Unwired Planet Terminates ITC Litigation; Intends to Pursue Matter in District Court of Delaware

Monday, October 15, 2012

We are providing an update on the significant developments in our ITC case, which has involved a total of 5 patents out of more than 200 and has been one component of our multi-pronged strategy to realize value for shareholders based on Unwired Planet’s intellectual property assets. 

Quick Summary of Events Following Our Last Post:

• On Thursday morning, October 11^th, all of the parties in the ITC investigation (Apple, RIM, Unwired Planet and ITC Staff counsel) filed a joint agreed motion petitioning Administrative Law Judge (“ALJ”) Gildea for summary determination of non-infringement (based upon the results of the claim construction orders) to immediately allow us to appeal what Unwired Planet considered to be an erroneous claim construction without having to bear the delay and substantial expense of a trial.
• Despite the agreement of the parties, the ALJ denied the joint motion and ordered the parties to proceed to trial even though he had already determined that the patents were not infringed based on the claim construction order.    The trial, which would have covered all other matters besides infringement (such as validity and domestic industry), would have been futile for Unwired Planet in view of the indication from the ALJ that he intended to find no infringement.
• Rather than proceed with a costly trial, we determined that it was in our shareholders’ best interests for us to terminate the investigation, which would allow us to turn our focus to our pending cases in the Federal District Courts of Nevada and Delaware.  The Delaware case was filed in August 2011 in parallel with -- and involving the same patents as -- the ITC investigation, and provides us with a fresh opportunity to seek a revised claim construction that is more favorable.

Discussion:

The ALJ entered several orders in the past several weeks that had the collective effect of: (i) undercutting our infringement case, (ii) requiring us to bear substantial costs to move to the next phase and (iii) postponing our opportunity to seek an appeal of the effects of these orders.  As a collective result, we have terminated the investigation. 

First, in his claim construction (Order No. 46), the ALJ made an unfavorable, and in our view, erroneous construction of a set of closely-related terms - the mobile device terms - in three of our patents.  The error was that the ALJ limited the invention of the patents to mobile devices that do not contain a “computer module,” as shown in the following quote from the ALJ’s opinion: 

Order 46, at Page 77 (emphasis added): 

Based on the foregoing, the Administrative Law Judge finds that term "mobile device" in the '037 patent should be construed to mean "portable wireless two-way communication device that does not contain a computer module“

The ALJ went on to seemingly define a “computer module” as something separate and in addition to the processing power already present in a cell phone:

Order 46, again from Page 77 (emphasis added): 

Based on the portions of the specification previously cited, the Administrative Law Judge finds that one of ordinary skill in the art would understand that a "computer module" would be understood to be "memory and processing power" separate from and in addition to the limited "memory and processing power" already found in a cellular phone, pager, or telephone.

We believe the introduction of computer module into the patent claims was an error.  Nonetheless, based on this definition of a “computer module” and the word “separate”, infringement under this construction was still possible.

On Friday, October 5^th, the ALJ issued a clarification order (Order No. 51) in which he stated that, despite the language of his prior order (No. 46) which stated how a person of skill in the art would understand the meaning of the term “computer module,” he had not meant to actually define the term and did not intend the parties to restrict the meaning of that term at trial:

Order 51, at Page 3

 The ALJ also rejects any notion that the Markman provides an express definition for the term “computer module”. Thus, to the extent UP is seeking to rewrite the construction for the mobile device terms to incorporate an express definition of the term “computer module”, that request is rejected.

After this clarification order, which we believe is also erroneous, there could be no infringement.  As a result, there was no way to prove infringement at the trial. 

Unwired Planet, Research in Motion and Apple together, as well as the investigatory staff of the ITC, filed a joint request to stay the proceedings, enter an initial determination of non-infringement (based on the claim construction), and permit an immediate appeal.  Despite the agreement of all parties, the ALJ denied this joint request in Order No. 57 and ordered the parties to proceed with a trial on the remaining issues (validity of the patents and the existence of a domestic industry) commencing immediately. 

This latest decision would have created untenable consequences had we proceeded. It would have required the parties to bear the considerable expense of trial which could not possibly result in a victory for Unwired Planet.  Then we would have had to wait until February 2013 for an initial determination, then further wait until approximately June 2013 for the ITC Commission to review the determination, and then (and only then) proceed to an appeal at the Federal Circuit of the ALJ’s claim construction (another 12-18 months process).

In view of the cost of the trial and the length of time before appeal, the Company decided to withdraw the ITC case and proceed in district court on these patents.

As we stated in our last blog, the ALJ’s claim construction is not binding on the court in our Delaware case.   We will have a Markman hearing in front of a federal judge who is required to define the “mobile device” terms, as well as all the other disputed claim terms, as he or she sees fit without deferring to the ALJ’s views.  We will have an opportunity to persuade that judge that the ALJ committed error in his definition of “mobile device.”  In addition, in the Delaware case we will be able to pursue an award of damages (something that was not available at the ITC). 

We will be able to reuse a substantial portion of our discovery and other work product that was created in the ITC investigation.  In our estimation, we have a chance to get to the point of a new Markman ruling as fast, if not faster, than if we had proceeded forward with a trial in the ITC.

The Procedural Status:

At our request, the ALJ has terminated the investigation and we are now waiting for the Commission to certify the termination (a process that typically takes around 30 days).  Once we have this certification, we can then petition the Delaware court to lift the stay on that case and move it forward.  

Unwired Planet Comments on ITC Litigation

Welcome to the Unwired Planet blog.  We created this blog to provide interested parties with more information regarding our initiatives, as we try to be as transparent as possible without limiting or impairing our strategy.  With this in mind, we will strive to keep you informed, but we remain circumspect to protect stockholders’ interests.  We plan to update this blog only when we determine that there is publicly available information in court or PTO records that requires explanation or comment by Unwired Planet.

As you are probably aware, Unwired Planet’s first filed patent lawsuit is an ITC complaint against Apple and Research-in-Motion, with a parallel lawsuit in the Federal District Court of Delaware.  We filed the complaint in August 2011.   Below is an update based on the Markman order than was made public on Friday, October 5^th.

Monday, October 8, 2012

Our hearing (similar to a trial in Federal Court) is set to start a week from today (Monday, October 15, 2012). 

Quick Summary of Events:

• On Friday, September 28, 2012, Administrative Law Judge (ALJ) E. James Gildea issued a Markman (or “claim construction”) order (Order No. 46), which provides the meaning of disputed terms in the claims of the patents at issue. In response to a Motion for Clarification filed by Unwired Planet on Monday October 1, the ALJ then issued an additional Order (Order No. 51) on Friday, October 5.
• As a result of these Orders, all 4 patents in the ITC case have been construed in at least one way that significantly weakens our infringement case.
• We believe it is very important to note that this result, while disappointing:
  • will not impact any of the 20 patents in our pending cases in Nevada,
  • will not impact any of the other patents in the portfolio except possible indirect implications on the patent family members of the patents-in-suit, and
  • is not binding on the judge in the pending Delaware equivalent case.
  • As of now, the trial is still scheduled to begin on October 15^th.  We have requested the court to enter summary determination of non-infringement (given the Markman definitions) and to stay the remainder of trial pending appeal.  This would save unnecessary costs and allow us to commence the appeal process immediately first through an ITC commission review (expected 30 day process), and if that is not successful, through a subsequent Federal Circuit appeal (estimated 1 year process).
  • We have dropped the ‘608 patent from the ITC investigation and will not be appealing the rulings regarding that patent for a variety of reasons.  The ‘409, ‘447 and ‘037 patents, which share a common specification, remain in the investigation.

Our Perspective:

Our patent portfolio is broad and robust (containing 200 patents and 75 applications) and encompasses foundational contributions to the mobile industry.  The pending ITC case is a small part of our strategy, but it happens to have been filed first -- and be publicly observable -- and therefore, in our view, it currently receives the most scrutiny.

Certainly, a positive quick result from the ITC would have accelerated our strategy.  We have been, nonetheless, fully prepared for the possibility of a negative result, and have been taking actions over the last few months designed to better situate Unwired Planet for our long-term licensing effort. These events do not materially impact our long-term plans – as noted, this Markman decision impacted only a small fraction of our 200 patents.

Our pending Federal court cases in Nevada continue unaffected (containing a collective total of 20 patents) and the ITC has no binding effect upon our Delaware case (containing the 5 patents initially filed in the ITC matter).  We also have many valuable patents that are not in pending litigation.  Finally, we have a strategy to address any adverse impact that the ITC proceeding may have had on the foundational patents at issue and their family members.

Simply stated, we remain enthusiastic about this patent portfolio and our licensing prospects.

Detailed Discussion:

The Markman Ruling:

On Friday, September 28, 2012, Administrative Law Judge E. James Gildea (ALJ) issued a Markman (or “claim construction”) order (Order No. 46), which provides the meaning of disputed terms in the claims of the patents at issue.  On Friday, October 5, 2012, Judge Gildea issued the public version of this order, which anyone can read.

We now understand the ALJ adopted Apple & RIM’s position that the terms “wireless mobile telephone”, “two-way communication device” and “mobile device” (as used in the ‘409, ‘447 & ‘037 patents, respectively) exclude any device that uses a “computer module.” 

In the initial Markman Order, however, it wasn’t quite clear what the ALJ’s determination had been. The ALJ concluded in Order 46 that there had been a “disavowal” of subject matter in the ‘037, ‘449 and ‘409 patents, finding that the mobile devices could not contain a “computer module” and still infringe.  However, although the term “computer module” does not appear in the patent claims, the ALJ referred repeatedly to the computer module as something that must be separate from, and in addition to, the processing power already in the cellular phone (see page 77, definition of “computer module”).  This statement, if incorporated into the definition of the mobile device terms, would have potentially preserved our infringement case.  We filed a Motion for Clarification to this effect on Monday, October 1, 2012.  On Friday, October 5, 2012, the ALJ ruled in Order 51 that Unwired Planet’s interpretation was incorrect, and that he did not define a computer module to be separate (see bottom of page 3), therefore severely weakening our infringement case under that construction.

Separately, with respect to the ‘037 patent, which we believe covers the basics of an app store, we interpret the Markman order to be unfavorable to Unwired Planet in one additional way beyond the limitations on “mobile device”, namely, that the ALJ has construed this patent to exclude any download of applications to the mobile device. 

Finally, the Markman order is unfavorable regarding the ‘608 patent in a number of different ways such that our chances of ultimately prevailing on this patent at the ITC are remote. Thus, we have determined to drop the ‘608 patent from the investigation.

The Procedural Status:

As of right now, we remain scheduled to go to trial on October 15^th.  We have determined that there is no triable issue of fact with regard to our infringement case under the present claim construction.  We have petitioned Judge Gildea to enter summary determination of non-infringement so that we can pursue an immediate appeal of the claim construction.  We have further requested a stay of the pending trial during the appeal to the commission. Both petitions are currently under consideration by the ALJ. 

Cautionary Language Regarding Forward-Looking Statements

This blog contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding Unwired Planet’s expectations regarding its pending litigation matters, the impact of the Markman order and Unwired Planet’s strategy and plan. All statements other than statements of historical fact contained in this blog are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause Unwired Planet’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. These forward-looking statements are subject to a number of risks, including the uncertainty of the impact of the Markman order, the ability of Unwired Planet to realize anticipated results of its plan and strategy, the ability of Unwired Planet to implement and execute its plan and strategy as well as those risk factors discussed in filings with the U.S. Securities and Exchange Commission (“SEC”), including but not limited to Unwired Planet’s Annual Report on Form 10-K filed on September 7, 2012, and any subsequently filed reports on Forms 10-Q and 8-K. Unwired Planet undertakes no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of each applicable posting in this blog.