Thursday, August 6, 2020

COVID prevention rules must outweigh judicial independence as superspreader patent judges are out of control

Few blogs have more judges among their readers than this one, so I wish to clarify something upfront: not only do I acknowledge but I fervently support the concept of judicial independence. About 14 years ago I raised concerns over a lack of independence of the judges of a future unified European patent judiciary (now known as the UPC, back then labeled EPLA). Later I criticized the way the European Patent Office treats the members of its Boards of Appeal (BoA). And I've suggested on a variety of occasions that the judges of the Court of Justice of the EU (CJEU) should be appointed for life (with a reasonable retirement age), not for short terms.

That said, courtrooms must not become lawless zones--especially not when public health concerns are at stake.

Nobody in his right mind would advocate unfettered judicial independence to the extent that a judge or a panel of judges could allow court staff, counsel, party representatives, or spectators to strangulate each other. Accordingly, I just can't see why it should be acceptable for hearings and trials to become coronavirus superspreader events. Actually, strangulation at least wouldn't be infectious.

Depending on the legal framework of a given jurisdiction, executive governments may indeed lack the authority to impose certain coronavirus prevention rules on courts. Wherever that may be the case, lawmakers need to step in.

Looking beyond the immediate effects of maskless hearings and trials, the fact that potential superspreader events take place precisely where the laws should be applied adversely affects many people's willingness to comply with COVID prevention rules elsewhere.

On Tuesday, the Marshall News Messenger reported on the kickoff of the first U.S. patent trial since the start of the COVID-19 pandemic. That's a PanOptis [just a troll] v. Apple litigation in the Eastern District of Texas, and my previous post reported on Judge Rodney Gilstrap's questionable decision to proceed. Far east of the Eastern District, a certain panel of judges of the Munich I Regional Court held a Nokia [almost a troll] v. Daimler trial without initially requiring everyone to wear masks, and without ever enforcing the recommended minimum distance across the entire courtroom (which was done only in the spectators' area, and only an hour and a half into the trial).

Two trials the world doesn't need to go forward in the current situation. Two trials that posed a threat to public health for no good reason. And there'll be more, I'm afraid.

A rule is a rule is a rule, and not a mere recommendation, invitation, or attempt. It's unavailing when judges or the government departments in charge of operating courts point to recommendations, invitations, or attempts to prevent the spread of the virus. Seen in that light, I considered a reply I got from the State Ministry of Justice of the Free State of Bavaria (which operates, inter alia, the Munich I Regional Court) to be tantamount to an executive declaration of powerlessness.

A spokeswoman for the state ministry pointed me to their guidelines on judicial proceedings, according to which a judge presiding over a hearing or trial can require participants to wear masks. If masks are optional in courtrooms, why aren't they in so many other places? In some parts of the world, they're mandatory even on the streets.

The ministry stressed that in light of the overall circumstances and the anticipated number of attendees, the trial took place "in the largest courtroom available [at the time]." The virus doesn't give a damn about a court's best efforts, though. Nor does the virus care about some judges' obsession with patent cases. They do have larger rooms that belong to the state judiciary, plus they could--if all else failed--rent a venue. And, again, patent cases--especially when it's not about disputes between direct competitors--are extremely non-urgent.

The ministry's reply goes on to claim that windows and doors were open "all the time," which is not true. In fact, at 9:46 AM (on July 29, the day of that most recent Nokia v. Daimler trial) I emailed a spokesman for the court just to ascertain that the room at least had electrical ventilation.

Finally, the ministry notes that the plexiglass panes installed on the tables in front of counsel were "customary." Again, the coronavirus couldn't care less about what's "customary." Plexiglass panes come in all sizes, and the ones that were in use on that occasion fell far short of what would be useful. They were next to useless as I'm sure any expert would confirm. Retail stores, gas stations etc. have all been able to obtain far larger plexiglass panes that truly serve their purpose.

Equally unhelpful is the ministry's reference to the fact that the court offered access via videoconferencing. Only a few people made use of that option, and most if not all of them hadn't physically participated in any Nokia v. Daimler trial as far as I recall. So videoconferencing failed to bring down the number of physical attendees.

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Thursday, July 30, 2020

In Judge Gilstrap's Eastern COVID of Texas, patent trolls trump public health concerns: PanOptis v. Apple trial to go forward regardless

Another day, another post calling out a court obsessed with advancing the cause of patent assertion entities and prepared to compromise public health in the process. Yesterday I reported on a courtroom insanity of potentially pathological proportions in Munich (Nokia v. Daimler), but regrettably a similar problem exists in the Eastern District of Texas--Munich's role model in some respects--on an even larger scale.

I think hard and long before naming and shaming judges, but Judge Rodney Gilstrap has hit a new low by exposing well over 100 people to significant health risks, and dozens of them over the course of several weeks, only because he's worried about his court's ability to attract patent troll lawsuits. He's made other decisions over the years that one can or must respectfully disagree with. This month he's done something no reasonable person could possibly accept, much less condone--except for the most ruthless and reckless patent trolls out there, maybe.

The Eastern District of Texas hasn't really made itself a name as the cradle of patent litigation sanity, but at least one used to associate the region with honest, hard-working, mostly conservative people leading a healthy rural life in their picturesque cattle towns, remote from whatever may plague more densely populated areas such as the nearby Dallas-Fort Worth metropolitan area. Unfortunately, certain parts of East Texas, such as Harrison County (where the Marshall division of the United States District Court for the Eastern District of Texas is based), have very recently been designated as "Red Zones" from an epidemiological perspective.

In that town--Marshall, TX--a notorious standard-essential patent (SEP) troll, PanOptis, is suing Apple over some wireless SEPs. The original trial date was pushed back by about a month as the spread of SARS-CoV-2 slowed down preparations. A couple of weeks ago, Apple moved (again) in light of COVID-19 for a continuation (postponement) of the trial that is now set to kick off in that corona hotspot in a few days' time (this post continues below the document):

20-07-14 Apple Motion to Co... by Florian Mueller on Scribd

To its motion, Apple attached a declaration by Dr. Robert Haley, M.D., professor of medicine and epidemiology and chief of the Division of Epidemiology in the Department of Internal Medicine at the University of Texas Southwestern Medical Center in Dallas, explaining the public health concerns raised by such a trial (this post continues below the document):

20-07-14 ExhA Dr. Haley Dec... by Florian Mueller on Scribd

Apple's proposal was to wait until early October and re-evaluate the situation then. Obviously Apple, like pretty much any defendant to a patent infringement suit, may be suspected of "stalling" when bringing such a motion. But a litigant's motives don't matter when the public interest--specifically, the health of counsel, court staff, and the local community (potential and actual jurors)--is at stake. The facts are clear:

  • PanOptis brought that case in February 2019, less than 18 months ago. Judge Gilstrap overemphasizes speedy resolution when he's worried about a delay at this point.

  • Not only is any patent case, by definition, less time-sensitive than whatever may involve capital crimes or terrorism, but this one is even particularly non-urgent by the standards of a patent case, given that PanOptis is merely seeking to be compensated monetarily (no prayer for injunctive relief).

  • Obviously, the situation may not be better by early October. Chances are it will get even worse. But in that case, another delay may be inevitable. It's not about anyone's crystal ball forecast, but about the hard facts stressed by Apple's motion and the attached declaration by a leading Texas-based epidemiologist, which outweigh by far and away a patent troll's interest in a rocket docket and a judge's ambition to let his court maintain the status of a patent litigation hotspot--when the real concern is that it's presently a corona hotspot.

  • On the bottom line, it should have been a no-brainer to grant Apple's motion, even at risk of slightly discouraging other plaintiffs from filing new cases in that district.

But--guess what--Judge Gilstrap denied Apple's motion (this post continues below the document):

20-07-21 Order Denying Appl... by Florian Mueller on Scribd

Judge Gilstrap complained about the timing of the motion, when the Governor of Texas himself just put some rules in place this month as he recognized an escalating health crisis. Judge Gilstrap is so unbalanced. He's apparently very happy about the fact that key expert witnesses from Europe won't be able to testify in person due to corona-related travel restrictions. Ironically, the countries from which those witnesses hail have far lower COVID-19 infection rates than Texas. In fact, it is roughly 200 times less likely someone from China is corona-positive than someone from Harrison County.

He ordered Apple's lawyers to arrive for the pretrial conference three days early and to stay through the trial. They can't go home in between. Whether Texas or California is the better or worse place to be these days in terms of COVID-19 is another question, but the benefit of that order is hard to see.

At some point there'll be several dozen prospective jurors (the venire) in the room, plus counsel. It will get somewhat crowded. But all that Judge Gilstrap points to in his scandalous order comes down to "encouraging all participants to follow the [Center for Disease Control]'s community-mitigation guidelines." This means people are recommended to wear masks, but as the pretrial conference showed, they won't. Face shields will be in use, but they aren't anywhere near as effective as masks, particularly not when the concern is centered around aerosolized infections in a closed-room setting.

While the order says the court would "preclude entrance to the Courthouse to those [...] who exhibit fever, cough or shortness of breath," it remains to be seen how consistently this rule will be enforced...

In case you're interested in further facts that show just how absurd Judge Gilstrap's course of action is, you may also find Apple's reply brief informative (though it was stricken by the court).

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Wednesday, July 29, 2020

Irresponsible Munich judges provoked coronavirus superspreader event at today's Nokia v. Daimler patent trial: no masks, no minimum distance

I am shocked, disgusted, and concerned about my health because even the most basic rules for preventing the spread of the coronavirus were waived at a Nokia v. Daimler patent trial in Munich today, only because the court--as one of the judges explained--was so very eager to hold that trial. I can only hope that neither I nor anyone else got infected today. I will give further thought to the possibility of directing formal complaints to certain politicians and authorities. I furthermore wonder whether this might give rise to a retrial as today's trial was held under unlawful circumstances.

Most of my blog posts about Munich patent trials mentioned a judge whose panel is not at issue: much to the contrary, I commend Presiding Judge Dr. Matthias Zigann of the Munich I Regional Court's 7th Civil Chamber for taking a perfect set of precautionary measures at last week's Sharp v. Daimler trial. I arrived about one hour early, and it lasted five hours. It will come as no surprise that I felt relieved to take my mask off upon leaving the building. But it was undoubtedly warranted to wear masks, and everyone complied 100% of the time: the judges, the lawyers, the party representatives, and "the general public" (such as me). And, very importantly, there was plenty of distance between any two persons in the room. So, the court's 7th Civil Chamber does what it can to prevent infections, but its 21st Civil Chamber has a reckless patent-centric attitude that the government of the Free State of Bavaria, which actually took the lead in Germany with respect to corona policies, should be ashamed of.

I went to the Palace of Justice early this morning to attend a 9 AM trial (Nokia v. Daimler, case no. 21 O 3891/19 over German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets"). Initially, everything looked just as proper as at last Thursday's trial. But then, at around 8:30 AM, I noticed that one of the technicians setting up audio and videoconferencing equpiment in the courtroom wasn't wearing his mask. I notified his supervisor or colleague, who then told him to put on his mask again. He did so, but only for a short while. At around 8:45 AM I asked the mask-refusing technician directly, as he was sitting quite close to me at the back of the room, and he walked by me several times at a close distance without a mask. He told me he "didn't know" what the rule was, and we would see when the judges were going to enter the room.

I immediately emailed a spokesman for the court, as well as one of the judges on today's panel. Nothing changed, though the spokesman came to the room (but at around 9:05 AM, when the court was already in session).

No judge or lawyer was wearing a mask. The approximately 35 maskless persons included three judges (Presiding Judge Tobias Pichlmaier and side judges Dr. Anne-Kristin Fricke and Mr. Schmitz), one court secretary, two audiovisual technicians, and (just stating the totals of in-house and outside counsel) eight Nokia representatives, eight Daimler representatives, and approximately 15 representatives of intervening suppliers. (There were more supplier representatives, but the others were sitting at the back of the room, where I was sitting, too, and on those 10 or 11 seats, all but one actually did wear a mask.)

There are smaller courtrooms, but it still wasn't large enough for almost 50 people under the circumstances of the coronavirus pandemic. In order to squeeze all those party representatives in, they allowed them to sit next to each other, except that the Nokia team kept the proper distance. The court had some small plexiglass panes installed here and there, but of a ridiculous size: their height was sufficient to prevent infections between laptops, but little more than that.

Back in the area for spectators, the legal minimum distance of 1.50 meters wasn't observed either.

That combination of neither imposing masks nor enforcing the necessary minimum distance is nothing short of a scandal.

At 9:19 AM, I emailed the court's president (chief judge), pointing out what was going on. Initially, nothing happened but roughly an hour and a half into the trial, Presiding Judge Pichlmaier finally imposed an unconditional obligation to wear masks (at all times, including when speaking), and police officers checked on distances between chairs in the spectators' area. It turned out that some people had brought in additional chairs. A fair amount of rearranging turned out necessary.

When the trial resumed, Judge Dr. Fricke gave an impassioned speech, seeking to justify the panel's irresponsible original decisions. While it is true that the court had taken some measures, such as ensuring that a window or a door would be open most of the time (in addition to electrical ventilation) and asking court staff to set up chairs for spectators at a proper distance (until others brought in additional ones; the judges could have prevented them simply by ensuring the presence of police officers instructed to enforce compliance with anti-corona rules), all that matters is the result. The result is that today's trial was a potential--but hopefully not an actual--superspreader event. The judges could have noticed from the bench that spectators were sitting too close to each other.

Judge Dr. Fricke stressed how eager the judges were to hold today's trial and to discuss some key legal issues in open court. No doubt about that, but the end of holding a patent trial that the world doesn't need (it's just one of ten German Nokia v. Daimler cases) now instead of, say, two or three months later in a more spacious room doesn't justify the means of compromising corona prevention. We're not talking about a habeas corpus type of issue that needs to be resolved as quickly as possible.

The risk of a superspreader was non-negligible. Most of the participants were from the states of Bavaria (of which Munich is the capital) and North Rhine-Westphalia (due to Dusseldorf being a major patent litigation venue). Both those states are still struggling with significant numbers of infections. Just yesterday, Markus Soeder, the prime minister (the equivalent of a governor) of Bavaria, explained to the general public that "the coronavirus is coming back, subtly but with a vengeance."

Last week, Judge Dr. Zigann noted that there was a corona-positive participant in a recent Federal Patent Court hearing (a court that is also based in Munich), but presumably thanks to precautionary measures no one got infected there.

At a time when the courtroom was sealed, one spectator--who wasn't wearing a mask at the time, though there was actually an obligation to do so in the court building--sneezed quite heavily. That's what happens outside a courtroom in which the judges waive some essential rules. Irresponsible.

As for the trial itself, the courtroom was sealed for the entirety of the FRAND discussion, which is rather questionable as even the presiding judge himself initially indicated that the court deemed only part of that to involve confidential business information. Anyway, what I learned from various sources is that the court didn't indicate any inclination. They discussed infringement, validity (where Daimler apparently had two pretty good arguments relating to the priority date of the patent-in-suit, and I understand Daimler's oral argument, delivered by Quinn Emanuel's Dr. Marcus Grosch, was extremely compelling), and FRAND, including the possibility of referring to the Court of Justice of the EU the questions raised by the Federal Cartel Office of Germany. Anything can happen when the court announces a decision in late September.

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Friday, July 24, 2020

Huawei's automotive component-level patent license deal with Sharp reduces Daimler's injunction-related exposure by 86%

Whether (and if so, when) Sharp is going to obtain a standard-essential patent injunction against Daimler remains to be seen. Two of the five German Sharp v. Daimler cases have already been stayed due to the patents-in-suit being likely invalid, and another stay is quite a possibility (though far from certain) on September 10, 2020 when the Munich I Regional Court's Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann; side judges: Judge Klein and Judge Dr. Werner) will announce a decision in case no. 7 O 8818/19 over EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method," based on how yesterday's trial went.

Should Sharp prevail over Daimler on some cellular SEP, the economic impact of the hypothetical enforcement of an injunction will amount to only one-seventh of what it would have been before Huawei secured a component-level SEP license from Sharp that covers baseband chips, connectivity modules, and telematics control units provided by Huawei or its customers, such as Continental and Harman. Quinn Emanuel's Jérôme Kommer, who argued the FRAND part of the case for Daimler, told the court that the amount of the security (bond or deposit) Daimler would want Sharp to post should an injunction be enforced during an appeal (so as to ensure Daimler can be made whole in the event of wrongful-enforcement damages) had been reduced by six-sevenths (roughly 86%) as a result of the Sharp-Huawei deal.

This suggests that the Mercedes maker can equip 6 out of 7 of its models with TCUs that come from Huawei or contain a Huawei component. Mr. Kommer, who according to one of my sources arrived in a Tesla (which I can relate to and simply shows the primary threat Daimler is facing doesn't come from patents), provided only that ballpark figure without elaborating on what Daimler products could not be equipped with TCUs covered by the Sharp-Huawei license deal. I find it technically hard to imagine that Daimler's other TCU suppliers (or their network access device suppliers) couldn't simply incorporate a Huawei baseband chip into their products, but based on what I remember from FTC v. Qualcomm, Huawei's HiSilicon division makes chips only for Huawei's own use. Therefore, the ongoing Sharp v. Daimler patent litigation campaign increases the pressure on Daimler's other suppliers to secure exhaustive component-level SEP licenses from Sharp.

Based on what counsel for certain suppliers said yesterday, Sharp appears willing to extend component-level SEP licenses to other companies as well, but others haven't been able to reach an agreement on the specific terms yet. This is speculative, but the strength of Huawei's own cellular SEP portfolio likely constituted a bargaining chip some other parties lack. Actually, Samsung would be a in a very strong position as well, but its Harman Becker subsidiary uses Huawei components anyway.

With respect to past damages, the parties didn't take definitive positions, but there appeared to be a consensus that the Sharp-Huawei deal resolves more than half (and possibly far more than 50%) of the past-damages aspect of the case.

The most relevant take-away is this: In a world in which a single license deal between Sharp and Huawei can reduce Daimler's injunction exposure by 86% and resolve well over 50% of past damages, component-level licensing is clearly the way to go. It would take each SEP holder (or pool, such as Avanci, if it modified its licensing policy) only a very few license deals to cover virtually every car made anywhere on this planet. Any alleged inefficiencies of component-level licensing are not even pretextual--they are simply preposterous.

There's another key take-away from yesterday's trial, but it would go too far to address here: Presiding Judge Dr. Zigann told Daimler that the recent Sisvel v. Haier ruling by the Federal Court of Justice of Germany places the emphasis on an implementer's willingness to take a license, and Daimler might be enjoined as a result. Professor Thomas Cotter recently shared a couple of thoughts on Sisvel v. Haier (via his Comparative Patent Remedies blog), and I'll talk about the case on some other occasion. Mr. Kommer sought to distinguish Daimler's conduct from Haier's, but didn't appear to get much traction in that regard.

The Federal Cartel Office of Germany (Bundeskartellamt) participated via videoconferencing, but only passively so. Sharp's cases against Daimler are gradually distinguishable from Nokia v Daimler (where the Federal Cartel Office requests the referral of certain component-level licensing questions to the Court of Justice of the EU), given that Sharp doesn't rule out extending true (exhaustive) licenses to component makers. I was disappointed to hear that the Munich court believes Daimler's willingness to negotiate a direct license with a SEP holder like Sharp precludes an antitrust defense based on a SEP holder's failure to license component makers. I don't think Daimler could have made it any clearer that it believes its suppliers should be licensed, but fiduciary duties make it absolutely impossible for any company not to take the necessary steps to avoid being exposed to an injunction. The Munich court's position is tantamount to enabling extortion (in an antitrust sense), and underscores the necessity to have the EU's top court rule on various SEP-related questions, given that Huawei v. ZTE has practically been gutted by now.

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Tuesday, July 21, 2020

Another Nokia patent case against Daimler practically stayed as patent-in-suit may be invalid

The additional Nokia v. Daimler trial day that the Munich I Regional Court (Landgericht München I) had scheduled for this week's Thursday has been pushed back to February 8, 2021, as I just learned from a spokesman for the court. The court's 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) had suggested this postponement to the parties, and Nokia ultimately consented. Daimler had moved for a stay anyway, so it just depended on Nokia. This postponement is practically a stay because the whole reason for it is just that the court would like to await the Federal Patent Court's preliminary opinion on the (in)validity of the patent-in-suit, which is expected to come down in September.

The patent-in-suit is EP1671505 on a "redundancy strategy selection scheme." The original trial took place on February 6 (further to a first hearing held in 2019), but since then there have been various delays, and now that trial is going to continue one year and one day later...

Two other Nokia v. Daimler cases have recently been stayed on a consensual basis (one in Munich, one in Mannheim). In my original blog post on those stays, I prematurely said that this case over EP'505 had been stayed. It hadn't yet, but has by now. Nokia apparently has a huge patent quality problem. While that is good news for Daimler, the automotive industry at large (car makers and suppliers alike) is waiting for a German court to refer the antitrust questions raised by the country's Federal Cartel Office to the Court of Justice of the EU. Technically, however, it's understandable that a court would firstly ascertain whether an asserted patent is valid. If it's not, then the antitrust issues aren't reached in the first place.

There's still going to be an automotive patent trial in Munich on Thursday in one Sharp v. Daimler case. Sharp, unlike Nokia, has meanwhile granted an exhaustive component-level license to Huawei, resolving more than half of the case in economic terms and giving Daimler an option for uninterrupted supply. But other suppliers haven't managed to secure a license from Sharp yet, which is why those infringement cases are going forward, at least for now.

Also, a Nokia v. Daimler trial (case no. 21 O 3891/19 over EP1388234 and the related German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets") is still scheduled for next week.

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Monday, July 13, 2020

BREAKING: Sharp grants automotive component-level SEP license to Huawei, partially withdraws patent infringement suits against Daimler

[BREAKING NEWS]

With multiple simultaneous filings dated July 6, 2020, Sharp partially withdrew its German standard-essential patent (SEP) infringement actions against Daimler as the Foxconn-owned Japanese electronics maker has concluded an automotive component-level license agreements with Huawei. The infringement actions are continuing with respect to Daimler cars that do not come with a Huawei baseband chipset, telematics module, or telematics control unit (TCU).

In terms of the economic significance of the remaining claims, it's a safe assumption that well over half of the dispute between Sharp and Daimler has been amicably resolved by virtue of patent exhaustion. But this breakthrough agreement far transcends that particular set of cases. It divides the Avanci gang led by patent abusers and formed for the purpose of dissuading blue-chip SEP holders such as Sharp from granting component-level licenses, while exposing Nokia's dogged denial of the feasibility and fairness of component-level SEP licenses as purely pretextual. Sharp's partial withdrawals conclusively prove that it is possible to differentiate at the end-product level based on upstream suppliers.

I applaud Sharp--which owns a large SEP portfolio and has proven its will to enforce its rights in court--for showing the way forward for licensing cellular SEPs to the automotive industry, which has traditionally required its suppliers to secure the prerequisite patent licenses; I congratulate Huawei on having convinced Sharp of the benefits of such an agreement at the negotiating table; and I'm happy to see Daimler--as a beneficiary of its indirect customer relationship with Huawei, which is known to provide connectivity modules to Daimler's tier 1 suppliers such as Continental and Harman--being relieved from a significant part of the litigation pressures it has been facing for a while. In practical terms, the Sharp-Daimler cases are now merely about past damages with respect to cars that came without Huawei components. Injunctive relief is a practical non-issue as Daimler could presumably equip 100% of its products with components supplied by Huawei or coming with Huawei chips and modules.

It bears recalling that Huawei is suing Nokia in Dusseldorf for an exhaustive component-level SEP license on FRAND terms. That antitrust trial will go forward in early September. Meanwhile, Nokia's infringement claims against Daimler are falling apart.

The Sharp-Huawei license deal further validates the positions taken by the Bundeskartellamt (Federal Cartel Office of Germany) in its interventions in multiple German Nokia v. Daimler cases, advocating the referral of a set of component-level licensing questions to the Court of Justice of the EU (CJEU).

The groundbreaking agreement won't go unnoticed in Brussels, where the European Commission is dealing with SEP licensing issues at the policy as well as competition enforcement levels.

The fact that Sharp agreed to license not only tier 2 (connectivity modules) and tier 1 (TCUs) products, but also baseband chipsets (tier 3 from a car maker's perspective), means that this license agreement is bound to be referenced by smartphone makers in some of their disputes. Apple, in particular, has been advocating chipset-level SEP licensing for a long time. Sharp's parent company, Foxconn, is the largest one of Apple's contract manufacturers.

There can't be the slightest doubt that we'll see more and more agreements of this nature and stature now. Some of them will come into being on a consensual basis, such as the one I learned about today, while others will simply result from regulatory action and judicial decisions. One way or the other, the likes of Nokia, Ericsson, and Qualcomm won't be able to deny component-level licenses for too much longer.

IoT startups stand to benefit from this trend. They are far too small to be in a strong position vis-à-vis certain abusive and anti-innovative SEP holders (and the trolls they feed with patents). IoT innovators depend on their suppliers being licensed. The European Commission has failed the IoT industry so far, siding with yesterday's losers rather than tomorrow's winners, but as a result of negotiations (such as Sharp-Huawei), private lawsuits (such as Huawei v. Nokia), and regulatory interventions (such as the Federal Cartel Office's submissions in Nokia v. Daimler), change is coming.

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Friday, July 10, 2020

Nokia getting nowhere: two more infringement cases against Daimler stayed as declared-essential patents-in-suit are likely invalid

An earlier version of this post went live on Wednesday and confused EP'505 (asserted in Munich) for EP'199 (asserted in Mannheim). A source of mine had gotten confused, and I should have double-checked, but now it's all 100% correct--and the conclusions are obviously the same, except that the Nokia v. Daimler trial in Munich on the 23rd will go forward and promises to be the most important event to date in the automotive patent wars. I'll try to attend.

Sometimes I wonder whether the S in "SEP" stands for "scam" rather than "standard."

Everyone who deals with patents professionally knows that, at least with respect to information and communications technologies, the system is broken beyond repair. Patent offices issue far too many patents and treat mass filers as "key accounts" whose "demand" for weapons of extortion they seek to satisfy. Unlike its U.S. counterpart, the European Patent Office isn't run by a trolls' lawyer, but it's also part of the problem.

But standard-essential patents take the issues facing the patent system to an even higher level. Companies overdeclare (though some have higher "hit rates" than others). No scrutiny is performed. And besides countless patents that aren't essential from an infringement point of view, the vast majority of those who may claim a standard-essential technique are simply invalid as granted.

Nokia failed to deliver a great smartphone user experience, then increasingly resorted to patent monetization. But it concluded license deals without a lot of patents actually coming to judgment. They monetize a portfolio that contains a huge amount of hot or even not-so-hot air. Where's the substance?

For a while, everything appeared to be working out according to plan for Nokia with respect to the Daimler dispute. They knew they were facing a 19th-century company that they hoped would cave at some point. Daimler certainly failed to put the necessary pressure behind its EU antitrust complaint, while Nokia found political opportunists of the worst kind in Brussels who were--and potentially still are--perfectly prepared to do lasting damage to the European Commission's reputation as a competition watchdog. After so many years of having been accused of protectionism, the Commission couldn't vindicate its critics more effectively and convincingly than by condoning Nokia's conduct.

Meanwhile, Nokia was hoping to get leverage through a barrage consisting of ten German patent infringement actions against Daimler. But the tide has turned, and this appears to be a dreadful season for the failed handset maker. The amicus curiae brief filed by the Federal Cartel Office of Germany with the courts hearing Nokia's cases makes it very hard--if not impossible--to imagine that Nokia would obtain an enforceable injunction against Daimler anytime soon, if ever.

Now I've found out that Nokia also keeps losing on the technical merits. Not only has Nokia been unsuccessful in Mannheim so far, but Nokia felt forced to enter into stipulations to stay two more cases given the high likelihood of invalidation of the relevant patents-in-suit:

  • On October 30, 2019, the Munich I Regional Court's 21st Civil Chamber had held a first hearing in two cases, one of which is about EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission." The trial was supposed to be held on July 29, but it won't go forward as this patent, too, appeared likely invalid, so much so that Nokia had to consent to a stay (as per a filing on July 7, 2020).

  • In Mannheim, Nokia had already lost one case (patent not essential), and another case had been stayed. On June 15, case no. 2 O 37/19 over EP1273199 on a "method and arrangement for maintaining synchronization in association with resetting a communication connection" was also stayed pending a preliminary opinion of Federal Patent Court on validity. The week before, counsel for Nokia had reiterated that they considered the patent valid, but nevertheless consented to a stay.

There still are some other Nokia v. Daimler cases pending in Germany, with a Munich trial still being slated for later this month, a Mannheim ruling scheduled for early August, and a few Dusseldorf hearings set to take place in August and September. But so far, Nokia simply isn't winning. Much to the contrary, Nokia keeps devaluating its portfolio, and all those handset makers whose licenses are up for renewal in the not too distant future are presumably watching those developments attentively. Nokia's litigators picked the patents they thought were their strongest weapons, and it turns out they're largely non-starters...

What makes me really happy is the fact that the Munich I Regional Court appears increasingly receptive to strong invalidity arguments. That brings at least some balance to an otherwise broken system.

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