The US Court of Appeals for the Federal Circuit ruled that a party did not have Article III appellate standing to obtain review of a final ruling of the Patent Trial & Appeal Board because the underlying district court proceedings had been dismissed with prejudice after a settlement and license agreement were reached. Apple Inc. v. Qualcomm Inc., Case Nos. 20-1561; -1642 (Fed. Cir. Apr. 7, 2021) (Moore, J.)
After Qualcomm sued Apple in district court, Apple filed petitions for inter partes review (IPR) of the asserted patent claims. The Board instituted on both petitions but found that Apple did not prove the challenged claims were obvious. Apple appealed the Board’s final written decisions finding non-obviousness.
While the IPR proceedings were pending, the parties settled their litigation worldwide. The settlement included a license to Apple and payment of royalties to Qualcomm. The parties filed a joint motion to dismiss Qualcomm’s district court action with prejudice, which the district court granted.
At the Federal Circuit, Qualcomm argued that Apple waived any argument to establish its appellate standing by failing to address or submit supporting evidence in its opening brief. However, the Federal Circuit exercised its discretion to reach the issue of standing, explaining that the issue of standing was fully briefed, there was no prejudice to Qualcomm, and the question of standing impacted these and other appeals. Qualcomm sought leave to file a sur-reply addressing Apple’s evidence and arguments on standing, and agreed that if its motions to file a sur-reply were granted, it would not suffer any prejudice, and that evaluating the evidence may resolve standing in other pending cases. The Court granted Qualcomm leave to file a sur-reply.
Apple argued that it had appellate standing based on its ongoing payment obligations that conditioned certain rights in the license agreement, the threat that Apple would be sued for infringing the two patents-at-issue after the expiration of the license agreement, and the estoppel effects of 35 USC § 315 on future challenges to the validity of the asserted patents. The Federal Circuit disagreed.
Distinguishing the 2007 Supreme Court case MedImmune v. Genentech (where standing was found based on license agreement payment obligations after analyzing evidence for injury in fact or redressability), the Federal Circuit explained that Apple did not allege that the validity of the patents-at-issue would affect its contract rights and ongoing royalty obligations. The license agreement between the parties involves tens of thousands of patents. Apple did not argue or present evidence that the validity of any single patent (including the two patents-at-issue) would affect its ongoing payment obligations, or identify any related contractual dispute that could be resolved through determining the patents-at-issue’s validity. Accordingly, the Court concluded that Apple failed to establish Art. III standing under MedImmune.
THREAT OF POST-LICENSE SUITS
Apple’s second argument was based on the possibility that Qualcomm might sue Apple for infringing the patents-at-issue after the license expired. The Federal Circuit found the mere possibility of any such suit too speculative to confer standing, as Apple provided no evidence that it intended to engage in any activity that may give rise to an infringement suit. The Court noted that neither of Apple’s supporting declarations mentioned the patents-at-issue or set forth plans to engage in conduct post-license-expiration that might lead to a suit. Neither of the declarations included any mention that Apple had any plan to make, use, offer to sell, or sell any of the products or features accused of infringement in the district court. Apple requested that the Court take judicial notice that Apple sells and will continue to sell smart phone products, but the Court refused to act as “fortune-tellers” of “[w]hat products and product features Apple may be selling at the expiration of the license agreement years from now,” which it considered to be reasonably questionable—not undisputed facts. Without such evidence, the Court could only speculate about what activity Apple might engage in after the expiration of the license agreement that would give rise to a potential Qualcomm suit.
Apple also argued standing based on Qualcomm’s refusal to grant Apple an irrevocable license or other permanent rights in the patents-at-issue, and Qualcomm’s history of asserting patents against Apple after certain royalty agreements expired. Again, the Federal Circuit concluded that Apple’s allegations were only speculation and conjecture about Qualcomm’s proclivity to assert its patent rights generally, devoid of the specificity necessary to show that Qualcomm was likely to assert the patents-at-issue against any particular products which might be sold after the license agreement expired.
Thus, the Federal Circuit concluded that Apple’s professed injuries did not meet the Lujan standard of showing “actual or imminent, not conjectural or hypothetical harm.”
35 USC § 315(E) ESTOPPEL
Lastly, Apple argued that its injury would be compounded by the likelihood that 35 USC § 315(e) estoppel would prevent it from arguing that the two patents-at-issue would have been obvious in future disputes. However, citing its 2019 decision in AVX v. Presidio Components, the Federal Circuit reiterated its rejection of the estoppel provision as a sufficient, independent basis for standing.
Finding no standing, the Court dismissed Apple’s appeals without reaching the merits.
Practice Note: If an appellate standing challenge is likely, an appellant is well advised to get ahead of such arguments in its opening briefing. When standing is in doubt, declarations or other evidence to support appellate standing should be presented in the appellants opening brief. Such evidence may include the effect of patents-at-issue on business contracts or license agreements, likely future commercial activity and other elements that may support particular, non-speculative, imminent harm should the parties’ agreement fail or a suit be brought post-expiration of any license(s).