Apple : License Agreement Not Enough For Standing On Appeal Of An IPR Apple Inc. v. Qualcomm Inc.

In a precedential decision, the Federal Circuit held that Apple lacked standing to appeal from its loss as petitioner in a couple of inter partes  reviews (IPRs) against patent owner Qualcomm.¹

Background

Qualcomm sued Apple in the United States District Court for the Southern District of California for infringing claims of two patents, U.S. Patent No. 7,844,037 (the '037 patent) and U.S. Patent No. 8,683,362 (the '362 patent).² Apple sought an IPR of claims 1-14, 16-18 and 19-25 of the '037 patent, and an IPR of claims 1-6 and 8-20 of the '362 patent.³ The Board issued final written decisions that Apple did not prove that the challenged claims in both the '037 patent and the '362 patent were obvious.⁴ As part of a global settlement agreement, Apple and Qualcomm entered into a six-year license agreement that included an agreement to license the '037 patent and the '362 patent.⁵ Accordingly, Apple and Qualcomm moved to jointly dismiss Qualcomm's district court action with prejudice.⁶ Apple subsequently characterized the license agreement as a "covenant-not-to-sue" and appealed the Board's final written decisions.⁷

Issue of Standing at the Federal Circuit

Standing to appeal, like standing to sue, is a jurisdictional constraint derived from Article III of the U.S. Constitution,⁸ and the Supreme Court has recognized that not every party will have standing to appeal a final Board written decision.⁹

Qualcomm argued that Apple waived Apple's arguments regarding standing because Apple failed timely to address the issue of standing.¹⁰ However, the Federal Circuit has held that waiver is a matter of discretion.¹¹ The Federal Circuit exercised its discretion to reach the matter of standing, finding that the issue of Apple's standing had been fully briefed, Qualcomm would not be prejudiced, and Apple's issue of standing may impact other appeals.¹²

Because the parallel district court infringement litigation had settled as part of the global settlement between the parties (a settlement that included the multi-year license agreement including the challenged patents), Apple hooked its standing arguments to the license agreement between Qualcomm and Apple.¹³ Apple drew similarities between its license agreement and the license agreement in MedImmune, Inc. v. Genentech, Inc.¹⁴

In MedImmune, Genentech asserted that a Genentech patent licensed to MedImmune covered MedImmune's new product.¹⁵ Because the Genentech patent covered MedImmune's new product, Genentech argued that MedImmune owed Genentech royalty payments under the license agreement.¹⁶ MedImmune paid the royalty payments because it did not want to violate the license agreement, but MedImmune sought a declaratory judgment against Genentech, arguing that the Genentech patent was invalid so Genentech did not owe any royalty payments.¹⁷ The Supreme Court found that MedImmune had standing to bring the declaratory judgment action, even though MedImmune was still operating under the license agreement with Genentech.¹⁸

Apple wanted to apply the logic behind the MedImmune decision such that Apple could operate under the license agreement and have standing in court. Apple argued that the ongoing payments under the license agreements and the rights associated with the Qualcomm '037 and '362 patents were sufficient for standing.¹⁹

However, unlike the one patent in the MedImmune license whose validity was questioned, the license agreement between Apple and Qualcomm involved 100,000 patents, including the '037 patent and the '362 patent.²⁰ Further, Apple did not assert that invalidity of any of the patents in the license agreement would affect its payment obligations, or would otherwise affect the license agreement.²¹ In contrast, in MedImmune, because the validity of the patent in the license agreement was at issue, the rights and obligations stemming from the patent in the license were at issue.

Apple effectively argued that a license agreement involving 100,000 patents gave Apple standing to challenge the validity of any of the licensed patents, even if the validity of the challenged patents did not affect the rights or obligations under the license.²² The Federal Circuit declined to find standing on Apple's basis that ongoing payment obligations under a license agreement provided standing.²³

Apple unsuccessfully argued other grounds for standing, including that Qualcomm may sue Apple for patent infringement when the license expires.²⁴ Specifically, Apple argued that Qualcomm's refusal to grant Apple an irrevocable license (or other permanent rights in the patents) provided standing because Qualcomm will likely sue Apple in the future.²⁵

However, the Federal Circuit found that Apple's allegation was based on Qualcomm's right to assert its patent rights generally.²⁶ Apple did not provide evidence of any future plans to make, use, offer to sell, or sell products/features accused of infringement.²⁷ While Apple argued that the Federal Circuit should take judicial notice that Apple sells and will continue to sell smart phone products that may infringe the '037 patent and the '362 patent, the Federal Circuit refused.²⁸

Apple also unsuccessfully argued that estoppel under 35 U.S.C. § 315(e) should be a basis for standing, but the Federal Circuit relied on its own precedent and ruled that estoppel as an independent basis is not sufficient for standing.²⁹

Learning from Apple

Apple was unable to prove that it had standing to appeal the Board's final written decisions based on its argument of ongoing payment obligations under a license agreement. However, a different patent challenger may be successful at proving standing by modifying Apple's arguments. For example, a patent challenger might be successful in showing standing if it argued that the challenged patents in the license agreement affected the challenger's ongoing payment obligations. For example, Apple could have argued that the validity of the '037 patent and the '362 patent would affect payment obligations.

Alternatively, a patent challenger might be successful in showing standing by identifying a contractual dispute involving the ongoing payment obligations. For example, there might be a disagreement over whether the challenger's products infringe the licensed patents such that the challenger would not need to pay royalties under the license.

Or, a challenger might be able to prove that it had standing to appeal if it could prove, with specificity, that the patent owner was likely to assert the licensed patents against the challenger upon the expiration of the license. For example, the challenger could submit evidence that it planned to engage in specific conduct that could reasonably lead to an infringement suit.

What's Next for Apple?

On May 7, 2021, Apple petitioned for rehearing en banc.  .

Footnotes

1 Apple Inc. v. Qualcomm Inc., 992 F.3d 1378 (Fed. Cir. 2021)

2 Id. at 1381.

3 Id.

4 Id.

5 Id.at 1382.

6 Id. at 1381.

7 Id. at 1382,

8 Spokeo, Inc. v. Robins,  136 S. Ct. 1540, 1547 (2016).

9 Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143-44 (2016).

10 Apple,  992 F.3d at 1381. See Phigenix, Inc. v. Immunogen, Inc.,  845 F.3d 1168, 1173 (Fed. Cir. 2017) (quoting Sierra Club v. E.P.A.,  292 F.3d 895, 900 (D.C. Cir. 2002) (stating that "an appellant must identify the relevant evidence demonstrating its standing 'at the first appropriate' time, whether in response to a motion to dismiss or in the opening brief.").

11 Apple,  992 F.3d at 1381. See, e.g., Harris Corp. v. Ericsson Inc.,  417 F. 3d 1241, 1251 (Fed. Cir. 2005) (stating that "[a]n appellate court retains case-by-case discretion over whether to apply waiver."); Ericcson Inc. v. TCL Commc'n Tech. Holdings Ltd.,  955 F.3d 1317, 1322-23 (Fed. Cir. 2020) (quotation and citation omitted) (quoting Automated Merch. Sys., Inc. v. Lee,  782 F.3d 1376, 1379-80 (Fed. Cir. 2015)) (stating "[w]hile there is no general rule for when we exercise our discretion to reach waived issues, we have done so where, among other factors, the issue has been fully briefed by the parties.").

12 Apple,  992 F.3d at 1382. The Federal Circuit granted Qualcomm's motion to file a sur-reply addressing Apple's arguments on standing, and Qualcomm agreed that it would not suffer any prejudice and also agreed that evaluating the issue of standing in this appeal may resolve standing in other pending cases.

13 Id.

14 MedImmune, Inc. v. Genentech, Inc.,  529 U.S. 118, 120 (2007).

15 Id.  at 121.

16 Id.

17 Id.  at 122-23.

18 Id.  at 137.

19 Apple,  992 F.3d at 1383.

20 Id.

21 Id.

22 Id.

23 Id.  at 1384.

24 Id.

25 Id.

26 Id.  at 1385.

27 Id.at 1384-85.

28 Id.  The Federal Circuit found that the products Apple may be selling when the license expires is not "accurately and readily determined from sources whose accuracy cannot reasonably be questioned" because the products Apple sells six years in the future (the duration of the license) may be reasonably questioned. FED. R. EVID. 201(b); Apple,  992 F.3d at 1385.

29 Id.  "We have already rejected invocation of the estoppel provision as a sufficient basis for standing."Quoting AVX Corp. v. Presidio Components, Inc.  923 F. 3d 1357, 1362-63 (Fed. Cir. 2019) (citing Phigenix, 845 F. 3d at 1175-76).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Alexandra Leigh Lodge
Foley & Lardner
321 North Clark Street, Suite 2800
Chicago
IL 60654-5313
UNITED STATES
Tel: [phone]
Fax: [phone]
E-mail: [e-mail]
URL: www.foley.com

© Mondaq Ltd, 2021 - Tel. [phone] - http://www.mondaq.com, source Business Briefing