Tuesday, April 9, 2019

Nokia is abusing standard-essential patents, Daimler and medium-sized supplier BURY Technologies allege in EU antitrust complaints

It is high time that the automotive industry stopped being the ideal target of shakedown attempts by standard-essential patent (SEP) holders due to its sheer size, the high prices of its end products, and its pacifist attitude. For a long time, car makers used to be on the sidelines of major disputes. They generally resolved any IP issues out of court, respecting exclusionary rights in some cases and cross-licensing (or simply refraining from hostilities) in many others. But times have changed, and with cars increasingly becoming smartphones on wheels, those car makers are no longer dealing with a herd of sheep when it comes to patent assertions but have entered a jungle teeming with predators. As a result, they must confront those challenges more decisively, lest they be eaten alive.

Against this backdrop I'd like to promote (not getting anything for it) an upcoming Munich conference hosted by the Bardehle Pagenberg firm: Automotive Patent wars -- To pay or not to pay: That is the question." on May 9.

SEP disputes raise antitrust issues, and that's what's now, finally, also happening in the automotive industry:

  • On March 29, Reuters reported on an EU antitrust complaint brought by Daimler against Nokia. The article quotes an official Daimler statement: "We want clarification on how essential patents for telecommunications standards are to be licensed in the automotive industry. Fair and non-discriminatory access to these standards for all users of the essential patents for telecommunications standards is a key prerequisite for the development of new products and services for connected driving." (emphasis added)

    The three words "for all users" are interesting. This wording at least makes it plausible that Daimler's complaint relates to Nokia's refusal to extend SEP licenses on FRAND terms to certain component suppliers. The motivation would obviously be for Nokia justify its royalty demands with the end price of an entire car, or substantial parts thereof.

  • What reinforces this impression is the subsequent filing of a complaint by a medium-sized company (that just employs about 2,300 people; a midget compared to Daimler) named BURY Technologies, but instead of burying the hatchet, they're throwing down another gauntlet to Nokia. Yesterday (Monday, April 8), BURY Technologies announced its EU antitrust complaint against Nokia, alleging that "the Finnish group had refused to grant licenses for mobile communications components from BURY."

    The official press release refers to a "cartel complaint," which is just an incorrect translation of the German word "Kartellbeschwerde" (which broadly covers any complaint with a competition enforcement agency): it's not about Nokia having formed a cartel with others, but about unilateral conduct by Nokia as a SEP holder. It's not hard to imagine that a relatively small company just doesn't have a lot of expertise in the area of competition law.

    The fact that this complaint was filed in relatively short succession to Daimler's makes it fairly likely that there was some coordination behind the scenes, except that Daimler would know the difference between antitrust and cartels.

The question of component-level licensing is also the key issue in the FTC v. Qualcomm dispute in the Northern District of California. Just like one of the world's most famous FRAND judges, United States District Judge James L. Robart, I also think Judge Lucy H. Koh's FTC v. Qualcomm ruling could come down any moment. Daimler's and BURY Technologies' complaints over Nokia's conduct with the EU Commission show that this is a global issue, and Judge Koh has the potential here to be a global thought leader, like Judge Robart became one with respect to FRAND rate determinations (and in the U.S., with respect to antisuit injunctions against SEP abusers).

Having watched Nokia in litigation over many years (even going back to its first dispute with Apple), and the unfortunate (for Nokia and its stakeholders, though not for consumers) demise of its mobile device business that changed its attitude toward patent monetization, I'm not surprised that it apparently made demands that Daimler wasn't willing to meet without a fight. Daimler is also defending itself against Broadcom's German lawsuits (as is BMW).

With all that's going on, this blog may have to take a closer look at automotive patent cases going forward just because of a huge overlap with smartphone issues. For now, I really hope the European Commission will launch formal investigations of Daimler's and BURY Technologies' complaints. The best-case scenario would be for the U.S. to clarify the question of component-level licensing on the basis of a ruling by Judge Koh and for the European Commission to do so at the end of an antitrust investigation.

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