Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. We got the first genuinely ground-breaking ruling this week in the Qualcomm antitrust litigation. I've got some reaction below. Plus I'm presenting my Oscar for the wildest Federal Circuit argument of the year. Pull up a chair and spare me a few minutes. Better yet, email me your thoughts and follow me on Twitter.

U.S. District Judge Lucy Koh.

It's Hard to Compete With FRAND

Smart phone patent holders are going to face some challenging decisions in the wake of U.S. District Judge Lucy's Koh's ruling this week in the Federal Trade Commission's antitrust action against Qualcomm.

The question will be whether to accept Koh's decision that they're required to license their standard-essential patents to competitors or continue brushing them off.

“It's a very sobering ruling for large-scale standard-essential patent holders, especially in the 3G, 4G, 5G licensing space,” Goodwin Procter counsel Monte Cooper said. “It's only one district court judge's interpretation” of a licensor's commitment to fair, reasonable and non-discriminatory (FRAND) royalties, “but it's a very influential district court judge in a very influential case.”

Koh ruled Tuesday that when Qualcomm signed on with American standard-setting organizations such as the Telecommunications Industry Association, Qualcomm promised to license its standard-essential patents (SEPs) at FRAND rates not only to handset makers, but also to competing chip makers.

She looked to two Ninth Circuit decisions involving FRAND disputes between Microsoft and Motorola Mobility. “Those binding precedents are clear: a SEP holder that commits to license its SEPs on FRAND terms must license those SEPs to all applicants,” Koh wrote.

Cooper has been following the Qualcomm litigation as a veteran of SEP licensing and litigation and as counsel to Sequans Communications, one of numerous third parties in the case. If major SEP holders such as Ericsson and Nokia accede to Koh's ruling, it will likely depress the royalty income they earn not only on phones, but other consumer items like drones and cars. But if they continue refusing to license competitors, they could risk getting hauled into court and accused of breaching their FRAND obligations.

“It's definitely going to make life more complicated for SEP holders in the 3G and 4G space,” he said. “That's going to be a tough decision for in-house [attorneys] to make.”

Surprise! Here's Our Winning Argument

There've been some wild arguments before the Federal Circuit this year, but Grober v. Mako Products might win the grand prize. It's just not every day that both sides distance themselves from their briefs, while the apparent winning argument infuriates the judges and possibly costs the winner money.

Grober stems from 14-year-old litigation brought by David Grober, inventor of an Academy Award-winning camera stabilization system called Perfect Horizon. Grober alleges that after he won a favorable claim construction ruling from the Federal Circuit, Mako Products declared bankruptcy to avoid paying. Then the principals reacquired the assets through a private auction and resumed infringing, he alleges. He's appealing a series of district court orders, including the refusal to impose discovery sanctions on Mako's law firm, Varnell & Warwick.

On Monday, Grober's attorney Robert Lauson of Lauson & Tarver had barely begun arguing when Judge Evan Wallach accused him of selectively quoting from Rule 37in his brief.

“Your honor, I wasn't the author of the brief,” Lauson replied.

“You signed it, did you not?” Wallach asked.

“Actually I did not,” Lauson maintained. Grober had filed the principal appellate brief pro se, and his licensee, Voice International, had subsequently joined it. “I'm here for Voice International today,” Lauson said.

David Lietz of Varnell & Warwick, which is asking for sanctions on appeal, told the court there was no need to drill down into the minutiae of Rule 37, because it turns out the plaintiffs missed the statute of limitations when they filed their appeal. 

Judge Kimberly Moore told him it was far too late in the case to raise that new argument. But timeliness is jurisdictional and can't be waived, Lietz pointed out. “This court lacks jurisdiction to even consider the appeal,” he declared.

“Wouldn't it have been a lot more convenient if you'd raised this when we could read it?” Wallach asked.

“It sure would have, your honor,” Lietz said. But guess what? “I was not on brief in this case.”

Chief Judge Sharon Prost had heard enough. “This is all quite extraordinary,” she said. “It seems to me that what you've done is you've allowed this court to spend numerous hours going through briefs. You even filed a motion for sanctions where you're seeking attorneys fees from the other side.” Now Lietz was saying, “That's all for naught because here, we've come up with a winner of a jurisdictional argument.”

Lietz explained that he'd only come into the case a couple of weeks ago, and the issue had surfaced as he was preparing for argument.

“You don't know how much time you've wasted,” Wallach told him. Coming into the argument, “I was leaning strongly towards attorneys fees. I am no longer. You've talked yourself out of that.”

In his rebuttal time, Lauson asked for an opportunity to brief the timeliness issue, which Prost quickly granted. He also asked for “one minute to make one point” on the merits of the sanctions issue.

“Your best bet is to sit down,” Moore told him. “I'm giving you really good advice right now.”

Lauson took it.

Fortunes Turn in Hearing Implant Case

Three years ago, U.S. District Judge Fernando Olguin seemed ready to knock out a $131 million jury verdict in a patent case over hearing implants. This week Olguin doubled it. With supplemental damages, the Alfred E. Mann Foundation for Scientific Research and Morgan Lewis & Bockius come away with $268 million.

What changed? A partial victory on appeal, new U. S. Supreme Court law on willful infringement, and defendant Cochlear's move to seek reexamination after the jury verdict, as I explain here.

Who Got the Work?

The government and Genentech unveiled stunning allegations of trade secret theft last week against six former employees and Taiwanese competitor JHL Biotech. The San Francisco U.S. attorney's office indicted Xanthe Lam, a principal scientist at Genentech; her husband, Allen, a former Genentech employee; and two other former employees with conspiring to pass confidential information to JHL to help it produce biosimilar versions of Genentech's Herceptin, Rituxan, Pulmozyme and Avastin. Genentech has brought a civil action against the same four, plus JHL itself and co-founders Racho Jordanov and Rose Lin. The cases are pending before U.S District Judge William Alsup.

➤ The dispute: The government alleges that Xanthe Lam downloaded and transferred a raft of confidential information to Allen Lam and to Chan, both of whom were working for JHL as consultants, over the course of five years. Xanthe Lam referred Quach for work at JHL after he left Genentech, and he violated the Computer Fraud and Abuse Act by using her login credentials to download confidential information, the indictment alleges. The civil complaint alleges that the Lams provided JHL with “confidential, proprietary and trade secret information from Genentech, at the behest of Jordanov and Lin, that helped accelerate JHL's development of biosimilar versions of Genentech medicines.” Michael Stepanian, who represents Allen Lam, told The Recorder last week that the Lams would do “nothing at all to harm Genentech and did not profit in any way from these allegations.”

➤ The attorneys: Veteran Assistant U.S. Attorneys Matthew Parrella and Michelle Kane are heading up the criminal prosecution.

Genentech is represented in the civil case by a Keker, Van Nest & Peters team comprising partners Elliot Peters, Laurie Mims, Cody Harris, and Steven Ragland, plus associates Elizabeth McCloskey, Maya Perelman and Sean Arenson.

Xanthe Lam is represented in the criminal proceeding by William Osterhoudt of Osterhoudt Law.

Allen Lam is represented by Michael Stepanian of the Law Offices of Michael Stepanian.

John Chan is represented by John Runfola, of the Law Offices of John M. Runfola.

James Quach is represented by Julia Mezhinsky Jayne of the Jayne Law Group.

No official word yet on counsel for JHL, Jordanov and Lin.

That's all from Skilled in the Art this week. I'll see you all again on Tuesday.