Friday, January 11, 2013

HTC demands $132 million bond from Nokia for enforcement of potential German patent injunction

This afternoon I attended a Nokia v. HTC trial at the Mannheim Regional Court (whose windowless courtrooms and widely-noticed decisions received U.S. legal press coverage this week). The court already held another trial involving the same parties (plus Google) in December, and has many more such trials coming up as I mentioned toward the end of the previous post.

Today's patent-in-suit was EP1312974 on an "electronic display device and lighting control method of same". It's a patent that can give Nokia substantial leverage. The Finnish company is also asserting the U.S. equivalent, U.S. Patent No. 7,106,293 on a "lighting control method and electronic device", against HTC in an ITC investigation and a (presently stayed) companion lawsuit in the District of Delaware. And Judge Andreas Voss ("Voß" in German), the judge presiding over this action (and the world's number one wireless patent judge), mentioned that Nokia previously asserted this patent in his court against "another party", which shortly thereafter settled. Due to the rules here Judge Voss wasn't allowed to name that other party, but I'm free to tell you: Apple.

The patent covers the idea of a light guide integrated into a display that leads light to a sensor. The brighter it is outside, the more the background light of the display has to be turned up so as to adjust to the needs of the user's eyes. Conversely, if you use your phone in the dark, you don't need a bright screen -- in fact, a bright screen would hurt your eyes in that scenario. This Nokia patent doesn't lay exclusive claim to the broader concept I just outlined, but it does cover an important element of its technical implementation. Nokia's patent would not apply if ambient light could reach the light sensor through any part of the screen surface. But it appears that the most common solution used by the likes of Apple and HTC these days is the one this patent protects. The patent's description says that [t]he essential idea of the invention is that the light guide [which is needed to direct ambient light to a sensor] is integrated as part of the protective display window".

Nokia is asserting claim 6, which is a device claim without any software element. If Nokia won an injunction over this claim, HTC would have to modify the hardware of its devices or stop selling in Germany. And while it's certainly possible to steer clear of infringement, it's unclear whether any commercially viable alternative exists if HTC wants to preserve the basic functionality of an adaptive lighting of the display, which is a feature that mobile phone users simply expect nowadays.

In an effort to show the economic significance of this patent to the court, HTC's lead counsel in this action, Dr. Martin Chakraborty of Hogan Lovells, handed over an affidavit (presumably signed by an HTC executive or an external expert) and asked the court to require Nokia to post a 100 million euro ($132 million) bond in the event it wins and enforces an injunction. The bond amount is in the discretion of the court. 100 million euros would be identical to the bond set in each of a couple of Motorola Mobility v. Apple cases.

After Judge Voss obtained clarification on Nokia's infringement contentions from its counsel, Klaus Haft of Reimann Osterrieth Koehler Haft and his associate Dr. Mirko Weinert, HTC was on the defensive for all of the remaining time. Its primary non-infringement argument is that a non-colored part of the protective display window does not meet the "light guide" claim limitation, arguing that a hole is not a guide and that it does not change the angle in which ambient light hits the sensor. But the court did not appear convinced of this theory, which as far as I can see isn't supported by the seven-page specification of the patent.

HTC's best shot is that the Mannheim court may stay this infringement action for the duration of a parallel nullity (invalidation) proceeding before the Federal Patent Court if it believes that the patent is highly probable to be invalidated. HTC pointed to a U.S. patent and a UK patent as its key prior art references. Its outside patent attorney, Dr. Karl-Ulrich Braun-Dullaeus, laid out in detail how he believes either prior art reference anticipates all claim elements. I don't have an opinion on the strength of this argument because I haven't seen the prior art references yet (and most probably won't find the time to look at them in detail before the Mannheim ruling, which was scheduled for March 8, 2013). Judge Voss noted that the outcome of a patent reexamination in the U.S. was a claim amendment that Nokia argues was merely a clarification and which Judge Voss doubted would be helpful to HTC if replicated in Germany.

This looks like a patent that's very hard for any lawyer to fight on the infringement side. It's the kind of patent you have to license, work around (which comes with a price), or prove invalid. Dr. Chakraborty urged the court to take into consideration that HTC's nullity action in Germany won't be adjudged before late 2014 or, more likely, early 2015. If Nokia won an injunction in March 2013, it will have a two-year window to enforce, and even the Federal Patent Court's decision would be appealable (to the Federal Court of Justice). The root cause of this problem is called bifurcation.

HTC's efforts to prove this patent invalid also involve some action that has been filed or will soon be filed in the UK. I'll discuss that initiative in my subsequent post. Given the growing popularity of this litigation tactic (bringing actions in the UK to influence decisions in Germany), it's worth highlighting more broadly than in the narrow Nokia-HTC context.

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