Up the creek without a paddle: downstream exclusion threatens Qualcomm.

With echoes of the blockbuster Apple v Samsung case (see past IPilogue coverage here, here and here), The United States International Trade Commission (ITC) announced on Oct 6th that it will move ahead with a section 337 investigation into patent infringement claims made against Samsung Electronics Co. Ltd by NVIDIA Corp. The plaintiff alleges infringement of seven of its patents. This claim could potentially affect many of Samsung’s popular smartphone lines including the Galaxy Note, the Galaxy S, and the Galaxy Tab. Qualcomm, maker of the Snapdragon mobile processor, is also a named defendant and in much higher danger of being economically affected by the suit, as the company is vulnerable to a downstream exclusion order that would block devices using its technology from being imported into the US.

 

NVIDIA is a graphics chip manufacturer based in Santa Clara, California.  Since 1993 they have been responsible for many innovations in Graphical Processing Unit (GPU) design that have made sweeping changes in the way graphics can be processed on PCs. These improvements have been revolutionary in many industries such as smartphone design, video gaming, medical imaging, and computer generated imagery and special effects.

 

When building its smart phones, Samsung incorporates GPU chips that it has either designed in house or obtained from Qualcomm, Inc. NVIDIA alleges that the two companies are violating its patents by using the technology without a licence. The alleged patent infringement in the case refers to the Adreno GPUs used in Qualcomm’s Snapdragon processors, and the PowerVR and Mali GPUs used in Samsung’s Exynos processors.

 

NVIDIA’s ITC complaint refers to seven of its patents:  US Patent Nos. 6,198,488 (“the ‘488 Patent”) — “Transform, lighting and rasterization system embodied on a single semiconductor platform”, 6,992,667 (“the ‘667 Patent”) — “Single semiconductor graphics platform system and method with skinning, swizzling and masking capabilities”, 7,038,685 (“the ‘685 Patent”) — “Programmable graphics processor for multithreaded execution of programs”, 7,015,913 (“the ‘913 Patent”) — “Method and apparatus for multithreaded processing of data in a programmable graphics processor”, 6,697,063 (“the ‘063 Patent”) — “Rendering pipeline”, 7,209,140 (“the ‘140 Patent”) — “System, method and article of manufacture for a programmable vertex processing model with instruction set”, and 6,690,372 (“the ‘372 Patent”) — “System, method and article of manufacture for shadow mapping”.

 

What is interesting and distinguishing from the Apple v Samsung case, is the fact that NVIDIA is not filing a civil suit but is instead asking the ITC to commence an investigation. The federal agency is a favourable venue because of its speed:  the ITC usually responds within 30 calendar days of a filing, can provisionally accept motions for temporary relief within 35 days, and typically wraps up proceedings for a case in about a year.  The complaint is also under section 337, which enables the ITC to conduct investigations into unfair practices in imports. Under section 337, the primary remedy at the agency’s disposal is an exclusion order that prohibits the importation of the infringing goods into the Unites States.  Furthermore, and more importantly for Qualcomm, the ITC can issue exclusion orders that affect downstream products, meaning that potentially any smartphone using Qualcomm’s Snapdragon processors (which include the Adreno GPU) could potentially be blocked from importation.  This appears to be the most damaging part of the filing, as the Snapdragon is used not only in Samsung smartphones, but also those made by LG, Asus, Sony, Sharp, and Nokia.

 

The ITC first claimed these downstream rights in Certain Erasable Programmable Read-Only Memories, Components Thereof, Products Containing Such Memories, And Processes For Making Such Memories, Inv. No. 337-TA-276, USITC Pub. 2196, (May 1989).  In that investigation, the ITC identified several factors determining the balance of downstream remedies:

“In performing this balancing, the Commission may consider such matters as the value of the infringing articles compared to the value of the downstream products in which they are incorporated, the identity of the manufacturer of the downstream products ( hare, the downstream products manufactured by the party found to have committed the unfair act, or by third parties), the incremental value to complainant of the exclusion of downstream products, the incremental detriment to respondents of such exclusion, the burdens imposed on third parties resulting from exclusion of downstream products, the availability of alternative downstream products which do not contain the infringing articles, the likelihood that imported downstream products actually contain the infringing articles and are thereby subject to exclusion, the opportunity for evasion of an exclusion order which does not include downstream products, the enforceability of an order by Customs” — at page 207

For Samsung, this remedy would be crippling; its handsets represent a 29.5% share of the smartphone market in 2013. Google and the android ecosystem would also be affected,  as the Snapdragon is a very popular processor used by many of the various android manufacturers.

 

Will the showdown turn to the courts? Based on the amount of damages awarded to Apple in their suit against Samsung, one might think to answer that question in the affirmative. Apple v. Samsung was a personal fight however; Steve Jobs was famously (and acrimoniously) quoted as saying “I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.” and “I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion [£25bn] in the bank, to right this wrong”. Due to the venue the plaintiff has chosen, it’s far more likely that NVIDIA will pursue a negotiated settlement. Alternatively, this investigation may serve to position NVIDIA for a future iPad and iPhone licensing deal with Apple; this is not a far reach considering it currently provides GPUs for several of the company’s Mac desktop and laptop products.

 

Paul Blizzard is an IPilogue Editor and a JD candidate at Osgoode Hall Law School. 

Twitter: @paulblizzard

 

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