Wednesday, October 16, 2019

German patent injunction reform process plagued by misconceptions, strawmen, and bogeymen

Juve Patent wrote last month that the patent reform bill the German government is currently drafting "will likely disappoint many experts and not include the major changes to the automatic injunction that have been called for by the German automotive and telecommunications industries." I don't think one can know for sure at this point that the process isn't going to go in a helpful direction. The proposal might still end up being better than expected, and even if not, the legislative process in the Bundestag (Federal Parliament) could result in major improvements. But given how long major stakeholders such as Germany's automotive industry and Deutsche Telekom have been lobbying for change, an article like the one I just mentioned is disappointing. What we should see at this stage is articles in which patent monetization-focused organizations like Siemens and its allies would spread FUD (fear, uncertainty, and doubt), such as warning against a decline in innovation.

What that Juve Patent article calls "major changes" (to patent injunction rules) would simply put German patent law in compliance with settled EU law. It's not an overreaching demand; it should be viewed as an inevitable minimum outcome.

There hasn't been much press coverage of the German patent reform process, and only last week did two members of the German federal parliament--both from the chancellor's party, the Christian Democratic Union (CDU)--issue a public statement. The headline of the joint press release by Elisabeth Winkelmeier-Becker, the CDU/CSU group's legal affairs spokeswoman, and Ingmar Jung, the group's patent reform rapporteur, demands better protection of corporations from patent trolls.

Placing the emphasis in a patent reform context on trolls is generally beneficial in the public debate as hardly anyone would want to stand up to defend the "trolls'" interests. Anyone who disagrees with measures against "trolls" would firstly have to insist on properly defining what a "troll" is versus a legitimate research-focused licensing business. The term "patent troll" can serve to frame a debate, and that's what those center-right politicians apparently considered appealing.

But there's a significant downside. Not only are "patent trolls" just one part of the problem (and still--despite some signs of increasing activity--a far smaller part in Europe than in the U.S.) but there's a serious risk that even if German patent law was modified and required a proportionality analysis as opposed to practically automatic injunctions, the courts might end up denying injunctive relief only (or largely) to non-practicing entities (NPEs).

While both the Supreme Court's eBay v. MercExchange ruling and the America Invents Act (AIA) made it harder for trolls to gain leverage over alleged infringers, the rules and tests they established aren't NPE-specific (though there is a strong argument that eBay hasn't had nearly as much of an impact on patent holders who can establish competitive harm as ithas on NPEs). If Germany, contrary to Juve Patent's current operating assumption, added a proportionality requirement to the injunction clause (§ 139) of its Patent Act, the statute itself wouldn't be as specific as the four-factor test in eBay. It would be up to the courts how to interpret and apply the new statute, and in the initial absence of any German case law, they would try to understand the legislative intent behind the reform bill.

A press release by the larger one of the two parliamentary groups in the current government coalition would not, all by itself, prove or disprove any legislative intent. No irreparable harm has been done to the cause. However, when you get closer to the actual votes, there will be debates: in the legal affairs committee, possibly also in other committees (such as economic affairs), and in the plenary. What lawmakers say there about the underlying rationale and the objectives they pursue with the bill is likely going to influence the subsequent interpretation of the new statute by the courts. If judges conclude that the purpose came down to denying NPEs access to injunctive relief, they will rule accordingly--and nothing will change with respect to patent lawsuits brought by organizations like Qualcomm, Nokia, Ericsson, Siemens (who hold far more patents than trolls, and are no less aggressive).

There's only one thing I do like about the CDU/CSU press release: they stress that there's an urgent need to act in order to prevent that German companies would be permanently disadvantaged in the global economy. That is indeed a problem with respect to companies that manufacture and/or warehouse products (such as cars) in Germany. And trolls are a significant part of that problem, but not the largest part.

Mr. Jung's quote is very soft and weak with respect to what legislative change is actually needed: he merely describes a proportionality requirement as "a/one [the indefinite article and the numeral are the same word in German] possible solution." Again, considering that it's simply dictated by the EU enforcement directive (the related passage of which has in fact been implemented by Germany in connection with other types of intellectual property than patents), it's mandatory, not optional.

The debate should only be about what guidance the courts should get: what criteria to analyze, and their relative weight.

As a secondary demand, the two CDU/CSU politicians propose what the leading German automotive industry association demands as well: to close the injunction gap, which is the net effect of invalidation proceedings before the Federal Patent Court of Germany taking far longer than the initial infringement decisions by (at least) the Mannheim Regional Court and the Munich I Regional Court. (At this point the Federal Patent Court has such a backlog that even the Dusseldorf Regional Court would order an injunction long before the validity determination.)

The injunction gap is definitely part of the problem--but closing it wouldn't be enough. At this point there's a high risk of the ultimate "compromise" just amounting to an enforcement stay between the conclusion of the first-instance infringement case and the Federal Patent Court's validity determination.

The final sentence of that CDU/CSU press release is simply off-base. It says: "With a particular view to standard-essential patents, there is an observable increase in lawsuits leveraging patent injunctions to the detriment of producing companies."

There was a time when German courts granted SEP injunctions almost as readily as non-SEP injunctions. But with the CJEU ruling in Huawei v. ZTE, that changed; in fact, courts were already somewhat hesitant during the European Commission investigations of Samsung's and Motorola's SEP assertions.

Further improvement with respect to SEP injunctions would be highly desirable, and there have been some worrying decisions by some courts recently. But SEPS are now the only category of patents over which even German courts don't grant automatic injunctions. A key stakeholder said at a government roundtable in May: "We're not here to talk about SEPs." He didn't mean that SEPs should be outside the scope of the reform bill, but that there's a need for a more balanced patent injunction framework with respect to SEPs and non-SEPs alike.

Siemens, which doesn't want any such reform to have teeth (until its own IoT products or medical devices get enjoined at some point), likes to frame the debate that way. They say those concerns are mostly over SEPs, and for SEPs the situation has improved after Huawei v. ZTE.

It's positive to see some parliamentary engagement here at this stage (before the bill is officially introduced). It's very good that a government party (though it's not the one running the Federal Ministry of Justice) confirms there's a sense of urgency for reform. But last week's statement falls far short of what's needed, and reflects the political clout of those who would like to maintain, to the greatest extent possible, the status quo.

Trolls are a bogeyman that can ultimately limit the impact of any reform. The portrayal of the problem as being SEP-related above all else is a strawman that some like to put up only because it's not too hard to take down.

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Saturday, October 12, 2019

Brussels conference (12 Nov) on component-level SEP licensing: roster of speakers almost finalized

I have an update on the upcoming (November 12, 2019) Brussels conference on component-level standard-essential patent (SEP) licensing (for a reminder, here's the registration link). We'll have a roster of really great speakers representing a diversity of perspectives and opinions. I will soon publish the final conference program with all names, but for a preview, let me introduce the moderators and speakers I can already announce--in the order of their planned appearances:

The first session in the morning will be a discussion panel touching on the implications of component-level licensing, or companies' refusal to engage in it, from an antitrust and contract law perspective. There will be a total of four panelists, and I'll ask the questions. As of today I can announce two of the panelists: Pat Treacy is a competition lawyer and partner with Bristows, and a part-time judge on the Chancery Division of the High Court of England and Wales. Paul Lugard is a partner at BakerBotts who has represented clients from many industries (including, but not limited to, consumer electronics and telecommunications) vis-à-vis the European Commission.

Dave Djavaherian, the founder of PacTech Law, served as associate general counsel at Broadcom (I met him at the time as certain Broadcom customers faced lawsuits in Germany). Dave has a wealth of experience in licensing, litigating, and arbitrating SEP matters--and is deeply involved with standards development and policy making (for an example, as vice chair of CWA2).

Two executives from innovative European companies will share experiences in seeking component-level licenses: Nordic Semiconductor's CTO Svein-Egil Nielsen, and AirTies' co-founder and CTO Metin Taskin.

Professor Joachim Henkel teaches technology and innovation management at the Technical University of Munich, and was a visiting scholar at University College London, MIT Sloan School of Management, Harvard Business School, and Singapore Management University. Professor Henkel recently updated his paper entitled "How many patents are valid? Extent, causes, and remedies for latent patent invalidity," the first version of which I mentioned five years ago. His focus at next month's conference will be on the economics of patent licensing.

John "Jay" Jurata is an Orrick, Herrington & Sutcliffe partner and the leader of the firm's global antitrust practice. I've linked to some of his writings in the past, such as an article on Assistant Attorney General Makan Delrahim's SEP policy positions and one on the Unwired Planet global FRAND rate case that the Supreme Court of the UK will hear in about a week from today.

Eric Stasik, the founder and director of consulting firm Avvika AB, provides assistance and guidance to firms engaged in commercial patent license negotiations (both patent holders and potential licensees), particularly within the field of mobile communications. I've seen his expert reports in various SEP cases involving FRAND licensing questions, and while we've often disagreed on LinkedIn, we get along well and maintain a constructive dialog. Eric's 20+ years of SEP licensing experience include 10 years of working for Ericsson (1992-2002), initially as a senior patent engineer and later as Drector of IPR and Licensing for Telefonaktiebolaget LM Ericsson (the corporate parent of the entire Ericsson group). He'll comment on the fallout from FTC v. Qualcomm against the background of his hands-on licensing expertise.

Evelina Kurgonaite became Executive Director of the Fair Standards Alliance earlier this year. Previously, she was Head of Policy Strategy and Legal Counsel at Samsung. She also worked for PaRR (Policy and Regulatory Report). Evelina will analyze the the FTC v. Qualcomm decision from the perspective of whether a similar outcome would be possible under EU antitrust law.

Rafał Sikorski is a professor of law (with a focus on IP as well as competition law) at Adam Mickiewicz University (Poznan, Poland) and a senior partner at SMM Legal. He's a sought-after conference speaker. He gave very well-received speeches at a Munich conference on injunctive relief earlier this year (where Judge Robart and (soon-to-be Lord) Justice Arnold also spoke). At my Brussels conference, Professor Sikorski will talk about certain SEP-related antitrust complaints.

Kent Baker, Head of IP Strategy & Licensing at u-blox (a company headquartered in Switzerland and selling positioning and wireless communication technologies around the globe), will discuss the U.S. Continental v. Avanci et al. case.

Edmund Mangold, a co-inventor of multiple patents, is patent counsel at BMW. Mr. Mangold will introduce the panel on access to injunctive relief and later join fellow panelists Maurits Dolmans, a Cleary Gottlieb Steen & Hamilton partner who represents major clients such as Google, IBM (for whom he recently secured unconditional approval of the acquisition of Red Hat) and Walt Disney in the EU (and is also admitted to practice in the United States), and Bram Nijhof, who heads Taylor Wessing's competition, EU and trade practice group in the Netherlands. I will ask the panelists a few questions about patent injunctions, not only related to SEPs but also with a view to the ongoing patent reform process in Germany.

This conference will touch on certain hot topics that some people prefer not to talk (or even not to think) about. I took this initiative because I felt it was time to organize an event with that focus. It will be an honor to welcome such top-notch speakers in a month from today. And if you'd like to come and listen, here's a link to the registration page, again.

As I've mentioned on another occasion, there will be a comparable event in the San Francisco Bay Area in mid-January, and I expect to be able to share some more information on that one next month.

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Thursday, October 10, 2019

After voting down EC candidate Goulard, the European Parliament should oppose giving France control over both DG GROW and DG CONNECT

The Financial Times' EU reporter Mehreen Khan just reported that the European Parliament has overwhelmingly decided to reject Sylvie Goulard, French president Emmanuel Macron's candidate for what would arguably have been the most powerful position in the new European Commission (this post continues below the tweet):

As Mehreen Khan noted, only 12 MEPs outside her own European-level political group voted for her. Practically all European People's Party and Socialists & Democrats MEPs voted against Mrs. Goulard, a scandal-ridden candidate who failed to provide a convincing answer in her confirmation hearing to the simple question of why one should confirm her as an EU commissioner in light of the fact she had to resign as French minister of defense. She promised to step down should she be ultimately convicted of any wrongdoing, but that was unsatisfactory because it wouldn't have occurred before the end of her term.

Virtually all European media reports in the build-up to the parliamentary decision suggested that resistance to her nomination was fueled by institutional outrage: at least the two largest groups in the European Parliament believe in the spitzenkandidat approach, a word borrowed from German that means "top-list candidate" and stands for the notion that only a candidate for the EP should be named president of the European Commission, the bloc's executive branch of government. But the new Commission president, Ursula von der Leyen, didn't run in this year's EU elections. She was Germany's minister of defense, and came into play when neither the EPP's Manfred Weber or the S&D's Frans Timmermans (whom I've repeatedly called "Poor Man's Bernie") managed to secure a majority.

What only one of the articles I saw mentioned is, however, the issue I'd like to focus on because innovation matters more than retribution: apparently some MEPs were concerned not only about the integrity of that particular candidate but also (or even primarily) about the allocation of fields of policy-making among the different commissioners.

No matter who will be named instead of Mrs. Goulard, what the EP should never accept--for the sake of Europe's fitness for an increasingly digital future--is that one commissioner--and especially not a French commissioner--effectively controls both DG GROW (the Directorate-General for the Internal Market, previously called DG MARKT) and DG CONNECT (Directorate-General for Communications Networks, Content and Technology, previously called DG INFSOC = Information Society).

Formally, the DGs are part of the Commission's "services" and "independent" from the commissioners and their aides ("cabinets"). But that's nominal. In reality, the political appointees make all the decisions.

The IP policy unit is part of DG GROW, and they consistently promote ever broader patents and ever more leverage in litigation for patent holders. By contrast, DG CONNECT has a tradition of, and hard-earned reputation for, being sympathetic to the digital sector. DG CONNECT takes a more balanced approach. They understand the implications of IP enforcement in connection with highly complex and multifunctional products. They realize to a greater extent than some other people that certain startups seek to be protected by patents, while many others need to be protected from patents. And they tend to look at free and open-source software as an opportunity, not merely a threat to other business models.

DG GROW already has the upper hand in IP policy-making. But with DG CONNECT ceasing to be an independent voice within the Commission (which would be the inevitable effect of the same commissioner being in charge), there's a risk of the EU Commission's IP policies completely drifting off balance.

Even the Wall Street Journal's article entitled "Incredible Shrinking Europe," which describes the EU as an economic-policy failure, acknowledges that the Single Market is the one aspect of EU economic policy that is working out--not in the sense of growth or wealth, but sheer size (more than 500 million consumers).

France got the most out of all the backroom horse-trading between the governments of the EU member states:

  • The new Commission president, Ursula von der Leyen, grew up in French-speaking Brussels, was nominated by France (as opposed to her country), and is more likely to pursue an agenda to Macron's liking than to advance Germany's interests.

  • A Frenchwoman, Christine Lagarde, will be president of the European Central Bank and continue its policy of financing southern European governments in contravention of EU law.

  • And France secured not only one of the two most important areas of responsibility within the Commission--the Internal Market (only Competition is similarly important)--but convinced the rest of the EU to allow the Internal Market division to absord and neutralize DG CONNECT.

Not only does France have its own national patent troll (France Brevets), which creates a huge conflict of interest for a French commissioner, but the Macron Administration is on a crusade against global digital powerhouses they generally refer to as "GAFA" (Google, Apple, Facebook, Amazon). Their top-listed candidate in this year's EU elections even likened those companies to large countries such as China.

A French EU commissioner nominated by Macron is, in practical terms, going to be an anti-GAFA commissioner. Giving an anti-GAFA commissioner control over both DG GROW and DG CONNECT is a bad idea. It's ultimately even bad for Europe because the French agenda does not benefit European consumers (who want access to innovative digital products and services) and countries with a stronger innovation culture than France, such as the Nordic countries or even Germany.

France has a rich history, but it doesn't have much of a future. None of its largest corporations (such as LVMH, L'Oréal, and Sanofi-Aventis) is a digital-economy player. Macron likes to think of France as a "Startup Nation," but has no facts to back up that vision. And it's hard to see how this is ever going to improve, given that many of the brightest young French engineers and programmers go to work for GAFA and other non-French companies and, which is so shocking, considering that only 2% of French students reach the top performance level in the TIMSS international math test, roughly at a level with Persian Gulf states. By comparison, 50% of Singapore's students are top performers in math, 40% of South Korean students, 20% of Russian students, and 14% of American students. Even Kazakhstan is at a level with the U.S., i.e., seven times as strong as France.

The French digital policy agenda is to dumb down all of Europe only because France has degenerated. This year's EU copyright reform is an example, as is the French pet project of a "digital tax" (the U.S. threatened with retaliation, but a deal was reached in August). The situation will get a whole lot worse with a Macron appointee controlling both the EU's internal-market and digital-policy divisions--an unprecedented concentration of power that would be undesirable even if the commissioner came from a more innovative country with brighter students.

Hopefully the European Parliament will defend DG CONNECT's independence. Today's vote against Mrs. Goulard opens the door to interinstitutional negotiations. The French government is already afraid of this, and I agree with former Swedish MEP Amelia Andersdotter that commissioner portfolios aren't allocated to countries:

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Wednesday, October 9, 2019

Judge Koh denies Continental's anti-anti-antisuit TRO motion against Avanci, Nokia, Sharp, others: complex legal issues require hearing from defendants

Late Tuesday afternoon by local time, Judge Lucy H. Koh of the United States District Court denied automotive supplier Continental's motion for a temporary restraining order (TRO) against the Avanci patent pool firm and several of its members (Nokia, Sharp, Conversant, Optis). The motion had been brought earlier in the day and sought not only to prevent defendants from pursuing injunctive relief against Continental supplier Daimler but also to bar them, by means of an ex parte TRO, from seeking yet another anti-antisuit-injunction injunction (AAII) in Munich or from another German court.

I have uploaded the decision to Scribd, but it is short enough that I'll copy the text of the decision below and insert my commentary:

ORDER DENYING PLAINTIFF'S EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE

On June 12, 2019, Plaintiff filed a motion for anti-suit injunction against some of the defendants in the instant case. ECF No. 32. On July 23, 2019, Plaintiff's First Amended Complaint added an additional defendant. ECF No. 97. On September 10, 2019, the Court denied without prejudice Plaintiff's motion for anti-suit injunction. ECF No. 173. The Court stated that, if Plaintiff elected to refile its motion for anti-suit injunction, Plaintiff should do so against all Defendants, and that all Defendants should file one consolidated opposition. Id. As of October 8, 2019, Plaintiff has failed to file a new motion for an anti-suit injunction. Instead, Plaintiff filed an ex parte application for a temporary restraining order and order to show cause why an anti-suit injunction should not issue against Defendants on October 8, 2019. ECF No. 185.

[COMMENT] Not only is Judge Koh an extremely analytical and meticulous judge but she also has a reputation for being a very strict judge. Here, she says Conti filed a motion for a TRO instead of a motion for an injunction. While she hadn't expicitly authorized a TRO motion, it is practically a motion for an injunction, given that any TRO would either have to be converted into an injunction after a couple of weeks or it would automatically go out of effect.

In the exemplary SEP-related antisuit case in the Ninth Circuit, Microsoft v. Motorola, Judge James L. Robart of the United States District Court for the Western District of Washington entered an injunction before his original order--a TRO--would have expired. A technical difference is that Microsoft had filed a motion for a preliminary injunction (PI) simultaneously with its motion for a TRO. And an important procedural difference is that even the TRO didn't come down without the non-movant being heard. [/COMMENT]

Federal Rule of Civil Procedure 65(b) provides that a court may issue a temporary restraining order ("TRO") without notice to the adverse party in limited circumstances where "specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant result to the movant before the adverse party can be heard in opposition." Fed. R. Civ. P. 65(b)(1)(A) (emphasis added). The movant must also certify in writing any efforts made to give notice and the reasons why it should not be required. Fed R. Civ. P. 65(b)(1)(B).

Plaintiff has not provided specific facts in an affidavit or a verified complaint that show why irreparable harm will result to Plaintiff if the Court does not issue a temporary restraining order before Defendant can be heard in opposition. Nor has Plaintiff certified in writing any efforts made to give notice and the reasons why it should not be required. The Court therefore DENIES Plaintiff’s ex parte application for a temporary restraining order and order to show cause why an anti-suit injunction should not issue against Defendants. Additionally, the Court DENIES as moot Plaintiff’s corresponding motion to seal, ECF No. 184.

[COMMENT] Conti's motion came with a legal memorandum, with three declarations, and with a host of documents attached to them. But any such requirement is qualitative, not quantitative. What Conti did make clear is that, absent an anti-anti-antisuit TRO, the other parties would likely move for another anti-antisuit injunction in Germany (and there, almost certainly in Munich, where Nokia has already succeeded twice and an appellate hearing has been scheduled for Halloween). Obviously, with a German anti-antisuit order in place against the pursuit of a U.S. antisuit injunction, the three Avanci members already suing Daimler in Germany--Nokia, Sharp, Conversant (a total of 16 cases between the three)--, and possibly others, will be free to seek and enforce injunctive relief against Conti's customer, which would most likely force Daimler into a license deal on Avanci's supra-FRAND terms.

What Judge Koh's order makes clear is that she wasn't satisfied with how Conti described the situation. She might have missed an affidavit (that word is part of a passage she highlighted when quoting the Federal Rules of Civil Procedure) specifically for the purpose of coherently and compellingly laying out the facts that Conti believes warrant a TRO. Indirectly and implicitly, Conti did; but that wasn't enough.

What might also have played a role is Conti's footnote that the ten already-pending German Nokia cases were, for the time being (awaiting the outcome of the Munich anti-antisuit appeal) excluded. Those are the cases were the Avanci group of companies is most likely to obtain and enforce a first German SEP injunction against Daimler. But due to the Munich anti-antisuit order, Conti had to exclude them (otherwise a contempt proceeding in Munich would surely have started). So the TRO motion was just about five Sharp cases, one Conversant case, and any future or unknown cases, not to the ten more advanced Nokia cases.

Conti's TRO motion was very reasonable in terms of the breadth of the relief sought--unlike the original antisuit motion, which I had criticized for being ridiculously overreaching. But they still face a couple of problems they could have avoided by making better and faster decisions earlier on. There's only an indirect connection--one has to walk around a few corners to reach the destination--between the plaintiff in the U.S. case, a Michigan-based Conti subsidiary, and the legal entities facing a potential indemnification claim from Daimler. They could have avoided this by having the German group parent, and/or some other legal entities, join the U.S. entity in the NorCal case. Another problem here is timing: they should have brought their U.S. complaint far earlier, and probably should have targeted more Avanci members from the get-go (such as Sharp) if part of the plan was to seek a U.S. antisuit injunction against German SEP cases. Judge Koh's order doesn't mention or allude to timing. I believe she simply didn't even reach that point because the causal nexus between the denial of a TRO and alleged irreparable harm from those German Avanci companies v. Daimler cases was missing, and that part was dispositive in and of itself. [/COMMENT]

Given the complexity of the legal issues raised in Plaintiff’s application, the Court finds that hearing from Defendants will likely be necessary for resolution of any future application for a temporary restraining order.

[COMMENT] That final paragraph of the order suggests that even if Conti had gone to extreme lengths to provide an affidavit on the facts requiring a TRO without a hearing, Judge Koh would almost certainly have denied the motion because this is a complex matter that she's not going to decide in violation of the principle of audiatur et altera pars.

An antisuit order is an extraordinary remedy, and an ex parte (= without hearing the other side) TRO is no less extraordinary. What Conti asked for would have been doubly extraordinary--actually, extraordinariness even grows exponentially.

Judge Koh's denial of the motion means she declines any invitation to go to a sandbox and play with her colleagues in Munich. While the Munich I Regional Court appeared fairly passionate about those anti-antisuit injunctions, Judge Koh is above the fray. She's never allowed anyone to use her court as a tool. In that context, I remember how Judge Robart in Microsoft v. Motorola, a case that really made FRAND history, told counsel for both parties of an Irish proverb that when the chess match is over, the king and the pawns return to the same box--and complained that he felt his court was basically being used as a pawn in a global chess match. The presiding judge of the panel that hears Munich patent appeals has a mentality that appears closer to Judges Koh and Robart than the lower Munich court, so if the German appeals court, too, wants to stop playing transoceanic torpedo games, the two antisuit orders currently in force in Germany may be lifted on Halloween.

Both Conti and Nokia face difficult decisions now. Conti could easily derive a motion for a preliminary injunction from its just-failed motion for a TRO, and refile--but they might be well-advised now to firstly await resolution of the German appeal (in three weeks from tomorrow). Nokia, Sharp and Conversant could show Conti's latest U.S. attack on its German cases to the lower Munich court immediately and seek a new anti-antisuit order, which they'd almost certainly be granted, but they, too, might await the Halloween hearing. [/COMMENT]

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Tuesday, October 8, 2019

Escalation: Continental seeking anti-anti-antisuit (yes, 3x 'anti') temporary restraining order against Avanci, Nokia, Sharp, others

In July, Nokia surprised everyone by obtaining an anti-antisuit-injunction injunction ("AAII") preventing automotive supplier Continental from pursuing a U.S. antisuit injunction against Nokia in an effort to shield Continental customer Daimler from Nokia's ten (and possibly other) German patent infringement suits. When that news broke, a few people in the industry were already wondering about whether the next level of escalation would be an anti-anti-antisuit motion. In fact, there is historic precedent for that, though it's rare.

Here we go--a couple of hours ago, Continental brought a motion for a temporary restraining order (TRO), asking Judge Lucy H. Koh of the United States District Court for the Northern District of California to bar within a matter of hours--ex parte, i.e., without a hearing--Avanci, Nokia, Sharp, Conversant (which has very recently become the third and latest Avanci member to sue Daimler for patent infringement, as I reported earlier today), and Optis from seeking another AAII against Continental in Germany.

Today's TRO motion renews the original pursuit of a U.S. antisuit injunction against those defendants, but now also includes Sharp. About a month ago, Judge Koh had denied the previous motion without prejudice, explicitly allowing renewal (but didn't want to entertain multiple motions in a row).

I've criticized Continental's lawyers very harshly. I thought the original motion was overbroad. They were seeking to shield Daimler even from lawsuits targeting cars that don't come with an accused Continental component, which I described as behaving like a class-action plaintiff without meeting the requirements for a class action; they failed to clarify at the time that they didn't mean to enjoin Sharp, which wasn't a defendant when the original motion was brought and when defendants had to respond to it (but by now Sharp has been added to the case--and presumably been properly served, too); and they originally wanted to prevent patent assertions against Daimler regardless of remedies sought.

Continental has now brought a narrowly-tailored TRO. That makes a lot more sense, and I feel that their decision to focus on what's more realistically achievable (though a motion for an antisuit injunction or TRO is never a cakewalk) also validates my criticism. They've abandoned their unbelievable attempt to overreach, and I commend them for that. Now it's just about Daimler cars that come with accused Continental components; it's only about parties that were in the case at the relevant time; and it's only about preventing those Avanci members from seeking injunctive relief against Daimler.

The current TRO motion does not include the first ten cases Nokia brought against Daimler in Germany. Continental already had to withdraw that part of the original motion in September due to Nokia's Munich AAII. But the motion notes that--as this blog has also reported--the Munich Higher Regional Court will hear Conti's appeal on Halloween, and should the existing AAIIs be lifted, Conti will inform Judge Koh and will presumably seek an extension to those cases.

The exclusion of those ten pending Nokia v. Daimler cases is a major limitation. Even if today's TRO motion succeeded, the Avanci group would achieve its strategic goal of forcing Daimler to accept their supra-FRAND royalty rates if Nokia just got enough leverage from one of those first ten cases.

Continental has certainly become very reasonable now. Will they succeed? I generally like to offer predictions, but in this case I'll refrain from it, especially since this motion will likely be resolved very swiftly one way or the other.

The anti-anti-antisuit request makes a lot of sense. It could be that Judge Koh flatly declines to play a long-distance game of leverage with her Munich counterparts, but she might also conclude that an anti-anti-antisuit TRO just for the purpose of quickly resolving the actual motion is reasonable.

The more conventional part of the motion, which comes down to a motion for an antisuit (just one "anti" for a change) injunction that would start as a TRO (TROs need to be converted into injunctions after a short while or they automatically expire), is now narrowly-tailored as I said. This is a clear case of standard-essential patent holders--who whine about "hold-out" (implementers' delay tactics) all the time--being unwilling to license a company just because they don't like Conti's position in the supply chain and consider car makers like Daimler the more lucrative type of target. That's a strong policy argument in favor of Conti's U.S. case. The primary issue is still timing. What matters here is not the date of the motion, but the date of the filing of the original complaint. The Northern California complaint was brought in May, but Nokia's and Sharp's patent assertion campaigns against Daimler started before. However, timing is not an issue with respect to any cases that were filed after Continental's U.S. complaint (such as that newly-discovered Conversant lawsuit) or will be filed going forward. The two Munich AAIIs that are in effect (one against the U.S. entity that is the plaintiff in California, and one against the German group parent) require Conti to exclude Nokia's first ten cases from the scope of the requested TRO for the time being. So timing could become a bigger issue should Conti, after a successful appeal in Munich (a Happy Halloween scenario for Conti), seek to broaden the scope of the order they're seeking.

This is an interesting procedural twist, and should I find anything worth highlighting after a closer look (so far I've looked at those documents only cursorily), I may do a follow-up post, though chances are that some sort of a decision--even if just a procedural order--will come down before I even get there.

Let me now, finally, show you both the motion and the underlying memorandum (two documents):

19-10-08 Continental Motion... by Florian Mueller on Scribd

19-10-08 Continental Memo I... by Florian Mueller on Scribd

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Conversant joins fellow Avanci contributors Nokia and Sharp in suing Daimler, asserting former Nokia patent in Munich

The automotive patent wars keep escalating. Conversant Wireless Licensing, a wildly unsuccessful (see 1 and 2) privateer that owns a portfolio of patents it received from Nokia, has become the third and latest--but possibly not even the last--contributor to the Avanci IoT patent pool to sue car maker Daimler for patent infringement.

A filing made today by Continental, one of Daimler's suppliers of telematics control units, in the Continental v. Avanci et al. FRAND/antitrust case in the Northern District of California (Judge: Lucy H. Koh), reveals that Conversant filed a patent infringement complaint against Daimler with the Munich I Regional Court over EP2934050 on an "apparatus and method for providing a connection" on August 13, 2019. The original complaint merely seeks an accounting of Daimler's sales of infringing products, but Conversant could add a request for injunctive relief anytime (the patent is set to expire in early 2021).

Conversant is represented in the German proceedings agaist Daimler by lawyers from the Dusseldorf office of the EIP firm, which is also known to represent Conversant against Huawei.

The complaint makes it clear upfront that referral to alternative dispute resolution is considered pointless. Interestingly, Conversant does not point to any direct licensing offer to Daimler, but notes that Daimler still hasn't accepted Avanci's pool licensing terms.

All in all, at least 16 (or more, should some have been filed but not yet served, which German courts do only after a bond is posted or deposit made) German patent infringement cases against Daimler have been brought so far by Avanci members: ten by Nokia (at least five of which will go to trial between December and May), five by Sharp, and now one by Conversant. Avanci has no mercy on Mercedes.

Continental has attached Conversant's complaint to a declaration in support of a motion for a temporary restraining order today. I'll blog about that TRO motion, which involves an anti-anti-antisuit provision, right after this post. But in closing let me show you Conversant's complaint:

19-08-13 Conversant v. Daim... by Florian Mueller on Scribd

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Monday, October 7, 2019

USPTO Director Iancu looking to fix standard-essential patents policy that just ain't broke

Four weeks ago, USPTO director Andrei Iancu gave a keynote address at a Brussels conference on standard-essential patents (SEP) strategy. That event, organized by commercial conference organizer Premier Cercle, covered a wide range of SEP-related topics (unlike my upcoming conference, which is focused on the #1 hot-button issue, component-level licensing).

After explaining the importance of standards, Director Iancu recalled the 2013 joint statement with the USPTO on SEP remedies. Mr. Iancu, without attributing this view to any particular organization or person, said that the 2013 policy statement has been interpreted "as putting the thumb on the scale against injunctive relief for FRAND-encumbered standard essential patents in most cases." And he then mentioned the recent decision of the DOJ Antitrust Division, under Antitrust Assistant Attorney General Makan Delrahim, to withdraw their agency's support for that joint statement.

In that Brussels speech, Mr. Iancu repeatedly indicated that the 2013 policy might not give SEP holders as much leverage as he--a former patent litigator--would like them to have. While the USPTO had not and has not withdrawn its support for the statement yet, he said his agency was "now carefully studying the issue and discussing it internally, with [their] stakeholders, and with other relevant government agencies." He describes the possibility of a new policy in the hypothetical, but let's be realistic: he's not going to stick to the 2013 policy, and the question is just how radical (on a scale from "grossly unbalanced" to "extremist") its replacement will be.

Rutgers Law School professor Michael A. Carrier published a reply to Director Iancu's speech on Law360 (and SSRN) a few days ago. Professor Carrier diplomatically exposes Director Iancu's quest for balance as unwarranted, given that the 2013 policy statement already struck one between SEP hold-up on the one hand and delay tactics by unwilling licensees on the other hand. As the paper notes, the Federal Circuit even cited to that policy statement in a decision clarifying that injunctive relief was available to SEP owners in more situations than a district court had said.

That Law360 article is not the first call on Director Iancu not to join AAG Delrahim in disowning the 2013 policy statement. Earlier this year, an open letter by multiple stakeholders and groups (which I had previously linked to on two occasions) delivered the same message.

Those efforts aren't totally in vain, but the most one can hope for is that the new policy statement won't be totally outrageous, though chances are that it will be.

Messrs. Delrahim and Iancu represent almost precisely the same school of thought with respect to patent policy. There's only a difference in style. While Mr. Delrahim doesn't seem to care about coming across as rash, radical, and highly partisan (as former outside counsel to Qualcomm) and won't even refrain from utterly absurd initiatives such as suggesting that standard-setting organizations that seek to give meaning to FRAND might violate the antitrust laws (while SEP abusers don't in his view) or making an untimely filing in a court case reflecting ignorance of the record, Mr. Iancu is more concerned about perception. He's a more sophisticated pretender. Now he's pretending to be on a quest for balance. He sure isn't.

In his Brussels speech, European-born Mr. Iancu tried to portray himself as understanding both sides of the SEP negotiating table, and called himself "sensitive to the business realities of licensing--both in and out--patent portfolios," including FRAND-encumbered ones. I don't doubt that his former firm (which he'll presumably return to), Irell & Manella, also advised implementers of standards and defended alleged infringers. But I've usually seen them represent plaintiffs, and their page on IP litigation primarily touts their record and expertise in IP enforcement. They also have an IP transactions practice that focuses on the maximization of the value of IP portfolios--which is exactly Mr. Iancu's mission (make bad patents strong again).

Apart from focus, it's good for the IP litigation business when even bad patents are kept alive (take Mr. Iancu's PTAB guidelines for an example) or when even FRAND-pledged patents can be asserted aggressively in litigation, regardless of whether a given litigator is on the asserting or defending side in a given situation. They get paid either way.

I'd love to be wrong on this, but I'd be surprised if Mr. Iancu didn't simply agree with Mr. Delrahim on virtually every aspect of SEP enforcement, just that Mr. Iancu tries to mislead people to think that he's open-minded about it. He's a patent enforcement extremist, the proverbial fox in charge of the hen house, and even Professor Carrier's strong defense of the existing SEP policy statement sadly won't change Mr. Iancu's mind, I'm afraid.

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