Since Microsoft does not buy Nokia's utility (i.e., technical) patents, the remaining Nokia entity after the close of the transaction is going to continue to monetize one of the leading portfolios in the industry. That's why the interest of actual and prospective Nokia investors in the company's patents is stronger than ever. On Twitter I see plenty of speculation all the time about how much the portfolio is worth -- but what are those price tags in the billions of dollar based on? Overly simplistic comparisons of Nokia's portfolio with what other companies in other situations paid for other portfolios on a per-patent basis, and sometimes statistical methods of portfolio valuation that have little to do with the reality, which is that you can't sue someone over thousands of patents but only over a few dozen (if you sue in multiple venues), and the results you get then will determine the outcome for the most part.
The analysts who believe they know more or less precisely how many billions Nokia's patent portfolio is worth don't, however, show up where the rubber hits the road, such as in Munich today, where I was the only person in attendance besides the three judges, a court secretary, and in-house and outside counsel of the parties. The analysts who put out numbers without a serious basis don't care to look at litigation, which besides license deals (the terms of which are usually not published) is the only meaningful indicator of patent strength. But analysts believe they have better methodologies in place.
If any of those analysts had attended today's Nokia v. HTC trial in Munich over EP1246071 on a "method of configuring electronic devices", they could have easily seen that Nokia is on the winning track in this case. There have been a few Nokia v. HTC lawsuits in Germany that didn't result in infringement findings (those were presumably appealed), and various other actions have been stayed because the patents-in-suit were infringed but the judges had doubts concerning validity. The one injunction Nokia has won so far has not given it enough leverage to force HTC into a settlement. But in the months ahead HTC could (finally) come under settlement pressure. A preliminary ITC ruling on Nokia's first complaint against HTC is due on Monday, and on November 8, 2013, the Munich I Regional Court will rule on the USB configuration patent at issue in today's trial, where Nokia was on the winning track.
As an Android user I make use of the patented functionality on an almost daily basis. I use a USB cable to connect my phone (presently, a Galaxy Mega 6.3) to my Windows desktop. Windows then offers several choices for the purpose of the connection. Most of the time I just want to access files (photos etc.) stored on the phone, using it like an external USB storage medium. Alternatively, I could run a synchronization program. Or a user might want to use a smartphone as a USB wireless modem. These different use cases require different device drivers, and depending on my choice, the right one will be activated (and, if necessary, installed in the first place). I can also select a default connection type, which will then be activated automatically.
HTC could still sell phones in Germany even if Nokia prevailed on this patent, but it would have to remove this functionality, which would make its devices considerably less competitive. I guess HTC will opt to take a royalty-bearing license rather than cripple the products it sells in Germany.
There will be some post-trial briefing and the court refrained from commenting on certain prior art references presented so shortly before the trial that Nokia hasn't been able to respond to them yet. Also, HTC raised a new non-infringement argument today that the court appeared to consider untimely -- and that I don't consider too strong. It would be a bit of a surprise if HTC could defeat this patent on infringement. After a first hearing held in December 2012, I wrote a post entitled "Android appears to infringe Nokia patent relating to multifunctional phone-computer USB connections " and agreed with Nokia's counsel that HTC's non-infringement arguments appeared only tactical, not substantive. So infringement is pretty much a given, and the bad news for HTC at the start of the trial was that the court allowed Nokia to add the relatively new HTC One and HTC One SV devices to the case because there is no difference between these newer devices and the older, originally-accused ones with respect to Nokia's infringement contentions. HTC's lead counsel in this action, Hogan Lovells' Dr. Clemens Plassmann, argued that this addition raised the stakes by at least a factor of five and suggested to the court that Nokia should have to post a substantial bond it wins an injunction and chooses to enforce it on a provisional basis (i.e., while the decision on the merits is being appealed). Nokia's lead counsel, Bird & Bird's Christian Harmsen, disagreed, and the court didn't set a number from the bench.
There's no indication that this patent is standard-essential. HTC raised no such defense.
HTC's best chance, relatively speaking, is, as Judge Andreas Mueller ("Müller" in German) said, on the invalidity front. Judge Mueller, who is very difficult to convince of infringement claims, said that this patent covers some basic functionality, so it's easily infringed but it's also easy to bring invalidity contentions. The problem for HTC, like for other defendants in German patent cases, is that there's no full invalidity defense in an infringement lawsuit. A different court, the Bundespatentgericht (Federal Patent Court), which also happens to be based in Munich, adjudicates all German nullity (invalidation) complaints. The Federal Patent Court has scheduled a nearing on HTC's challenge to this USB configuration patent for November 20, 2014: well over a year after the scheduled infringement ruling. Realistically, the earliest point in time at which HTC could bar Nokia from further enforcement would be about two to three months prior to the nullity hearing, provided that the Federal Patent Court expresses a skeptical opinion at that stage. So HTC needs a stay at this stage. The legal standard applied by German regional courts in such infringement cases is that a stay is ordered if there is a high probability (80% or more) of the patent being found invalid as granted. And in practical terms, defendants usually need a strong non-novelty case to surmount this hurdle, because the infringement courts are reluctant to make obviousness assessments.
The court doesn't buy HTC's different non-novelty theories -- at least not the ones to which Nokia has been able to respond. It appears that this case now hinges on the question of (non-)obviousness. To the extent that the court commented on HTC's obviousness theories, it was also very skeptical. The court's skepticism was based in part on substantive deficiencies (incomplete disclosures) and also on the German equivalent of the teaching-suggestion-motivation (TSM) test under U.S. patent law. For example, one of HTC's prior art references in the obviousness context is the Sony DSC-S75 camera, and the court declared itself unconvinced that a person skilled in the art would consider a digital still camera when developing smartphone technology. I, too, found HTC's TSM-style argument wanting. It was more a "why not?" than a "this is why" kind of logic. Another problem facing this prior art reference is that it was made available to reviewers and demonstrated at certain events before the priority date of Noia's patent, but it was unclear to the court whether any of this amounted to a disclosure of the relevant claim limitations.
The three prior art references on which Nokia gets to comment in a post-trial brief are that Sony camera (which HTC demoed, with a projector, in the courtroom today), a passage from Jan Axelson's "USB COMPLETE" book, and a document referred to by the last name of its author, or one of its authors, which is Howard. Nokia doesn't have to completely dismantle HTC's obviousness contentions -- it just has to cast enough doubt on them that the court won't find the threshold of a high probability of invalidity satisfied, and then this dispute may be settled soon (and in that case we'd never know how the Federal Patent Court decides because all pending nullity actions would be withdrawn before a decision).
There were some other Nokia cases in which I anticipated stays or non-infringement findings, so I didn't attend the announcements. But this case is extremely interesting. I will be there in November to learn about the decision immediately when it comes down.
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