united, ever stronger front against Qualcomm,” Müller added later. That’s pretty recent news:

On Monday, four of its contract manufacturers (the ones Qualcomm is suing in the Southern District of California) impleaded Apple into Qualcomm’s breach-of-contract suit. Before midnight on Tuesday, Apple and its contract manufacturers (the most well-known of which is Foxconn) made various filings in San Diego. It will definitely take me some time to digest, but as I follow the various Qualcomm matters closely, I can share some observations here already.

This one report about it speaks of “patent actions made against indefensible software patents” because, as we noted here before, many of the patents at hand are on software and likely not patent-eligible/valid under Alice.

Qualcomm then resorted to throwing more lawsuits Apple’s way, this time in Germany [1, 2].

Just before the weekend Josh Landau (CCIA) argued that “If Qualcomm Wins At The ITC, We All Lose,” for it’s not only Apple’s business that’s at stake. To quote:

This afternoon, CCIA filed comments on the public interest in the Qualcomm v. Apple case pending at the International Trade Commission (ITC). Qualcomm sued Apple in the ITC as part of the large dispute between the two companies. (The dispute continues to grow, having recently added a case in Germany and suits and counter-suits between Qualcomm and the contract manufacturers Apple uses.)

As part of ITC investigations, the ITC seeks comments on how the requested relief would affect the public. As I’ve written before, Qualcomm’s practices are anti-competitive and harmful to consumers. And by seeking to exclude Apple from selling any iPhones that lack Qualcomm processors, Qualcomm is trying to use the ITC as a tool to maintain their anti-competitive practices in the face of lawsuits from Apple and the FTC.

We generally haven’t kept a very close eye on this case because it involves two (or three, if we count BlackBerry too) companies that we don’t support and would rather see destroying one another. At the end of the day, however, the outcome will have serious ramification for any company that sells devices with GNU/Linux, be it Tizen or Sailfish OS or Android in its various flavours. Müller seems to be the only person who’s really keeping up and abreast of every development.

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