Not the first rodeo for patents asserted against Apple

In trying to read the tea leaves on the case recently filed on May 26 against Apple Inc. and Broadcom by the California Institute of Technology, California Institute of Technology v. Broadcom Ltd., 16-3714 (C.D. Cal.), a telling document in the pleadings includes Caltech's notice of potentially related cases. In Caltech's notice, it discloses that the same patents-in-suit being asserted against Apple were previously asserted in the same district court in two cases against Hughes Communications Inc. et al.: 13-7245 (C.D. Cal.) and 15-01108 (C.D. Cal.). In these two cases, the parties filed a joint stipulated motion for dismissal with prejudice on May 25, which was granted on May 27. Thus, this is not the first rodeo for the patents being asserted against Apple, nor did Caltech waste any time in going after Apple after moving to dismiss its cases against Hughes and company.

Turning to the cases against Hughes, on Nov. 3, 2014, an order was issued by the Central District of California denying Hughes' motion for summary judgment on the grounds that the asserted claims were patent ineligible under 35 U.S.C. Section 101. Here, the court noted that "Caltech's patents improve a computer's functionality by applying concepts unique to computing (like using a linear transform operation to encode data) to solve a problem unique to computing (data corruption due to noise)." It is worth noting that such logic appears to be consistent with subsequent U.S. Court of Appeals for the Federal Circuit reasoning on the controversial topic that has invalidated so many software and business method patents.

Also in the Hughes cases, a notice of decisions was filed by Caltech on April 28, 2015. The notice disclosed that in October 2014, Hughes filed before the Patent Trial and Appeals Board (PTAB) a total of six petitions for inter partes review of the four patents-in-suit. On April 27, 2015, the PTAB rejected five of the petitions in their entirety, finding that the information presented by Hughes did "not establish a reasonable likelihood that Petitioner would prevail." In the remaining sixth petition, the PTAB instituted a review of two claims of one of the patents. On April 21, 2016, the PTAB found these two claims unpatentable.

In the PTAB action, Hughes asserted the same prior art it asserted against Caltech in the actions before the Central District. One difference between the two forums, however, is that the five petitions filed by Hughes before the PTAB were rejected as not having a reasonable likelihood of success under the "preponderance of the evidence" standard, which is a lower standard than the "clear and convincing evidence" standard in district courts. Moreover, the PTAB's decision was final and Hughes was precluded from appealing the decision not to institute an inter partes review to the Federal Circuit.

On May 5, 2015, the Central District granted Caltech's motion for summary judgment as to no indefiniteness and no equitable estoppel, and denied its motion for infringement, no inequitable conduct and no laches. The court also denied Hughes' motion for summary judgment as to invalidity of the patents-in-suit. These decisions came in light of a claim construction order issued earlier on Aug. 6, 2014. Thus, all of the parties were left with significant leverage for trying to reach a settlement.

The joint stipulated motion for dismissal with prejudice that was filed last month in both cases evidences the outcome of such settlement negotiations. In it, the court is informed that the parties "have entered into a license of the patents asserted in this action." Assuming Caltech has a colorable infringement claim against Apple, this could likely be where the present case is headed.

University technology transfer offices tend to be reasonable in preferring a license to recoup some gains for its institution's investment in technology versus pursuing prolonged litigation in order to stop a company from obtaining market share. Caltech's strategy against Apple could very well be to use its apparent victory in licensing the patents-in-suit to Hughes to drive a deal with Apple. The strength of the patents-in-suit has been somewhat showcased in the case against Hughes, and Caltech may be hoping this deters Apple from going down the same path as Hughes in attempting to discredit the patents.

One notable difference between Caltech's actions against Hughes as compared to its actions against Apple is that based on the complaint against Apple, as hard as it is to believe, this lawsuit might have come as a surprise to Apple. Specifically, the complaint states, "[o]n information and belief, Broadcom and Apple have had actual knowledge of their infringement of the '710 patent since no later than the filing date of this Complaint." The form of this pleading is used for the remaining patents-in-suit.

In contrast, the first complaint against Hughes states, "Hughes Defendants have had actual knowledge of their infringement of the '710 patent before the filing date of this Complaint through letters alleging such infringement, or at least have had actual knowledge of their infringement of the '710 patent since no later than the filing date of this Complaint." The form of this pleading is used for another one of the patents-in-suit. Given that both complaints appear to have been prepared and filed by the same attorneys, this suggests Apple might not have received a warning shot across the deck.

Assuming such lack of early warning, perhaps Caltech believes a "shock and awe" approach is the way to proceed against Apple. According to the complaint against Apple, "Broadcom markets and sells Wi-Fi products to customers such as Apple with the knowledge that those products will be incorporated into other products and imported into and sold in the United States" and "Apple is one of Broadcom's largest customers." Accordingly, Caltech may be of the belief that Apple will be looking to Broadcom to help it out of this situation and an aggressive approach coupled with an apparent recent victory is the best way to motivate these defendants to get in line behind Hughes and take a license to the patents-in-suit.

K. Brian Bathurst is senior counsel in the Intellectual Property Practice Group at Carr & Ferrell LLP in Menlo Park, CA. His practice includes patent prosecution, litigation and strategic counseling.