|

The $5 Billion Smartphone Payment Plan

A billion here, a billion there. Pretty soon you're talking class certification.

That's what I found myself thinking while digging into the Qualcomm antitrust litigation pending before U.S. District Judge Lucy Koh.

I reported yesterday that Koh denied the putative class' motion to preempt any International Trade Commission exclusion orders. But class certification, which is scheduled for argument Sept. 27, is the bigger kahuna.

The plaintiffs feature a dream team headlined by Susman Godfrey's Kalpana Srinisvasan, Cotchett Pitre & McCarthy's Joe Cotchett and Hagens Berman Sobol Shapiro's Steve Berman. They contend that Qualcomm's anti-competitive conduct has forced the likes of Apple, Samsung, LG, Huawei and other equipment makers to pay above-FRAND royalties for Qualcomm technology. That results in higher prices for consumers, lower-quality phones, “or a combination of the two,” they say.

According to Qualcomm, the plaintiffs are proposing a class of 250 million purchasers and seeking damages of $4.99 billion. Or as Qualcomm describes it, “a sprawling agglomeration of indirect purchasers” that is “virtually unprecedented in size and scope.”

The star of this class is the spectacularly conspicuous American smartphone shopper—and the cellular network carriers, retailers, employers and insurers who enable them. For example, one of the named plaintiffs purchased a Google-branded Motorola Nexus 6 in 2014 for an unknown price. He received a Samsung Galaxy S6 in 2015 from an insurer to replace it. The next month he sold that phone for $410 and bought a Huawei Nexus 6P from the Google Store, paying $0 down and 24 monthly installments of $22.88. When that contract ran out, he bought a Google Pixel 2 XL from the Google Store for 24 monthly payments of $35.38.

Other named plaintiffs have similarly idiosyncratic buying histories, according to Qualcomm. They “demonstrate the wide variety of distribution channels, price points, promotions and subsidies, and payment arrangements encompassed within the class,” states Qualcomm, whose signature block includes Keker, Van Nest & Peters' Robert Van Nest; Cravath Swaine & Moore partner Gary Bornstein; and former FTC general counsel (and now Morgan Lewis partner) Willard Tom.

What's intriguing about this showdown is that Judge Koh has seemed hospitable to the plaintiffs' antitrust theory to this point. She was careful to deny the ITC injunction this week without prejudice. And as the plaintiffs like to point out, the European Commission, China, South Korea and Taiwan have all penalized Qualcomm for anticompetitive practices, and the FTC is trying to crack down too.

So with a favorable playing field, the plaintiffs are stepping up and swinging for the fences.

Who's Arguing?

The next week (and a half) are calendar weeks at the Federal Circuit. Here are a few of the cases I'll have an eye on:

➤ Valeant Pharmaceuticals International v. Mylan Pharmaceuticals The court will hear arguments in three separate appeals in which Valeant and a subsidiary are seeking to disqualify Katten Muchin Rosenman. Valeant contends that, despite its being a longtime Katten client, the firm brought aboard a group of laterals from Alston & Bird in April who have been litigating two ANDA cases and a related IPR against the company. Katten says it only represented Valeant subsidiary Bausch & Lomb in unrelated trademark and copyright proceedings, and that Valeant's engagement letter demands the strictest loyalty only from “key external firms” with billings of more than $1 million per year. (Valeant says Katten has billed $4.3 million over the last seven years.) Two of the appeals were fully briefed and set for argument last July when the Federal Circuit postponed them to hear the DQ motions, which seems like an ominous sign for Katten.

Finnegan, Henderson, Farabow, Garrett & Dunner partner Charles Lipsey and Mary Bourke of Womble Bond Dickinson will split time for Valeant and subsidiary Salix Pharmaceuticals. Katten partner and general counsel Michael Verde will present his firm's defense.

➤ D'Agostino v. MasterCard International I flagged this appeal in a previous Skilled in the Art as having low probability of success but a potential fat tail of impact. Patent owner John D'Agostino lost before the PTAB in 2015, persuaded the Federal Circuit to vacate those decisions, but then lost again at the PTAB on remand. Now D'Agostino argues that the PTAB exceeded the America Invents Act's 18-month limit for deciding IPRs, and that any patent owner who is successful on appeal should be done with the IPR process. MasterCard and the PTO argue that federal appellate courts are empowered by law to remand cases for further proceedings. They also point to Supreme Court precedent holding that statutory deadlines aren't binding on federal agencies absent clear congressional intent—though that's not a flag I'd want to wave in front of this Supreme Court.

Rob Greenspoon of Flachsbart & Greenspoon will make D'Agostino's case to the Federal Circuit on Sept. 5. Baker Botts partner Eliot Williams will present MasterCard's argument. PTO Associate Solicitor Coke Morgan Stewart will argue on behalf of the Patent Office.

➤ Blackbird Tech v. Lululemon Athletica This is a dispute over a sports bra capable of holding objects such as an iPod or credit card between the breasts. Designer Nancy-Jane Sweeney had the inspiration while training for a marathon in the mid-2000s. Blackbird Technologies acquired her patent in 2015 and accused Lululemon of infringing. But Sweeney's patent claims a bra “constructed of first and second ply laminated material,” and Lululemon's bras are sewn, not laminated. U.S. District Judge Richard Andrews agreed that the plain and ordinary meaning of laminated is “joined by means of heat or adhesive bonding”—not sewn. Blackbird argues that the claim must be read in light of its specification, which refers to material that's “sewn or otherwise laminated.”

Blackbird will be represented at the Sept. 5 argument by its co-founder and Kirkland alum Chris Freeman. DLA Piper partner Aaron Fountain will defend the judgment.

Eversheds Beefs Up in China

Eversheds Sutherland has hired Hong Kong-based partner Cedric Lam from Dorsey & Whitney to head up its China IP practice, my ALM colleague John Kang reports. Lam's focus is on acquiring and maintaining IP rights and implementing IP protection and licensing strategies.

This probably won't be the last such transaction we see in this space. Eversheds notes the growing demand for IP services in Asia as trade tensions escalate between the United States and China.

That's all from Skilled in the Art for this week. Enjoy the holiday weekend, and I'll see you all again on Tuesday.