Thursday, November 14, 2019

Munich appeals court likely to reverse Nokia's anti-antisuit injunction against Continental: Judge Koh may have to rule on third antisuit motion soon

Before we go to today's Munich appellate hearing, let me just say that this week's Component-Level SEP Licensing conference in Brussels exceeded expectations, which applies to the quality of the presentations of those who strongly advocate component-level licensing obligations under antitrust and contract law as well as of those who are skeptical of, or even adamantly opposed to, at least one of those legal bases--everyone I invited was terrific. I'll publish the slides no later than this coming weekend. Now, the latest from Nokia v. Continental.

3 1/2 months ago I voiced a concern over what appeared to be a contradiction in the Munich I Regional Court's decision to grant Nokia an ex parte (i.e., without notice or hearing) anti-antisuit injunction against Continental, barring the automotive supplier from shielding Daimler from Nokia's numerous German patent infringement actions:

There's something odd about the anti-antisuit-injunction injunction. The order notes that antisuit injunctions of the kind that exists in the U.S. are not known in Germany. But then the court somehow threads the needle and actually does issue an antisuit injunction for the purpose of thwarting a potentially-upcoming antisuit injunction from overseas.

A month later, when the Munich court entered another such injunction (against a different Continental legal entity), I wrote "[t]he appeals court may very well find that two wrongs don't make a right."

That's precisely what's most likely to happen this evening by Central European Time (morning by Pacific Standard Time), though it won't become known until tomorrow morning local time.

To be fair, Presiding Judge Tobias Pichlmaier of the 21st civil chamber of the lower court--in a speech delivered a couple of weeks ago--as well as the late-August decision (which came after briefing and hearing, unlike the ex parte in July) were definitely more nuanced than the first, hastily-prepared decision. Still, Presiding Judge Konrad Retzer of the 6th Civil Senate of the Oberlandesgericht Muenchen (Munich Higher Regional Court) started today's appellate hearing with a summary of the factual and legal issues that included two grounds of reversal:

  1. A preliminary injunction might not be warranted as no Continental antisuit motion against Nokia is currently pending in the United States. But Nokia's lead counsel, Arnold Ruess's Cordula Schumacher, accurately pointed out that Judge Lucy H. Koh of the United States District Court for the Northern District of California had not resolved the issue on a definitive basis: Continental could refile. I would file under lawyer's hyperbole that she said Judge Koh had twice "invited" Continental to refile. Once: yes. Twice: well, the denial of Continental's motion for an anti-anti-antisuit temporary restraining order merely noted that Continental had been told they could bring another motion for a preliminary injunction, but it's in the eye of the beholder whether that's an invitation.

  2. Judge Retzer appeared to be unconvinced by the attempt to distinguish the German anti-antisuit injunction from a U.S. antisuit injunction only because of a narrower scope (relating to a motion rather than an entire litigation). While he credited the lower court for its diligent analysis of some other aspects of the matter, he appeared to view this part as reversible error. Also, being the incarnation of equanimity, he did not appear receptive to an equality-of-arms argument (U.S. court can issue antisuit injunctions, so--Nokia said--German courts should provide a countermeasure). Neither did Nokia's self-defense argument get much traction: Judge Retzer explained that self-defense is when a court can't help you before it's too late, and not when you can still go to or defend yourself in court. The analogy he used was somewhat similar to Second Amendment activists' "when seconds count but the cops are minutes away" argument.

    Recent anti-antisuit decisions in Paris and London didn't bear any non-negligible weight with the German appeals court either as they didn't (because they couldn't) address the questions to be resolved under German law.

The court declared its intent to reach a decision today, but it would be late, so Judge Retzer asked parties, counsel, and the general public (like me) to go home and call his chambers tomorrow morning.

The decision will be final as preliminary-injunction rulings cannot be appealed to the Federal Court of Justice.

Affirmance of Nokia's anti-antisuit injunction would be a major surprise. Also, while the presiding judge's initial outline also mentioned the intermediary or complicit liability of Continental AG with its indirect U.S. subsidiary Continental Automotive Systems as a potentially outcome-determinative issue with respect to one of the two injunctions, that question wasn't discussed in the hearing--presumably because it won't have to be reached.

Nokia voluntarily joined two U.S. standard-setting organizations--ATIS and TIA--and made U.S. FRAND declarations. In doing so, Nokia submitted to U.S. in personam and in rem jurisdiction, which entails, ínter alia, the possibility of antisuit injunctions. Continental couldn't have enforced its rights as a third-party beneficiary in any other jurisdiction than the U.S., where the automotive supplier has significant business activity in the Wolverine State as well as the Golden State. Assuming that Nokia's anti-antisuit injunction (which was in any event a brilliant tactical move and definitely had an impact, though probably a short-lived one) gets lifted, Continental is likely to refile in the U.S.--where the standard for an antisuit injunction is fairly high and may not be met in this case.

In a related development, Judge Koh canceled the hearing on the Avanci-Nokia venue transfer motion, which she often does when the parties' briefs constitute a sufficient basis for adjudication. But there may be a hearing--in a week from today--on the defendants' joint motion to dismiss.

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Wednesday, November 6, 2019

Component-Level SEP Licensing: final conference program as PDF

If you plan to attend next week's Component-Level SEP Licensing conference in Brussels, you may find it useful to download the final conference program (this post continues below the PDF document):

FOSS Patents 19-11-12 Confe... by Florian Mueller on Scribd

The conference is already overbooked, but for a few more days I'll still accept registrations via EventBrite as there are always some no-shows and the hotel can provide--to use a cloud computing-style term--some (limited) burst capacity if needed.

The PDF will render correctly on most devices. However, when viewed on Scribd (such as in this post), a special character in the name of one speaker may result in a "blot."

Also, I've already received some useful feedback from readers to yesterday's "Call for input: do you know of any cases in the PC industry in which SEP holders refused to license component makers or based their royalties on the end product?"

So far it looks like there are a couple of wireless companies that also try to impose device-level royalties on personal computers, but they just can't do that when WiFi cards are sold separately and later incorporated into PCs, and some tried the same with respect to MP3 (as implemented by the Microsoft Windows operating system). I'll follow up with more detail on that one later this month.

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Tuesday, November 5, 2019

Call for input: do you know of any cases in the PC industry in which SEP holders refused to license component makers or based their royalties on the end product?

What you find in the headline is not meant to be a rhetorical question. While I'm personally unaware of any case in the personal computer industry (with just one exception that I'll state in a moment) in which a standard-essential patent (SEP) holder insisted on the end product (desktop computer or laptop) being the royalty base and/or refused to grant an exhaustive license to component makers, I can't rule out that there have been such cases in that huge and decades-old industry. That's why I'm asking for your help. Input from readers has previously been very helpful, such as in connection with privateering (patent transfers from to non-producing entities).

My focus is on mobile devices, and I've looked at PC-related patent litigation only when countersuits targeting personal computers were brought in retaliation for mobile patent suits. In one such case, an absurd letter by Motorola Mobility to Microsoft entered the public record: Motorola wanted 2.25% per unit from Microsoft and explicitly stated that "the royalty is calculated based on the price of the end product (e.g., each Xbox 360 product, each PC/laptop, each smartphone, etc.) and not on component software (e.g., Xbox 360 system software, Windows 7 software, Windows Phone 7 software, etc.)." To put this into perspective, on most PCs that royalty rate would have been roughly at a level with Microsoft's entire income from selling a Windows OEM license. Motorola made that outlandish demand in a letter, but limited its royalty demand to 2.25% of the selling price of Windows in Judge James L. Robart's now-famous FRAND case as well as in a similar proceeding (that led nowhere before the parties withdrew all pending claims) before the Mannheim Regional Court. Motorola even denied the undeniable later on--apparently they realized they had been a bit too crazy, fortunately just temporarily.

Video codec patents are one example of a category of SEPs for which patentees could theoretically have insisted that the royalty base should be the end product. Graphics and memory standards are another example.

What about WiFi? All I know is that I've bought WiFi cards for several desktop PCs in a row, just because it's always a nice fallback when there's an issue with a landline or a router. I can just get a connection via a smartphone with tethering--and in many places, other options exist. Obviously, when I bought those cards for roughly $40-50 each, there was no way any WiFi patent holder could have collected a royalty based on the total cost of the related PC. I paid my $40-50 for that component regardless of whether I plugged it into a $500 or a $5,000 computer. Apparently, the companies that made the WiFi cards I bought were fully--and exhaustively--licensed. It's the same situation when you buy an additional or larger memory chip or a new graphics adapter and just install such components yourself.

Today's smartphones are handheld PCs. If there really is no example (other than a letter Motorola distanced itself from) of SEP holders having treated the PC industry the way they're now trying to treat the mobile device and automotive industries, then that would expose the likes of Qualcomm, Nokia, and Ericsson as total outliers in the wider technology industry.

In case you do know of any cases, please fill out the contact form. I protect my sources unless you request--in writing--to be named. What I'm primarily looking for is verifiable information, such as publicly accessible court filings. If you have unverifiable information that you nevertheless consider highly pertinent, please let me know, too--but I may then have to follow up with you to get a better idea.

Thanks in advance for your help! I will publish the results of this call for input on this blog, in a future post.

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Friday, November 1, 2019

Upcoming Brussels conference on component-level SEP licensing: final program and roster of speakers

The hottest SEP-related topic at this time is the question of whether--and on what terms--implementers of FRAND-pledged standards should have access to exhaustive component-level licenses. It's relevant to antitrust enforcement, litigation, and policy-making.

On Tuesday, November 12, FOSS Patents' Component-Level SEP Licensing conference will be held at the Sofitel Le Louise. Tickets are available via EventBrite. Here's the final program (with all panelists named):

08:30Registration & Reception
09:00Panel discussion on component-level licensing (antitrust and contract law)
10:00"All Comers" Or Not? Access to Licenses Under Contract Laws
Moderator: Dave Djavaherian (Founder, PacTechLaw)

Panelists:
11:00Patent Licensing: Implications for Business
Moderator: Ief Daems (Legal Director Antitrust EMEAR, Cisco Systems)

Seeking Component-Level Licenses: Experiences From the Field
Patent royalties in the IoT industry: an economics perspective
Joachim Henkel (Professor of Technology and Innovation Management, Technical University of Munich)
12:30Lunch
13:30The 2019 FTC v. Qualcomm Ruling: Key Holdings, Next Steps, Global Impact
Moderator: Jay Jurata (Partner, Orrick, Herrington & Sutcliffe)

Judge Lucy H. Koh's findings of fact, conclusions of law, and remedial orders
Jay Jurata (Partner, Orrick, Herrington & Sutcliffe)

Licensing practitioner's perspective on fallout from FTC v. Qualcomm ruling
Eric Stasik (Founder and Director, Avvika)

Could Judge Koh's reasoning be adopted under Art. 102 TFEU?
Evelina Kurgonaitė (Secretary General, Fair Standards Alliance)
15:00Afternoon Coffee Break
15:30Antitrust Complaints Over Component-Level Licensing
Moderator: Rebekka Porath (Director IP Policy EMEA, Intel Corporation)

Antitrust complaints over SEP licensing
Rafał Sikorski (Professor, Adam Mickiewicz University; and Senior Partner, SMM Legal)

Continental antitrust lawsuit against Avanci
Kent Baker (Head of IP Strategy & Licensing, u-blox)
16:00BONUS SESSION: Access to Injunctive Relief
Moderator: Edmund Mangold (Patent Counsel, BMW)

Evolution of national case law on SEP injunctions since Huawei v. ZTE
Bram Nijhof (Counsel, Taylor Wessing)

The proportionality requirement under the EU enforcement directive
Maurits Dolmans (Partner, Cleary Gottlieb Steen & Hamilton)

The German patent reform debate
Moderator: Florian Mueller (Founder, FOSS Patents)
Panelists: Messrs. Dolmans, Mangold, and Nijhof

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Wednesday, October 30, 2019

Game changer in automotive patent wars? Huawei brought antitrust complaint against Nokia in German court to get exhaustive module-level SEP license

The Munich I Regional Court scheduled a Nokia v. Daimler "double-header" for today: first hearings (several months after which there will be trials followed by decisions) in two of the Finnish company's ten patent infringement cases pending against the German car maker.

The wireless standard-essential patents-in-suit are EP1388234 and the related German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets" as well as EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission." On June 5, the same court held a hearing on Nokia's infringement action against Daimler over EP1671505 on a "redundancy strategy selection scheme," and indicated a strong inclination to rule in Nokia's favor, unless things change when the actual trial takes place on February 6, 2020.

A number of suppliers of telematics control units (TCUs) to Daimler are intervening in the infringement case on the automotive company's behalf: Continental (which tried twice, but unsuccessfully so far, to shield Daimler from Nokia's lawsuits by means of a U.S. antisuit injunction), BURY, Bosch, TomTom (world-famous for its navigation systems), and Valeo subsidiary Peiker. Another intervenor, Huawei, makes cellular communications modules that are at the heart of many TCUs made by others; Huawei is also known to offer TCUs, but its counsel mentioned only its connectivity modules today.

Another factor that sets the Chinese mobile technology company apart from the other intervenors is that Huawei is presently obtaining several times more SEPs--and has a far higher share of existing 4G patents--than Nokia. By contrast, the TCU makers intervening in this case largely don't own cellular SEPs. What lends this particular importance is that it shows it's about product-focused innovators (car makers, TCU makers, and the likes of Huawei, Samsung, and LG) versus companies like Nokia and Ericsson, whose current product business is a shadow of its former self, so they increasingly focus on patent monetization.

Something I had heard through the grapevine was finally confirmed today:

Huawei has recently filed an antitrust complaint against Nokia with the Dusseldorf Regional Court, asking the court to order Nokia to make a FRAND licensing offer to Huawei--which (as was also mentioned today) already has a license agreement in place with Nokia for its end products (phones, tablets etc.)--that would result in an exhaustive SEP license covering Huawei's cellular connectivity modules.

Huawei is more likely than not to succeed with its Dusseldorf antitrust action. Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German), who chairs one of the two patent-specialized "senates" (divisions) of the Dusseldorf Higher Regional Court and is the principal author of the leading German reference work on patent infringement proceedings, published an article this year in the periodical of the German Association for the Protection of Intellectual Property (GRUR). In that article, Judge Dr. Kuehnen explained why implementers at all levels of the supply chain are entitled to an exhaustive FRAND license--and after analyzing various procedural avenues, he concluded that the most practical approach is for the implementer to ask a court--as Huawei is doing now--to obligate the SEP holder to make a FRAND offer. That appears more reasonable than a prayer for relief over a specific set of terms, given that a SEP owner has more information available to make a FRAND offer that complies with the criteria laid out by the Court of Justice of the European Union (CJEU) in Huawei v. ZTE.

Huawei's counsel in the Dusseldorf antitrust action--and representing Huawei to the extent it is an intervenor in Nokia's patent infringement actions--is Preu Bohlig's Professor Christian Donle. Preu Bohlig is one of Germany's oldest IP law boutiques. In the smartphone patent wars that firm successfully defended HTC against a couple of Apple patents. When I heard of Professor Donle's component licensing antitrust action, I invited him to speak at my Brussels conference on November 12 (that's already the week after next), and he thankfully accepted, so he will share a panel with Bristows' Pat Treacy, BakerBotts' Paul Lugard, and Orrick's Jay Jurata. But back to the German cases:

If at the end of Huawei's antitrust action Nokia is required to grant an exhaustive module-level SEP license on FRAND terms (and a real license as opposed to an "extended workbench" type of deal under which the de facto licensee would still be the car maker, with the component supplier merely acting as a licensing agent on the OEM's behalf), Nokia's patent infringement actions against Daimler will, to the extent they involve Daimler cars that come with a then-licensed Huawei component, be not only meritless, but even downright unlawful.

For that reason, Huawei has intervened in the German Nokia v. Daimler cases, requesting that--to the extent Huawei is affected--the cases be severed and stayed. I don't know what percentage of Daimler cars come with a cellular communications module from Huawei--all that has been mentioned so far is that Continental is one of Huawei's various customers among TCU makers, so the percentage could be extremely high.

In today's first hearing, the Munich court (I'll comment separately on their attitude toward antitrust defenses to patent infringement cases) basically said that since Nokia has chosen to sue Daimler, they are for now inclined to be ignorant of the issues raised by Huawei--though we're simply talking about the very (il)legality of what Nokia is doing by refusing to license Huawei while suing its (indirect) customer, Daimler. But it was just a first hearing, so there still is a chance for Huawei to obtain a stay even from the Munich court (which is an outlier court even within Germany in this specific context), or maybe it won't even be necessary in case Nokia fails to prevail on infringement and/or cases get stayed over validity concerns.

I've quickly drawn up a few diagrams to explain the relationship between the different parties and cases. First, here's a hypothetical scenario in which Nokia would--which it probably won't unless forced to--finally honor its FRAND pledge and extend an exhaustive SEP license to Huawei, which would in turn supply TCUs (which it may or may not do, but definitely could do anytime) to Daimler (click on the image to enlarge):

Patent exhaustion works downstream, so the net effect is that Daimler, as the end-product maker, would find itself fully licensed. While an argument was made today about exhaustion under German law requiring that the first licensed sale already involves a product practicing all claim limitations, Nokia did not--as I'm convinced it could not--make an argument that its SEPs claim cars, and Huawei's connectivity modules are full-featured communications devices that--to put it in a slightly oversimplified way--contain all the hardware you find in a phone apart from a screen.

Patent exhaustion works across any number of levels of a supply chain. Here's the second of my three charts--the present commercial reality of Huawei supplying its modules to Continental, which in turn sells a TCU to Daimler, but with the assumption of Nokia finally (which is not the case yet) granting a component-level license to Huawei (click on the image to enlarge):

The third and final chart combines the two previously-shown paths down the supply chain with Nokia's ongoing (allegedly unlawful) patent litigation campaign against Daimler and Huawei's Dusseldorf antitrust action against Nokia (click on the image to enlarge; this post continues below the diagram):

The chart mentions the basis for the Huawei v. Nokia antitrust case: Art. 102 TFEU, the unilateral-conduct (abuse of dominant position) paragraph of EU law.

Daimler and four other suppliers (Continental, Valeo, BURY, and Gemalto) filed EU antitrust complaints against Nokia earlier this year. Huawei would be in its right to do so, but no such filing is known. What is known by now is the Dusseldorf antitrust case, and just like Huawei v. ZTE started in that same town, where I attended the January 2013 trial that resulted in the referral of various SEP injunction-related questions to the CJEU, Huawei v. Nokia, too, has the potential to make EU antitrust history.

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German judge wants EU competition commissioner Margrethe Vestager to do his job: Nokia v. Daimler

The biggest news from today's Nokia v. Daimler doubleheader patent infringement hearing in Munich was Huawei's potentially groundbreaking German antitrust lawsuit against Nokia over the former handset maker's refusal to extend an exhaustive component-level standard-essential patent (SEP) license to Huawei, which is at least an indirect--through telematics control unit (TCU) makers like Continental--supplier to Daimler. But there's more (I typed 11 pages of notes)...

The two divisions of the Munich I Regional Court that hear patent infringement cases (the 7th Civil Chamber and--which held today's hearings--the 21st Civil Chamber) appear to have an interesting self-concept. While they very much focus on patent cases, their responsibility extends to all fields of civil law, depending on what issues get raised in their cases. Competition law is not an exception. But their protective instincts consistently benefit patent holders, even trolls and other abusers, and apparently never those whose businesses are profoundly impacted by antitrust violations.

Hogan Lovells's Dr. Benjamin Schroeer ("Schröer" in German), counsel for Nokia v. Daimler intervenor Peiker (a Valeo subsidiary), was one of several attorneys for Daimler suppliers who explained to the court how their clients are affected by Nokia's refusal to extend exhaustive component-level licenses to them, choosing to sue Daimler instead. But what matters to the court is that Nokia holds patents and elected to sue Daimler over them--end of story, for the time being...

Dr. Schroeer suggested that Daimler is just serving as a proxy for Nokia to sue because, in reality, it's about the telematics control units (TCUs) supplied by the likes of Peiker and Continental. In that context he even hinted at a violation of the intervenors' right to be heard. Whether he meant to indicate to the Munich court that they're considering a complaint with the Federal Constitutional Court of Germany wasn't clear--but that's where a complaint over a denial of the right to be heard would ultimately go.

When Dr. Schroeer stressed his client's antitrust injury, Judge Dr. Hubertus Schacht, who filled in for Presiding Judge Tobias Pichlmaier today, said the following:

"Complaints [over Nokia's allegedly anticompetitive conduct] are also pending with the [European] Commission. It appears there are legal remedies for [what you've described]."

It's a well-known fact that Daimler and at least four suppliers (Continental, Valeo, BURY, and Gemalto) have lodged such complaints this year. The EU Commission will at some point--possibly in the near term--decide whether to open formal investigations. Assuming the Directorate-General for Competition (DG COMP) does investigate, and finds that Nokia has violated Art. 102 of the Treaty on the Functioning of the EU (TFEU), and further assuming that such Commission decision would be upheld by the Court of Justice of the EU, Nokia might indeed get fined. But in the meantime, the German courts will have to adjudicate the pending Nokia v. Daimler patent infringement actions (at least ten are known, and more may be--or may even have been--filed). If a patent injunction is ordered against Daimler, and actually enforced, the car maker will be left with no choice but to bow to Nokia's demands--and those may be totally out of line, as counsel for Huawei said today that he's ready to produce the existing Huawei-Nokia patent license agreement covering mobile end products within five minutes of Nokia waiving the confidentiality requirement, and the court would see that what Nokia is seeking from Daimler is a disproportionately higher license fee for its cars than the one it's actually getting from Huawei for its mobile phones and tablets.

As I noted in another post on today's hearing, the positions the Munich court took today were highly preliminary. It's happened before in some Munich cases--though never with respect to an antitrust defense to the best of my knowledge--that the court adopted a different position at the time of the second hearing, which is the actual trial. Should Nokia be granted injunctive relief in these cases, it would amount to a dereliction of duty with respect to the application of competition law. In that light, I found it disappointing and disconcerting that a German judge would tell automotive suppliers to complain with the EU's competition authority instead of recognizing the ramifications of Nokia's refusal to license component makers.

Relying on EU competition commissioner Margrethe Vestager is not the answer to serious antitrust issues raised in a German patent infringement litigation.

If Daimler's suppliers are--as any remotely reasonable reading of the CJEU's Huawei v. ZTE makes perfectly clear--entitled to an exhaustive SEP license, the Munich court can't just argue that the bottom-line commercial effect of Daimler taking a license from Nokia would be that Daimler can continue to make and sell cars that come with cellular connectivity. With Huawei's private antitrust lawsuit against Nokia, it's fairly possible that the central question here--access to exhaustive component-level licenses that enable suppliers to sell to any customer anytime (one of the fundamental freedoms of the EU: freedom of movement of goods)--will reach the EU's top court within a few years. Should the CJEU then find that Nokia's refusal to deal was an antitrust violation, some people may end up looking very bad because they would have condoned or even abetted illegal conduct despite having had every chance to do their job and thwart SEP abuse.

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Qualcomm's German outside counsel: all mobile communications technology resides in baseband chipset

In the FTC v. Qualcomm antitrust litigation, particularly in its opposition to the FTC's motion for summary judgment on chipset-level licensing, Qualcomm disputed that cellular standards are implemented by baseband chips. Qualcomm claimed that only "complete devices" can implement cellular standards (which failed to persuade Judge Lucy H. Koh of the United States District Court for the Northern District of California).

That's why I just can't help but share a soundbite from today's Nokia v. Daimler patent infringement hearing in Munich. Today, Quinn Emanuel's Dr. Marcus Grosch represented Daimler against Nokia's standard-essential patent (SEP) assertions. But he also represented Qualcomm in its German patent infringement actions against Apple. Here's a fundamental truth he told the Munich court today:

"All that we're talking about with respect to mobile communications technologies is ultimately in the baseband chip."

That quote made my day--and justifies an unusually short blog post by my standards.

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