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CalTech Grilled at Federal Circuit Over $1.1 Billion Patent Win (1)

Sept. 1, 2021, 3:55 PMUpdated: Sept. 1, 2021, 5:11 PM

Two judges on a Federal Circuit panel appeared skeptical at oral argument of the California Institute of Technology’s billion-dollar patent infringement verdict, one of the largest in U.S. history, against Apple Inc. and Broadcom Inc.

Judge Timothy Dyk questioned that Apple and Broadcom infringed CalTech patents on WiFi technology, and whether a district court was correct to block the companies from making certain invalidity arguments. Dyk and Judge Alan Lourie also focused on whether CalTech’s royalty rates were reasonable.

“These royalty rates do not seem reasonable, they don’t seem rational,” Lourie said.

Apple and Broadcom are appealing a verdict from a California federal jury, which told Apple to pay CalTech $838 million. Broadcom was hit with $270 million in royalties. CalTech’s damages model applied different rates to the companies for licenses, despite being for the same technology.

That seemed to puzzle the Federal Circuit panel.

“It’s the same chip,” Dyk said. “You’re saying that some of the Broadcom chips require a higher license fee than others. I have difficulty understanding how that could be the case.”

CalTech’s attorney, Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan LLP, defended the rates by pointing to two settlement agreements that CalTech argues are comparable.

“Those real-world licences, your honor, are the best evidence that it is reasonable to suppose that the same chips sold to a manufacturer on the one hand, and supplied to an end-user on the other hand, will command different rates,” Sullivan said.

Shaw Rationale

Before trial in the U.S. District Court for the Central District of California, Judge George Wu blocked arguments that claims in CalTech’s patents were obvious, after Apple lost a validity challenge at the Patent Trial and Appeal Board.

A 2016 Federal Circuit ruling, Shaw Industries v. Automated Creel, interpreted the ban on patent challengers raising in district court arguments that could’ve been raised at the PTAB. Dyk said Shaw‘s reasoning is that “could have been raised” means an argument that could’ve been raised once review is instituted, not in the petition.

Dyk said the “district judge ignored that rationale” and effectively dismissed Shaw because of a later U.S. Supreme Court decision.

“It just doesn’t seem to me that’s correct,” Dyk said.

Dyk also questioned whether CalTech proved that Apple and Broadcom infringed. CalTech patents, which relate to error-correcting codes, require “repeating” information bits. Apple and Broadcom argue Broadcom chips don’t meet that requirement.

“I have difficulty in understanding how the idea that bits only occasionally get repeated brings them within the claims here,” Dyk said.

CalTech is represented by Quinn Emanuel Urquhart & Sullivan LLP. Apple and Broadcom are represented by WilmerHale.

The case is The California Institute v. Broadcom Ltd., Fed. Cir., No. 20-2222, argument 9/1/21.

(Updated with additional reporting)

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com