Google is an intervenor in several of the patent infringement lawsuits Nokia brought against Android device makers HTC and ViewSonic (yesterday I reported on some of those cases in Germany), and Nokia opposes the adoption of Google's VP8 (WebM) as an Internet standard. In other words, they have their disagreements, including that Nokia supports Apple's pursuit of a permanent injunction against Samsung over non-SEPs (I published Nokia's brief in this post), which Google opposes. But there's one thing on which they agree: they both feel that the FRAND part of Judge Posner's Apple v. Motorola ruling makes it too hard (or even virtually impossible) for standard-essential patent (SEP) holders to obtain injunctive relief and threatens to devalue SEPs.
More than a month ago I wrote about Nokia's motion for leave to submit an amicus curiae brief to the Federal Circuit, where Google is appealing the FRAND part of Judge Posner's ruling (and where Apple is trying to get the non-FRAND part reversed in its favor). Meanwhile, Nokia's motion has been granted, and the brief itself (the thrust of which was already summed up in the motion for leave) has become available (this post continues below the document):
On injunctive relief, Nokia concedes that "the unfettered availability of injunctive relief in every case in which a patent holder claims the infringement of a standard-essential patent could create a patent hold-up problem, as the patent holder could attempt to exploit additional value created by the inclusion of their intellectual property in a standard by demanding supracompetitive royalties from companies that would have difficulty adopting alternative technology", but it wants to be a little bit pregnant and promotes a case-by-case approach based on an analysis of how willing a licensee is (which all by itself creates major legal uncertainty SEP holders can exploit). Nokia refers, among other things, to an open-ended statement ("This list is not an exhaustive one.") in a DoJ/USPTO paper.
One argument Nokia makes in favor of SEP-based (case-by-case) injunctions was actually already addressed by Judge Posner in his ruling, and I'll add something after quoting Nokia's theory that implementers might prefer drawn-out litigation over an immediate license deal:
"Each manufacturer could simply infringe until litigation was brought, allowing the court to set the royalty rate for them several years after the commencement of the litigation, and in some cases potentially escape responsibility by making enforcement prohibitively difficult through restructuring of corporate organizations, manufacturing operations, and/or distribution channels. To adequately enforce its rights, a patent holder could be forced to litigate against every manufacturer of standard-compliant products in multiple fora across the world to ensure that all covered sales would be compensated. This, in turn, would result in a greater multiplication of patent litigation creating a greater drain on the courts."
There are two major flaws in this thinking. One is that the need for enforcement in multiple jurisdictions is simply a reality of the patent system (and not only of the patent system but almost every law, except perhaps certain parts of criminal law). It's not SEP-specific, and the solution is not to let someone use an actual injunction or the threat of an injunction in one jurisdiction to force someone into a global settlement. Nokia itself formally opposes this approach by InterDigital, so I'm surprised it advocates it, between the lines, in its amicus brief in the Posner case. As for the second major flaw, Judge Posner explained almost a year ago that it simply doesn't make sense for an implementer to refuse a license deal on clearly FRAND terms:
"Suppose, hypothetically, that the maximum reasonable FRAND royalty would be $10 million. If Motorola therefore demanded such a royalty, Apple, knowing that litigation is costly, would refuse, and Motorola would accept a lesser amount. Of course litigation would also be costly for Apple, and this might induce it to pay the $10 million rather than fight. But the deeper objection to Motorola's argument is that the 'American rule,' which with immaterial exceptions makes the winning party in a litigation bear his litigation costs rather than being able to shift them to the loser, does not deem damages an inadequate remedy just because, unless backed by a threat of injunction, it may induce a settlement for less than the damages rightly sought by the plaintiff. You can't obtain an injunction for a simple breach of contract on the ground that you need the injunction to pressure the defendant to settle your damages claim on terms more advantageous to you than if there were no such pressure."
The reasoning Judge Posner provided in the passage I just quoted is so compelling that I don't really see how Nokia's amicus brief overcomes it. It merely expresses disagreement, but it doesn't beat Judge Posner's logic.
Even if one assumed for the sake of the argument that Judge Posner somewhat overstated the disincentives for holdout in jurisdictions that don't have a "loser pays" rule, Nokia still wouldn't propose what I consider a good policy. If there's a holdout problem with SEPs, there will certainly be one concerning non-SEPs as well (look at how Samsung, having been found to infringe multiple intellecual property rights by Apple, continues to happily and steadily gain market share). In that case, there's a need to discourage holdout, and a general "loser pays" rule (not just for entities too unsophisticated to navigate around a legislative attempt to define patent assertion entities or non-practicing entities) could be part, possibly even a key part, of the solution, without having to authorize pernicious, SEP-based injunctions.
I don't like Nokia's argument against the definition of the smallest saleable unit as the proper royalty base for SEPs much better than its pro-injunction case, but I have to concede that it's well-written and potentially could mislead people (especially those with limited technical knowledge) to believe that the end product (such as an entire smartphone or tablet) should be the royalty base, and that, beyond that device, the value of the network infrastructure involved in the delivery of cellular connectivity services must be considered. I'll explain why I think Nokia is wrong, but its amicus brief definitely -- and cleverly -- complements the points Google made in this context.
As I watch wireless patent litigation on a daily basis, I obviously know that the asserted patent claims in disputes over mobile connectivity typically have elements that are outside the baseband chipsets Apple proposes as the royalty base. Those patent claims may refer to such elements and other components as devices, antennas, memory, a central processing unit, or, looking beyond and outside a mobile end-user device, base stations and even entire networks. That's sometimes necessary to describe wireless communication completely and comprehensively. The key argument against the network infrastructure side of things is that you can also assert such patents against network infrastructure makers (which is what Huawei's patent infringement actions against ZTE are mostly about) or carriers using such infrastructure. As for the end-user device, it's obvious that an antenna, memory and central processing units may all play a role in certain wireless communication patents. But the client (end-user device) part of those techniques is really controlled by the baseband chips. A baseband chip on its own, without even an antenna, obviously can't make a connection. Still it's in charge of a smartphone's wireless communication.
Nokia builds phones at all price levels, from low-cost phones for emerging market all the way up to high-end smartphones. All those phones can connect to a cellular network and handle phone calls and data transfers -- but there are reasons why some cost more and some cost less, and those are unrelated to cellular SEPs.
In a previous post I explained that Nokia's own SEP assertions against Apple can be easily reconciled with Judge Posner's ruling. Also, the fact that Nokia is pursuing SEP-based injunctions against ViewSonic in Germany means very little. I attended a couple of Nokia v. ViewSonic SEP trials in Mannheim in March, and ViewSonic didn't even raise a FRAND defense. In fact, it didn't even challenge the validity of the patents-in-suit. It only denied infringement, and Nokia appears reasonably likely to prevail on one or two SEP cases when the court announces a couple of decisions on May 23. ViewSonic has left Europe (as far as the smartphone market is concerned), which is why it probably doesn't care about an injunction anymore (it just wants to avoid liability for damages for past infringement).
Nokia's anti-Posner amicus brief talks about "the risk of vastly undercompensating holders of telecommunications standards essential patents and discouraging further investment in telecommunications standards". Nokia wrote this brief even before the low value of Motorola's H.264 and IEEE 802.11 SEPs (particularly but not only with a view to Microsoft's products) became apparent at the end of a court's FRAND determination effort, having created a situation in which Google is believed to be under pressure to write down a significant or even substantial part of the $5 billion book value of Motorola Mobility's SEPs. Nokia also has a pretty interesting portfolio of non-SEPs, though HTC is defending itself extremely well so far. I believe it shouldn't support Google's and some other companies' SEP-centric strategies. Regardless of what's the better choice for Nokia itself, its amicus curiae brief takes positions that clearly aren't in the public interest.
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