Friday, January 11, 2013

HTC has brought or is preparing a UK declaratory judgment lawsuit against Nokia

In my report on a patent trial that took place in Mannheim, Germany this afternoon, at which HTC demanded a 100 million euro ($132 million) bond if an injunction is granted and enforced, I already mentioned that "HTC's efforts to prove [the patent-in-suit] invalid also involve some action that has been filed or will soon be filed in the UK". Here's why I think so:

At today's Mannheim trial, HTC's German lawyers (lead counsel Dr. Martin Chakraborty of Hogan Lovells, another Hogan Lovells lawyer, and patent attorney Dr. Karl-Ulrich Braun-Dullaeus) were joined by two lawyers from Hogan Lovells' London office, who were taking detailed notes. Dr. Chakraborty is an experienced, well-known German patent litigator who doesn't need supervision or reinforcements from outside the country to handle a case.

HTC has previously filed for declaratory judgment in the UK against patents that were asserted against it in Germany -- by Apple. HTC won its first UK case: none of the four patents it challenged was deemed valid and infringed. At the related German trials, HTC's local counsel (from a different firm, Preu Bohlig; Lovells had a conflict because it previously represented Apple in some Nokia cases) was also joined by UK lawyers working on the declaratory judgment actions. HTC had some more declaratory judgment claims waiting to be adjudged in the UK. Those were scheduled to go trial in November 2013, but settled with Apple and thus withdrew them.

The week before Christmas Microsoft also won a UK declaratory judgment case relating to a patent it is still defending itself against in Mannheim, where a second trial (some issues could not be resolved at the first one) will take place in three weeks from today (i.e., on February 1, 2013). The infringement case got delayed by a credible prior user rights theory Microsoft presented shortly before the first trial. As a result, the UK declaratory judgment case got resolved before any infringement ruling can come down in Germany. Otherwise the UK decision would still have been useful with a view to a nullity (invalidation) trial at the Federal Patent Court and an appeal. In HTC's case there won't be a UK ruling before the March 8 decision on the integrated light guide patent. (Otherwise we would have heard of the UK case before, for example, due to a trial showing up on an official hearing list.)

The Federal Patent Court (Bundespatentgericht) faces a huge backlog of nullity actions targeting smartphone patents. Most of the related cases are pending before the Fifth Senate (a division of the Federal Patent Court). The normal time from filing to trial at the Fifth Senate is currently approximately two years, while an infringement case in Mannheim is typically adjudged within less than a year. But even though injunctions ordered by a German court of first instance can be preliminarily enforced in most cases, many defendants pursue an appeal and a parallel nullity action rather than settle. And for the appeal as well as the nullity action, a UK ruling usually comes down in time.

At this point the European patent system is still fragmented. While the European Patent Office grants patents that are valid in all the countries in which the patent holder makes and pays for a filing (which often involves translation costs), invalidation by national courts is a country-by-country decision. The UK High Court can declare a patent invalid within the UK -- and German courts can still decide differently, but a UK ruling is reasonably persuasive authority.

It's not without risk for companies to file for declaratory judgment in the UK against a patent. The patent holder may bring offensive counterclaims, and if the challenger then loses and the patent is deemed both valid and infringed, the patent holder can proceed directly to the pursuit of remedies relating to the UK market.

I must admit that HTC is playing the patent litigation game with really sophisticated tactics, and it has been smart not to pick too many fights at the same time. It was the first Android device maker to take a royalty-bearing license from Microsoft, unlike Motorola, which is still embroiled in litigation. It was also the first Android device maker to work out a license deal with Apple, but only after slow-rolling Apple's lawsuits for more than two and a half years. I have the greatest respect for the tactical decisions made by HTC's management and legal team in recent years. And I'm sure HTC will also pay royalties to Nokia in the not too distant future.

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