A series of motions in the ongoing battle between tech blue chips Qualcomm and Apple about whether the Southern District of California (or any federal court) has jurisdiction to hear additional patents-in-suit in Apple’s amended complaint raises the question of exactly what actions a patent holder must undertake to create an actual case or controversy for a patent-law declaratory judgment action.
Apple, who filed its original complaint against the mobile phone chips giant in January, alleging it overcharged for licenses to use its chip patents and withheld over a billion dollars in royalties, expanded its suit in July to add an additional nine Qualcomm patents. Apple asked that the court issue a declaratory judgment that those patents were not essential to manufacturing iPhones and that Apple had not infringed them. Qualcomm responded by moving for the dismissal of Apple’s amended claims relating to those nine patents on the grounds that the court lacked subject matter jurisdiction to hear them, claiming the patents are not in dispute. Instead, Qualcomm alleged in its introduction that the additional claims “are a product of Apple’s worldwide strategy against Qualcomm to create vexatious and costly litigation.” And, by asking for a declaratory judgment on these undisputed patents, Apple is “seeking the functional equivalent of an advisory opinion” thereby inviting the court to “indulge in its strategy of oppression.”
Qualcomm then argued that without some “affirmative act” on its part creating a real threat of patent litigation based on the nine additional patents, there could not be any case or controversy among the parties with respect to those patents. Without an actual case or controversy as required by Article III of the Constitution, the court lacks subject matter jurisdiction to hear the action. Qualcomm stated that is the case because it has never asserted any of those nine patents in an infringement action against any party, nor stated they were essential to any standard practiced by Apple and, therefore, no threat to Apple existed. Moreover, Apple’s cited basis for its contention that there is a case and controversy between the parties was the inclusion of the nine patents in a list of patents that Qualcomm declared to the European Telecommunications Standards Institute as potentially essential to a standard, which Qualcomm shared with Apple during license negotiations. This evidence was lacking according to Qualcomm because it did not accuse Apple of infringing any of those patents at the time they shared the list, nor did it “state that any particular patent was actually essential . . . as opposed to declared potentially essential” to any standard practiced by Apple. When Qualcomm ultimately did provide Apple a claim chart asserting potential infringements, none of the nine patents were in that chart. Therefore, Qualcomm argued, Apple could not point to any affirmative act by it to show its intent to enforce those nine patents.
In its response, Apple argued that the case or controversy requirement was met because “the overall context of Qualcomm’s actions and statements” supports its assertion that Qualcomm has threatened the company with patent litigation. Apple stated that during license negotiations, Qualcomm treated all of its standard essential patents as essential in order to inflate the royalties it could extract from Apple. Further, Qualcomm “refused to provide information on which patents it believed were essential, instead pointing to the fact that its patents have been declared essential to 3G and 4G standards and that Apple products are certified for such standards.” By using those claim charts as leverage in its license negotiations, Apple alleged Qualcomm did indeed engage in “affirmative acts” that showed its willingness to enforce its patent rights against the company.
The court has yet to rule on these motions but the result will be of interest for patent and license holders alike. The court’s decision may shed light on how far patent holders can go in their attempts to suggest potential enforcement of patents in order to leverage higher licensing fees without having to actually litigate the nature of those patents. Leaving the factual disputes to the side, a decision for Qualcomm may suggest that patent holders can do everything short of uttering an affirmative threat of litigation without creating an actual case or controversy. This would likely favor large patent portfolio holders such as Qualcomm because without an opportunity to discover the four corners of the patent(s), license holders would be at a distinct disadvantage in negotiating and countering the royalty claims of patent holders. That said, the Constitution places important bounds on the reach of federal courts which the courts themselves do not treat lightly. The court here may tell Apple and other license holders that they cannot invoke Article III jurisdiction without more than suggestion and innuendo.