Today we are providing an update on activity taking place at Unwired Planet. This post incorporates our past blog entries and we recommend that you review all of them in chronological order. As before, we have divided our activities into four categories: Licensing, Technology, Portfolio/Prosecution & Enforcement. Following is an update on each area.
We are, first and foremost, a licensing company. In other words, our entire goal is to recover a portion of the value that we contributed to mobile communication. We use private meetings and information exchanges, patent prosecution and enforcement as tools in this process, but the goal remains the same.
We have been experiencing a great deal of interference in this endeavor, resulting from macro factors affecting patents generally and standard essential patents in particular. These macro factors, particularly within the United States, create considerable uncertainty for intellectual property rights. This uncertainty (largely created by conflicting and evolving patent case law at all levels: the Supreme Court, the Federal Circuit and various US District Courts) creates divergent optimism for both sides of the argument, which drives a wedge in the economic discussions between negotiating parties.
Notwithstanding our lack of traction thus far in our enforcement efforts, we have typically been successful, in the private meeting context, when demonstrating the merits of the technology reflected in our portfolio. However, the sticking issue has been -- and remains – divergent opinions of royalty values.
As a result, we continue to be faced with two choices – (i) acquiesce to significantly lower valuations than we feel is merited and justified for the sake of completing licensing deals faster or (ii) continue our pursuit of enforcement success and more clarity regarding macro factors pertaining to patent rights.
2014 will be remembered as the year when LTE took over the mobile market. Strategy Analytics estimates that for the first time LTE basebands accounted for over 50 percent of Qualcomm's total baseband shipments in Q3 2014, thanks to new Snapdragon and Gobi chips and China’s LTE momentum (Market Watch article).
Apple announced record quarterly results making total net profit of $18B (the largest ever for any corporation) during the last quarter of the calendar year. This was largely achieved by selling 74.5M iPhones (Apple press release). Samsung said it shipped between 71 million and 76 million smartphones during the same period so Apple and Samsung are fighting heavily to be the largest supplier. Samsung still ranks as the world's No. 1 supplier of smartphones for the entire year 2014. Its yearly total was about 317 million units, while Apple's was about 193 million (Information week article).
LG also had a good year. It reported a $14.26B annual revenue, a steady 16% increase on a yearly basis. According to GSM Arena’s report, the rise is fueled in no small part by the North American market, where Q4 2014 marked a substantial 78% increase in units shipped compared to the same period in 2013. Out of a total of 78.2M handsets sold globally, 59.1M were smartphones, a 24% increase over that period (GSM Arena report).
The next few weeks will see the release of a few flagship devices. At the upcoming Mobile World Congress in Barcelona in March, Samsung is expected to release the Galaxy S6, LG the G4 and HTC should release the One M9 (TFJ article).
In the baseband industry, Qualcomm is facing an even heavier than expected challenge from its rivals, especially from MediaTek. Qualcomm recently lowered its outlook for 2015 and announced that a “large customer’s flagship device” won’t be using the Snapdragon 810 (Android Headlines article). Qualcomm's LTE baseband competitors also made progress during the quarter and as a result, Qualcomm's LTE baseband unit market share dropped from about 95 percent in Q3 2013 to less than 80 percent in Q3 2014. MediaTek is the second biggest LTE baseband supplier but HiSilicon, Intel, Marvell and Samsung are also making inroads. HiSilicon capitalized on multiple LTE device design-wins at its parent company, Huawei, while Intel also ramped up its LTE shipments with the help of high-profile design wins at Samsung (Market Watch article).
In Cloud & Services news, mobile shopping has gained more traction. According to research by IBM, for the first time ever, smartphones and tablets accounted for the majority of all online traffic on Thanksgiving Day. On Black Friday, one in four online purchases were made on a mobile device. (The Washington Post article).
Notably, Apple has announced a fifty percent increase in billings through the iTunes App Store, and has generated $10 billion of revenue for its developers. Over the lifetime of the store, it has generated $25 billion of revenue for developers. New Year’s Day 2015 is on record as the biggest day of app sales in the store’s short history, with half a billion dollars of revenue generated between January 1st and January 8th (Forbes article).
Below represents our current portfolio status
Overall Portfolio Prosecution Statistics -- 1 October 2014 to 31 December 2014
Number of Office Actions Received – 24
Number of Office Actions Responded – 28
Number of Search Reports Received – 2
Number of Search Opinions Responded – 1
Number of Foreign Acceptances (not yet issued) – 4
Number of US Acceptances (not yet issued) – 9
Number of EP Allowances (not yet issued) – 4
US Issued – 8
EP Issued (not including EPs in their opposition period, but including validated EP countries) – 3
EP Issued in Opposition Period – 4
Number of Foreign Issued – 2
TOTAL Granted – 17
Newly Filed Apps – 9
Abandoned – 59*
Patents Expired – 11
*We intentionally allowed certain patent assets to go abandoned.
Total Issued Patents = 2186
Total Pending Applications = 215
Total Portfolio Count: 2401
Post Grant Proceedings Summary
Pending Inter Partes Reexams – 1
Pending Broadening Reissues – 4
Recently Granted Broadening Reissue - 1
Pending Self-Initiated Reexams – 0 (we had two Reexam Certificates publish since the last blog update, including one we had just requested during the last quarter)
Inter Partes Review – 5
Covered Business Method – 4
EPO Oppositions – 5 (all related to the same patent)
We recently participated in Oral Arguments in the three Inter Partes Review (“IPR”) and the three Covered Business Method (“CBM”) proceedings initiated by Google, and are now awaiting Final Written Decisions from the Patent Trial and Appeal Board (“PTAB”).
We received Institution Decisions for the one CBM petition and two IPR petitions filed by Square, relating to each of the three patents from the Nevada litigation. While each case was instituted on fewer than all of the grounds alleged by Square, we still must proceed with each case at the PTAB.
Multiple Oppositions were filed related to a single patent from our European litigation, and initial responses are due by the end of March.
Below is a brief summary of each of our pending enforcement actions, all of which had significant developments over the past several months:
UK (Samsung, Huawei, Google)
- A third Case Management Conference (“CMC”) was held December 12th in London -- the next will be in March 2015.
The technical cases will consist of five successive single patent trials, each spaced generally two months apart. The trial dates were set as follows:
- October 5, 2015 (LTE patent - Trial A)
- November 30, 2015 (LTE patent - Trial B)
- February 1, 2016 (2G/3G patent - Trial C)
- May 2016 (3G patent - Trial D)
- July 2016 (Cloud push patent, not subject to FRAND commitments - Trial E).
At the December CMC the Judge set a separate trial to take place in October 2016 to cover competition and FRAND damages issues. These issues can be categorized into 3 areas:
Samsung and the other Defendants allege that the original transaction between Ericsson and Unwired Planet under the Master Sale Agreement (the “MSA”) is void as anticompetitive because:
- Royalty stacking occurs (i.e., LTE users now owe a royalty to Ericsson and a second royalty to Unwired Planet)
- Provisions of the MSA constitute price fixing and/or a restraint on trade
- The Defendants argue that Unwired Planet is behaving in an anticompetitive manner that violates FRAND because, they allege, our pricing is too high and our blended structure is inherently not acceptable.
- Samsung argues that, even if the MSA is valid, it has a license to Unwired Planet’s LTE patents on the basis that Ericsson effectively “controls” Unwired Planet and, as a result, Ericsson has granted Samsung a license under the language of the agreement between the two parties.
- Samsung and the other Defendants allege that the original transaction between Ericsson and Unwired Planet under the Master Sale Agreement (the “MSA”) is void as anticompetitive because:
- Under the UK “loser pays” system, we will be able to recover our costs for the issues that we win. Correspondingly, we would be obligated to pay the costs of the other parties for the issues that we lose.
Germany (Samsung, Huawei, Google, HTC, LG)
- The first oral hearing occurred May 22nd in Dusseldorf.
- The German Court set a series of trial dates, beginning June 30, 2015, with trials to follow approximately each 90 days until all material is covered. The second trial will be in November 2015.
- As a formality, the Court split the case into 30 separate matters (6 patents multiplied by 5 groups of defendants). However, much of the dispute will be heard at the same time.
- The Court also staggered the substantive response pleading due dates throughout the Fall (beginning in September, ending in December). Under the German system, these pleadings (and our subsequent responses) are paramount to the case (there is no discovery or expert testimony in Germany).
- The first trial in June is expected to include Huawei and Google on the LTE patents. The second trial will most likely include Samsung and the other defendants regarding 2G and 3G patents.
- As expected (and as is common practice in the German system) the parties have initiated invalidity proceedings at the EPO or the German patent office against the patents. In addition, the parties have raised similar competition and FRAND arguments as set out above in the UK proceedings. In Germany, these issues are typically dealt with at the same time as the technical issues.
Apple – District Court of Nevada / Northern District of California
- Initially, this case was filed to include 10 patents in the District of Nevada. Subsequently, the case was transferred to the Northern District of California (“NDCA”).
- The NDCA required us to select 10 claims from 5 patents for this first action and the parties agreed to dismiss the other 5 patents “without prejudice.”
- A claim construction (“Markman”) order was received in November 2014. Based upon the substance of the Markman, the parties stipulated to noninfringement on one patent, the ‘491 patent. Attached is a link to Judge Chhabria’s order in this regard (STIPULATION AND ORDER REGARDING JUDGMENT OF NON-INFRINGEMENT OF THE ’491 PATENT).
- Presently, the parties are exchanging expert reports and taking discovery from expert witnesses. Thereafter, summary judgment and other pre-trial motions will be submitted in March and April.
- Trial on the remaining 4 patents has been set for June 1, 2015.
Google – District Court of Nevada
- Google filed 3 re-examinations (3 out of the 10 patents originally in the case) and sought a partial stay (with respect to these same 3 patents). The partial stay was granted.
- We previously dropped 3 patents from the case (1 in reexamination and 2 in the typical course of litigation). As a result we have 5 patents presently at issue and 2 patents stayed pending reexamination.
- In December, Judge Du issued a Markman ruling that was very negative and disappointing for Unwired Planet. Rather than spending time and resources on a trial with low probability of success (given the Markman), Unwired Planet and Google are in the process of stipulating to noninfringement based on the Markman results, so that Unwired Planet can seek appeal of the Markman order. Judge Du’s order vacating the schedule can be found here (STIPULATION AND PROPOSED ORDER TO VACATE POST-MARKMAN DEADLINES IN ANTICIPATION OF STIPULATED JUDGMENT OF NON-INFRINGEMENT).
- The other 2 patents that are stayed will be dealt with when the USPTO results become available. The results are expected by April.
Apple/RIM – Court of Appeals for the Federal Circuit
- Unwired Planet’s appellate brief will be submitted in February.
- We expect the appellate process to take roughly 15 months.
Square – District Court of Nevada
- Square filed 2 IPR reexaminations and 1 CBM reexamination across our 3 asserted patents (see Prosecution section for more detail) and requested a stay in the case. Judge Jones initially ruled that a stay would be premature because the USPTO has not yet instituted proceedings.
- As of January 2015, the USPTO had instituted portions of all these 3 proceedings. As a result, we have agreed with Square to jointly request a stay of the litigation pending these USPTO procedures. This will provide efficiencies in terms of short term cost savings and a substantial reduction of issues for trial ( e.g., validity defenses).
- The USPTO process will most likely take all of 2015 and may spill into the beginning of 2016. As a result, if we are successful at the USPTO, we believe a trial would take place in the second half of 2016.
Microsoft – District Court of Delaware
- Judge Sue Robinson has been assigned to this matter.
- This is a breach of contract claim to recover an additional license payment that Microsoft owes to Unwired Planet.
- The parties dispute elements of contract interpretation.
- We expect this matter to progress relatively quickly (these matters are generally simpler than a patent infringement lawsuit).
- The parties are approximately midway through the discovery phase at this juncture.
- Summary Judgment motions are due in August.