The story today demonstrates that even experienced and sophisticated patent owners, like Apple, can trip over the fundamentals.
‘Inter partes review’ is a way* for a person or company to challenge someone else’s patent before the USPTO. A person who wants to challenge a patent can petition the USPTO and submit prior patents, applications or other printed documents showing that the patented invention is not novel or is obvious. If the USPTO agrees that the petitioner has a reasonable likelihood of success, the USPTO will grant the petition and allow inter partes review to go ahead. Inter partes review proceeds like infringer vs. patent owner litigation, with USPTO employees acting as judges. If the USPTO decides that the patent owner wins, then the patent remains in effect and the petitioner is barred from challenging the patent again in court or in another inter partes review on the same grounds or on grounds that the petitioner could have raised. If the USPTO decides that the petitioner wins, the challenged claims of the patent are cancelled and unenforceable. Because no judge is infallible, the losing party in inter partes review can appeal the loss to Federal court.
Because of the (relatively) low cost and (relatively) quick turn around, inter partes review is now the go-to option to litigate whether a patent is valid based on the prior art. A common strategy is that when a defendant is sued for infringement, the defendant will petition for inter partes review. If the inter partes review is successful, the defendant saves the cost of a trial in Federal court.
Who can file for inter partes review? That’s easy – anybody other than the patent owner can file for inter partes review. But who can appeal to Federal court after losing an inter partes review? Ah, that’s a different question, and it’s what tripped up Apple. Why it’s different is based on a fundamental limitation in the U.S. Constitution.
The Federal courts are created by Article III of the Constitution. The Constitution does not allow the Federal courts to decide just any matter – there must be a ‘case’ or a ‘controversy’ before the Federal courts will have power over the matter. The Federal courts address the ‘case’ or ‘controversy’ requirement to mean that the party bringing a matter to Federal court must have a real and concrete interest in the outcome of the litigation; namely, that the party must have suffered an actual injury due to the challenged conduct that will be corrected by the litigation. An academic or emotional interest in the outcome will not do.
Which brings us to the matter of Apple v Qualcomm, decided April 7, 2021. Qualcomm sued Apple for patent infringement and Apple petitioned for inter partes review by the USPTO. So far, we have a routine patent enforcement and defense strategy on both sides. After a full inter partes review, the USPTO decided that Qualcomm won and Apple lost; namely, the Qualcomm patents were valid and enforceable. Apple appealed its loss to Federal court.
After the USPTO decision, Apple and Qualcomm reached a comprehensive settlement. Under the settlement, Apple licensed ‘tens of thousands’ of patents from Qualcomm in return for Apple’s obligation to pay royalties to Qualcomm. The tens of thousands of patents included the patents determined to be valid in the inter partes review. As part of the settlement, Qualcomm dismissed its infringement lawsuit against Apple ‘with prejudice,’ meaning that Qualcomm could not revive the lawsuit later.
Here’s where the proceedings become anything but routine. Even though the comprehensive settlement was in place, Apple pursued its appeal to federal court from its loss in the USPTO decision. The Federal Circuit Court of Appeals decided that Apple did not have an adequate interest in the outcome to create a ‘case’ or ‘a controversy,’ and dismissed the appeal.
But how could that be? Under the settlement, Apple was liable for royalty payments which would not change regardless of the outcome of the appeal, so Apple’s royalty payment obligation did not create a case or a controversy.
The settlement agreement had a life of only six years, and Apple argued that it could be liable under the same patents at the end of the agreement. However, Apple failed to allege or provide evidence that it intended to infringe the patents after the settlement agreement expires, so any future harm to Apple was purely speculative. Apple’s inability to challenge the patents on the same grounds in the future was similarly speculative. As the court said: “Ultimately, Apple’s assertions amount to little more than an expression of displeasure with a license provision into which it voluntarily entered.”
The takeaway? Courts are different from administrative agencies. A party appealing from an agency decision must demonstrate to the court that the party has an actual and concrete interest in the result before the court will even consider the appeal.
— Robert Yarbrough, Esq.