The California Institute of Technology recently reached a settlement with Apple and Broadcom in its patent infringement dispute. Caltech had alleged that its patented data transfer technology was incorporated in Broadcom's WiFi chips that were present in Apple devices. Initially, Caltech was to receive USD 1.1 billion in damages but on appeal, a retrial was ordered for the calculation of damages. The Supreme Court of the US used the Caltech-Apple/ Broadcom dispute as a chance to clarify the scope of estoppel during inter partes review petitions that challenge the validity of patents. We discuss the significance of the judicial pronouncements in the Caltech-Apple/ Broadcom patent infringement matter as it was the first in a series of patent infringement suits that Caltech filed against major tech companies.
The California Institute of Technology (Caltech), a private university in the USA renowned for its scientific research, recently reached a settlement in a patent infringement suit against Apple and Broadcom.[1] Caltech held multiple patents regarding wireless data transmission technology, the earliest patent being granted in 2006. Wireless data transfer often leads to errors and deterioration in the quality of data. Caltech’s patented technology improved the speed and reliability of data transmission by identifying and correcting faulty data. Caltech alleged in their 2016 lawsuit that Broadcom’s WiFi chips utilized their patented technology without obtaining a license or paying royalties and numerous Apple devices contained these chips.
Apple and Broadcom challenged Caltech's data transfer patents, but in 2018 the Patent Trial & Appeal Board (PTAB) upheld the validity of the latter’s patents and in January 2020 the District Court found both companies liable for patent infringement. Caltech was awarded USD 1.1 billion in damages, Apple and Broadcom were required to pay $837.8 million and $270.2 million, respectively. In 2022, the Federal Circuit Court affirmed the District Court’s decision on patent infringement but held that the $1.1 billion damages were legally unsupportable, and ordered a retrial for the calculation of damages. Apple and Broadcom sought Supreme Court intervention to raise new arguments challenging the patents but were denied as they could have raised these arguments during earlier proceedings before the PTAB.
Despite the matter having been settled out of court, the judicial pronouncements in the Apple/Broadcom-Caltech dispute are significant for several reasons. Firstly, the wireless data transfer technology at the core of these disputes involving Caltech is ubiquitous to WiFi-enabled devices like smartphones and laptops, due to its ability to improve efficiency, memory or power usage. The successful enforcement of their patent rights has encouraged Caltech to pursue infringement suits against other companies like Samsung, HP, Dell, and Microsoft as their devices employ technologies similar to the patent infringing technology in the Apple case. Caltech has argued in the suits that these tech giants utilized Caltech’s patented technology in their WiFi enabled devices without obtaining licenses.
The patent infringement suit against Samsung also resulted in a settlement in August 2023[2], which along with the Apple settlement improves Caltech’s prospects for favorable outcomes in the disputes against HP, Dell and Microsoft. If Caltech succeeds in these infringement suits, these tech giants may incur significant monetary liabilities, either through damages or settlement payouts. This would serve as a warning to the technology industry about using technology developed by academic institutions, researchers, and other smaller organisations without proper licensing and payment of royalties.
Secondly, the decisions in the Apple/Broadcom-Caltech dispute have led to much-needed clarity regarding inter partes review. Inter partes review proceedings allow a third party like Apple to challenge the validity of a patent before the PTAB on grounds such as novelty and non-obviousness. Once the PTAB gives a final decision, a restriction called inter partes review estoppel takes effect, which means that in future proceedings the petitioner is restricted from bringing up arguments already raised during the review.[3] Earlier there was some uncertainty regarding the scope of this restriction, but in the Caltech-Apple matter the Supreme Court interpreted it in the broadest sense. They held that the petitioner cannot raise arguments against the validity of a patent in later legal proceedings if it was reasonably foreseeable that these arguments could have been raised during the inter partes review but were not introduced at that stage.
Petitioners sometimes submit several review petitions, where the claims challenged in one petition overlap with the claims challenged in another, leading to a multiplicity of proceedings. Apple often indulges in this practice and 56 percent of its inter partes review petitions involve a claim challenged by another review petition filed by them against the same patent.[4] Thus parties seeking to invalidate a patent already have sufficient opportunities to explore various grounds for review of the patent. Consequently, a broad interpretation of inter partes review estoppel will protect legitimate patent holders against hardship due to recurring challenges to their patents that prolong proceedings under the pretext of raising new arguments.
Thirdly, although the Federal Circuit Court's dismissal of the substantial $1.1 billion in damages was disheartening for Caltech and its advocates, the Court’s dismissal had more to do with the method used to calculate damages rather than the quantum of damages itself. The District Court utilized the Georgia-Pacific[5] approach where a percentage of the royalty rate is formulated based on hypothetical negotiations the patent holder could have had, and then multiplied by the dollar amount of infringing sales. Following the reasonable royalty model, Apple and Broadcom were assessed as separate infringers that were at different stages in the supply chain. Correspondingly, their infringing products were treated and valued differently for the calculation of damages. The Federal Circuit Court did not approve of this two-tiered damages calculation model, asserting that the distinction between Broadcom and Apple as separate infringers did not warrant differential treatment of the same WiFi chips at various supply chain stages. Despite the dismissal of the unconventional two-tiered damage calculation approach, this case marks a favorable advancement in safeguarding intellectual property generated by academic institutions or smaller businesses.
Finally, Caltech’s win against Apple may set an example for institutions that find themselves at a disadvantage when confronted with patent infringement by larger companies that involve them in protracted legal proceedings. Moreover, the true magnitude of this matter’s impact will become apparent as Caltech's ongoing infringement suits against other technology companies reach a resolution, potentially reshaping the dynamics of patent litigation in the tech industry.
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[3] 35 U.S.C. § 315(e) (America Invents Act)
[4] https://www.robinskaplan.com/-/media/pdfs/tallying-repetitive-inter-partes-review-challenges.pdf
[5] Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970)