This afternoon I attended the first of a series of four Samsung v. Apple trials (over one patent each) scheduled at the Mannheim Regional Court between today and mid-October. The patent-in-suit is EP1720373 on a "method and apparatus for reporting inter-frequency measurement using RACH message in a communication system". It's a declared-essential patent, and Samsung's infringement contentions (the accused devices include the iPhone 4, iPhone 4S and iPad 2 3G) are entirely based on the assertion of standard-essentiality (as opposed to evidence based on reverse engineering of Apple's devices). Samsung says that all devices implementing version 6.60 or higher of ETSI standard TS 125 331 (a UMTS standard) inevitably infringe EP'373. An injunction based on this criterion would also affect the iPhone 5. The list of accused products usually does not limit the scope going forward.
While the impending reassignment of one of the judges on the panel has resulted in an agreement of the parties on holding a second trial, which may or may not take place before the end of the year (but will definitely cause a delay of a few months that Samsung would rather avoid), today's court session had some very interesting information to offer.
The most noteworthy revelation was that Apple has asked the court to stay the lawsuit discussed today (and presumably also another 3G-essential patent lawsuit that will go to trial next month) pending resolution of the European Commission's formal antitrust inquiry into Samsung's enforcement of wireless standard-essential patents (SEPs), a theory that has its legal basis in an article of German competition law in conjunction with a European regulation.
It's unclear at this stage what the court will do if this issue turns out to be outcome-determinative (i.e., in the event Apple's other defenses, such as non-infringement or patent exhaustion, fail), but the court is clearly giving very serious thought to how to procede under the circumstances, and one alternative to an outright stay is a formal request by the Mannheim court that the EU regulator clarify its stance on the antitrust issues raised by Apple and indicate a timeline for a decision. If the Commission hands down a formal decision prior to the Mannheim ruling, the net effect is likely to be that Samsung's entitlement to injunctive and other relief against Apple over its wireless SEPs will be decided by the Brussels-based competition authority, applying European competition rules as opposed to the uniquely SEP-abuser-friendly German Orange-Book-Standard line.
Any motions by Samsung for sales bans against the iPhone 5 anywhere in the 27-country bloc will face the same obstacle. EU law seeks to prevent inconsistencies between decisions made by the Commission and those made by national courts. National procedural rules may differ in how they define their local courts' obligation to cooperate with the Commission, but ultimately they all have to comply with EU law in this area.
Without a formal complaint from Apple, but based on a fair amount of correspondence and presumably also a series of meetings with Apple and Samsung, the European Commission launched a preliminary investigation of Samsung's SEP enforcement against Apple in different EU member states last fall. At the time, Samsung had not only filed various infringement complaints but also filed preliminary injunction motions against the then-newly-launched iPhone 4S (which were denied, largely for patent exhaustion reasons) in France and Italy. In January, European Commission Vice President (and competition commissioner) Joaquín Almunia announced the launch of a full-blown formal investigation. While this is not tantamount to a finding of a violation and Samsung is still innocent until proven guilty, the formal nature of the investigation does indicate that there are reasonably strong initial suspicions.
Since the January announcement, the Commission has not commented in public on the specifics of the case (which it simply cannot do at this stage). But Vice President Almunia has seized various opportunities to reiterate and reinforce his personal commitment to the overall issue of SEP abuse. Samsung is not the only company whose behavior keeps EU investigators busy. There are also two ongoing investigations of Motorola Mobility's related conduct, and other more or less formal complaints to evaluate, including one by Huawei. Investigations of suspected abuse of market power (such as the one conferred on SEP holders) can take years. At some stage, the Commission either abandons a case (usually requiring commitments) or issues a Statement of Objections (SO), followed by a hearing and a final decision.
There is no indication as to whether and (if so) when an SO will issue here. A formal question by a national court brought in connection with a lawsuit in which an antitrust matter is outcome-determinative won't necessarily affect the Commission's timelines per se, but the Commission definitely seeks to avoid harm to consumers from sales bans. Short of an SO, some preliminary guidance by the Commission and/or an official timeline for a decision on an SO (which requires a vote by the 27-strong College of Commissioners) could also result, depending on the nature and content of such communication, in a dismissal or stay of Samsung's wireless SEP lawsuits.
Presiding Judge Andreas Voss ("Voß" in German) pointed out that Apple's motion can succeed only if the patent-in-suit is also at issue in the EU investigation. Apple claims that this is the case, and based on my reading of the official scope of the Commission investigation (wireless SEPs), that's perfectly plausible. Judge Voss furthermore noted that there is no related precedent that a German appeals court would have decided. This makes it pretty much a question of first impression. Judge Voss cited two opinions expressed by high-profile authors. One opinion suggests that national courts must give a lot of deference to an ongoing EU antitrust investigation, while another one suggests that they have some flexibility. I don't want to second-guess Judge Voss on this one, but I believe that it would be rather difficult for Samsung to dissuade him from at least asking the Commission for official input.
Let's take a look now at the legal basis of Apple's request. Article 90 of the German Antitrust Act covers the notification and involvement of antitrust agencies (the Federal Cartel Office or alternatively the European Commission, or in cases of merely regional relevance, regional offices) when litigations involve antitrust claims. The potential involvement of the European Commission is envisioned for claims under Article 101 (cartels) and Article 102 (abuse of dominant market position) of the Treaty on the Functioning of the EU (TFEU). The EU investigation of Samsung's conduct is based on the latter article.
Apple also invokes a European law: Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. When that regulationw as promulgated, Article 82 was the anti-abuse rule that is now Article 102.
Articles 21 and (especially) 22 of EC Regulation No. 1/2003 are key:
(21) Consistency in the application of the competition rules also requires that arrangements be established for cooperation between the courts of the Member States and the Commission. This is relevant for all courts of the Member States that apply Articles 81 and 82 of the Treaty, whether applying these rules in lawsuits between private parties, acting as public enforcers or as review courts. In particular, national courts should be able to ask the Commission for information or for its opinion on points concerning the application of Community competition law. The Commission and the competition authorities of the Member States should also be able to submit written or oral observations to courts called upon to apply Article 81 or Article 82 of the Treaty. These observations should be submitted within the framework of national procedural rules and practices including those safeguarding the rights of the parties. Steps should therefore be taken to ensure that the Commission and the competition authorities of the Member States are kept sufficiently well informed of proceedings before national courts.
(22) In order to ensure compliance with the principles of legal certainty and the uniform application of the Community competition rules in a system of parallel powers, conflicting decisions must be avoided. It is therefore necessary to clarify, in accordance with the case-law of the Court of Justice, the effects of Commission decisions and proceedings on courts and competition authorities of the Member States. Commitment decisions [i.e., settlements] adopted by the Commission do not affect the power of the courts and the competition authorities of the Member States to apply Articles 81 and 82 of the Treaty.
Judge Voss cited the objective of avoiding conflicting decisions, which could arise if the Mannheim Regional Court's adjudication of Samsung's infringement lawsuit against Apple assessed Samsung's conduct with respect to this action over this particular patent differently than the European Commission.
Three earlier Samsung SEP lawsuits against Apple went to trial in Mannheim last year, at a time when the Commission was investing only on a preliminary basis. Samsung's lawsuits were dismissed, apparently because it could not prove infringement. Therefore, the FRAND issues weren't reached at that stage.
Whether there will be a finding of a violation this time around is a different question. Given that there will be a second trial in the not too distant future, I'll just sum up the discussion of Apple's non-FRAND defenses quickly and elaborate in my report on the retrial:
The infringement question is really in the court's discretion. There's a claim construction issue that could be decided either way, with Apple having stronger arguments concerning the claim language itself and Samsung trying to leverage the description of the patent in its favor. Even if there is no infringement of this particular patent, another Samsung wireless SEP case will be tried next month.
Just like last year, Apple made a cease-and-desist commitment (and apparently also accepts a potential liability for damages) with respect to devices using a baseband chipset provided by Infineon. At some point, Infineon's baseband division got acquired by Intel, a transaction that changed the patent licensing situation. The latest ones come with Qualcomm chips. Apple is vigorously defending itself against claims brought against Intel- and Qualcomm-based handsets but doesn't want Samsung to win an injunction based on potential past infringement due to the use of Infineon chips. Apple apparently wants its exhaustion defense adjudged at the stage of the infringement action and not in subsequent enforcement proceedings. Last time the court didn't have to reach exhaustion. Now it may. Apple provided some clarification at today's trial that addresses a concern the court had over a potential loophole in that cease-and-desist promise.
Apple also has a nullity action (invalidation proceeding) going against this patent before the Federal Patent Court. Given current timelines of that overburdened court, a decision before 2014 is unlikely. Apple wants Samsung's infringement case stayed, pointing to statistics that two thirds of all patents in this industry do not survive a nullity action as granted (i.e., without at least being narrowed in scope). This part of the dispute is at a rather early stage and will be more interesting at the second trial. Apple's most important prior art reference at this stage (though some other ones also appear to be in play) is actually the specifications document of the previous version of the standard, on its own as well as in combination with certain change requests that were still submitted prior to Samsung's relevant patent application.
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