It was another “filibuster of a hearing” Friday—as U.S. District Judge Gonzalo Curiel put it—in Apple Inc. and Qualcomm Inc.’s patent and antitrust battle over smartphone chipsets.
Curiel sounded ready during a 2 1/2-hour hearing in San Diego federal court to prune a couple of side issues from the core dispute he’s fast-tracked for trial next fall.
Specifically, the judge said he was not inclined to let Apple go forward with nine of its 18 patent validity challenges. Although the two companies had held failed licensing negotiations last year, those nine patents weren’t part of the discussions. Instead, Apple added them to its amended complaint because Qualcomm had included them in a list of some 1,800 standard-essential patents provided to Apple.
“It seems like the least threatening letter that I can imagine under the circumstances,” Curiel said. “I tend to agree with Qualcomm … there seems to be an absence of declaratory judgment jurisdiction” on those patents.
Whether to dismiss Qualcomm’s counterclaim for unfair competition sounded like a closer question, though Curiel said repeatedly that Qualcomm seemed to be backing away from its original theory.
Apple declared war on Qualcomm in January, after negotiations on a license to Qualcomm’s standard-essential patents fell apart. Apple accuses Qualcomm of using its market dominance over baseband processor chips—the semiconductor units that create cellular connectivity—to leverage unfairly large royalties.
Qualcomm responded by suing Apple’s contract manufacturers for discontinuing royalty payments. It also brought a claim of unfair competition against Apple, alleging that the smartphone maker threatened massive retaliation if Qualcomm went public with its contention that Apple is watering down iPhone performance to accommodate competing Intel chips. A Bloomberg report on the subject in January sparked an uproar among Apple users.
Apple won the first major skirmish last summer, with Curiel rejecting a preliminary injunction that would have required Apple and the manufacturers to continue paying billions in licensing fees while the litigation plays out. He also turned down Qualcomm’s bid for an anti-suit injunction that would have stayed Apple’s parallel patent and antitrust litigation against Qualcomm in China, Taiwan, Japan, Korean and the U.K. Qualcomm then filed its own patent suit against Apple in China last month.
On Friday, Cravath, Swaine & Moore partner Evan Chesler told Curiel that Qualcomm is not backing off its unfair competition theory. Apple threatened to drop Qualcomm as a supplier and launch a retaliatory marketing campaign if Qualcomm truthfully told the public about Intel chips and iPhone performance.
But Curiel suggested Apple had a right to decide who it does business with, and asked why “threatening to sic the marketing hounds on Qualcomm” would amount to unfair competition. Although most of the precedents involve two competing companies, rather than a manufacturer and its supplier, the judge suggested Qualcomm would have to show Apple took action that was immoral, unethical, oppressive or unscrupulous, and that the action caused more harm than benefit to consumers.
Boies Schiller Flexner partner Karen Dunn said Apple had a right to respond publicly to any criticism from Qualcomm, and that Qualcomm’s true intent was to shut Intel out of the market. “There’s never been a UCL case like this—probably not brought, and certainly never one that’s survived,” Dunn said.
On the declaratory judgment issue, Fish & Richardson partner Laura Degnan argued that Curiel should look past Qualcomm’s “carefully worded” demands and consider the context of the negotiations, including Qualcomm’s patent infringement suits against other smartphone makers, she said.
Qualcomm was in effect saying “here are the patents you should be worried about. Pay us a lot of money for them, because there are a lot of them.” She reminded Curiel that Qualcomm has counterclaimed for a fair-and-reasonable royalty determination on its entire portfolio, something Apple opposes.
Then Curiel got to the issue that really seemed to be eating at him. “To the effect the court weighs in on these nine” patents, he said, how’s that going to help resolve negotiations over the other 1,791?
Degnan told the judge that “respectfully, that’s not your purview.” But Curiel said he’d be reluctant to exercise declaratory judgment jurisdiction if it isn’t going to change the relationship between the parties.
Quinn Emanuel Urquhart & Sullivan partner Stephen Swedlow emphasized that Qualcomm is willing to litigate the nine patents Apple identified in its original complaint. Qualcomm put those at issue by providing Apple claim charts and suing Chinese smartphone maker Meizu over the Chinese version of the patents. But the nine Apple is trying to add won’t help settle “any dispute between any of the parties.”