Apple Patent Review Limits Leverage of Smartphone Rivals

Apple Inc. (AAPL)’s patents behind the pinch-to-zoom, bounce-back and multitouch features of its iPhone aren’t invalid, at least not yet.

The U.S. Patent and Trademark Office’s initial rejections in recent weeks were consistent with a process in which most patents challenged over the past three decades, including ones rejected at some point, survived in original or modified forms, according to data compiled by the office.

That process can take years. In the meantime, Apple’s patents will be considered valid and enforceable in the global smartphone-patent litigation among it, Samsung Electronics Co. (005930) and Google Inc. (GOOG)’s Motorola Mobility unit.

“The Apple patents have not been held to be invalid by a court, and certainly not by an appellate court, so they are still enforceable,” said Robert Resis of Banner & Witcoff in Chicago, who’s not involved in the case. “Just because there’s an action going on in the patent office doesn’t render them unenforceable.”

The biggest practical impact of the review is that it gives Samsung an argument that Apple shouldn’t be able to collect the full $1.05 billion jury award the iPhone maker won against the Korean handset maker in San Jose, California, in August.

“It has to weigh on the judge’s mind on how much damages to award,” said Scott Daniels, a patent lawyer with Westerman Hattori in Washington who specializes in re-examinations, as the reviews are called. “If these are patents of questionable validity, can the judge in good conscience drop the hammer on Samsung?”

Jobs Patent

Two of the Apple patents, for a way that the screen seems to bounce back after it reaches the end and for the use of a pinching motion to zoom in, were found to be infringed in the San Jose case. The third patent, which is part of an Apple case against Samsung at the U.S. International Trade Commission in Washington, is for touch-screen technology co-invented by Steve Jobs, Apple’s late co-founder.

The patent office tends to issue notices in bunches when the reviews involve similar technology or the same company, and in this case has so far issued three non-final decisions in the past two months.

U.S. District Judge Lucy Koh in San Jose will decide whether to uphold the verdict or even increase that amount.

Judges have discretion whether to consider the patent office review, said Rob Sterne of Sterne Kessler in Washington, editor of “Patent Office Litigation,” a book on how the agency is used more in litigation. Sterne has represented Apple and Google, and said he couldn’t address the specific Apple fight with Samsung.

Multiple Layers

According to patent office statistics from 1981 through June, owners get all of their patent confirmed in 22 percent of re-examinations, and all of the claims canceled 11 percent of the time. The rest involve modifications of the patent, which in some instances means the patent owner changes the wording of the patent, removes elements, or even gets to add more claims.

The amount Samsung owes could be altered if Apple amends the patent claims that were part of the litigation. The U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law, has ruled that patent owners who amend their claims during the review can’t collect damages for any period that occurred before that change.

Apple has at least a month to respond to the issues raised by the patent office examiner, and then a second notice is issued. Apple also can request an interview with the examiner handling each review.

If the claims are still rejected, the Cupertino, California-based company can appeal to a board within the agency and then to the Federal Circuit. That’s the same court that will hear the appeal of the San Jose case.

Two Years

The ITC is scheduled to end its investigation by March 13, and it has ruled in other cases that it won’t wait for the patent office to complete its work.

The patent office has sought to speed up the process. Even so, it would probably take at least two years, and possibly longer, before reaching a point where the Federal Circuit could rule on whether to cancel any of the patents, Daniels said.

In court cases, jurors are told that patents are presumed valid, and the accused infringer has a high burden to overcome that. At the patent office, the examiner has no such constraints.

“You have the grizzled eyeshade of the examiner rather than the wide-eyed juror as the decision maker,” Daniels said.

Because of the different standards, the court and patent office could come to different conclusions. In May, the Federal Circuit upheld a finding by the office that a patent on a hemodialysis machine was invalid, while two years earlier it had affirmed a jury verdict in favor of the patent owner.

‘Validity Apple’

More technology companies are using the patent office as a second route to challenge patents asserted against them in lawsuits. They “are viewed as an insurance policy or a second bite at the validity apple,” Sterne said.

“The patent owner has to win in the district court and the re-exam process,” he said. “The challenger only has to win in one of those processes to win overall.”

For Suwon, South Korea-based Samsung, the preliminary rulings are good for its public image, Resis said.

“You’ve got a favorable ruling, you want to tout it,” he said. “This might be one item that helps their overall arguments. But it’s not an argument by itself, alone, that’s going to cause the judge to pause.”

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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