Tuesday, November 19, 2019

Report on Berlin SEP licensing and injunctions workshop released by ACT | The App Association: AllThingsFRAND

The patent injunctions panel at the Brussels conference I organized last week and the SEP licensing workshop hosted by ACT | The App Association in Berlin on September 30 had hardly any overlap, despite both having much to do with the ongoing German patent reform process. Some of the relevant SEP injunctions case law had to be summarized on either occasion for context, but apart from that, the focus in Brussels was very much on (i) the proportionality principle under the EU's IPR Enforcement Directive (IPRED) and (ii) the state of affairs in the German process (with the ministry's draft bill still being on the drawing board), while the Berlin event covered the subject from a multiplicity of angles. Another difference is that ACT's event--under the ALlThingsFRAND label--was subject to the Chatham House Rule (no attribution of quotes to speakers), enabling some people to participate and share their views who otherwise couldn't have done so.

Yesterday, ACT uploaded its official "Report from Berlin" in English (the language in which the event was held) and in German.

The underlying idea of ACT's event was multi-stakeholder collaboration, and the following roadmap is laid out in the report:

  • Communicate cross-sectoral multi-stakeholder consensus views on the interplay of patents, standards, and innovation in a public letter to EC leadership

  • Seek broad cross-sector multi-stakeholder collaboration in developing specific recommendations for German policy-makers on needed patent reforms to prevent SEP abuse

  • Continue support for CEN-CENELEC CWA 95000, Core Principles and Approaches for Licensing of Standard Essential Patents, through advancing its recommendations to EC policymakers and EU member states and seeking reedback on new venues and opportunities for this purpose

  • Replicate the goals of the Berlin workshop to be the beginning of further standards, patent, and SEP-related dialogue, scholarship, and ingenuity

With respect to SEP abuse, one of the speakers (whom I can't name due to Chatham though I'd like to give him credit for a first-rate presentation) gave a variety of examples of unfair conduct by SEP holders in connection with FRAND determinations and royalty negotiations. Those schemes were all known to me in principle because they surface all the time. But what I found really shocking is that even with the means of U.S. discovery at attorneys' disposal, some of those side agreements that effectively reduce royalty rates way below the nominal one (but the nominal one is then demanded from everybody else) don't show up easily. The panelist talked about one case (without naming the parties) in which even after extensive discovery they still hadn't seen the whole picture, but because of some oddities and irreconcilable numbers it dawned on them that some important element was missing. And then it turned out there was indeed yet another (not originally produced) agreement that changed the whole picture.

What others had previously told me is that SEP holders--with a view to future FRAND determinations in negotiations, arbitration or litigation with other parties--initially seek out small, financially weak and unsophisticated companies so they can easily impose high royalty rates on them and use those later in discussions or disputes with larger, deeper-pocketed and more experienced players as points of reference.

Another very well-known issue is that the confidentiality obligations imposed on potential licensees are often designed to just prevent--rather than enable--an actual analysis of the infringement allegations.

The mix of practicioners, policy experts, and academics at ACT's Berlin event was very good. Also, a European Commission speaker outlined the EC's perspective, and the audience agreed with most if not all of what he said.

What both ACT's Berlin event and my Brussels conference had in common is that, while "SEP" was in both titles, the injunction reform discussion inevitably includes non-SEPs. One can't help in the injunction context but touch on the problem of Germany's automatic patent injunctions over non-SEPs. Even for SEPs, despite the CJEU's Huawei v. ZTE ruling, more balance is needed in Germany. Those opposed to meaningful patent injunction reform in Germany try to argue that injunctions were only (or largely) a SEP-related issue that the CJEU allegedly solved years ago. But that's not true. The situation with respect to SEPs is still troubling, and non-SEP injunctions can wreak logistical havoc, too--not always, but sometimes.

ACT's Berlin event was designed to start and inspire discussion--not to solve the issues, but to contribute to the quest for solutions. The Federal Ministry of Justice and Consumer Protection will soon put a first draft bill on the table for stakeholders to comment on; thereafter, a second proposal will be sent to the Federal Parliament (Bundestag). There'll be more patent policy events in Berlin next year in all likelihood, and some of the information exchanged at ACT's event will be referenced on such future occasions, I guess.

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Monday, November 18, 2019

German patent reform discussed at Brussels conference: automatic injunctions contravene EU law

Apologies for being a bit slow to report on my own conference (held last week). On Friday I published all seven slide decks and an abstract. But there's so much going on that I have quite a backlog, which besides the component-level licensing parts of last week's conference also includes a DOJ amicus brief and a couple of SEP-related position papers as well as the Supreme Court's grant of certiorari in Oracle v. Google.

Not only have I received plenty of positive feedback to last Tuesday's conference from attendees but there was also an unmistakable sign: even though we were running one hour behind schedule, the room was still almost full at the end of the day. That speaks to the way the conference as a whole was received, and also to the popularity of the "bonus session" (as I called it because it wasn't exactly about component-level licensing, and not even SEP-specific, apart from Bram Nijhof's highly informative overview of the evolution of case law since Huawei v. ZTE) at the end of a long day.

Edmund Mangold, patent counsel at BMW and personally very much involved with the German patent reform debate at the level of industry bodies, provided an introduction. After Taylor Wessing's Bram Nijhof's case law overview, Cleary Gottlieb's Maurits Dolmans made an unequivocal statement in the title of his presentation: "We Need Proportionality Review for Patent Injunctions under German Law"

It's no secret that I couldn't agree more. Having observed well over 100 German patent trials this decade (SEP and non-SEPs alike), I've seen too many situations in which injunctions came down that probably--and sometimes most probably--wouldn't have been granted in other jurisdictions. All too often it's easy for an experienced litigation watcher to figure that some plaintiffs are playing the lottery by asserting a bunch of mostly dubious patents in Germany (typically, the most questionable ones are selected for complaints brought in Munich) in hopes of a lucky punch that allows the winner to take it all: a favorable settlement.

What we learned from Mr. Mangold was that the German government had originally planned to put forward a proposal by now, and that in his observation there was some political momentum toward closing the injunction gap, which is due to the fact that infringement cases are adjudicated much faster than nullity actions before the Federal Patent Court.

But what most companies in the automotive industry, but also the mobile communications industry, would like to see is a reform that would update Germany's Patentgesetz (Patent Act) to the effect of requiring a proportionality analysis--in each individual case--prior to ordering an injunction.

Mr. Dolmans--just like all the other speakers, expressing his personal views and not those of any particular client--had a nice analogy to the issue of royalty stacking in his presentation: at some point there were so many robber barons along the Rhine river, with each of them imposing his tax on boats passing by, that transporting goods over long distances became economically unviable on that particular river.

Compared to what Preu Bohlig's Professor Christian Donle had said on the first panel of the day (he likened SEPs to railroad station toilets--not that nice, but you need to use them; I'll report on that panel in another post), this was still a flattering comparison.

The focus, however, was on proportionality, and how clear-cut both the EU's Intellectual Property Rights Enforcement Directive (IPRED) and the Court of Justice of the EU's case law are.

To bookend the day, I asked the three panelists questions with a particular focus on the German reform process. They all had very interesting answers (for an example, Mr. Nijhof explained to what extent courts in other jurisdictions do or do not believe that Huawei v. ZTE inherently takes care of proportionality), but I'll highlight two soundbites from Mr. Dolmans with a view to the further debate:

  • When I asked him whether the European Commission could take Germany to task in case the forthcoming reform fails to incorporate the proportionality principle into German patent law, his answer was clear: yes, if the Commission wanted, it could. It could even impose fines on Germany.

  • In response to my reference to one of Germany's highest-ranking judges arguing that German patent remedies are inherently proportionate because difficulties in obtaining damage awards counterbalance easy access to injunctions, Mr. Dolmans said: "Structural is nice, but you need individual justice in each case." His co-panelists agreed as far as I could see. And (now Lord) Justice Richard Arnold from the UK also made this very clear, without naming Germany, earlier this year.

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Friday, November 15, 2019

Slide decks from Brussels conference on Component-Level SEP Licensing (November 12, 2019)

During and after the Brussels conference on Component-Level SEP Licensing that I organized on Tuesday, I've received various requests for the panelists' slide decks. Fortunately, all the speakers who used slides have provided them to me by now and authorized their publication.

I'll also do a follow-up in the form of a summary (with some soundbites).

Now, let me provide links to the slide decks in the chronological order of the presentations:

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Munich appeals court schedules ruling on Nokia's anti-antisuit injunctions against Continental for December 12

Just a quick follow-up to yesterday's report on the appellate hearing in Munich on Nokia's anti-antisuit injunctions against Continental:

The Munich I Higher Regional Court's press office told me today that a ruling has been scheduled for December 12.

I still predict the same outcome: reversal. The court's position on the irreconcilability of an antisuit--including anti-antisuit--injunction with German law didn't appear to change at any moment during the hearing that lasted well over two hours. What I attribute the delay to is simply that this appeals court--at least when it comes to patent cases--tends to write very comprehensive opinions. Those judges won't necessarily address each and every argument they don't have to reach. But unlike their U.S. counterparts, they do cover a lot of ground beyond the shortest path to a particular outcome when fundamental questions are at stake. Earlier this year, an injunction Qualcomm had won and enforced against Apple in Germany was tossed on three independent grounds, any single one of which would have been self-sufficient.

The practical effect of this target date is that Continental can't make a third attempt at a U.S. antisuit injunction for another four weeks. Meanwhile, on December 10, the first Nokia v. Daimler trial will be held in Mannheim (there have been first hearings in three Munich cases, but the second hearings there are the actual trials and the soonest one of them will take place in February). In all those years I've seen only one bench ruling in Mannheim, so realistically, there won't be any German patent injunction in place against Daimler before sometime in January. Meanwhile, a renewed motion for an antisuit injunction in the U.S. could be resolved if a motion to shorten time succeeded--which it might if a Mannheim injunction loomed large after the December 10 trial, especially since the issues have been briefed before, even if not by Sharp and Conversant.

The Mannheim Regional Court is more likely than the one in Munich to be receptive to the argument that Nokia shouldn't be granted injunctive relief against an end-product maker (Daimler) only because of a refusal to extend an exhaustive license to upstream companies in the supply chain. I'm cautiously optimistic it may work out that way (or Nokia's Mannheim case might also fail on the merits and be rejected or stayed). In that case, a U.S. antisuit injunction won't even be needed before the first final Nokia v. Daimler judgment is entered in Munich.

Nokia may lose everything in the end. Huawei is probably going to win its private antitrust lawsuit against Nokia in Dusseldorf. The European Commission might launch formal investigations anytime. And if Nokia can't gain decisive leverage over Daimler in the short term, it will probably end up paying tens of millions of euros under Germany's "loser pays" rule as there's an army of intervening companies on Daimler's side and Nokia has to pick up the bill for all those legal entities if it loses. Statistically, most of those types of complaints don't go anywhere, so Nokia needs a lucky punch, but it faces some hurdles. I was less optimistic about Daimler and its suppliers' ability to fend off Nokia's patent assertions, but Huawei's Dusseldorf action is a game changer: even if Nokia could force Daimler to take a license (be it from Nokia or from the Avanci pool as a whole), Huawei's lawsuit would continue unabatedly.

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Thursday, November 14, 2019

Munich appeals court likely to reverse Nokia's anti-antisuit injunction against Continental: Judge Koh may have to rule on third antisuit motion soon

Before we go to today's Munich appellate hearing, let me just say that this week's Component-Level SEP Licensing conference in Brussels exceeded expectations, which applies to the quality of the presentations of those who strongly advocate component-level licensing obligations under antitrust and contract law as well as of those who are skeptical of, or even adamantly opposed to, at least one of those legal bases--everyone I invited was terrific. I'll publish the slides no later than this coming weekend. Now, the latest from Nokia v. Continental.

3 1/2 months ago I voiced a concern over what appeared to be a contradiction in the Munich I Regional Court's decision to grant Nokia an ex parte (i.e., without notice or hearing) anti-antisuit injunction against Continental, barring the automotive supplier from shielding Daimler from Nokia's numerous German patent infringement actions:

There's something odd about the anti-antisuit-injunction injunction. The order notes that antisuit injunctions of the kind that exists in the U.S. are not known in Germany. But then the court somehow threads the needle and actually does issue an antisuit injunction for the purpose of thwarting a potentially-upcoming antisuit injunction from overseas.

A month later, when the Munich court entered another such injunction (against a different Continental legal entity), I wrote "[t]he appeals court may very well find that two wrongs don't make a right."

That's precisely what's most likely to happen this evening by Central European Time (morning by Pacific Standard Time), though it won't become known until tomorrow morning local time.

To be fair, Presiding Judge Tobias Pichlmaier of the 21st civil chamber of the lower court--in a speech delivered a couple of weeks ago--as well as the late-August decision (which came after briefing and hearing, unlike the ex parte in July) were definitely more nuanced than the first, hastily-prepared decision. Still, Presiding Judge Konrad Retzer of the 6th Civil Senate of the Oberlandesgericht Muenchen (Munich Higher Regional Court) started today's appellate hearing with a summary of the factual and legal issues that included two grounds of reversal:

  1. A preliminary injunction might not be warranted as no Continental antisuit motion against Nokia is currently pending in the United States. But Nokia's lead counsel, Arnold Ruess's Cordula Schumacher, accurately pointed out that Judge Lucy H. Koh of the United States District Court for the Northern District of California had not resolved the issue on a definitive basis: Continental could refile. I would file under lawyer's hyperbole that she said Judge Koh had twice "invited" Continental to refile. Once: yes. Twice: well, the denial of Continental's motion for an anti-anti-antisuit temporary restraining order merely noted that Continental had been told they could bring another motion for a preliminary injunction, but it's in the eye of the beholder whether that's an invitation.

  2. Judge Retzer appeared to be unconvinced by the attempt to distinguish the German anti-antisuit injunction from a U.S. antisuit injunction only because of a narrower scope (relating to a motion rather than an entire litigation). While he credited the lower court for its diligent analysis of some other aspects of the matter, he appeared to view this part as reversible error. Also, being the incarnation of equanimity, he did not appear receptive to an equality-of-arms argument (U.S. court can issue antisuit injunctions, so--Nokia said--German courts should provide a countermeasure). Neither did Nokia's self-defense argument get much traction: Judge Retzer explained that self-defense is when a court can't help you before it's too late, and not when you can still go to or defend yourself in court. The analogy he used was somewhat similar to Second Amendment activists' "when seconds count but the cops are minutes away" argument.

    Recent anti-antisuit decisions in Paris and London didn't bear any non-negligible weight with the German appeals court either as they didn't (because they couldn't) address the questions to be resolved under German law.

The court declared its intent to reach a decision today, but it would be late, so Judge Retzer asked parties, counsel, and the general public (like me) to go home and call his chambers tomorrow morning.

The decision will be final as preliminary-injunction rulings cannot be appealed to the Federal Court of Justice.

Affirmance of Nokia's anti-antisuit injunction would be a major surprise. Also, while the presiding judge's initial outline also mentioned the intermediary or complicit liability of Continental AG with its indirect U.S. subsidiary Continental Automotive Systems as a potentially outcome-determinative issue with respect to one of the two injunctions, that question wasn't discussed in the hearing--presumably because it won't have to be reached.

Nokia voluntarily joined two U.S. standard-setting organizations--ATIS and TIA--and made U.S. FRAND declarations. In doing so, Nokia submitted to U.S. in personam and in rem jurisdiction, which entails, ínter alia, the possibility of antisuit injunctions. Continental couldn't have enforced its rights as a third-party beneficiary in any other jurisdiction than the U.S., where the automotive supplier has significant business activity in the Wolverine State as well as the Golden State. Assuming that Nokia's anti-antisuit injunction (which was in any event a brilliant tactical move and definitely had an impact, though probably a short-lived one) gets lifted, Continental is likely to refile in the U.S.--where the standard for an antisuit injunction is fairly high and may not be met in this case.

In a related development, Judge Koh canceled the hearing on the Avanci-Nokia venue transfer motion, which she often does when the parties' briefs constitute a sufficient basis for adjudication. But there may be a hearing--in a week from today--on the defendants' joint motion to dismiss.

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Wednesday, November 6, 2019

Component-Level SEP Licensing: final conference program as PDF

If you plan to attend next week's Component-Level SEP Licensing conference in Brussels, you may find it useful to download the final conference program (this post continues below the PDF document):

FOSS Patents 19-11-12 Confe... by Florian Mueller on Scribd

The conference is already overbooked, but for a few more days I'll still accept registrations via EventBrite as there are always some no-shows and the hotel can provide--to use a cloud computing-style term--some (limited) burst capacity if needed.

The PDF will render correctly on most devices. However, when viewed on Scribd (such as in this post), a special character in the name of one speaker may result in a "blot."

Also, I've already received some useful feedback from readers to yesterday's "Call for input: do you know of any cases in the PC industry in which SEP holders refused to license component makers or based their royalties on the end product?"

So far it looks like there are a couple of wireless companies that also try to impose device-level royalties on personal computers, but they just can't do that when WiFi cards are sold separately and later incorporated into PCs, and some tried the same with respect to MP3 (as implemented by the Microsoft Windows operating system). I'll follow up with more detail on that one later this month.

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Tuesday, November 5, 2019

Call for input: do you know of any cases in the PC industry in which SEP holders refused to license component makers or based their royalties on the end product?

What you find in the headline is not meant to be a rhetorical question. While I'm personally unaware of any case in the personal computer industry (with just one exception that I'll state in a moment) in which a standard-essential patent (SEP) holder insisted on the end product (desktop computer or laptop) being the royalty base and/or refused to grant an exhaustive license to component makers, I can't rule out that there have been such cases in that huge and decades-old industry. That's why I'm asking for your help. Input from readers has previously been very helpful, such as in connection with privateering (patent transfers from to non-producing entities).

My focus is on mobile devices, and I've looked at PC-related patent litigation only when countersuits targeting personal computers were brought in retaliation for mobile patent suits. In one such case, an absurd letter by Motorola Mobility to Microsoft entered the public record: Motorola wanted 2.25% per unit from Microsoft and explicitly stated that "the royalty is calculated based on the price of the end product (e.g., each Xbox 360 product, each PC/laptop, each smartphone, etc.) and not on component software (e.g., Xbox 360 system software, Windows 7 software, Windows Phone 7 software, etc.)." To put this into perspective, on most PCs that royalty rate would have been roughly at a level with Microsoft's entire income from selling a Windows OEM license. Motorola made that outlandish demand in a letter, but limited its royalty demand to 2.25% of the selling price of Windows in Judge James L. Robart's now-famous FRAND case as well as in a similar proceeding (that led nowhere before the parties withdrew all pending claims) before the Mannheim Regional Court. Motorola even denied the undeniable later on--apparently they realized they had been a bit too crazy, fortunately just temporarily.

Video codec patents are one example of a category of SEPs for which patentees could theoretically have insisted that the royalty base should be the end product. Graphics and memory standards are another example.

What about WiFi? All I know is that I've bought WiFi cards for several desktop PCs in a row, just because it's always a nice fallback when there's an issue with a landline or a router. I can just get a connection via a smartphone with tethering--and in many places, other options exist. Obviously, when I bought those cards for roughly $40-50 each, there was no way any WiFi patent holder could have collected a royalty based on the total cost of the related PC. I paid my $40-50 for that component regardless of whether I plugged it into a $500 or a $5,000 computer. Apparently, the companies that made the WiFi cards I bought were fully--and exhaustively--licensed. It's the same situation when you buy an additional or larger memory chip or a new graphics adapter and just install such components yourself.

Today's smartphones are handheld PCs. If there really is no example (other than a letter Motorola distanced itself from) of SEP holders having treated the PC industry the way they're now trying to treat the mobile device and automotive industries, then that would expose the likes of Qualcomm, Nokia, and Ericsson as total outliers in the wider technology industry.

In case you do know of any cases, please fill out the contact form. I protect my sources unless you request--in writing--to be named. What I'm primarily looking for is verifiable information, such as publicly accessible court filings. If you have unverifiable information that you nevertheless consider highly pertinent, please let me know, too--but I may then have to follow up with you to get a better idea.

Thanks in advance for your help! I will publish the results of this call for input on this blog, in a future post.

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Friday, November 1, 2019

Upcoming Brussels conference on component-level SEP licensing: final program and roster of speakers

The hottest SEP-related topic at this time is the question of whether--and on what terms--implementers of FRAND-pledged standards should have access to exhaustive component-level licenses. It's relevant to antitrust enforcement, litigation, and policy-making.

On Tuesday, November 12, FOSS Patents' Component-Level SEP Licensing conference will be held at the Sofitel Le Louise. Tickets are available via EventBrite. Here's the final program (with all panelists named):

08:30Registration & Reception
09:00Panel discussion on component-level licensing (antitrust and contract law)
10:00"All Comers" Or Not? Access to Licenses Under Contract Laws
Moderator: Dave Djavaherian (Founder, PacTechLaw)

11:00Patent Licensing: Implications for Business
Moderator: Ief Daems (Legal Director Antitrust EMEAR, Cisco Systems)

Seeking Component-Level Licenses: Experiences From the Field
Patent royalties in the IoT industry: an economics perspective
Joachim Henkel (Professor of Technology and Innovation Management, Technical University of Munich)
13:30The 2019 FTC v. Qualcomm Ruling: Key Holdings, Next Steps, Global Impact
Moderator: Jay Jurata (Partner, Orrick, Herrington & Sutcliffe)

Judge Lucy H. Koh's findings of fact, conclusions of law, and remedial orders
Jay Jurata (Partner, Orrick, Herrington & Sutcliffe)

Licensing practitioner's perspective on fallout from FTC v. Qualcomm ruling
Eric Stasik (Founder and Director, Avvika)

Could Judge Koh's reasoning be adopted under Art. 102 TFEU?
Evelina Kurgonaitė (Secretary General, Fair Standards Alliance)
15:00Afternoon Coffee Break
15:30Antitrust Complaints Over Component-Level Licensing
Moderator: Rebekka Porath (Director IP Policy EMEA, Intel Corporation)

Antitrust complaints over SEP licensing
Rafał Sikorski (Professor, Adam Mickiewicz University; and Senior Partner, SMM Legal)

Continental antitrust lawsuit against Avanci
Kent Baker (Head of IP Strategy & Licensing, u-blox)
16:00BONUS SESSION: Access to Injunctive Relief
Moderator: Edmund Mangold (Patent Counsel, BMW)

Evolution of national case law on SEP injunctions since Huawei v. ZTE
Bram Nijhof (Counsel, Taylor Wessing)

The proportionality requirement under the EU enforcement directive
Maurits Dolmans (Partner, Cleary Gottlieb Steen & Hamilton)

The German patent reform debate
Moderator: Florian Mueller (Founder, FOSS Patents)
Panelists: Messrs. Dolmans, Mangold, and Nijhof

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