HEVC Royalty Stacking and Uncertainty Threaten VVC Adoption

IPWatchdog today published an article on the independent economic study that Unified Patents conducted with Charles River Associates on the economic value of the newly released Versatile Video Coding standard. The study points out that “[f]or VVC to capture market share among cellular device manufacturers, [its] royalty rates will have to be very attractive compared to the rates for AVC and AV1.” VVC is entering a fragmented, multi-codec market and its adoption is uncertain in the face of competitive video solutions that are subject to lower or no royalties. Much of this is due to the excessive royalties and licensing uncertainties that continue to plague VVC’s predecessor, HEVC.

Click HERE to read the full article.

Express Mobile Patent Narrowed After Ex Parte Reexamination

At the end of 2020, Unified filed two ex parte reexamination (Reexam) requests against patents owned by Express Mobile Inc., a prolific patent troll that has sued over eighty different companies for website development features. In early August 2021, the Reexam of U.S. Patent 7,594,168 concluded with a “Notice of intent to issue a Reexamination Certificate” that likely impacts Express Mobile’s infringement theories and still leaves open future questions about validity. The examiner narrowed claims that Express Mobile has argued repeatedly in court were much broader. For the first time, you can view every ex parte filing since 2000 on Unified’s Portal here. 

This reaffirms the Northern District of California’s and the Middle District of Florida’s stays of their cases involving the challenged patents. As the notice of intent comes less than one year after the filing of a request, patentees will be hard-pressed to argue that the ex parte reexamination process is too long to wait for a streamlining of their myriad infringement claims—if the patent is valid, it should be more likely that the reexamination will end quickly, and very little burden would be faced by the applicant due to a delay. On the other hand, if the challenged claims are invalid or substantially narrowed past the point of reasonable infringement, it would be a waste of resources to litigate. Additionally, in Express Mobile’s case, had the courts proceeded while the reexamination was still pending, the claim construction briefing would not have had the benefit of Express Mobile’s affirmative, binding disavowal of scope, and the examiner’s basis for allowance, itself probative for claim construction. See, e.g., Salazar v. Procter & Gamble Co., 414 F. 3d 1342, 1347-48 (Fed. Cir. 2005). That is particularly true here, where the examiner concluded that Express Mobile’s references to the specification amounted to a definition, i.e., lexicography. Notice of Intent, pp.7-8.

And the Office went further.  For example, the examiner observed that if any non-object oriented formatting or styles are used in the building of a web page, it would not infringe the ’168 Patent. Id., p.4. Express Mobile disagreed with the Examiner for construing “entirely” as “only” in Claim 1, but its arguments beg the question of what “entirely” does mean, if not “only,” and whether Express Mobile has a viable infringement case based on the proper construction of this term.

Additionally, it will not be enough for Express Mobile to argue vague notions of what a timeline or transformation of a style is anymore: the transformation of an image object is limited to the description at (c), the transformation of a button object is limited to the description at (g) the timeline of both image and button objects is limited to examples at (d), and the claims specify that these settings are required for an image or button object for “each” web page on the site.  Id., 5-6; see also ’168 Patent, 30:32-33:46. It is unclear whether any of the pending product accusations meet these requirements.

And while Express Mobile filed a nonbinding statement disagreeing with the examiner’s characterizations, such post hoc self-serving statements are entitled to little weight, although they keep the interpretation open for an invalidity litigant or IPR petitioner construing the claims as broadly as Express Mobile. For example, Express Mobile disagreed with the examiner that the statements regarding image and button objects are definitional, citing the specification’s use of “can” instead of “must.” ’168 Patent, 30:32-33:46. This does not respond to the examiner’s point; “can” is not necessarily synonymous with “may,” and it should indicate limitation if the list refers to the only settings the user could employ. Here, Express Mobile’s points to no language that indicates that the “can” is exemplary and not limiting, as the examiner concluded.

The certificate also does not absolve Express Mobile of the need to address invalidity in its pending cases. The Notice made it clear that if a reference was not cited in its actions, then it was only given a cursory review, and no references other than the art submitted with the request appear to have been addressed by the examiner. Notice of Intent, 3.

Reexaminations are a valuable tool, particularly with Fintiv lingering. The Reexamination Unit has recently been processing requests much faster than the past, making their use to obtain stays a prudent option.  Reexaminations are also a less expensive option (and sometimes faster way) to extract claim scope disavowals and highlight infringement theory weaknesses even though there is little control over what the examiner considers.

The PTAB’s Misplaced Reliance on Litigation Trial Dates in the NHK Spring/Fintiv Framework

As discussed in prior blog posts (for example, here and here), the Patent Trial and Appeal Board (PTAB) has increasingly exercised its discretion under 35 U.S.C. § 314 (a) to deny institution of post-grant proceedings when the challenged patent is involved in related litigation, using the framework outlined in NHK Spring and Fintiv. See NHK Spring Co. Ltd. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 (Precedential); Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (Precedential). A major consideration in the NHK Spring/Fintiv framework is whether trial in related litigation will occur before the PTAB’s one-year statutory deadline for issuing a final written decision after institution; if trial will occur before, the PTAB will likely exercise discretion to deny institution. The rationale is simple and seemingly cogent: due to the advanced state of related litigation, institution would be an inefficient use of PTAB resources and inconsistent with the America Invents Act’s goal of providing an “effective and efficient alternative to district court litigation.” NHK Spring, Paper 8, pp. 19-20. But determining when trial in related litigation will occur is not straightforward because litigation schedules often change. Over the past year, such changes have become more prevalent due to the COVID-19 pandemic. Thus, the PTAB may deny institution based on a litigation trial date that ultimately falls after the statutory deadline. We discuss instances where this occurred below. 

• Next Caller, Inc. v. TRUSTID, Inc – Institution is denied but the trial date relied on is delayed by a year. 

TRUSTID asserted U.S. Patent 9,001,985 against Next Caller in January 2018 and amended its complaint to additionally assert U.S. Patents 8,238,532, and 9,871,913 in April 2018. See TRUSTID, Inc. v. Next Caller, Inc., 1:18-cv-00172-MN (D. Del. 2018). Next Caller filed an IPR petition challenging validity of the ’985 patent in October 2018; this proceeding was instituted and resulted in a final written decision finding some claims unpatentable and others not. IPR2019-00039, Paper 1; id., Paper 77, p. 90.

In April 2019, Next Caller filed IPR petitions challenging validity of the ’532 and ’913 patents. See IPR2019-00961; IPR2019-00962; IPR2019-00963. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in July 2020 versus the PTAB’s statutory deadline in October 2020. IPR2019-00961 and IPR2019-00962, Paper 10, pp. 14-16; IPR2019-00963, Paper 8, pp. 13-14. But the trial date was pushed back to July 2021 due to the COVID-19 pandemic.

•  Apple, Inc. v. Fintiv, Inc. – The trial date relied on in Fintiv itself is delayed and scheduled to occur months after the PTAB’s statutory deadline.

 Fintiv asserted U.S. Patent 8,843,125 against Apple in December 2018. See Fintiv, Inc. v. Apple, Inc., 1:19-cv-01238-ADA (W.D. Tex. 2018). In October 2019, Apple filed an IPR petition challenging validity of the patent. IPR2020-00019, Paper 1. The PTAB exercised discretion to deny institution of the petition under § 314 (a), relying on the related litigation’s anticipated trial date in March 2021 versus the PTAB’s statutory deadline in May 2021. Id., Paper 15, pp. 12-13. But again, due to COVID-19, the trial date was pushed back – this time to October 2021.

• Ethicon, Inc. v. Board of Regents, The University of Texas System – Institution is denied based on an “expectation” of trial within a year but knowledge of delay; the trial date relied on is delayed over a year.

The University of Texas (“UT”) asserted U.S. Patents 6,596,296 and 7,033,603 against Ethicon in November 2017 (serving the complaint in December 2017). See Board of Regents, The University of Texas System et al. v. Ethicon, Inc. et al., 1:17-cv-01084-LY (W.D. Tex. 2017). In December 2018, Ethicon filed IPR petitions challenging validity of the patents. See IPR2019-00406; IPR2019-00407. The IPRs were suspended for about a year pending the Federal Circuit’s decision in Regents of the University of Minnesota v. LSI Corp., Case No. 2018-1559, addressing the applicability of sovereign immunity to IPRs. IPR2019-00406 and IPR2019-00407, Paper 11. After the suspension was lifted, UT filed a preliminary response in the 00406 proceeding without addressing the merits, arguing only that the Board should exercise discretion to deny institution under § 314 (a). IPR2019-00406, Paper 26. And the Board did just that, even though it was aware the related litigation’s June 2020 trial date had already been continued due to COVID-19, relying on the litigation court’s “emphasis that the parallel litigation should proceed as if still set for June 22, 2020,” “expectation of holding a bench trial within a year,” and expected final written decision issuance date of June 2021. Id., Paper 27, pp. 9-10. But trial did not occur and instead, a bench trial is scheduled for September 2021.

Interestingly, the same Board panel instituted the 00407 proceeding on the same day the 00406 denial issued. IPR2019-00407, Paper 29. The 00407 decision did not address Fintiv, but UT did not file a preliminary response in that proceeding. Id. UT disclaimed all challenged claims of the patent at issue after institution and the Board entered adverse judgement in June 2021. Id., Paper 33.

• Cisco Systems, Inc. v. Ramot at Tel Aviv University Ltd. – Institution is denied based on trial date that is now uncertain, but litigation is stayed pending Ex Parte Reexaminations filed after the denial.

Ramot sued Cisco, asserting U.S. Patents 10,270,535 and 10,033,465 in June 2019, and adding U.S. Patent 10,461,866 in an amended complaint in December 2019. See Ramot at Tel Aviv University Ltd. v. Cisco Systems, Inc., 2:19-cv-00225-JRG (E.D. Tex. 2019). Cisco filed IPR petitions challenging the ’535 and ’465 patents in November 2019, and another petition challenging the ’866 patent in January 2020. IPR2020-00122; IPR2020-00123; IPR2020-00484. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in December 2020 versus the PTAB’s statutory deadlines in May 2021 and August 2021. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8. But after denial, Cisco filed Ex Parte Reexaminations at the U.S. Patent and Trademark Office (USPTO) challenging validity of the patents in suit, and after reexamination was ordered, office actions issued rejecting all asserted claims.  Ramot, Dkt. 235, pp. 1-3. Thus, the litigation court granted a stay pending resolution of the reexaminations in January 2021. Id. When the stay issued, trial had been delayed from December 2020 to March 2021. The case is currently still stayed, with the trial date uncertain.

According to the U.S. Patent and Trademark Office, the average reexamination pendency from filing to certificate is just under 26 months. See https://www.uspto.gov/sites/default/files/documents/ex_parte_historical_stats_roll_up_21Q1.pdf. Here, Cisco filed its reexaminations in June 2020 and November 2020 for each patent.  Ramot, Dkt. 235. Thus, the reexaminations are estimated to conclude in August 2022 and January 2023. These dates are over a year past what would have been the PTAB’s statutory deadlines in May 2021 and August 2021, had the IPRs been instituted. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8.

Conclusion

Due to the likelihood that litigation trial dates change, the PTAB’s reliance on such dates to deny institution of post-grant proceedings under the NHK Spring/Fintiv framework has had unintended consequences, denying petitions (and an examination of the merits) when trial ends up occurring months after when a final written decision would have issued. The PTAB’s analysis of litigation trial dates under the NHK Spring/Fintiv framework should therefore not take litigation schedules at face value; instead, a more nuanced approach is needed that considers circumstances such as the current stage of litigation, issues that remain in litigation, and whether (and to what extent) extensions to deadlines and/or changes to the trial date have been requested and granted.

VVC royalty report by Charles River Assoc. estimates lower rates due to AV1 adoption

Unified is pleased to announce the release of a new economic royalty rate report estimating the aggregate royalty burden for all standard-essential patents (SEPs) covering the video codec standard H.266, also called Versatile Video Coding (VVC). The report is a part of Unified’s Video Codec Zone, the goal of which is to provide objective, independent evidence of reasonable royalty rates, thus refuting unsubstantiated SEP licensing demands. 

VVC (H.266) constitutes the latest installment in a series of video codec standards released by the ITU and ISO/IEC and is regarded as the direct successor to HEVC (also H.265).

The fragmented licensing landscape for HEVC with three different patent pools has resulted in a significant degree of uncertainty about HEVC’s licensing terms and very high aggregate royalties. The issues revolving around its licensing have not only significantly hampered HEVC’s adoption but also likely have further boosted the significant momentum around royalty free video codecs like AV1. Against this background, the future uptake of VVC will strongly depend on whether the VVC SEP holders will be able to set clear and transparent licensing terms and royalties that are not excessive, but FRAND. VVC’s estimated FRAND royalty rates range from $0.05 for cellular devices to $0.17 for streaming devices.

In addition, AV1, often considered equivalent to HEVC, is already being implemented in many recent TVs. As adoption of alternative codecs increases, the value of VVC decreases. In this case, AV1 adoption lowers the cellular FRAND rate of VVC 40% to $0.03.

Read the executive summary below. Members of Unified's Video Codec Zone receive a full copy of this economic report. Email info@unifiedpatents.com for more info.

VVC Report - Public by Jennifer M Gallagher on Scribd

The trials and tribulations of Chinese patent invalidation proceedings

Unified’s senior patent counsel, Jessica Marks, explains Chinese oppositions and some of the unexpected issues that can crop up.

Validity challenges at the China National IP Administration are an increasingly important part of the Chinese patent landscape, but they can be confusing affairs. With regulations and guidelines, the process that PRID follows is intended to be efficient and many Chinese practitioners will advise that invalidations can be accomplished in six to nine months. However, Unified Patents has filed 18 such challenges since 2020 in China but, based on its experiences, the reality can be very different to expectations.

Read the article HERE, published by IAM.