More litigation on way after verdict against Apple

In a major milestone in the smartphone patent wars, a federal jury has found that Apple’s iPhone infringes on three patents with respect to the camera feature and the handling and rejection of calls.

The case, which was tried in U.S. District Court in Delaware, was argued by attorneys from Proskauer Rose and Fish & Richardson.

“Anytime a jury verdict finds Apple infringing on a patent it’s pretty significant,” said John L. Strand, who practices at the intellectual property firm Wolf, Greenfield & Sacks in Boston.

More significant to some is that the plaintiff was MobileMedia Ideas Inc., a Delaware-based company owned by Sony, Nokia and top patent licensing firm MPEG-LA. Created to hold patents but not manufacture products, companies like MobileMedia are sometimes referred to as “patent trolls.”

“As far as I know, this is one of the first big victories by a patent assertion entity or patent troll,” said Professor James Bessen, an economist who teaches at Boston University School of Law and who authored a study on patent trolls with his colleague Professor Michael J. Meurer. “We’ve already seen patent troll litigation going at a very healthy clip. This is just going to fuel it even more.”

The strategy for a plaintiff that is not a manufacturer holds litigation advantages, such as being immune to counterclaims of infringement and having fewer documents to turn over in discovery, Meurer noted.

The damages phase of the case was bifurcated and is not yet scheduled for trial, but the jury’s finding of infringement covers “tens of millions” of iPhones, according to the plaintiff’s lead counsel, Steven M. Bauer, who co-chairs the patent litigation practice at Proskauer in Boston. The jury took a tidy four hours to render its verdict, he added.

New phones, old patents

The year was 1994. Hootie and the Blowfish and Salt-N-Pepa were hot on the music charts. “Forrest Gump” was the big box-office draw. And cell phones still looked like walkie-talkies.

Taking jurors back to the days before smartphones was one of Bauer’s biggest challenges in the seven-day patent trial.

“We gave the jurors old phones from 1995, the size of a brick, and a picture of Michael Douglas using a cell phone in the movie ‘Wall Street.’ I also showed the jury a picture of the first cell phone: Maxwell Smart on his shoe. It got a few chuckles,” Bauer said.

The joking aside, Bauer’s client, MobileMedia, claimed that the iPhone used technology dating back to 1994 that included patents for a cell phone camera; for rejecting a second call while one is using the phone; and for merging or conferencing a second call that one does accept.

A former head of sales at Nokia testified how, after coming home from a meeting in 1992, he came up with the idea for a camera phone and told his employer the market would be heading in that direction.

To demonstrate the two patents for call handling and call rejection, Bauer displayed an iPhone on a projector. His associate called the phone while an expert testified what was going on inside the phone when the call came in.

“This wasn’t animation; the jury got to see it in operation. I think jurors like to see things and touch things,” Bauer said.

But there were other obstacles to overcome, the most major one being Apple’s popular image.

“Most people think Apple is the most innovative company in the U.S., and we’re accusing them of patent infringement. My biggest challenge was explaining that the two are not inconsistent,” he said. “You can be innovative and still use someone else’s technology.”

In telling the jury his client never claimed to have invented the iPhone, Bauer offered the following analogy: Someone who builds a single-engine jet is still using the Wright brothers’ original invention of an airplane with two wings and a propeller.

Fortunately for Bauer, most members of the jury were in their 50s and not one of the eight owned an iPhone, though one juror, a retired chemist, did hold a patent.

Lead counsel for Apple, Frank E. Scherkenbach of Fish & Richardson in Boston, did not return a call seeking comment for this story.

‘A mess’

BU’s Meurer said the verdict is another indication that the software patent system is a “mess” and will keep attorneys busy in the coming years.

“It’s very hard for patent lawyers to know the scope of property rights because the claim language in software patents tends to be abstract and is typically vague and ambiguous,” he said.

Lawyers advising companies will be cautious about green-lighting new features, Meurer added.

“When you see a claim that could plausibly be construed broadly, lawyers might be conservative because you don’t want to be labeled as willful infringers. So the level of uncertainty is huge,” he said.

But Strand said there is little risk that Apple will stop selling iPhones.

The verdict pertains to the iPhone 3 and 4, but not the iPhone 5, which was released after the lawsuit was filed in 2010.

Chances are Apple will appeal the liability verdict rather than “capitulate to a patent troll” by settling too quickly and making the company an easy target for others, Strand said.

He added that litigation by patent trolls is more likely to result in the infringer paying a licensing fee rather than an injunction because a holding company such as MobileMedia, which exists solely for purposes of licensing patents, cannot show “irreparable harm.”

More litigation is already on the way. Bauer said the three claims were test cases that were narrowed down from a total of 16 original claims.

“There are still at least six other patents in this case, sitting there waiting to be filed. Some of the claims involve iPhones, iPods and iPads,” he said, noting that client MobileMedia has a pending lawsuit against BlackBerry maker Research In Motion — or RIM — and Android and Windows smartphone maker HTC over some of the same patents it alleged Apple infringed.