Federal Circuit Holds Apple Lacked Standing to Appeal IPRs It Initiated, Distinguishes MedImmune

Fitch, Even, Tabin & Flannery LLP

On April 7, in Apple Inc. v. Qualcomm Incorporated, the Federal Circuit held that Apple lacked standing to appeal final decisions by the Patent Trial and Appeal Board (PTAB), upholding validity in two inter partes review (IPR) proceedings involving Qualcomm patents. This case provides an important reminder of the difference between parties entitled to petition for IPR at the PTAB and those with standing in the federal courts. The court held that standing did not exist despite prior litigation between the parties and even though Apple is a licensee of the challenged patents.

In 2017, as part of a larger global dispute between the parties, Qualcomm filed a lawsuit against Apple in the Southern District of California alleging infringement of various patents by Apple’s iPhone products. In response to the lawsuit, Apple filed IPR petitions challenging the validity of the two patents at issue.

In April 2019, Qualcomm and Apple entered into a global settlement agreement that included payment by Apple in exchange for a six-year covenant not to sue (with a potential two-year extension) on tens of thousands of Qualcomm patents, including the petitioned patents. The district court action was dismissed with prejudice, but the IPR proceedings continued. In January 2020, the PTAB issued final written decisions in each IPR upholding the validity of the two patents, and Apple appealed.

As an initial matter, the Federal Circuit agreed with Qualcomm that Apple had waived its argument to establish standing because it had failed to address or submit evidence related to standing in its opening brief. Nevertheless, in its discretion, the court decided to address the standing issue.

First, Apple argued that it had standing to appeal the IPR decisions based on its ongoing royalty payments pursuant to the parties’ settlement agreement, citing the MedImmune, Inc. v. Genentech, Inc. decision. In MedImmune, the U.S. Supreme Court held that a patent licensee has standing to challenge a patent’s validity in a declaratory judgment action even without breaking or terminating a license agreement by stopping the royalty payments. However, the Federal Circuit here distinguished MedImmune, finding that Apple had not alleged that the validity of the petitioned patents would affect its ongoing contract obligations to make royalty payments. Because the license agreement between Qualcomm and Apple included a license to “tens of thousands” of patents, the court found that the validity of any individual patent (e.g., either of the two patents at issue) would not affect Apple’s royalty obligations. As the court explained, “[t]his failure is fatal to establishing standing under the reasoning of MedImmune, whether we analyze Apple’s evidence for injury in fact or redressability.” The court further opined that “[u]ltimately, Apple’s assertions amount to little more than an expression of its displeasure with a license provision into which it voluntarily entered,” and “[s]uch allegations do not establish Article III standing.”

Second, Apple argued that it had standing to challenge the IPR decisions based on the possibility that Qualcomm could file a lawsuit alleging infringement of the patents after the expiration of their license agreement, which only had an initial six-year term. The court again disagreed, finding that “this possibility of suit is too speculative to confer standing” and that “Apple provides no evidence that it intends to engage in any activity that may give rise to an infringement suit . . . when the license expires.” Likewise, the court found that Apple failed to provide “the specificity necessary to show that Qualcomm is likely to assert these particular patents against any particular products which would be sold after the license agreement expires.”

Finally, Apple submitted that “its injury is compounded by the likelihood that 35 U.S.C. § 315(e) would estop it from arguing that the [patents] would have been obvious in future disputes.” But the Federal Circuit dismissed this argument as well, finding this reasoning had already been rejected in AVX Corp. v. Presidio Components, Inc. (as previously reported here) and “the harm Apple may face from estoppel is insufficient to provide standing.”

This decision highlights the difference between parties with rights to petition the PTAB relative to those with declaratory judgment jurisdiction. As noted by the court in this case, “[w]hile nearly any person may seek an inter partes review, an appellant must ‘supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in a federal court.’” As such, standing at the federal courts is an issue a petitioner should consider both prior to filing a post-grant review at the PTAB and when appealing from the PTAB to the Federal Circuit. Failing to address standing or submit related evidence in an opening appeal brief could waive the issue, regardless of the merits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Fitch, Even, Tabin & Flannery LLP

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