Quarterhill Inc T.QTRH

Fed. Circ. Groans At Idea Of 3rd Apple-WiLan Patent Trial

[Lazaros]

Fed. Circ. Groans At Idea Of 3rd Apple-WiLan Patent Trial JULY 21, 2020 Law360 (October 8, 2021, 8:39 PM EDT) -- No one on a Federal Circuit panel seemed excited about sending a patent dispute between Apple and licensing firm WiLan Inc. back down for a third damages trial, but that option remained on the table Friday during arguments over the tech behemoth's challenge to an $85 million verdict. U.S Circuit Judge Kimberly A. Moore "lament[ed] the notion of potentially sending this back for third trial" amid Apple's argument that the lower court incorrectly allowed vague expert testimony about the value of the patents that should have been excluded. "Can't you all just settle this?" Judge Moore asked. The parties have been through two damages trials already. The first wrapped up in 2018 and saw Apple smacked with a $145 million jury verdict for infringing two of WiLan's patents dealing with wireless communication technology. But the court later took issue with the way those damages had been calculated and gave the licensing firm the option of taking a dramatic cut down to $10 million or a retrial, with WiLan choosing the latter. That option appeared to be the best route when a second jury awarded WiLan $85 million in early 2020. But Apple argues that the calculation was still off, saying that the jury was exposed to an unacceptably vague expert opinion that two patents from Wi-Lan's 1,000-patent portfolio were worth about 75% of the whole. Judge Moore said that if the panel agreed with Apple, she saw no other relief than to "just go back for a new trial on damages" which was frustrating. The tech behemoth agreed that if the judges weren't convinced by its arguments about claim construction but did accept its views on the expert testimony, it would have to "go back and try again." U.S. Circuit Judge Sharon Prost, however, wondered whether there was a way to close the door on a third trial. "There's no case that says two tries and you're out," she said, eliciting laughter from her fellow panel members. "But is there a basis for saying that the other side has had several opportunities to make their case on damages?" The burden lies with the injured party to make the case for damages, she said. "I don't want to make a case argument for you, but I'm just following up on" what Judge Moore said, Judge Prost added, laughing when counsel for Apple said that they would accept that result. "Yeah, I know you would." Apple's other arguments centered around claim construction that WiLan's patent definitions "ignore[d] the context" of the invention and proposed an inflated theory of "direct" infringement. The instant dispute has been broiling since 2014, when Apple filed suit asking for the court to declare that it hadn't been infringing several of the Canadian patent licensing company's patents. WiLan followed with counterclaims and by the time the matter was before a jury, the licensing firm had focused just on claims from two patents. Those patents cover technology used in voice over LTE wireless communications technology, including that used in various iPhones, according to court filings. U.S. Circuit Judges Kimberly A. Moore, Sharon Prost and William Bryson sat on the panel for the Federal Circuit. The patents-in-suit are U.S. Patent Nos. 8,457,145 and 8,537,757. Apple was represented by Mark S. Davies of Orrick Herrington & Sutcliffe LLP. WiLAN was represented by Jeffrey A. Lamken of MoloLamken LLP. The case is Apple Inc. v. Wi-LAN Inc., case number 20-2011, in the U.S. Court of Appeals for the Federal Circuit. --Editing by Michael Watanabe.

[wilander]

The real problem here is that Apple isnt interesting in settling whether they are right or wrong. Delays, drawing it out, costing patent holders money is their goal and only goal. Would be nice to find a judge(s) who had the conviction to teach them that is not what the courts are for. I am sceptical these three have such conviction. Sadly.

[v_guerriero]

They have in the past when they sided with VirnetX.   They are concerned with "headline" risk and also with the Supreme Court reviewing another one of their patent decisions.   I actually read into the judges line of questioning on damages that they had less of a problem on the Madisetti opinion from the first trial.  The approach tied the value of the invention to

[SixMileLake777]

Hey V and Cabbie can you remind me. The case in Germany against Apple. Same patents? skid

[cabbieJBJ]

No Skid, they are different. I believe they are 3 German semiconductor patents from Polaris that relate to memory interface used in Apple’s application processors.

[redcoats]

The courts in Germany might not be quite as "patient" as they seem to be towards Apple in the U.S.

[v_guerriero]

I don't think people realize that the court of appeals decision will likely start by saying the following, the CAFC: 1.  Confirms that WiLan's VoLTE patents are valid 2.  Apple infringes the WiLan patent It is a very big deal to have patents found valid and infringed that are foundational to a wireless standard.   That puts any practicing chip of VoLTE that has been

[wilander]

You do know that Wilan has been priced at zero and we have been screaming about it, to no avail, FOR YEARS. Right? Just sayin'.

[v_guerriero]

Not true.  Frankly, QTRH remains incredibly undervalued.  ETC changed the valuation game entirely.  It is because of that which makes the valuation ludicrous.  Never have we traded with the WiLan patent portfolio vs 0, except for 2 very brief periods in the stock's history.  Yet here we are again.   The statement that WiLan is worth zero will remain true until

[cabbieJBJ]

I've relistened to the total hearing and portions several more times.  This is my read before turkey time. The court seemed uninterested in the claim construction and thus infringement, so I agree with v_g in stating that the court will:   Confirm that Wilan’s VoLTE patents are valid; and Confirm that Apple infringes the Wilan patents. That is very important, as noted

[Capharnaum]

I agree with Cabbie's assessment of Friday's events. When Quarterhill receives money from this, they will be able to do another ETC size acquisition!

[v_guerriero]

Thanks Cabbie.  Another outstanding post. I had a lawyer that has argued at the CAFC take a listen and give me his perspective.  Let me share his perspective. He concurs that this is just about damages.   His view was that (1) The judges spend their time on where they think the decision rests.  They go directly to the area of the law that is grey.  They don't

[ChiChi3]

Thanks for this perspective V-G but which jury verdict is going to be affirmed by the judges?  If it's the second verdict of 45 cents, my main concern would be the Samsung issue that was part of the court documents.  The argument the WiLan seemed to be making was that if they took a settlement at too low a price, then that would invoke a 'most favoured nation' clause in the

[v_guerriero]

He didn't have a view.   You are talking $350 vs $550M CAD in the total damages including Intel and all of the post litigation iPhones. Samsung paid $50M for a lump sum license.  You can see the financial impact in the qtr after they announced it.  The adjustment right even if it wiped out 1/2 the Samsung license is immaterial.  But the adjustment right will probably

[astutein]

V-G Our current  case was filed  6/23/2014 . On Sept 29/ 2017 Wilan announced a renewal  COMPREHENSIVE  LICENSE AGREEMENT WITH  SAMSUNG.  Terms  are confidential.   so comment " But the adjustment right will probably not be invoked at $ .45 as this would just be for 2 patents and not the whole portfolio"  is very reasonable comment

[ChiChi3]

You may be right about the materiality of any Samsung clawback V-G.  Thanks for your reply. chi

[onlygame]

just to recall, ... but didn't Samsung get a preferrable rate because they were willing to be honest and negotiate in good faith. Apple can't seriously be be expecting similar terms after being so difficult and costing everyone so much time and money to deal with their bullying and dirty tactics.

[cabbieJBJ]

Wouldn't it be the case that if Wilan gets a court award that means they have not granted a license to Apple and therefore are not on the hook for undercutting the Samsung license rate? Is this possibly an impediment to settlement?

[v_guerriero]

Two things I failed to mention here: - His view is both Apple and WiLan know exactly where they stand now.  It is all about damages.  He did mention that WiLan's lawyer almost sounded "gleeful" when it was his turn to start his argument.  He agreed with my language that the hearing "greatly narrowed the issues"... both parties know exactly where they stand.

[wilander]

Not exactly getting the virnetx bounce we wanted. While I agree we should win, anyone really watching the orals sees this as 50-50 or less I guess .

[mrmoribund]

Even if it were only 50-50 the stock should still go up. Of course it is up a little bit--it was around $2.40 not long ago. But I agree that the current price is not reflective of what happened at the hearing. It's also not reflective of that recent hire at ETC and what it appears to indicate. Basically, I doubt Darby Swank would have joined ETC without a pretty solid conviction that what

[cabbieJBJ]

Wilander, I don't think the market sees it as a binary 50/50 event.  The issue is that the market is unable to see the amount with any degree of certainty, so it will sit on the sidelines.  The upside ranges from Chi's minimal to v_g's parabolic.  Minimal = Apple's remittittur amount fo $10M, which wouldn't move the stock price much.  Parabolic = Masotti'

[wilander]

Well yes, i just threw 50-50 out there to say nothing was clearly decided according to investors. And yes, we are still unknown.  No one knows about us as Quarterhill, no one understood us as Wilan.  A long standing beef with me. Never seen a mgmt so incompetent on that front. And while being known may be the future my friend...with this mgmt/BOD....the past says I doubt it. 

[v_guerriero]

Pull up the one month chart. The direction is up.  People are (wisely) not selling.  This is wound up.  We've already taken a run at $3 a few times... and holding just below that level.   We await the catalyst.  Paul Hill - please provide the catalyst. This stock will rocket.    

[v_guerriero]

And a perfectly acceptable news release would be another major ITS acquisition funded by the Motorola settlement+ cash on hand.   In addition, the announcement of the $200M in fixed rate loans to finance the balance of the acquisition and to refinance the HSBC floating rate loan. I think we would all like that very much. :)

[ElJ]

Thank you cabbie for your energy and time invested in reasonable and experienced analysis and the sharing of your perspective. My thought process includes agreement with you on the following issues:  -  The focus of the oral argument was overwhelming on damages.  -  My innocent expectation is that the court will, as you have indicated in your assessment, Confirm that

[SixMileLake777]

I agree with EIJ who agreed mainly with Cabbie. V,  I am sorry I couldn't jump with your excitement since we've been trying this to long. I have been a Debbie downer. Forgive me Cabbie i am waiting for our payday skid

[v_guerriero]

No worries.  Seems like many investors here have PTSD.  And are looking at the current situation through the prism of the past. Never has WiLan beat a major corporation in court on a foundational 4G patent.  Frankly few companies have.  Intellectual Ventures, Interdigital to name a couppe.   Not only is this going to be very valuable for our current wireless portfolio

[wilander]

I hope you are right but they have their own in-house lawyers so there isnt more lawyer fees and even if they didnt, they could care less of the cost. They have a bajillion in their bank account. They just hate to lose and wont willingly is my take. I expect only the court decision will solve this, no settlement before. I'd love to be wrong. I can wait until Dec. I will be adding a little more

[v_guerriero]

The judges had a very strong command of the issues.  And as the chief judge said, these issues are narrow.   I expect this to be communicated within 2-3 months.   The beauty of this situation is that the stock price already assumes a loss.  I don't think Quarterhill feels the same pressure to settle this.  You can already see it in their corporate presentation to

[cabbieJBJ]

v_g, I can't agree with your phrasing, "The beauty of this situation is that the stock price already assumes a loss."  I think it would be more appropriate to say that the stock price already does not factor in a win.

[whaler83]

No doubt there will be an overreaction to a loss or a re trial

[cabbieJBJ]

I agree with you Whaler.  If anything, buy the dip. 

[ChiChi3]

I listened to the hearing again thinking I may have panicked when I sold some of my position on Friday.  But after doing so, and the IAM article, I satisfied with what I did.  There is no way you should feel better about the stock now than you did before the hearing.  Lamkin wasn't able to defend our position on any of the issues raised by the judges.  I was embarrassed for

[v_guerriero]

#paperhands

[valueist]

In house counsel at large corporations are project managers with a law degree. The litigation firm that Apple has hired is McKool Smith: McKool Smith Home Page and their principals are named in the reply brief from Jeffrey Lamken. 

[cabbieJBJ]

valueist, you should know that McCool Smith is Wilan's lawyer.

[valueist]

Doh! You are right of course, cabbie; I was looking at the wrong doc. Here's the Apple representatives: Sean C. Cunningham Stanley J. Panikowski Erin P. Gibson DLA PIPER LLP (US) Mark S. Davies Thomas King-Sun Fu Benjamin P. Chagnon James Anglin Flynn Katherine M. Kopp ORRICK, HERRINGTON & SUTCLIFFE LLP

[redcoats]

When something's rotten, it's also slimy, in my experience.