When it comes to HTC and patent lawsuits, the big question today is what decision the ITC will finally make on Apple's first complaint against HTC. Meanwhile, here's a quick update on HTC's dispute with German patent holding firm IPCom.
On Friday, HTC announced that the Düsseldorf Regional Court barred IPCom "from sending misleading warning letters threatening legal action against German retailers of HTC products". IPCom had announced such cease-and-desist letters earlier this month.
The key word in HTC's statement is "misleading": the court didn't enjoin IPCom from sending out any kind of patent assertion letters to retailers. It just took issue with certain aspects of IPCom's letters.
HTC's press release on Friday didn't quote the decision made by the Düsseldorf court, which is why I waited until I obtained a copy of the preliminary injunction order (and of the parties' briefs and the questions the court asked the parties prior to making its decision). Here's the order, which I'll discuss further below:11-12-16 EV HTC v IPCom
On page 2, items 1 and 2 are the particular elements of IPCom's letters that the court deemed misleading:
While IPCom's letters mentioned an opposition proceeding concerning the asserted patent, the court took issue with the fact that IPCom did not inform the recipients of its letters of the fact that the opposition department of the European Patent Office had raised a question concerning one of the elements of the asserted patent claims.
HTC argued -- and the court agreed -- that the question indicated doubts about the validity of the patent. IPCom, however, says that the related remark by the EPO is a neutral request for clarification and cannot be construed to call into question the validity of the asserted patent.
IPCom's letters said that HTC withdrew its appeal against a Mannheim Regional Court decision on the last business day before the appellate court's decision in order to avoid a negative ruling. The Düsseldorf court agreed with HTC that IPCom should have stated clearly that the outcome of the appeals proceeding was not a foregone conclusion.
I can see why the Düsseldorf Regional Court doesn't like the idea of a party appearing to describe another court's hypothetical decision as having been certain. It doesn't appear to show all the respect for the judicial process that courts deem necessary. However, I can also understand IPCom's argument that it was writing those letters to a sophisticated audience (retailers with an internal legal department) that didn't need to be reminded of the fact that a decision by a court isn't 100% certain until it's actually handed. IPCom was basically just second-guessing HTC, not the Karlsruhe Higher Regional Court.
Note that this injunction does not have any effect on the letters IPCom had already sent out. It would limit IPCom's choices only if it sent out additional letters (which it might not have intended to do). IPCom could even send out cease-and-desist letters to new recipients, but those would have to be written differently with respect to the two issues outlined above.
Also, IPCom would be free to sue any of HTC's German resellers directly. Under patent law, anyone from the manufacturer of an allegedly infringing technology down to a reseller (and in some jurisdictions, even an end user) can be sued. By suing someone in Germany without a previous cease-and-desist letter, a plaintiff only waives his right to recover legal fees if the other party elects not to defend itself, but that doesn't play a role in litigation of this profile (where a favorable ruling is far more valuable than the potential recovery of legal fees).
HTC scored a PR win against IPCom by being able to claim a preliminary injunction against IPCom's cease-and-desist letters. But in practical terms, IPCom is not barred from anything important, and HTC's customers are protected only against certain types of potentially misleading information, not against IPCom's patent infringement claims themselves.
Under the German "loser pays" principle, the court imposed 50% of the fees on a European HTC subsidiary, 20% of the fees on HTC's parent company in Taiwan, and 30% on IPCom. While this looks like HTC losts 70% (50%+20%) of what it asked for, it's different because the aforementioned European subsidiary was initially one of the two plaintiffs but withdrew after doubts about its standing in this action came up. If we forget about the standing part, it means that the court found HTC prevailed on 60% of its claims and IPCom defended itself successfully against 40% of them. Those percentages are just the court's estimate of the economic value of the different claims. For HTC's PR purposes, it was a 100% win, and for IPCom's legal purposes, nothing was really lost. So both parties can claim victory.
Still no 3G-compliant workaround presented
In connection with the injunction, HTC said it was going to protect its resellers. The best way to do so would be for HTC to demonstrate that it has a workaround in place that steers clear of infringement of the asserted patent family and is fully 3G-compliant. Anything less (such as meeting only one of the two criteria) wouldn't do.
If HTC had shown such a workaround to the Karlsruhe Higher Regional Court (instead of withdrawing its appeal), it could have won a favorable ruling. And now, in connection with IPCom's cease-and-desist letters, HTC would have had another opportunity to argue that it has a fully 3G-compliant workaround in place. After all, IPCom's cease-and-desist letters argued that one cannot fully implement the 3G standard without inevitably infringing on its asserted patent.
Such an argument might have been too complex to evaluate in a fast-track proceeding related to a petition for a preliminary injunction. But this question is infinitely more important -- especially to the resellers HTC seeks to protect -- than any possible shortcomings of the wording of IPCom's cease-and-desist letters.
Unless HTC can prove the asserted patent invalid, this is the only interesting question in this context. I don't want to blame HTC for not having answered that question yet, but (again, unless the patent is proven invalid) it won't be able to dodge it forever. If I were an HTC reseller, this is the question I would ask them: do the devices you sell me come with a workaround that is fully compliant with the official 3G specifications?
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