S3 Patents that Apple Violated Were Ruled Unpatentable

| Analysis

In a rather interesting turn of events, the two patents owned by S3 that the U.S. International Trade Commission (ITC) were being violated by Apple’s Mac OS X operating system have been ruled to be unpatentable due to prior art by the U.S. Patent & Trade Mark Office (USPTO). The curious thing about the ruling, however, is that it came the same day as the ITC ruling, five days before HTC bought S3 in order to use that ITC ruling against Apple.

The U.S. patent system is a tangled web, with various and sundry governmental bodies having overlapping jurisdictions, including the USPTO, which issues (and reviews) the patents, the ITC, which among other things has the power to ban the import of products it finds violate a U.S. patent, and the U.S. court system, which hears many and more cases of patent infringement from companies looking to collect damages for said infringement.

 

Apple vs. HTC

 

1 - S3’s Case

To give this situation context, we’re going to back up a little: S3 Graphics was pursuing patent infringement complaints against Apple through the ITC. S3 has already successfully enforced its patents in the field of image compression against other companies, including Nvidia, and was bringing those same patents to bear against Apple for its Macs and iOS devices.

2 - Parallel Complaints, Suits, Reviews

At this point, we’ll have to lean on Matt Macari’s analysis at LitigatingApple for help: The USPTO had already ruled that two of those four patents were unpatentable due to prior art, and Apple was able to get that information in front of Administrative Law Judge James Gildea, who was in charge of investigating the S3 patent claims against Apple. Not surprisingly, Apple was not found to be infringing on those two patents.

According to Mr. Macari’s analysis, there isn’t anything that necessarily binds the ITC to pay attention to USPTO reviews, but it’s common for it to do so. The other two S3 patents were still being reviewed, however, and it’s a complete coincidence that the USPTO’s review findings were issued on the same day that AL Gildea issued his own ruling.

All this happened on July 1st — the ITC found that Apple was infringing on the S3 patents (it was July 26th when the ITC revealed some details of the ruling, including that it was Apple’s Mac OS X that infringed, clearing iOS in the process) and the USPTO ruled those same patents as unpatentable.

3 - Enter HTC

On July 6th, HTC entered the squabble between Apple and S3. It was on that day, five days after the ITC handed down its ruling, and not-so-coincidentally, five days after the USPTO found those patents to be unpatentable — that HTC plunked down US$300 million to buy S3.

We realize that due to the obscene amounts of money Apple makes these days, $300 million may not sound like a lot of money, but we checked, and it turns out that $300,000,000 is still a lot of money, especially when you’re buying a company’s unpatentable patents to help fight off Apple.

It seems like $300 million could have been spent on hiring better attorneys, for instance, or maybe hiring someone like Matt Macari from LitigatingApple to explain it to you.

1 + 2 + 3 = WTF?

The question is, why would HTC do this? We’ll point out that it took us four weeks to put the pieces together. After all, these rulings took place on July 1st and we’re just now covering it, but as we noted at the beginning of this piece, the U.S. patent system is a tangled web, and most news sites missed these connections.

At the same time, none of those sites have the resources of even a modestly successful tech company like HTC, you know, the company that had $300 million to buy a couple of worthless patents and a soon-to-be-cast-aside patent infringement victory.

Since it was public knowledge that Apple was pursuing the parallel review process at the USPTO, you would think that HTC would have bothered checking in on that process before plunking down its money for S3.

Perhaps this will all end up making sense in the long run, and HTC’s seemingly perplexing move will end up looking like a brilliant gamble that paid off. What’s more likely, however, is that HTC will still be faced with a patent infringement victory by Apple against its Android smartphones, but that the company will have approximately $300 million less to do anything about it.

Comments

VaughnSC

Terse Chaffin headline first read deemed incomprehensible.

sflocal

What was that loud sound?  Oh yes, it must be the sound of Apple’s very large hammer getting dropped on HTC’s head.

Now it gets very, very interesting!

Bryan Chaffin

Indeed, to both of you. smile

(I edited the title. Hopefully the sense it makes is now greater than what it was before.) wink

MyRightEye

What? And PLEASE rewrite the headline so it makes at least a modicum of sense.

Nemo

I think that the problem here for HTC is that it hasn’t the culture or expertise in intellectual property (IP).  Expertise in IP can come from being an innovative company, like Apple.  Or it can come from being in the business of having to evaluate IP for acquisition.  Or it can come from having a large portfolio of IP to manage.  Or—and this has only recently been true for HTC—you are routinely a party in IP enforcement actions.  Until recently, none of these things was true for HTC.  HTC was nothing more and probably still is nothing more than a low cost producer of computing devices that used others’ IP, whether it be Microsoft’s Windows or Google’s Android that runs on either Intel or ARM’s chips. 

Thus, a technology integrator, such as HTC or Acer, doesn’t have and hasn’t needed a culture of expertise in managing and acquiring IP, nor does it have much experience in prosecuting or defending IP enforcement actions.  The result here has been a company, HTC, that appears to have been taken for a ride by S3, which sold it $300 million dollars worth of patents of dubious quality that are useless for any of HTC’s business purposes, whether inside or outside of the courtroom.

The kind of legal and executive skill that HTC desperately needs to deal with the many IP enforcement actions that it faces can be purchased on the market, but having to bring that expertise on board in the midst of such ferocious and high stakes IP battles and integrate it into HTC’s corporate culture and senior decision making is a daunting task.  HTC needs expertise in IP to deal with partners, such as Google, that present it with technology, like Android, that may have serious risks of IP infringement. 

Google has helped HTC by deploying its best IP litigator to HTC, but that gentleman’s skill will be matched by the skill of Apple, Microsoft, and Oracle’s topflight IP counsel, so that decisions on HTC’s many disputes will most likely be decided on the merits.  And some of the disputes that could determine HTC’s fate in the important market of tablet computers and smartphones don’t even involve HTC, such as the Oracle v. Google dispute over Google’s alleged infringement of Oracle’s IP in Java.

This kind of high stakes IP litigation and management of IP is a long way from HTC’s roots and culture as an assembler of Windows and Android boxes.

Ed

LOL at the news, both company are owned and controlled by the same person, the current CEO of HTC. $300 Million is moving money from left hand to right hand.

Nemo

Dear Ed:  Then others, who have an interest in HTC, certainly have cause to wonder whether they were dealt with fairly.

jameskatt

Oh, my God!

Ha ha ha ha ha ha ha ha ha ROTFLOL.

HTC is now in a pickle.

They have ZERO LEVERAGE against Apple.

Their only hope as are:

1. License the patents Apple sued it with by begging and pleading with Apple. $20 per phone, anyone?

2. There is no other option.

Bosco (Brad Hutchings)

Cursory examination of the review documents indicates that for at least one of the patents, about half of the claims remain intact. At any rate the S3 claims are about the same level of mundane as the Apple patents which the ALJ ruled were violated by HTC.

I don’t think HTC will be too eager to settle, and frankly, I don’t think Apple would be anyway. Even less likely is that the ITC will take any action. They can find infringement and not do anything about it. Banning popular phones or laptops would be as much a disaster for the ITC as for either HTC or Apple. The ITC could find infringement in either or both cases, then tell the parties to take these silly disputes to court where they belong.

On to court… Contrary to Nemo’s predictions, what we’re finding in Oracle v. Google is that federal judges see willful infringement of really good patents in the $100M range rather than the multi-billion dollar range. Even then, there are a hundred ways to dispute patents—perhaps estoppel might work for Google here

This pretty much confirms the strategy I’ve suggested from the beginning of gain market share and let the legal stuff work itself out later. HTC, Sammie, Google are competing, not wholesale copying as Apple fans suggest. And note that Apple does the same infringement crap with patents. It’s unavoidable with all the ridiculous software patents out there. Even the most headstrong innovative people know that the proportions of innovation and execution required for success heavily favor the execution side. Unfortunately for Apple in smart-phones, it has been out-executed in spades by a loose coalition of manufacturers and Google. It’s success in the courtroom ought to reflect the relative proportions that innovation and execution play, i.e. the legal penis waving won’t make much of a difference in the long run.

Nemo

Bosco:  You are one helluva a patent lawyer.  How any claims survive on either of the S3’s unpatentable patents at issue is a mystery to me.  A necessary requirement for claims to valid is that the underling invention be patentable.  If the invention isn’t patentable, then none of its claims can be valid.  While the patentability of S3’s patents at issue is still subject to further review, right now, given the USPTO’s finding that the underling inventions are unpatentable means that all claims associated with those invention are invalid.

As for the Commission, it has two ministerial possibilities:  (1) Either vacate, modify, or remand the ALJ’s decision, or (2) Ban HTC’s infringing devices.  If the latter, HTC must go to the Fed. Cir. to seek relief.

Finally, a public statement by Sun’s CEO congratulating Google on its Java phone, while the record is clear that Sun and Google were in bitter disagreement over Google’s failure to license Java for Android pursuant to Sun’s terms, will not constitute an estoppel, because Sun had in emphatic terms made it privately clear to Google that its use of Java in Android was, in Sun’s view, infringing.  That alone should be more than sufficient to establish that Sun had not made any statement giving Google permission to use Java so that Oracle instant claims of infringement are either estopped, by either equitable or promissory estoppel, or waived.

Nemo

Oh yes, and if you want to read a statement that shows Google knew that it did not have Sun’s blessing to use Java, read the quote from Andy Rubin’s email in Judge Alsup’s recent order rejecting Oracle’s expert’s opinion for damages, where Rubin notifies his superiors, the troika then running Google, that Sun refused to license Java to Google for Android and that Google must either Abandon Java for Android and use Microsoft’s tech instead or simply use Java without permission and defend its decision to do so.  See Judge Alsup’s order at page 3 at http://www.scribd.com/doc/60720923/11-07-22-Oracle-Google-Damages-Report-Overhaul-Decision.

Nemo

Bosco:  I smell a rat.  You are beginning more and more to sound like a Google plant, even parroting-forgive the mixed metaphors—its talking points:  Google and the Android OEMs are competing, not copying; but everybody infringes, because infringement is inevitable, and Google and its partners had to execute and leave the legal stuff, that is, allegations of misappropriating others’ intellectual property, to work itself out. 

Well, the legal stuff is working itself out, with various tribunals determining whether Google and its OEM partners have in fact competed rather than illicitly copied; whether and where Apple or Google and its partners have infringed; and where infringement is found, the excuses that everybody infringes or that Google and its partners had to execute by stealing others’ IP won’t defend against the legal sanctions of damages and injunctions and perhaps even worse sanctions, if infringement is found to have been knowing and intentional.

Bosco (Brad Hutchings)

A necessary requirement for claims to valid is that the underling invention be patentable.? If the invention isn?t patentable, then none of its claims can be valid.? While the patentability of S3?s patents at issue is still subject to further review, right now, given the USPTO?s finding that the underling inventions are unpatentable means that all claims associated with those invention are invalid.

Ah come on Nemo. I hate contradicting you with easy facts. Having been a listed patent applicant on a few occasions, I am familiar with lots of the process. From Bryan’s first link, which is the reexamination result from the USPTO:

Claims 1-4,8,13,16, 18, and 19 are subject to reexamination.
Claims 5-7,9-12,14,15,17, and 20-22 are not subject to reexamination.
...
Claims 1-4,8,13,16, 18, and 19 are rejected.

The claims which were not subject to reexamination are still considered valid still get patent protection. This contradicts what you said. That doesn’t mean the S3 patents have any remaining value, but it does mean that we have to look deeper at the remaining claims and how they square with the ALJ’s ruling. That’s all I’m saying here.

As to Oracle/Google, I guess you’re conceding the point about what Google might eventually have to pay even if found to have willfully infringed. Peanuts. And you know, that’s how it should be. Sun and later Oracle were never going to create a wildly successful smart phone platform. It wasn’t in their DNA. It was in Google’s once it bought Android. Most of Google’s gains were not dependent upon infringing on these patents. They were dependent on just killing it in the market. It looks like Alsup’s request to the parties that they bring reasonable numbers to the table reflects his own understanding of that. There is your big picture, which is basically what I’ve been predicting about all these skirmishes since they began a little more than a year ago. Market share gained today matters far more than patent infringement, either incidental or deliberate.

Bosco (Brad Hutchings)

Bosco:? I smell a rat.? You are beginning more and more to sound like a Google plant, even parroting-forgive the mixed metaphors?its talking points:? Google and the Android OEMs are competing, not copying; but everybody infringes, because infringement is inevitable, and Google and its partners had to execute and leave the legal stuff, that is, allegations of misappropriating others? intellectual property, to work itself out.?

Fine, call me a rat. My analysis that I present here is, on the whole, a result of my original thoughts about this stuff, obviously influenced by my voracious reading and interest in the topics, and heavily influenced by my own views of intellectual property.

When the outcomes of these long drawn out processes match my predictions far more than they match yours, take a minute to acknowledge it. You know how I know that Android isn’t wholesale copying iOS? Because Android doesn’t feel like a Fisher Price toy in my hand. That’s how. Ultimately, when reasonable judges sort these things out, they are going to recognize that there is a tremendous amount of innovation in Android, and that remedies that would bury it are necessarily unjust. The best thing your pals at Apple can do now to compete is look at what Android is doing different and decide whether it’s worth emulating. Turns out that lots of the things Apple fans mock about Android are exactly what Apple needs to do to become more than a high-priced niche player in a maturing market.

daemon

Nemo, Bosco’s been a contributing member of this community much longer than you. Those kind of accusations typically come from someone obfuscating.

Matt Macari

It should be noted Bosco that the claims that were found unpatentable in S3’s first reexamination office action referenced in the article include ALL claims declared infringed by Apple in the S3 v. Apple ITC proceeding.  The rest of the claims are not relevant to Apple, at least for now.

gnasher729

Nemo, Bosco?s been a contributing member of this community much longer than you. Those kind of accusations typically come from someone obfuscating.

Facts: Apple was found infringing on two patents. But you don’t infringe on a patent per se, you infringe on claims in the patent. We don’t know which claims Apple was infringing on. Apple then asked for reexamination of certain claims, and invalidated all of them. With the claims that S3 / HTC still have, Apple hasn’t made any attempt at all to invalidate them.

Now it seems just logical to me that Apple would have _tried_ to invalidate all claims that it was found to infringe and not care about the others. So if there were any claims that Apple tried to invalidate and that survived, that would be worrying for Apple. But there are none. Everything that Apple put up a fight against was thrown out.

Matt Macari

gnasher: We know exactly which claims from S3’s patent the ITC ALJ indicated were infringed by Apple. Those are really the only ones Apple cares about.

gnasher729

LOL at the news, both company are owned and controlled by the same person, the current CEO of HTC. $300 Million is moving money from left hand to right hand.

Actually, that’s not what happened. HTC _bought_ S3 for $300 million. And what they wanted were S3’s patents, especially two patents that Apple were found to be infringing on.

Tardis

According to:

http://techcrunch.com/2011/07/06/smartphone-maker-htc-buys-s3-graphics-from-via-wti-for-300-million/


VIA Technologies acquired S3 Graphics in 2001 ..... S3 Graphics became undercapitalized in 2005, prompting VIA to add WTI ...  as a new investor ....

Notably, WTI is a private investment company, in which VIA Technologies chairman Cher Wang is a significant shareholder. Update: Wang also co-founded HTC, by the way.

Thomcarl

what a collection of mind farts.

mhikl

Sing with me Ron,

Ta-ra-ra Boom-de-ay!
You’ve made my day
It’ll be a sunny ray
When HTC & Bosco fade away.

Nemo

Dear Bosco:  I admit my error in saying that the USPTO found the two patents at issue unpatentable.  I relied on the statement of a patent attorney in a ComputerWorld report (http://www.computerworld.com/s/article/9218715/Macs_infringe_S3_patents_could_face_U.S._import_ban) that the two patents were found to be unpatentable, which I took to mean that the USPTO had struck all of the the two patents’ claims.  That is not true.  What is true, however, and what probably caused the patent attorney in the ComputerWorld report to say that the two patents were found to be unpatentable, is that the USPTO found unpatentable the claims that S3 asserted and that the ALJ relied on in finding that Apple infringed the two S3 patents.  See http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs unpatentable.  So speaking loosely, the USPTO has found two S3 patents unpatentable but only with respect to the claims that Apple sought to have re-examined, which are the same claims that the ALJ relied on to find Apple to infringed on the two S3 patents.  See http://www.litigatingapple.com/blog/2011/7/24/why-htcs-courtship-of-s3-might-be-too-clever-by-half.html.

As I said, supra, if the Commission follows its customary practice, it will vacate the ALJ’s ruling that Apple infringed on the two S3 patents on the grounds that the USPTO has found that the relevant claims of those two patents are unpatentable, a fact which was not available to the ALJ, because the USPTO issued its decision on the unpatentability of the relevant claims on the same day the ALJ issued his ruling that Apple infringed on the two S3 patents.

And, of course, this was never going to amount to much, even if the claims in the two S3 patents had been valid and enforceable, because the infringing products were not Apple’s Macs per se, but certain third-party graphic chips in certain Macs.  To avoid an import ban, Apple would only have to substitute Nvidia graphic chips, which were found not to infringe, for the infringing AMD and, I think, Intel chips.  Of course now, with the USPTO’s ruling, none of the chips in Apple’s Macs are infringing. 

And had S3 pressed its claim of infringement in court and won damages for past infringement, the parties ultimately liable for those damages would have the third-party makers of the infringing graphic chips.

So, yes, for the purposes of the proceeding before the ITC, the USPTO has found the two S3 patents unpatentable with respect to the claims at issue before the ITC.

RonMacGuy

Sing with me Ron,

Ta-ra-ra Boom-de-ay!
You?ve made my day
It?ll be a sunny ray
When HTC & Bosco fade away.

Sounds good, mhikl !!

Ta-ra-ra Boom-de-rall
Bosco thinks he knows it all.
And makes all others feel small.
But we know who’ll take the fall.

RonMacGuy

When the outcomes of these long drawn out processes match my predictions far more than they match yours, take a minute to acknowledge it.

Just like your market share predictions, Bosco?  Bosco, oh master of predictions, I bow to you!!  So ironic that you ask others to acknowledge the one or two predictions you get right when you stubbornly refuse to acknowledge your idiotic predictions that miss the mark by such a large margin they aren’t even on the same planet.  How about some acknowledgement of those, Bosco?  How about it?  How about an “I was wrong” from Bosco?  Are you capable?  I suspect you will continue to ignore me.  But very few here disagree with my assessment of you, jester.

You know how I know that Android isn?t wholesale copying iOS? Because Android doesn?t feel like a Fisher Price toy in my hand.

  Ah, the Bosco way:  People are disagreeing with him, so he throws out the usual immature shots at Apple.  Surprising how Google, HTC, and everyone else is copying that toy.  I guess everyone wants a successful toy.  You’re clueless.  See what I did there?

patent litigation

Apple is savvy enough not only to aggressively patent its inventions, but also to actively seek reexamination as a response to patent infringement claims. Reexamination is one of the most effective methods (and best-kept secrets) for fighting off patent trolls and others in patent litigation.

ArtimusMacimus

As to Oracle/Google, I guess you?re conceding the point about what Google might eventually have to pay even if found to have willfully infringed. Peanuts. And you know, that?s how it should be. Sun and later Oracle were never going to create a wildly successful smart phone platform. It wasn?t in their DNA. It was in Google?s once it bought Android. Most of Google?s gains were not dependent upon infringing on these patents. They were dependent on just killing it in the market. It looks like Alsup?s request to the parties that they bring reasonable numbers to the table reflects his own understanding of that. There is your big picture, which is basically what I?ve been predicting about all these skirmishes since they began a little more than a year ago. Market share gained today matters far more than patent infringement, either incidental or deliberate.

Maybe Sun/Oracle hadn’t created a wildly successful smart phone platform, but they had a wildly successful phone platform. Second only to Symbian.
Androids have taken all that market share you so proudly boast of from 3 sources. The vacuum left from WinMo, Java and most recently Symbian. The only numbers the judge is going to care about is how many Java phones did Android phones displace. That number is likely to be 100s of millions.
So Google will be on the hook for Billions, if not 10s of Billions. Whatever the going rate for a Java license. And remember it matters not at all that Google gave Android away free. All that matters is how much harm (damage) was done to Java. That will be what Google will owe.

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