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Suggestion and Innuendo Held Insufficient To Create Federal Jurisdiction in Qualcomm Patent Licensing Litigation

Qualcomm scored a victory in one of the many battles in its war with Apple and others surrounding licensing practices for baseband processors. In July, Apple — which is suing Qualcomm for allegedly overcharging for licenses to use its chip patents and withholding over a billion dollars in royalties — amended a pending complaint to add claims relating to an additional nine patents-in-suit. In August, Qualcomm moved to dismiss the additional claims relating to those nine patents on the grounds that the court lacked declaratory judgment jurisdiction to hear the claims. This month, the Southern District of California dismissed the additional claims, agreeing with Qualcomm that jurisdiction did not exist.

The center of Qualcomm and Apple’s dispute over the nine potential patents-in-suit regarded whether Qualcomm’s reference to the nine patents as potentially essential to a standard practiced by Apple, or some other action, were “affirmative acts” relating to the enforcement of Qualcomm’s patent rights needed to establish an actual case and controversy for declaratory judgment jurisdiction. In our coverage of Qualcomm’s motion, we noted that the court “may tell Apple and other license holders that they cannot invoke Article III jurisdiction without more than suggestion and innuendo.” Indeed, in granting Qualcomm’s motion, the court stated “[t]he law of declaratory judgment jurisdiction requires more specificity and more detailed infringement analysis than mere identification in a 1,975 page list.” We could spend all day debating which was the better crafted punchline, but the point remains that this was a solid victory for Qualcomm.

The court also separately dismissed the claims of several cellphone manufacturers who asserted they were at risk of patent litigation from Qualcomm for the potential infringement of those same nine patents. The manufacturers had argued the “threats” Qualcomm issued Apple extended to them as the manufacturers of those actual phones. Since the court found those same threats insufficient to create jurisdiction in Apple’s case, the court declined to find they were sufficient here. The manufacturers also sought a declaratory judgment for unpaid royalties under their respective licensing agreements, but the court found there was no case or controversy with respect to the additional nine patents because any declaratory judgment on those grounds would not finally and conclusively resolve the underlying controversy between the manufacturers and Qualcomm.

The court’s order was not a complete victory for Qualcomm. Apple also succeeded in its motion to dismiss Qualcomm’s state-law unfair competition claims that it was harmed by (1) Apple’s public comments that there were no differences in performance between iPhones powered by Qualcomm processors and iPhones powered by chips from other manufacturers, and (2) related threats of retaliation if Qualcomm disclosed the discrepancy. The court found that Apple’s actions in concealing the performance advantage of Qualcomm chips was pro-competitive because it allowed Intel to develop as a competitive supplier. Therefore, Qualcomm could not assert harm on those grounds. The court did, however, grant Qualcomm leave to amend its claims to show how it was harmed by Apple’s threats that it would retaliate against Qualcomm if it disclosed the performance disparity.

As we noted previously when speculating on the outcome of these motions, a decision for Qualcomm suggests that patent holders can do everything short of uttering an affirmative threat of litigation without creating an actual case or controversy sufficient to establish declaratory judgment jurisdiction. Companies hoping to assert jurisdiction in such actions should be advised to make sure that they can produce evidence of specific threats relating to specific patents if they wish to survive motions to dismiss. Qualcomm’s allusions to infringement on the part of Apple in this instance were sufficiently vague to give them victory on those grounds in this battle. Elsewhere, the fight continues.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.