Federal Circuit Finds Insufficient Evidence to Establish Standing to Appeal IPR Decisions in Apple Inc. v. Qualcomm Inc.
On April 7 2021, the Federal Circuit in Apple Inc. v. Qualcomm Inc., No. 20-1561, — F.3d —-, 2021 WL 1287437, *1, *5 (Fed. Cir. Apr. 7, 2021), held that Apple failed to establish standing to appeal inter partes review (IPR) decisions by the Patent Trial and Appeal Board (PTAB), which found that Apple did not prove that Qualcomm’s patents were obvious. The decision was based on the Federal Circuit Panel’s determination that, among other things, Apple’s settlement of a global patent litigation with Qualcomm and license to the patents-at-issue in the IPRs (as well as many other patents) meant that there was not a sufficient case or controversy to support standing.
As background, Qualcomm sued Apple in district court alleging infringement of certain claims of U.S. Patent Nos. 7,844,037 and 8,683,362. Id. at *1. Thereafter, Apple filed IPR petitions against those claims. Id. Ultimately, the PTAB decided that Apple did not prove that the challenged claims would have been obvious. Id. Prior to the present appeals, both companies settled all litigation between them and jointly moved to dismiss Qualcomm’s lawsuit against Apple concerning these same patents with prejudice. Id. As a part of the settlement, both parties executed a six-year license agreement, which included a license to the patents at issue and, as Apple admitted, a covenant-not-to-sue related to those patents. Id. at *2. Nonetheless, Apple moved forward with the filing of the present appeals of the Board’s IPR decisions. Id. at *1.
To establish standing, “an appellant must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [appellee], and (3) that is likely to be redressed by a favorable judicial decision.” Id. at *1 (quotation omitted). The standing issue on appeal was primarily focused on whether Apple could establish an injury in fact—that is, a harm that was “concrete and particularized and actual or imminent, not conjectural or hypothetical.” Id. (quotation omitted). While standing is not required to seek inter partes review under the Patent Act, the Panel noted that “an appellant ‘must supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in federal court.’” Id. at *1 (quoting Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168, 1171-72 (Fed. Cir. 2017)).
Prior to resolving the standing issue on the merits, the Panel addressed Qualcomm’s assertion that Apple waived any argument as to standing because Apple failed to address or submit evidence in support of standing in its opening brief. Apple, 2021 WL 1287437 at *2. The Panel noted that the court in Phigenix had held that “an appellant must identify the relevant evidence demonstrating its standing ‘at the first appropriate’ time, whether in response to a motion to dismiss or in the opening brief.” Id. (quoting Phigenix, 845 F.3d at 1173 (Fed. Cir. 2017)). And the Panel further reasoned that because of “the global settlement between the parties, Apple should have made its standing arguments and proffered its evidence in support of standing in its opening brief.” Id. at *2. The Panel, however, highlighted that the court has “consistently held that waiver is a matter of discretion” and that the court has exercised this discretion to reached waived issues “where, among other factors, the issue has been fully briefed by the parties.” Id. (citing Ericsson Inc. v. TCL Commc’n Tech. Holdings Ltd., 955 F.3d 1317, 1322-23 (Fed. Cir. 2020) (quotations omitted)).
Here, the Panel determined that the issue of Apple’s standing had already been fully briefed, there was no prejudice to Qualcomm from considering the issue, and the question of standing impacted these and other appeals. Id. at *2. Interestingly, Qualcomm, in its motion for leave to file a sur-reply to Apple’s evidence and arguments on standing, admitted that if the motions were granted it would not suffer prejudice. Id. Additionally, Qualcomm admitted that evaluating the evidence would resolve standing in other pending cases. Id. Thus, the panel exercised its discretion to review the standing issue. Id.
As to the merits, Apple argued that it had standing based on (1) its ongoing payment obligations under the license agreement; (2) the threat that it would be sued for infringing the patents at issue after the expiration of the agreement; and (3) because of the estoppel effects of 35 U.S.C. § 315 on any future challenges that Apple could bring against the validity of the patents at issue.
Apple’s first argument focused on its ongoing license payment obligations, in view of the Supreme Court’s holding in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). Specifically, Apple argued based on MedImmune that its “ongoing payment obligations as a condition for certain rights [under the license agreement] provid[ed] standing.” Id. at *3. Finding the facts of MedImmune distinguishable and the holding less broad in scope, the Federal Circuit disagreed. See id. In MedImmune, the issue was whether royalties were owed under a license agreement when the patent at issue in that case was, according to Medimmune, invalid and did not cover its product. See id. (citing MedImmune, 549 U.S. at 121-22). After paying the royalties under protest, Medimmune had filed a declaratory judgment action asking the court to find that it did not owe royalties because its product did not infringe any valid claim of the Genentech’s patents at issue. Apple, 2021 WL 1287437 at *3 (citing MedImmune, 549 U.S. at 122-23). Under the reasoning of Medimmune, the Panel decided that the fatal flaw in Apple’s argument was that Apple nowhere alleged that the validity of the ’037 or the ’362 patent would affect any of its contractual rights, including its ongoing royalty obligations. Id. at *3. The license agreement between Qualcomm and Apple covered “tens of thousands of patents,” and Apple did not provide “evidence that the validity of any single patent … would affect its ongoing payment obligations.” Id. Therefore, the Panel found that Apple’s standing argument rooted in its ongoing payments obligations failed. Id.
As to Apple’s second argument, Apple asserted that it had standing because of the possibility that Qualcomm may sue Apple for infringing the ’037 and ’362 patents after the license expires. Id. at *4. According to the panel, numerous factors weighed against the sufficiency of this argument making the “possibility of suit too speculative to confer standing.” Id. Apple provided no evidence that it intended to engage in infringing activity after the license expires. Id. In fact, in its declaration submitted as evidence of standing, there was not even a mention of the ’037 and ’362 patents. Id. Further, there was no indication in the declaration that Apple planned to engage in infringing conduct post license expiration, such as plans to make or use the products accused of infringement in the original district court action (e.g., the iPhone 4, 5, 6, and 7). Id. According to the Panel, the declarations were “devoid of any of the specificity necessary to establish an injury in fact.” Id.
Citing Grit Energy Sols., LLC v. Oren Techs., LLC, 957 F.3d 1309, 1320 (Fed. Cir. 2020), Apple argued that Qualcomm’s original district court action for infringement of the ’037 and ’362 patents provided evidence of standing. Id. But this was of no avail. The Panel pointed out that unlike Grit Energy, which involved a dismissal without prejudice, the district court action here was dismissed with prejudice. Id.
Similarly, Apple’s assertion that standing should exist because of Qualcomm’s refusal to grant Apple permanent rights in the patents at issue and Qualcomm’s history of asserting patents against Apple after agreements have expired was also insufficient. Id. The Panel determined that, at best, Apple’s assertion was “speculation and conjecture about Qualcomm’s proclivity to assert its patent rights generally.” Id. But the assertion was “devoid of the specificity necessary to show that Qualcomm is likely to assert these particular patents against any particular products” upon license agreement expiration. Id. Thus, Apple had “failed to show an injury in fact based on potential future allegations that its products infringe the ’037 patent or the ’362 patent.” Id.
Lastly, Apple’s third asserted basis for standing was that 35 U.S.C. § 315(e) would estop it from arguing that the patents at issue would be obvious in future disputes. Id. Quickly dismissing this assertion, the Panel responded that “[w]e have already rejected invocation of the estoppel provision as a sufficient basis for standing.” Id. (citing AVX Corp. v. Presidio Components, Inc., 923 F.3d 1357, 1362-63 (Fed. Cir. 2019)).
Because Apple had failed to establish standing, the Federal Circuit ultimately dismissed the appeal. Id. at *5.
This decision provides an interesting discussion about waiver and standing issues that may arise when appealing IPR decisions involving a licensee and licensor. Given the global settlement of all litigation between the parties, the dismissal with prejudice of Qualcomm’s district court action, and the numerous patents at issue in the license agreement beyond those at issue in the IPRs, the Federal Circuit determined that there was no case or controversy that remained to support standing to hear the appeal of the IPR decisions. Indeed, the Panel seemed somewhat surprised that Apple pursued the appeal. As one potential reason, the Panel framed the situation as Apple’s “displeasure with a license provision into which it voluntarily entered.” Id. at *3. The Panel further suggested that Apple’s argument that “cancellation of the ’362 patent would redress its ongoing payment obligations because it would remove a significant barrier” perhaps provided another theory. Id. at *3 n.4. But as the Panel noted, Apple did not provide an explanation as to why the ’362 patent created a barrier, nor did it provide a reason why cancellation thereof would be likely to affect its payment obligations. Id. Thus, the Panel’s decision provides guidance for practitioners who are structuring license and settlement agreements and who may want to maintain standing for future appeals of IPR decisions. In addition, the waiver discussion provides insight for those who are briefing such appeals.