One week ago, Reuters' Foo Yun Chee (who's been covering EU competition matters for more than a decade and whom I regard very highly) reported on a statement by Nokia according to which "the Finnish telecoms equipment maker had submitted a proposal for resolving the patent licensing fee row." This relates to the situation between Nokia and Daimler as well as Daimler's suppliers. Nokia brought ten German standard-essential patent (SEP) infringement actions against Daimler earlier this year--several months after Daimler had lodged an antitrust complaint with the European Commission's Directorate-General for Competition (DG COMP) over Nokia's refusal to extend exhaustive SEP licenses on FRAND terms to Daimler's suppliers. At around the same time, four suppliers (Continental, Valeo, Gemalto, and BURY Technologies) also filed complaints against Nokia with DG COMP.
I've always been outspoken about stalling. HTC's mastery of that skill in its dispute with Apple was first-rate. I could write a book or hold a full-day seminar on stalling tactics especially in U.S. and cross-jurisdictional disputes. So when I see the parties' divergent comments in that Reuters piece, I know Nokia is stalling:
"'Nokia continues to work toward constructive ways to resolve commercial disputes related to licensing of our standardized cellular technologies,' Nokia said in a statement, without mentioning any specific proposal to end the row."
"Daimler declined to comment specifically on Nokia's proposal but a spokeswoman said: 'We want clarification on how essential patents for telecommunications standards are to be licensed in the automotive industry. Nokia so far refused to comprehensively and directly license our suppliers.'"
This juxtaposition tells it all. Nokia is pretending to make a bona fide effort to address the issue. But that's just not credible for a simple reason: we're not talking about adjustable fishing quotas. This here is a binary question. Either the component makers get an exhaustive license on FRAND terms (which terms would later have to be negotiated or, if necssary, determined by a court of law or, if the parties agree on the parameters, an arbitration tribunal) that allows them to go about their business--or they don't. Huawei raised that binary question in its Dusseldorf antitrust lawsuit against Nokia.
It's an illusion that there could be anything in between. You can't be just a little bit pregnant.
So what's needed is not lip service, such as hollow-ringing words like "constructive." What's imperative is a sharp decision that puts the disputed matter to rest for good. And that's what Daimler's statement suggests between the lines. They want "clarification" on component-level licensing. Apparently they just haven't figured out yet how to get there, given that they filed their EU complaint more than a year ago and the Commission still isn't investigating.
A Mannheim trial was scheduled for next Tuesday. It would have been the first real trial--as opposed to an early first hearing--and a ruling could have come down anytime thereafter (in January with a likelihood comfortably above 90%, thus ahead of the first Munich trial scheduled for early February).
But out of an abundance of caution, I sent Yun Chee's story to the Mannheim court's press office and requested confirmation that the trial was still going forward. Judge Ruppert, a spokesman for the court, told me that the case would be heard on Tuesday at the scheduled time, but he also highlighted it was only an "early first hearing."
The Mannheim court--which I've described as the most responsible German court when it comes to staying cases involving likely-invalid patents--typically decides these cases after just one trial (which normally lasts only a couple of hours because they are so focused and efficient). However, they call it an "early first hearing" even if they conclude they can hand down a judgment afterwards. So the court's wording doesn't necessarily mean the Tuesday court row has been downgraded from "trial" to "early first hearing."
In Munich they have Patent Local Rules under which an early first hearing is mostly just about claim construction and initial infringement analysis. However, there are exceptions even in Munich. In the first Nokia v. Daimler hearing in June, Presiding Judge Dr. Matthias Zigann also addressed FRAND, even before Nokia's prayer for injunctive relief. But in Munich, when they say "early first hearing," you know for sure that there'll be a second one--the actual trial. In Mannheim, most cases are decided after the "first hearing."
Whatever the scope of the Tuesday hearing will be, the German car maker must be cautious so it won't get outwitted by Nokia. It's absolutely in Daimler's interest to get a Mannheim judgment prior to the first one in Munich, given that the Munich court has so far taken very unFRANDly positions on component-level licensing, while there is at least one Mannheim precedent where Deutsche Telekom benefitted from a supplier's willingness to take a SEP license. A Mannheim decision wouldn't be binding on the Munich court, but could help psychologically since Dusseldorf (unreasonable in other ways, but rather progressive on component-level licensing) will almost certainly decide in Daimler's favor. Munich would then be the outlier, but the appeals court there may very well be more favorable to component-level licensing. In order to get a Nokia injunction stayed quickly, a Mannheim decision upholding FRAND in the component-level licensing context would serve as persuasive authority that could make a decisive difference.
Nokia is playing games, and Daimler must be extra cautious. In the current situation, the European Commission will continue to drag its feet, and won't make a decision on that late-2018 complaint before early 2020 at the earliest. More aggressive parties in Daimler's shoes would already have lost their patience and exerted more pressure; they'd also have considered bringing in, in addition to or as a replacement of current counsel, some other EU antitrust lawyers to make more headway. It should be a simple decision for the Commission to investigate: not only is the CJEU's case law pretty clear that everyone is entitled to a FRAND license but Nokia and Ericsson are basically dying companies compared to the automotive industry and the wider IoT industry (smart meters etc.).
Quinn Emanuel defends Daimler against German patent infringement complaints all the time and is superb at that, but not involved with the EU complaints--unfortunately, QE is largely on the other side of the FRAND debate, which hopefully won't benefit Nokia (a QE client in the United States, by the way) at some point.
Nokia's EU counsel, Thomas Vinje of Clifford Chance, is extremely effective. I was adverse to him ten years ago (Oracle-Sun merger review), and he made a statement to the media about me in 2010 that was just an unsubstantiated rumor, but that's par for the course in Brussels. It's just interesting to see how his positions on standard-essential IP have evolved over the last 15 years, from his fight against Microsoft (where he led the "European Committee for Interoperable Systems") and his zero-royalty advocacy efforts in the EU procurement context over his representation to Samsung and now Nokia. I may talk about that some other time, and that's not why I wouldn't trust Nokia's talk about settlement. The reason for that is the one I gave further above: it's a binary question like being pregnant or not, so there's no middle ground, period.
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