On October 23, 2012, Samsung (OTC:SSNLF) filed a late-night Statement of Recent Decision in the Northern District of California, San Jose division. This was the venue where it lost perhaps its most important IP lawsuit against Apple (NASDAQ:AAPL) plaintiffs. In the filing, Samsung brought to the court's attention a recent non-final Office action in response to an "anonymous" re-examination request, in which the USPTO has declared all 20 claims of Apple's rubber-banding patent (U.S. Patent No, 7,469,381) invalid. This includes claim 19, which was key to much of Apple's case against Samsung.
Who Was Behind The Re-examination Request?
This non-final Office action was triggered by what some reporters called an anonymous request for re-examination for this patent. I did some research and found some interesting details: the request, after all, is not so anonymous. As noted by the USPTO (I found during my research), the requester was Joseph J. Richetti, of the IP litigation law firm Bryan Cave, LLP. of New York, NY. Mr. Richetti is a well-known IP litigator who has successfully defended Belkin, Boeing (NYSE:BA) and other companies against infringement claims. I did some more research and found that the law firm of Bryan Cave has represented Google (NASDAQ:GOOG) multiple times in IP litigation, for example, in this copyright related litigation. So it is easy to put two and two together: Google was behind the request for re-examination.
What Was Rejected?
As I saw in the USPTO rejection document cited in the Samsung filing cited above, here's a list of the rejections:
The following rejections are utilized by the Examiner below, referencing the proposed prior art listed on pages 23-85 of the Request:
Rejection A: Claims 1-6, 8-12, 16, 19, and 20 as being anticipated by Lira
Rejection B: Claims 7 and 13-15 as being obvious over Lira
Rejection D: Claims 1-5, 7-13, and 15-20 as being anticipated by Ording
As noted before by Foss Patents (by eminent IP law expert Florian Mueller) in an article I have used extensively as background to my research, claim 19 has been rejected for two reasons, once as anticipated by Lira and once as anticipated by Ording (these are names of patent holders whose patents are cited by the USPTO, specifically PCT Publication No. WO 03/081458 and U.S. Patent No. 7,786,975). Anticipation is a narrower category of rejection than obviousness, but in my opinion, it also shows more inventiveness, as understood from this Berkeley paper. Anyway, the upshot of this action is that, until the action goes through the complete appeals process, Apple may not be able to stop Samsung from using this confusion to its advantage.
Judge Koh is currently hearing Rule 50 motions, which at their core claim that what this jury decided would be found unreasonable by any other set of 12 rational jurors. This is a very high standard and is almost never met fully; however, it is not implausible to accept the motion in parts, especially where a hugely complex case like this one, done on multiple issues, has been jury-ruled.
Until the USPTO office action is finalized (which may take years), the most important immediate effect this rejection may have on Judge Koh is for her to amend injunctions on several devices affected by this patent infringement ruling. However, Samsung and others have already found workarounds for the particular effect - bounce scroll, or "rubber banding" - so that does not seem like a lot.
Having said that, the long-term effect of the non-final action can be important. There are many issues - the very quick verdict, the non-rejection of any of the 12 patents at issue by the jury, the huge damages and the obviously biased foreman - that has created a shadow of doubt over this trial in many circles (read the just cited Foss Patents article). A positive ruling on this issue may have some effect on other decision making that have possibly been hanging on a balance due to these issues.
As for the final verdict on the patent; if it goes against Apple, we are bound to see a slew of requests for re-examination for other design and method patents that have confused the jurists and general public alike (for a great article by an eminent jurist, see here). It should be noted that there was another request for re-examination for another Apple patent, the 949 patent (U.S. Patent No. 7,479,949 for touchscreen heuristics), which is more integral to all iOS devices so far as it covers how multi-point input is computed and processed. Losing that patent will be worse for Apple.
Apple investors need not be overly concerned about possible effects of this issue on Apple stock. Not right now, that is. After the recent iPad Mini Launch event, Apple is trading lower at $613.09, seeing a small rise to $615.80 after hours, or +$2.44 (0.40%). This is a good position to buy Apple if you think the iPad Mini is going to improve the stock price, as I do. As for the patent rejection issue, since Samsung has already found workarounds, there will be hardly any immediate effect in business. However, there might be a rippling effect in the patent litigation arena if this issue goes through positively for Samsung, with other interested parties with deep pockets filing re-examination requests and motions in other jurisdictions similar to the US rule 50 motion, specifically in the cases of Motorola Mobility which was ruled by a German Court around September 13th to have infringed on the same rubber-banding patent, and the upcoming HTC Apple ruling on the 381 patent infringement this November.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.