As we anticipated here, ParkerVision's patent case against Qualcomm is going to trial. The bottom line -- this is good news in the short term for those long or interested in ParkerVision (NASDAQ:PRKR).
ParkerVision's case against Qualcomm (NASDAQ:QCOM) has reached a mature stage. Discovery has been completed, and over the past few months, both ParkerVision and Qualcomm have engaged in a round of summary judgment motions. Litigations, including patent litigations, can be split roughly into two stages -- discovery and trial. During discovery, both parties collect their evidence. Then at trial, they present that evidence to the jury. In a patent case, a plaintiff (patent-holder) attempts to prove to the jury, using the evidence it collected during discovery, that the defendant is infringing its patent. Alternatively, the defendant attempts to use the evidence that it collected to prove either it is not infringing or the patent is not valid. The judge will run the trial, but when it comes to making factual determinations (is the patent infringed? is the patent invalid?), the answers to those questions are determined by the jury.
Yet, at the end of discovery, but before trial, parties have the opportunity to move for summary judgment. By filing a motion for summary judgment, a party can effectively argue to the court: Your honor, there is no need to have a trial in this case because the evidence overwhelmingly proves our case (be it infringement or defenses to infringement). In other words, even though the question of whether a patent is infringed or invalid is one for the jury to decide, a claim will warrant summary judgment where, in the face of this evidence, no reasonable juror could possibly find the patent is not infringed, or the patent is not invalid, as the case may be.
That is what ParkerVision and Qualcomm have been doing over the past few months -- briefing their motions for summary judgment. At the beginning of their briefing, we reported that the case was going to trial. How did we know that, given that the point of summary judgment is to avoid trial? Because neither party -- ParkerVision nor Qualcomm -- moved for wholly dispositive relief on all of their outstanding claims or defenses. Qualcomm moved only for partial summary judgment. In other words, Qualcomm pursued only partial summary judgment of non-infringement. That meant, even if it won all of its motions, and successfully dismissed numerous claims of infringement from the case, ParkerVision would nonetheless still hold some cards.
On August 26 and 27, the Honorable Roy B. Dalton, Jr., United States District Court for the Middle District of Florida, who is presiding over ParkerVision's patent case against Qualcomm, decided the pending motions for summary judgment. The specifics of Judge Dalton's decision are below, but the takeaway remains the same -- this case is going to trial and the potential damages scenario remains unaltered.
But before we delve into the specifics of Judge Dalton's decisions, why does it matter that the case is going to trial? Because trial is a different game. To simplify, there are three instances during a patent litigation when a party can, quite literally, win or lose the case -- summary judgment, trial and the Federal Circuit appeal. Each stage requires different tactics and different approaches, and therefore, having a strong case at one stage may not mean as much at the next. On summary judgment, it may be easier to win highly technical arguments, but only if the evidence is clear. At the Federal Circuit, the focus is more often on the legal issues, which can frequently appear to be esoteric and divorced from the details about the technology. But at trial, the technical details and the merits of the infringement or invalidity analysis is only part of the show. The performance and integrity of the attorneys can often be equally, if not more important, and it can in fact outweigh being correct on the technical details of the technology. That is why, even though Judge Dalton criticized ParkerVision's validity arguments (as discussed below), Qualcomm still faces risk if it goes to trial. Juries like to hear a story, and they statistically favor awarding judgments to inventors. In this case, that's ParkerVision.
Qualcomm's Motions for Partial Summary Judgment
First, Qualcomm argued that products acquired from Atheros Communications should be summarily adjudicated as non-infringed. ParkerVision has accused approximately 71 different Qualcomm products of infringing six of its patents, but only about 14 or 15 of those products were acquired from Atheros. Qualcomm argued that no reasonable juror could find that these products infringe because ParkerVision failed to submit any expert testimony. ParkerVision, on the other hand, due to lack of evidence, asked the Court to dismiss its claims of infringement rather than enter summary judgment on those claims relating to Atheros products. Judge Dalton sided with Qualcomm. These products are out of the case. Ironically, this decision has no impact on ParkerVision's potential damages theory since ParkerVision asked for dismissal anyway.
Second, Qualcomm argued that ParkerVision's allegations of indirect infringement of four of the six patents must also be dismissed. To prove indirect infringement requires proof that the defendant (in this case, Qualcomm) had knowledge of the patent-at-issue before the lawsuit. ParkerVision submitted evidence showing that it engaged in negotiations with Qualcomm executives within the late 1990s regarding its technology and its patents. Judge Dalton found that there was sufficient evidence to raise a genuine dispute of material fact. What does that mean? It means that, even though Qualcomm contended that no reasonable juror could find that it had a pre-suit knowledge of the applicable patents to substantiate ParkerVision's claims of indirect infringement, Judge Dalton disagreed. He decided that a reasonable juror could, upon hearing the evidence, find they did have that knowledge. For that reason, he decided this question should be resolved by the jury. Note, he did not decide that ParkerVision wins or loses its claims of indirect infringement -- only that summary judgment is inappropriate, and the jury gets to decide.
One interesting piece of evidence that came out of the briefing was the 2004 email exchange between Qualcomm engineers discussing "disruptive technology" for receivers. One engineer thought that it "would be a great idea to explore the idea of RF sampling for a low dynamic range receiver," to which the other responded that he would set up a meeting to "go over [the] parker vision approach" to "see if we can make it work." Not only does this go towards knowledge of the patents, but it may have a significant impact on determination of willfulness.
Finally, Qualcomm attempted to exclude another category of products from the case that use a 50% duty cycle. The argument is fairly technical. The parties' dispute revolves around opposing theories of whether or not Qualcomm's capacitors satisfy certain discharging limitations in ParkerVision's claims based upon discrete charging and discharging cycles. Judge Dalton did not resolve which party's theory was correct. Instead, he decided that there was sufficient evidence that reasonable jurors could disagree. For this reason, summary judgment was not warranted for Qualcomm's claims of non-infringement of the 50% duty cycle products. Instead, the jury will have to decide. Again, Judge Dalton did not decide whether ParkerVision won or lost on its 50% duty cycle claims, only that the jury will have to make that determination. That can only happen at trial.
ParkerVision's Motion For Summary Judgment of No Invalidity
The above decisions disposed of Qualcomm's motions for summary judgment. Yet ParkerVision made its own motion for summary judgment. Not one that would, if successful, summarily resolve the case, but only one that would unburden ParkerVision from having to make certain arguments at trial. Specifically, ParkerVision made a motion for summary judgment of no invalidity. Put simply, after being sued by ParkerVision, Qualcomm asserted counterclaims, including allegations that ParkerVision's patents are invalid. Qualcomm will surely argue that they are at trial. Yet before trial, ParkerVision attempted to block Qualcomm's opportunity from doing so by arguing that no reasonable juror could find its patents invalid. Judge Dalton disagreed. He decided that genuine issues of material fact existed to make summary judgment of no invalidity unwarranted. Instead, the jury will determine whether or not ParkerVision's patents are invalid.
ParkerVision's main challenge was directed to three grounds asserted by Qualcomm or why the patents are invalid -- anticipation, enablement and indefiniteness. Put simply, ParkerVision lost on all three grounds. That does not mean Judge Dalton found the patents to be invalid, but only that Qualcomm will have the right to argue they are invalid on these grounds at trial. (With one exception, Judge Dalton invalidated two specific claims as being indefinite due to non-minor typographical errors in the mathematical formulas in the claims.) Qualcomm's main argument, that the patents are invalid for being anticipated by earlier prior art, is likely its strongest invalidity defense. Some thoughts on that defense are warranted.
ParkerVision's patent claims are directed to a method for down-converting a carrier signal to a lower frequency signal. (We previously reported in greater detail on the technology disclosed in its patents in our previous article on Qualcomm, linked above.) Judge Dalton focused on a claim from the '551 patent. That claim requires a transferring step, whereby energy is transferred from a carrier signal, and a generating step, whereby a lower frequency signal is generated from that transferred energy. Qualcomm has brought forth a number of prior art references that it contends teach these two steps. The parties are disputing whether or not these two steps -- the transferring step and the generating step -- must occur separately, or whether they can occur simultaneously. Resolving that question depends not only on what the patents say, but also upon what is permitted by certain fundamental principles of physics.
This dispute between ParkerVision and Qualcomm is noteworthy for investors because it illustrates one of the classic tensions that patentees and accused infringers wrestle with during a patent case. And it shows how winning or losing a patent case can depend as much upon strategy as upon the strength of the patents and the merits of the infringement claims.
During the Markman hearing, ParkerVision pursued broad constructions of the claim terms. Presumably, it did so because it wished to make its job of proving infringement easier. The idea is simple: the broader the patent, the more likely Qualcomm's products infringe it. Yet now, facing Qualcomm's invalidity challenge to its patents, ParkerVision is on the other side of the eight ball. Rather than arguing the patents are broad, it needs to argue they are narrow. Again, the idea is simple: the more narrow, focused and specific the invention, the less likely it was previously disclosed in an earlier patent.
To that end, ParkerVision has taken the position that the generating step requires the discharge of energy from a storage device. And it has pointed to embodiments within the patents' specifications showing that. However, Qualcomm has argued that, even if certain embodiments within the patents' specifications show generating by virtue of discharging from a storage device, the language of the claims does not require that. In other words, to avoid Qualcomm's invalidity challenge, ParkerVision is arguing that the claim is more narrow than it looks (by requiring discharge from a storage device), even though it appears to have argued to the contrary at the Markman hearing. Notably, Judge Dalton pointed out this apparent inconsistency within ParkerVision's arguments within his decision.
Judge Dalton denied ParkerVision's motion for summary judgment of no invalidity on anticipation. He held, effectively, that reasonable jurors could buy into Qualcomm's theory of anticipation; namely, that the generating step does not require discharge from a storage device, and for that reason, ParkerVision's patents may be broad enough to be anticipated by prior art references cited by Qualcomm. Again, Judge Dalton has not decided that ParkerVision has lost its argument that the patents must be valid, but only that the jury gets to decide.
So, if Judge Dalton criticized some of ParkerVision's arguments in his decision, does that mean Qualcomm will likely succeed on proving invalidity at trial? Not necessarily. Yes, Qualcomm may have strong technical arguments that the prior art may teach the inventions disclosed in ParkerVision's patents. But juries are who they are. They are not typically judges, and they are not often electrical engineers. The technically correct answer, particularly where it embraces highly abstract electrical-engineering and physics principles, such as in this case, can escape them. (Quite frankly, given the highly rigorous technical questions they are asked to answer, we, as patent litigators, have tremendous respect for what juries are capable of accomplishing.)
Additionally, Qualcomm's arguments depend as much upon the prior art as they do on the interpretation of the patents' scope -- does it require that the generating step must discharge from a storage device or not? That is effectively a legal question of claim scope that may be resolved by Judge Dalton, rather than the jury. To the extent ParkerVision did indeed take a contrary position during claim construction, that may prejudice its position. We have not studied this particular issue in enough depth to weigh in on it, but because it is really a legal matter, the jury may not even hear about ParkerVision's alleged flip-flopping.
ParkerVision's motion for summary judgment included other arguments. Qualcomm's counterclaims alleged that ParkerVision's patents are invalid on many grounds. Qualcomm's main arguments are that the patents are anticipated by earlier prior art, not enabled and indefinite, which were discussed above. Judge Dalton has allowed Qualcomm to present these arguments at trial. Yet, Qualcomm also alleged in its counterclaims that the patents are also invalid for lacking written description, violating the prohibition against double patenting, failing to disclose the best mode, or because they were abandoned or subject to a prior filing. On these arguments, Judge Dalton agreed with ParkerVision. Qualcomm will not be allowed to argue ParkerVision's patents are invalid on these grounds at trial.
From the perspective of an investor, what does that mean? The answer is not much. A patent's validity can be challenged on many grounds. Qualcomm most likely loaded up its counterclaims with many grounds for challenging the validity of ParkerVision's patents, hoping that evidence would turn up during discovery to support each ground. That is not an uncommon strategy. For some of those grounds, no evidence turned up. That is also not uncommon. These grounds were dismissed by Judge Dalton. An accused infringer, such as Qualcomm, only needs one successful ground to render a patent invalid. Qualcomm has preserved three (anticipation, enablement and indefiniteness) for trial. That's not nothing.
Yet is it something? Does the fact that Qualcomm has preserved more than one argument for trial to challenge the validity of ParkerVision's patents evidence the strength of its case? Not necessarily. Enablement and indefiniteness can be a very difficult ground on which to invalidate a patent. And even if successful with them at trial, the Federal Circuit is just as likely to reverse. We anticipate that the bulk of Qualcomm's invalidity case at trial will focus on the anticipation arguments discussed above. Those arguments will need to meet the onerous "clear and convincing" evidence standard to sway the jury and result in the patents being invalidated. In complex patent cases before lay juries, that can be a tall task.
At the beginning of this article, we stated that Judge Dalton's recent decisions on the parties' motions for summary judgment is good news in the short term for those long in PRKR. All of the key issues concerning infringement and validity will be presented to the jury at trial. For the reasons discussed, that is good news for investors long in PRKR. But it bears emphasis that trial is by no means the end of a patent case. The Federal Circuit always looms in the background, prepared to dismantle a seemingly indelible jury verdict on legal grounds.
What does this mean for investors? It means that at each stage, a party can gain leverage, and leverage always influences whether the parties will settle. ParkerVision just gained some short-term leverage. We look forward to seeing how they parlay that leverage at the trial.
Trial in this case was previously set to begin on October 7, 2013, and as of now, that date has not been altered or removed. Presently, the parties are briefing motions in limine, which are motions brought in advance of a trial to exclude certain types of evidence. Because the outcome of those motions determines what evidence can and cannot be used at trial, that can give critical insight into how the trial will take shape. In particular, the outcome of the motions in limine may affect the scope of potential damages recoverable by ParkerVision. We will be monitoring these motions in advance of the trial.
Disclosure: I am long PRKR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.