Thursday, May 28, 2020

Mannheim Regional Court's Second Civil Chamber updates position on standard-essential patent injunctions -- FRAND-compliant defendants in the clear

Access to standard-essential patent (SEP) injunctions in Germany remains in flux. This is the third post in a row to share news regarding the situation in Mannheim, the "diversity venue" du jour.

One week ago, I reported on the position taken by the Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) in a Nokia v. Daimler trial earlier that week. Effectively, Judge Dr. Kircher's panel told the parties (behind closed doors, but without insisting on confidential treatment of that part of the conversation) that the judges were going to reverse their Huawei v. ZTE-related approach of several years: they were going to start their analysis with the implementer's counteroffer.

Toward the end of yesterday's post on Conversant's quartet of patent infringement complaints against Daimler in Munich, I mentioned that in a Nokia v. Lenovo trial on Friday, the Mannheim court's other patent-specialized division--Presiding Judge Dr. Peter Tochtermann's Seventh Civil Chamber--had distanced itself from the other panel's stance.

Meanwhile I've obtained a copy of a clarifying order by Judge Dr. Kircher and his side judges Sender and Dr. Seibel, dated Monday, May 26, 2020, in that Nokia v. Daimler case. With a view to the defendant's leave to file a post-trial brief on FRAND, the Second Civil Chamber explains its current position on the legal framework as follows:

  • They still stand by the sequence of analysis they outlined last week and will focus on the defendant's (here, Daimler's) counteroffer first, unless Germany's top court for civil litigation, the Federal Court of Justice, were to decide otherwise at some point. (This makes it a possibility that they might not even follow such guidance by their direct appeals court, the Karlsruhe Higher Regional Court--with case law being weak in Germany, they wouldn't have to.)

  • But--and I can hardly overstate the extent to which I welcome this latest development--they have thought again about what the practical impact of a scenario in which both the SEP holder's initial offer and the implementer's counteroffer are deemed FRAND-compliant should be. In last week's trial, they indicated that even in the "FRAND vs. FRAND" case, an injunction would issue (which is the position of the Munich I Regional Court). Now, however, Judge Dr. Kircher's panel has stated in writing that the pursuit of an injunction by a SEP holder despite a FRAND counteroffer by the implementer might constitute abusive behavior under EU antitrust law and, therefore, be rejected by the court.

I have updated my chart accordingly (click on the image to enlarge; this post continues below the image):

This means that, apart from the procedural approach (which offer to analyze first), the only difference from the court's previous legal position is the bottom-right cell of the matrix: previously, non-FRAND behavior by the SEP holder would have resulted in a denial of injunctive relief without even having to look at the implementer's counteroffer; now, however, the SEP holder might get away with a FRAND violation, which would be practically "cured" by the implementer's failure to submit a FRAND counteroffer.

For the Nokia v. Daimler case at hand, this adjustment--it wouldn't be grossly unfair to say they backtracked a bit, but it's more appropriate to recognize and respect their diligence in having furthered their thinking--means that Daimler now has to convince the court that its offer was FRAND-compliant. Should the post-trial brief make a compelling case to that effect, Nokia will come out on the losing end as it (statistically speaking) almost always does in litigation.

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Wednesday, May 27, 2020

Nokia-fed Avanci-aligned patent troll Conversant stepped up litigation campaign against Daimler: now four cases pending in Munich

Nokia used to be the pride of Europe in its field, but it failed (as the saying goes, the higher you climb, the harder you fall), and a result, its patents have become not the, but certainly a scourge of Europe.

In October I discovered a German Conversant v. Daimler lawsuit because it was mentioned in a U.S. court filing. Nokia gave Conversant a package of cellular standard-essential patents (SEPs)--a practice commonly referred to as "privateering" that anybody in Brussels trying to dissuade the European Commission from enforcing EU antitrust law against Nokia should be ashamed of.

By now, Conversant has brought at least three more cases in Munich (and maybe others in different fora):

  • The first one I became aware of is over EP2934050 on an "apparatus and method for providing a connection" and was filed on August 13, 2019. The original complaint (case no. 21 O 11384/19) merely sought an accounting of Daimler's sales of infringing products, but Conversant could add--and by now might have added--a request for injunctive relief anytime (the patent is set to expire in early 2021).

    The case will go to trial on September 23, 2020 before the 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier).

These are the three new cases and the hearing dates I'm aware of (I have yet to find out whether those are first hearings--as I believe--or already trials):

  • Case no. 21 (<= that's the number of the chamber, i.e., court division) O 17752/19 over EP3300421 on a "slow mac-e for autonomous transmission in high speed uplink packet access (hsupa) along with service specific transmission time control" (hearing date: November 25, 2020)

  • Case No. 21 O 17753/19 over EP3267722 on a "fixed hs-dsch or e-dch allocation for voip (hs-dsch without hs-scch/e-dch)" (hearing date: December 2, 2020)

  • Case no. 7 (= Presiding Judge Dr. Matthias Zigann's division) O 17751/19 over EP1797659 on a "slow mac-e for autonomous transmission in high speed uplink packet access (hsupa) along with service specific transmission time control" (hearing date: December 2, 2020)

This further escalation of the Avanci-Daimler dispute shows that the problem wouldn't go away even if Daimler felt forced to settle after a decision such as the one that may come down in Mannheim next month. The issues needs to be addressed. The European Commission has been waiting and waiting and waiting--but its hesitance has not helped in the slightest.

As I just mentioned Mannheim, I have meanwhile learned that Presiding Judge Dr. Peter Tochtermann of the Mannheim Regional Court's 7th Civil Chamber (Presiding Judge Dr. Holger Kircher's division is the 2nd Civil Chamber) held a trial on Friday in a non-automotive case, and from what I hear, that division still has the same perspective on FRAND as before, thereby declining to perform the same about-face as Judge Dr. Kircher's panel. Case law works has merely persuasive weight in Germany, so--unlike in Common Law jurisdictions--inconsistent decisions by the same court on the very same legal question would not be unheard of (no stare decisis doctrine). While I'm unaware of a high-profile question of patent law that would have been decided differently by judges of the same German court, I have read about cases in other fields of law. In one such case, the owners of different condominiums in the very same building in the Northern Bavarian city of Nuremberg brought lawsuits over the very same issue (no difference in facts or law), and one judge found for a plaintiff while another judge did the opposite.

It will be interesting to watch how this SEP injunction issue settles out before the Karlsruhe Higher Regional Court, provided that an appeal is brought and adjudicated prior to a poor mistreated defendant feeling forced to cave.

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Thursday, May 21, 2020

Mannheim court reverses position on FRAND defense: standard-essential patent injunctions become readily available again

On Tuesday, the Mannheim Regional Court held a trial in a Nokia v. Daimler case (case no. 2 O 34/19 over EP2981103 on an "allocation of preamble sequences") and announced the most colossal about-face I've seen from a court so far on a key question of patent law:

Presiding Judge Dr. Holger Kircher of the Mannheim court's 2nd Civil Chamber explained to the parties and intervenors that he and his side judges had concluded their court's application of the Court of Justice of the EU's Huawei v. ZTE standard-essential patent (SEP) injunction decision had been erroneous for several years. They were now going to interpret the CJEU opinion differently, with severe implications for those defending themselves against SEP injunction requests in that court.

For the time being, I'm not going to comment on the technical merits, though a Tier 2 (= indirect) supplier to Daimler disclosed to the court its implementation of the relevant part of the cellular standard in question and it appears to be clearly non-infringing, given that patent law is all about using specific means to achieve a result, as opposed to the result viewed in isolation. Also there appears to be a very strong case for impermissibly-added subject matter, which would render the patent invalid. But let's focus on FRAND.

In Huawei v. ZTE, a case referred to the CJEU by the Dusseldorf Regional Court, the EU's top court wanted to prevent both holdup (SEP holders obtaining supra-FRAND royalties against the backdrop of an injunction) and holdout (implementers using delaying tactics as opposed to negotiating license terms with SEP holders in good faith). Therefore, injunctions shouldn't be available as long as good-faith negotiations are ongoing, but mere lip service to negotiation wouldn't suffice. The key paragraph that sums up the CJEU's position on both parties having to act in good faith (with the initial obligation of making a FRAND-compliant licensing offer falling upon the SEP holder) is paragraph 71 (click on the image to enlarge; this post continues below the image):

That one is the final paragraph of the relevant part of the CJEU's ruling. It's the answer to the most important parts of the questions the Dusseldorf court had raised. It states clearly that, for (chrono)logical reasons, the SEP holder must make a FRAND offer "prior to bringing that action," and the implementer is expected to respond diligently and without delaying tactics to that offer, which means it has to make a FRAND counteroffer. FRAND is a range, so both the SEP holder's offer and the implementer's counteroffer can be FRAND at the same time.

There are 2x2=4 possible combinations of FRAND and non-FRAND positions taken by the parties on the licensing terms they would accept (click on the image to enlarge; this post continues below the image):

What the CJEU meant was that only one of the four combinations would lead to an injunction. The SEP holder would not get one if it failed to discharge its FRAND licensing duty, and if both parties made offers within the FRAND range, the SEP holder wouldn't be entitled to an injunction either as it could simply accept the implementer's counteroffer (or negotiate further to find some common ground in between).

What the Mannheim court explained on Tuesday is that the test would, from now on, focus on the implementer's counteroffer. Judge Dr. Kircher and his colleagues have recently decided to interpret para. 66 of the CJEU's decision to that effect:

66. Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.

We'll get to the interpretation of that paragraph in a moment. The net effect is that a SEP holder could get away with a FRAND violation if the court isn't convinced that the counteroffer is FRAND. Instead of one of the four FRAND/non-FRAND combinations resulting in an injunction, all but one would (click on the image to enlarge; this post continues below the image):

That approach is materially consistent with, and may very well have been inspired by, the Munich I Regional Court's recently-published SEP guidelines.

But is that really a correct interpretation of Huawei v. ZTE?

It's a highly problematic approach to say the least.

Paragraph 71 is the one that really matters. It refers to all previous paragraphs, such as para. 66, as "the foregoing considerations" and then states a rule.

It's not just about whether para. 66 would be considered way too important. It also takes para. 66 out of context in another way: para. 66 discussed a scenario in which "the alleged infringer [does] not accept the offer made to it." It says "the offer", not just "any offer." And "the" offer is previously defined as an offer on FRAND terms.

Focusing on the implementer's (counter)offer turns the CJEU's case law on its head. It used to be the German Orange-Book-Standard approach to place all the burden on the implementer. But then came the CJEU (in Huawei v. ZTE and basically said (in other words): "No, firstly the SEP holder has an obligation under the antitrust laws, but if it discharges its FRAND duties, then we're not going to tolerate holdout tactics by the implementer. The implementer can keep negotiating, but within reason."

Arguably, the new (but actually not so new) Mannheim stance on SEPs is even worse than Orange-Book-Standard was, given that in the old days defendants were at least able to avert an injunction by making a licensing offer that relegated the determination of royalty amounts to a future judicial proceeding (they still had to post a bond or make a deposit).

The problem is clear. The impact can be disastrous. But how can this be fixed?

If an injunction comes down (the decision will be announced on June 23), Daimler can appeal it to the Karlsruhe Higher Regional Court. That appeals court could stay the enforcement of the injunction rather swiftly and set the record straight.

Regulatory authorities such as the European Commission and Germany's Federal Cartel Office could make filings with the Mannheim court, or with the appeals court in Karlsruhe. The courts would be free to disagree, but less likely to disagree with, say, DG COMP than with Daimler.

Theoretically, a solution could also come from the legislature. However, the German patent reform process is much ado about (pretty much) nothing due to the ineptitude of those pushing for injunction reform to make lawmakers understand what benefits an economic majority. They've foolishly wasted time and energy within existing industry organizations instead of just simply forging a strong cross-sectoral alliance and taking matters into their own hands while the window of opportunity to influence the political opinion-forming process was open. Now that window is closed, not in formal but in practical terms.

The new un-FRAND-ly development in Mannheim is shocking, and I believe there will be some resistance by industry. For the sake of innovation, and in the ultimate interest of consumers, I can only hope that it will be forceful, intelligent, timely, and effective.

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Tuesday, May 19, 2020

Munich I Regional Court won't adjudicate Nokia v. Daimler case tomorrow, schedules new trial for 7/23: stay looms large

The Nokia v. Daimler patent ruling (patent-in-suit: EP1671505 on a "redundancy strategy selection scheme") that the Munich I Regional Court had originally scheduled for tomorrow has been postponed.

Instead of announcing a decision tomorrow, the court has reopened the proceedings and scheduled another trial date for July 23, 2020. On that additional trial date, the focus will be on validity. Based on what I've heard about the order, Nokia now has to overcome a significant hurdle: it needs to dissuade the court from staying the case pending the parallel invalidation proceedings.

More than three months have passed since the original trial in this case. It speaks to the court's diligence that the judges identified a need for an additional court session in order to carefully analyze Daimler's invalidity defense. With so much at stake in the wider dispute, it would have been unfortunate if a rush to judgment had resulted in an enforceable injunction over a patent that shouldn't have been granted in the first place (at least not in the form in which the European Patent Office granted it).

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Monday, May 18, 2020

Patent troll Sisvel files second case against Tesla in Delaware, asserting nine standard-essential patents from Nokia, LG, and BlackBerry

The automotive patent wars are heating up. On Wednesday, a key Nokia v. Daimler decision is going to be handed down in Munich. Meanwhile, Nokia's partners in crime are pretty active, too. Three weeks ago I reported on patent infringement complaints brought by a Nokia-fed troll, Conversant, against Tesla in the Western District of Texas and in Mannheim, Germany. In that post I also mentioned other pending litigation by contributors to the infamous Avanci patent pool against Tesla:

  • a lawsuit by Foxconn-owned Sharp in Japan, and

  • a case brought by patent troll Sisvel in the District of Delaware over former Nokia patents.

The latest news is that Sisvel stepped up its campaign on Friday (May 15, 2020) by filing a second Delaware complaint against Tesla (this post continues below the document):

20-05-15 DED20cv655 Sisvel ... by Florian Mueller on Scribd

The co-complainants are Sisvel and one of its subsidiaries, named 3G Licensing.

The prayers for relief do not include injunctive relief for the time being. It's just about money.

These are the nine patents-in-suit, all of which were declared essential to certain cellular standards (3G and 4G):

  • U.S. Patent No. 7,979,070 on "mobile equipment for sending an attach request to a network" (a former Nokia patent that was declared essential to the 4G/LTE standard)

  • U.S. Patent No. 8,600,383 on an "apparatus and method for making measurements in mobile telecommunications system user equipment" (a former BlackBerry patent declared essential to the 4G/LTE standard)

  • U.S. Patent No. 8,189,611 on a "system and method for resolving contention among applications requiring data connections between a mobile communications device and a wireless network" (another former BlackBerry patent declared essential to the 4G/LTE standard)

  • U.S. Patent No. 7,215,653 on "controlling data transmission rate on the reverse link for each mobile station in a dedicated manner" (a former LG patent declared essential to the 3G standard)

  • U.S. Patent No. 7,319,718 on a "CQI coding method for HS-DPCCH" (another former LG patent declared essential to the 3G standard)

  • U.S. Patent No. 7,661,625 on a "method of scheduling an uplink packet transmission channel in a mobile communication system" (a third former LG patent declared essential to 3G)

  • U.S. Patent No. 7,580,388 on a "method and apparatus for providing enhanced messages on common control channel in wireless communication system" (a fourth former LG patent declared essential to 3G)

  • U.S. Patent No. 7,869,396 on a "data transmission method and data re-transmission method" (a former LG patent declared essential to 4G/LTE and temporarily assigned to Thomson)

  • U.S. Patent No. 8,971,279 on a "method and apparatus for indicating deactivation of semi-persistent scheduling" (a patent filed by Thomson Licensing claiming priority to a patent originally filed by LG; declared essential to 4G/LTE)

So this is a typical "privateering" case, with operating companies--especially a couple whose core business (handsets) failed miserably--having transferred patents to a patent troll for the purpose of extracting royalties from makers of innovative products.

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Munich court to hand down key Nokia v. Daimler patent decision on Wednesday (5/20)

This morning, a spokesman for the Munich I Regional Court ("Landgericht München I") confirmed to me that the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) is still on schedule to announce a decision in a Nokia v. Daimler standard-essential patent (SEP infringement case on Wednesday (May 20) at 10 AM local time. The trial was held in early February, and the original ruling date was postponed by about six weeks.

"Decision" doesn't necessarily mean final judgment; the case could also be stayed or the proceedings might be reopened. So what are the most plausible possibilities?

  • A finding of non-essentiality (Nokia's infringement theory is based on the specifications of the UMTS standard) appears very unlikely. Should it happen nevertheless, the complaint would be rejected. Nokia would likely appeal.

  • At trial time it looked pretty much like the court was going to find in Nokia's favor on all counts and order an injunction against Daimler. Most observers still expect that to happen, and I'll prepare a blog post for that event (because there's a sufficient probability to warrant such preparation on my side), but I'm a bit of an outlier because I'm far from convinced. The passage of time might have worked against Nokia. The court might have had second thoughts in the meantime, given that Nokia's case is deficient in more than one way.

  • The most obvious weakness of Nokia's case is the patent-in-suit itself. It's not realistically going to be deemed valid as granted once the Federal Patent Court of Germany looks at it. In most cases in this industry, settlements occur before the Federal Patent Court gets to decide, but this case is more likely than the average case to reach that point.

    Statistically, the Munich court stays only about 10% of its cases, while 80% of all patents-in-suit turn out invalid. That's a huge discrepancy. Injustice of the worst kind. But every once in a while, even the Munich court stays a case, and this patent--I repeat--is a particularly weak one.

  • The court could also identify a need for further FRAND analysis. In this regard I'd like to refer you to a previous post on this case, entitled How many times can a patent holder violate EU antitrust law in a single litigation? (Nokia v. Daimler)

Getting back to the scenario of an injunction, however unjustified it would be, it wouldn't be a general sales ban: Daimler would still be allowed to sell cars in Germany that come with telematics control units (TCUs) from Harman (a Samsung subsidiary). Nevertheless, Daimler argues that the financial impact of not being allowed to sell cars with non-Harman TCUs would amount to 4.5 billion euros.

What many people don't know is that it's easier in Germany to obtain a patent injunction than to persuade a court to impose contempt sanctions. The standard of proof would be higher: at the contempt stage, Nokia would no longer be able to base its infringement theory on a comparison between the patent claims and the specification of the standard.

An injunction could be lifted before it has any commercial impact whatsoever, depending on what the appeals court finds. Given the fundamental flaws of Nokia's case, and the possibility of one or more antitrust authorities taking action in the meantime, that's fairly possible.

But an injunction could set off a massive news cycle in Germany. Theoretically, that could benefit the camp pushing for patent injunction reform, but as I explained before, the pro-reform movement in Germany is so ridiculously incompetent (and the worst part is they don't even know how bad they are) that even the most spectacular German patent injunction ever (or at least in a long time) probably wouldn't change the political dynamics. But one never knows.

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Thursday, April 30, 2020

Nokia's patent assertion tactics conflict with von der Leyen's environmental and Vestager's industrial policy goals

Daimler brought its EU antitrust complaint against Nokia in 2018, and the Euporean Commission is still dragging its feet while another court decision (Nokia v. Daimler, scheduled for May 20) is around the corner. Just for a few seconds, let's imagine an alternative universe in which the target of the complaints would have been a cellular SEP holder like Qualcomm, InterDigital, Huawei, or LG--as opposed to Nokia. Those organizations, especially the American ones, might already have been fined by now, or at a minimum they'd have received a strong Statement of Objections (SO). But Nokia and, by extension, Ericsson benefit from such an obvious and indefensible kind of protectionism that this situation threatens to wreak havoc to the EU Commission's credibility as a competition watchdog on the global stage.

So Daimler's and its suppliers' tough luck here is that shrinking Nordic companies are above EU law in the eyes of some people in Brussels--according to what I've heard from a variety of sources, Nokia can also count on French commissioner Thierry Breton, who has a telecoms background that appears to be infinitely more important to him and his cabinet than the importance of the automotive industry to Europe as a whole and his native France. As an EU commissioner, he's supposed to focus on the European interest, which he is apparently not doing; and as a French appointee, there is a natural expectation in his country that he would keep French industrial interests in mind as opposed to personal preferences or loyalty conflicts.

But instead of regretting Daimler's and its suppliers' (politically, not legally) wrong choice by complaining about Nokia first, the Commission should also look at it from another angle: Nokia self-servingly seeks to leverage its increasingly-devalued patent portfolio without giving a damn about the EU's economic interests and the Commission's overarching policy goals.

  1. There's a simple reason for which Nokia decided to sue Daimler prior to any other automaker on this planet and previously bullied Volkswagen and BMW--two rather cowardly organizations--into Avanci license agreements of limited scope. That reason is Germany's unbalanced patent litigation system. While it's obvious that a patent holder like Nokia would firstly go after premium car makers in order to establish high royalty amounts, those three German corporations aren't the only ones operating in that segment. Nokia could have sued some non-European brands first, but preferred to go to Germany because an injunction in that country would give them maximum leverage over a company with major manufacturing operations and logistics centers in that country.

    As I mentioned in previous posts, Germany won't make more than a negligible modification to its patent injunction regime. Nokia is lobbying very actively for the status quo. In fact, I personally participated in a WebEx conference in which Nokia's chief in-house litigator, Dr. Clemens Heusch, lobbied the German parliament to ensure patents would remain superstrong in Germany.

    By milking and suing European companies that are falling behind in terms of digital technologies and need resources to confront some fundamental challenges, Nokia makes it harder for EU Commission EVP Magrethe Vestager to achieve her vision of "A Europe Fit for the Digital Age."

  2. As automotive supplier Continental publicly stated in March, Nokia's refusal to provide the prereqisite degree of legal and financial certainty to everyone in the supply chain has already prevented innovation from happening--digital innovation that in some cases has direct environmental impact.

    By impeding digital and environmentally-friendly innovation on the part of automotive suppliers like Continental, Nokia's patent licensing tactics run counter to both Commission President Ursula von der Leyen's "EU Green Deal" and Commission EVP Magrethe Vestager's "A Europe Fit for the Digital Age" policies.

  3. As I reported yesterday, the Avanci patent pool/platform, whose primary purpose it is to advance Nokia's (and Ericsson's, Qualcomm's etc.) agenda of refusing to license component makers, has singled out Tesla as its next target for its patent attacks. It doesn't even matter whether those parties explicitly coordinated their lawsuits or simply act uniformly because of a shared strategic interest. Either way, they've decided to gang up on Tesla like a clan of hyenas.

    While Nokia itself isn't suing Tesla yet, Nokia patents are being asserted against Tesla by Sisvel as well as Conversant, with the latter being a Nokia front no matter how much Nokia disowns its privateer. And even Nokia itself apears to have bullied Tesla before based on what I hear (and what I conclude from what was discussed in the closed-door part of a Nokia v. Daimler trial in Munich).

    Many patent holders (this also applies to owners of non-standard-essential patents) consider Tesla a perfect target: they believe it may be somewhat soft because it's a small organization regardless of its market capitalization being about as high as the aggregate of the caps of VW, BMW, and Daimler; and they know that Tesla is a company everyone's watching closely in the industry.

    By choosing Tesla its next strategic target after those German car makers, Nokia--directly and indirectly--attacks the most innovative company in the automotive sector (which even invests big-time in Europe) instead of letting Tesla focus on what it's best at: eliminating automotive emissions and keeping up the pressure on the car industry at large to abandon combustion engines.

    Targeting Tesla after Daimler creates another conflict between Nokia's opportunistic patent monetization tactics and Commission President von der Leyen's EU Green Deal policy agenda.

Nokia is being very inconsiderate, so the Commission should take off its velvet gloves, focus on the actual issues, and just disregard the countries in which the different parties are based. Europe doesn't even own 15% of all 5G patents, so from a strategic point of view, patent abuse by non-EU companies poses a several times greater threat than whatever Nokia and Ericsson are doing.

That said, it would of course be desirable for Europe to slow down Nokia's and Ericsson's demise, or to enable them to grow again. But there's a right way and a wrong way to do it. Condoning SEP abuse is a bad deal for Europe on the bottom line.

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Wednesday, April 29, 2020

Avanci conflict with Tesla escalates as Nokia-fed patent troll Conversant sues Tesla in Texas and Germany

Avanci, which usually refers to itself as a licensing "platform" though its lawyers also described it as a "pool" in at least one U.S. court filing, offers a license to cellular SEPs held by a group whose key members are notorious standard-essential patent (SEP) abusers such as Nokia and Ericsson as well as some trolls they fed with patents. Various additional patents have been contributed by numerous organizations, such as Deutsche Telekom, that elected to come in for convenience and lack the strategic sophistication and foresight to realize the Avanci approach (of refusing to extend licenses to component makers) runs counter to their interests.

One Avanci member, Foxconn-owned Sharp, sued Tesla in Japan last month, requesting the Tokyo District Court to impose an import ban. Sisvel, a patent troll and Avanci member, sued Tesla in the District of Delaware in December over former Nokia patents. Yet another Avanci member, Nokia, may have an interim agreement with Tesla in place as an unnamed American car maker "X" was referenced in the public part of a Nokia v. Daimler trial in Munich in February; should Tesla have been that mysterious U.S. company, then they actually provided a fair amount of information that Daimler presented to the Munich court while the courtroom was sealed. And now we're witnessing an all-out Avanci v. Tesla patent litigation campaign as Conversant Wireless Licensing is asserting various Nokia patents against Tesla in two complaints filed in the Western District of Texas last week (this post continues below the two documents):

20-04-24 TXWD20cv323 Conver... by Florian Mueller on Scribd

20-04-24 TXWD20cv324 Conver... by Florian Mueller on Scribd

Conversant previously filed some German SEP lawsuits against Tesla as well:

"After no further communication from Tesla, on or about February 26, 2020, Conversant filed patent infringement complaints against Tesla, Inc. and its German subsidiary Tesla Germany GmbH before the Manheim [sic] Regional Court in Germany."

The correct spelling of the German city name is, of course, Mannheim. There are a few towns named "Manheim" in the U.S., but anyone who's ever driven from O'Hare Airport to downtown Chicago has seen "Mannheim Road".

I'm trying to find out how many cases Conversant brought in Mannheim, and what the patents-in-suit are. I just emailed the Mannheim Regional Court's spokesman before writing this post. At this stage the Mannheim court can't provide case and patent numbers, but I hope this will change in the months ahead.

The combination of Sharp and Conversant suing Tesla in different jurisdictions is the usual bulling with which Avanci is trying to coerce Daimler into a SEP license agreement on supra-FRAND terms while the likes of Nokia and its trolls refuse to license automotive suppliers, an issue that I hope Tesla will raise as well. Tesla is far more of a digital company than Daimler and therefore may be vertically more integrated with respect to cellular data communications, so it wouldn't surprise me should Tesla not buy telematics control units (TCUs) from the likes of Continental, but even Tesla won't make its own baseband chips. In contravention of its FRAND licensing obligations, Nokia licenses only end-product makers.

With respect to component-level licensing, a new academic paper was published yesterday in reply to a write-up by Nokia's outside counsel (which also mentioned this blog because of a recent post).

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Tuesday, April 28, 2020

The most lucrative patent shakedown strategy against German corporations: sue their CEOs

According to conventional wisdom, the way to extract patent royalties from German corporations is the pursuit of injunctive relief. While a reform process is underway, the corridor for any "reform" (a misnomer, thus in quotes) is so very narrow that it won't have any impact on negotiation dynamics. The pro-reform camp missed the opportunity: instead of acting like piranhas that smell blood in the water and then kill their prey, they kept making the kinds of modest political demands (only ultra-rare exceptions for extreme cases of egregiously abusive conduct) with which they got the reform process started, and they continued to limit themselves by operating only within the framework of associations (a recipe for failure). Now it's too late to move into a higher gear, and the German patent injunction regime is here to stay.

But most patent assertion entities have failed to identify and seize what would likely result in even higher royalty payments by German (and to some extent other European) companies, even though proof of concept was delivered more than six years ago. Admittedly, I didn't know either, though I could have found out as early as in the second half of 2013, but (in my defense) that's because I focus primarily on disputes between large operating companies rather than on patent troll cases.

In the summer of 2013, Reuters reported: "IPCom lands cash bonanza from D[eutsche] Telekom settlement." The deal settled all 20 cases between Fortress-funded IPCom (which was asserting former Bosch patents) and Deutsche Telekom. The financial terms weren't disclosed but two sources told Reuters that IPCom was going to receive "a low-to-medium triple-digit million euro" amount. (This blog, too, reported on the settlement.)

I remember overhearing a conversation between lawyers in Mannheim (just before some other trial) who defended other parties, such as HTC, against IPCom. Nokia and HTC defended themselves against IPCom for many years, and numerous parties intervened in various IPCom cases, particularly the cases against carriers. So there were a lot of patent litigators in Germany who had knowledge of where those cases stood, and they weren't impressed with the headway IPCom had made at the given time. Against that backdrop, they were all puzzled as to why Deutsche Telekom would, without an injunction looming large, cough up a rumored amount of hundreds of millions of euros.

The answer: a "CEO suit" strategy played out perfectly for the patent assertion entity. One might also call it the "sleepless nights" strategy.

Deutsche Telekom's 2012 Annual Report (PDF, in German) contained the following passage on patent-related risks (page 163; click on the image to enlarge; this post continues below the image):

The passage I underlined in that screenshot states that IPCom sued not only Deutsche Telekom but also "individual members of its executive board" (in the U.S., one would colloquially call them "C-level execs").

One of those individual defendants was then-CEO René Obermann, who served from late 2006 until the end of 2013. So the settlement fell into place a few months before Mr. Obermann would no longer have been covered by Deutsche Telekom's D&O (directors & officers liability insurance). If IPCom had prevailed after he left Deutsche Telekom, he'd have ended up with a potentially ruinous financial liability. He'd have gone from being a multi-millionaire to personal bankruptcy in an instant.

When the end of his term was approaching, he increasingly got nervous about the fact that the dispute with IPCom hadn't been settled yet. IPCom capitalized on this factor, big-time.

Most likely, this was by far and away the biggest license deal IPCom ever struck, despite the fact that there was no realistic chance that IPCom would have obtained and enforced an injunction anytime soon.

Under German patent law, members of the executive board are personally liable, a fact that patent holders can exploit. However, it works only against executives who live in Germany or at least some other EU member state. Otherwise, cross-border enforcement is unlikely to succeed. Hypothetically speaking, enforcement against a U.S.-based CEO would probably work only if he flew to Germany on a private jet that could be confiscated. The managing directors of local subsidiaries can be sued, but only if their entities actually sell products--not if they are merely marketing agencies within a global group structure.

Germany- and EU-based C-level executives can also be scared into settlements by threatening with criminal action. Willful patent infringements are a punishable crime in Germany (and the pseudo-reform that is in the making won't change a thing about that either), though the hurdle is reasonably high.

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Sunday, April 26, 2020

German patent reform process is already over before it's formally begun: automatic injunctions are here to stay

In the most formalistic sense, the German patent reform process will only begin when the federal government (with the Federal Ministry of Justice having the lead on this subject) officially relays its legislative proposal to the country's two legislative bodies, the Bundesrat (Federal Council), which could theoretically veto it (though its veto would be easily overruled) and the Bundestag (Federal Parliament). Despite the corona crisis, that's still likely to happen before the summer hiatus.

But in political terms, it's game over for the pro-reform camp. (I was going to say "pro-reform forces," but they're far too weak to justify that label.)

Merkel's party, the nominally conservative Christian Democratic Union (CDU), has already decided to support in the parliamentary process what the ministry outlined back in January (led by the junior coalition partner, the center-left Social Democratic Party). The ministry made it clear that it merely sought to clarify the law as it stands, and leading German patent litigators have confirmed this blog's analysis that it won't change anything, or only have minimal impact at best (which took some of the pro-reform people weeks or months to understand, and some are so analytically challenged that they haven't even grasped it by now and probably never will). The CDU definitely wants to preserve Germany's system of (near-)automatic patent injunctions across all industries regardless of complaints by automotive and other companies over a dysbalance. Only extreme cases that legally qualify as abuse should give rise to further analysis; contrary to Article 3 of the EU's Intellectual Property Rights Enforcement Directive, the CDU opposes a mandatory proportionality analysis.

I can't provide verbatim quotes here because of a request to treat certain statements confidential, though a WebEx conference call with two members of parliament, three parliamentary advisers, and about two dozen industry representatives on the line is a semi-public event on the bottom line, as the organizers well recognized. (Their insistence on a somewhat confidential treatment is undemocratic at best, unconstitutional at worst.)

The "debate" is now about minor editorial changes that won't impact the outcome of a significant number of cases and, therefore, won't put defendants in a better position when negotiating settlements.

The formal vote will probably be held in the fourth quarter of this year, or maybe in early 2021. There will be new elections in the fall of 2021, so if the fallout from the corona crisis requires the executive and legislative branches of government's nearly-undivided attention for several more quarters, discontinuity might derail the process, which would be preferable over the kind of decision that would be made during this term without the slightest doubt.

It wouldn't have been impossible to convince the Federal Parliament of Germany of the need for a paradigm shift away from the "Property Rule" (which the CDU still seeks to uphold). I was one of only two activists to achieve a unanimous resolution (against software patents) by the same legislative body in 2005, and in 2013 a similar resolution was adopted thanks to the late Jimmy Schulz. But the people advocating proportionality are, by and large, political novices who lack almost everything it takes to overcome the mendacious but effective resistance by the likes of Siemens, Nokia, and Ericsson. Germany's pharmaceutical and chemical industries also seek to preserve the status quo, but with a more intelligent and differentiated approach it would have been possible to address their (legitimate!) concerns over collateral damage from a statute favoring the interests of makers of highly multifunctional products.

The performance of those pro-reform advocates is more pathetic than anything I've ever seen in a comparable context (apart from the fact that they got the process started at all, which is remarkable but will ultimately be pointless). They have no one to blame but themselves. I know that some of them will try to spin-doctor their defeat into a victory, but you can all rest assured that this blog is going to tell it like it is.

The influence of patent trolls on both the Federal Ministry of Justice and the Federal Ministry of Econmics is shocking. Sisvel was the only company invited to a roundtable by the former (other companies were only allowed to participate to the extent their employees represented industry bodies), and Fraunhofer advises the latter. If the pro-reform camp wasn't as uncapable as it is, it would have been vocal about this issue, but weaklings don't win ball games. (A number of them are so unbelievably clueless and incompetent that the verb "to orchestrate" isn't even part of their political vocabulary; they play the game at a lower level than high school students campaigning for a local cause.)

So the problem will persist, and many will suffer. A solution is not going to come during this legislative term short of some German courts handing down spectacular patent injunctions this year that would lead to second thoughts among Berlin decision-makers. As I said before, the best scenario of those that aren't entirely unrealistic would be for the process to be derailed by corona like so many other initiatives, but most likely this will just go through as a low-priority item that will be considered uncontroversial because those who disagree don't have what it takes to make their presence felt and their positions clear. In the event of adoption in 2020 or 2021, those who want meaningful reform will have to go back to the executive and legislative branches of government next term and push for an upgrade. Additionally or alternatively, some might opt to challenge Germany's (near-)automatic patent injunctions under EU law. Just like Germany's disastrous Orange-Book-Standard approach to standard-essential patent (SEP) injunctions never got fixed within Germany until the European Commission and, especially, the Court of Justice of the EU set the record straight, the wider problem of automatic patent injunctions might also be solved through litigation--not legislation, and much less through national case law--somewhere further down the road.

Where things stand now, any pro-reform advocacy is futile. No one can help a bunch of misguided companies that obsequiously thank their government for backing mostly foreign patent trolls and failed businesses increasingly reliant upon a troll-like business model. I had actually started to prepare an initative but decided to fold it before it got off the ground because it's pointless under the circumstances, and I have more exciting and promising things to do, part of which you'll read about soon. That said, I will continue to comment on the process, but this blog was never intended to influence German politics--as its language demonstrates.

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Thursday, April 23, 2020

Europe's top three digital industry challenges: automotive; automotive; and don't forget, automotive

European Commission EVP Margrethe Vestager's mission statement is found on her homepage: "A Europe Fit for the Digital Age" That, of course, is easier said than done, given that the digital economies of both the United States and East Asia are far, far ahead of the European Union. There's no European Google, Apple, Facebook, Twitter, Amazon, eBay, Uber, AirBnB, whatever. No European cloud. No European smartphones (practically speaking). And U.S. tech giants employ far more top-notch researchers than all of the world's universities combined, which is just one of various factors contributing to the brain drain affecting Europe (and for which Africa--let alone sub-Saharan Africa--is never going to provide an adequate replacement).

"Incredible Shrinking Europe" (as the WSJ called it) has a rich history and a bleak future. What Mrs. Vestager faces is not merely a Herculean task. Putting Europe on an equal footing with America and East Asia is mission (absolutely) impossible. At the end of her term, Europe will have lost more ground than during the previous decade, no matter how hard she tries. But the EU can at least try to slow down its decline in an increasingly digital economy, and maybe avoid or delay the point at which a future European Commission president--if the EU still exists at that point--will have to fly to Washington DC and Beijing to beg for development aid.

That may sound like an exaggeration, but it's basically where continental Europe is headed in economic terms. In a matter of a few decades, the economic discrepancies between the more advanced parts of the world and Europe will be comparable to today's differences between Europe and, say, Latin America. One of various early indicators is the severe underperformance of continental European students in math (as evidenced by TIMSS), which keeps deteriorating.

The EU is wasting money on such a non-starter as its European Cloud Initiative. I've heard enough about it from industry experts to have no doubt that it's a fool's errand. So let's talk about what the real priority should be.

By far and away the biggest threat Europe faces in connection with an increasingly digital economy is the demise of its automotive industry: a doomsday scenario in which European car makers will suffer the fate of the handset divisions of Siemens, Bosch, Nokia, Ericsson, Philips, and Alcatel--not necessarily in the sense of non-European companies acquiring or licensing their brands, but the likes of Google (as the recent Android Auto deal with BMW already shows) will own the digital services, which is where the high returns, network effects, and most of customers' loyalty (even a lock-in at some point) will be, while some European companies will go out of business and others will just be making the low-margin parts that don't provide much differentiation. There's plenty of portents that this might actually happen. Not during Mrs. Vestager's term, but not to so long thereafter that she might not end up being considered one of the EU leaders who missed the last chance to avert a catastrophe comparable to the dinosaur extinction.

In fields like digital platforms, the EU has no chance to make headway, which is bad enough. But when it comes to automotive, it stands everything--its "automojo" if you will--to lose. Last month I pointed to some numbers that show how incredibly important the automotive sector is to the European economy (and, by extension, society). But that industry is being affected by digitization at a breathtaking pace and, as a result, is basically getting absorbed by the informations and communications technology (ICT) sector.

The European Commission would have to be asleep at the steering wheel not to make the automotive industry its #1 priority with respect to digital-industry policies. Cars are smartphones on wheels, software is increasingly in the driver's seat, and what most politicians probably don't even know is that the whole business model is going to change. By that I don't primarily mean ride-sharing. Whether future cars will be owned by one household or called on demand, the most lucrative revenue streams will be digital. Today, money is made primarily by selling, maintaining, and repairing the thing. Services (such as navigation) play a minor role. It will be just the opposite in about ten years' time.

Automobiles are the most important category of (increasingly-)digital products in which Europe today has significant market share. But those companies are all on the wrong track. Here's one data point that an analyst recently highlighted to me:

Tesla's market capitalization of US$135B (as of closing on Wednesday) is roughly the same as the aggregate of the market caps of Volkswagen (€64 billion), BMW (€32 billion), and Daimler (€30 billion). Tesla will turn 17 this summer while those three large German automakers are, on average, about 100 years old.

The stock market isn't always right, and it often changes mind. One or more of those traditional automotive companies may at some point stage an Apple- or Microsoft-like comeback. But at this point, and based on the profile of the Old Boys' Network people running those organizations now--there's no reason to be confident it will happen.

The market cap comparison I just drew is not merely about propulsion technologies. To just the same extent, it has to do with the fact that Tesla is truly a digital company, and Tesla will know how to derive digital service revenues from its customer base, while those European companies are still struggling to deliver a great digital experience.

As CEO of Daimler, "Dr. Z" tried to modernize the Mercedes company. He should have started with Daimler's user interfaces, but that was probably a world too far from his area of expertise. He aspired to be unconventional, appearing in sneakers at a Green Party convention, but his 19th-century moustache was a visual symbol of him not being a digital leader. The EU can't force those automotive companies to appoint digital industry executives as their CEOs now (or people with a mixed background, though that may be hard to come by). But at least the EU could and should define the automotive industry as part of the digital sector, and ensure that it won't fall too far behind. Mrs. Vestager chairs the working group of EU commissioners on digital industry affairs ("Commissioners' Group on a Europe Fit for the Digital Age").

This here is separate from how the antitrust laws should be enforced. The focus of this post is purely on industrial policy, regardless of poor structural choices made by the EU when the current Commission was put together.

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Tuesday, April 21, 2020

With new restrictions on standard-essential patent (SEP) injunctions against connected cars and other IoT products, Japan may leave Old Europe behind

Through IAM I became aware of a Nikkei.com article on a Japanese policy initiative regarding standard-essential patent (SEP) injunctions in the Internet of Things (IoT) space (including, inter alia, connected cars). I've tapped some other sources to find out about the status of Japanese policy-making in this area.

At the meta level, two differences between the situation in Japan and the one in the Western world are striking:

  1. The new initiative to further restrict access to SEP injunctions comes from the Japan Patent Office (JPO). By contrast, the people working on policy matters at the European Patent Office (under whatever president) and the United States Patent & Trademark Office under Director (and long-time patent trolls' lawyer) Andrei Iancu are pro-patent-holder extremists whose only policy idea is to have more patents, stronger patents, and ever more leverage for owners of patents that for the most part shouldn't have been granted in the first place in light of prior art.

  2. Even other policy-making institutions, such as the leadership of the IP subcommittees of U.S. Congress, the European Commission, or the German Federal Ministry of Justice have yet to acknowledge for the first time in history that it may be smart innovation policy to weaken patent rights. In Japan, an undoubtedly very innovative country, they're ahead of the pack. Especially in Europe, one-dimensional, backwards-oriented thinking is prevalent.

The Nikki article explains in its first paragraph that the JPO is working on a legislative initiative to deny SEP holders access to injunctive relief in cases in which their patents make only a minor contribution to IoT-related devices, which (as the Nikkei article clarifies) also includes connected cars and medical devices. It's hard to imagine a SEP that would not make only a minor contribution to an IoT product. Most SEPs are extremely underwhelming as they cover simple protocols of the "Hello, how are you? -- Thanks, I'm fine, how about you?" kind as opposed to rocket science. Even the few SEPs that are better than that merely constitute parts of standards with respect to which thousands of patents have been declared essential, and for every SEP there would have been numerous--often virtually infinite--numbers of viable alternatives at the time of standardization.

Japan wants its high-tech sector to be among the world leaders in IoT. You hear the same elsewhere, especially in the European Union, where one generation of politicians after the other states the ambition to make the economy more innovative while that continent is falling behind the U.S. and East Asia at a worrying pace. By contrast, Japanese policy makers appear to be prepared to not only talk the talk, but to walk the walk. According to Nikkei, the JPO's IoT-related proposal is envisioned to pass into law in 2021.

A JPO committee has outlined several cornerstones of a 2021 patent reform bill. Patent injunction reform has been discussed internally many times.

Not only is the JPO working on patent injunction reform but Japan's Ministry of Industry and Economy (METI) is drafting recommendations regarding SEP royalty rates.

I know that several Japanese car makers and automotive suppliers are watching with great interest what will come of Daimler's and four of its European suppliers' complaints against Nokia. At this point I'm not aware of official antitrust complaints lodged by Japan's automotive industry with the Japan Fair Trade Commission (JFTC), but anything's possible.

The draft patent reform bill Germany's Federal Ministry of Justice published earlier this year is fundamentally flawed and would likely have zero impact on SEP injunctions according to some leading litigators. While it's possible that Germany will enact a revised patent law slightly ahead of Japan, what actually matters is the impact any reform will have on litigation and, by extension, on licensing discussions that are informed by what would happen in hypothetical litigation. In that regard, Japan's approach looks more visionary for the time being.

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Friday, April 17, 2020

Rumors of Nokia facing hostile takeover bid: skepticism is warranted and competition enforcement can't wait

Nokia's stock price went up yesterday after a TMT Finance report said the company had hired Citi to fend off a hostile takeover bid from an unnamed U.S. private equity fund. The rumored bid could relate to the company as a whole or to specific assets. Nokia declined to comment.

Let's take a quick look at two questions:

I haven't formed an opinion on the reliability of TMT Finance. That website may indeed have scooped all other media on this one.

Richard Kramer of Arete Research, a 20-year-old and highly specialized, independent analyst firm headquartered in London, wrote in a note to his firm's clients that "Nokia is sure to deflect this unwanted attention on multiple grounds." Mr. Kramer then points to Nokia's ownership structure: "Its largest shareholders are local Finnish pensions funds, who are unlikely to just want to cash in." (That's also my impression as I've had conversations with Nokia shareholders on various occasions, and they were all Finnish pension funds.) Nokia shareholders may not be happy with the fact that the company's shares are "down a third on a [12-month] view," but in Mr. Kramer's opinion "this reflects poor execution that [private equity] is not going to resolve quickly, and a messy, protracted effort to buy out an €18bn market cap company would be highly unwelcome with all the other issues a new CEO faces, so we see this as much more of a negative distraction than a signal of underlying value."

That makes sense to me, and I can only add something when it's clearer what the proposed deal structure would look like.

On the antitrust side, this rumor is no reason to delay anything. Much to the contrary, there is a risk of a buyout like this resulting in even more aggressive enforcement. For an example, Nokia's management might want to coerce a number of companies into license deals just to demonstrate to shareholders that this is a stock worth holding on to. If the deal happened, the new owners might ratchet up patent enforcement, or they might sell some or all of Nokia's patents to trolls (a practice called privateering, which Nokia has already engaged in to a large extent).

Cellular SEP licensing is of great concern not only to smartphone and car makers, but also to the wider Internet of Things (IoT) industry. Many (European) companies might face outsized royalty demands, and with most of them being rather small, they actually depend on their suppliers (such as chipmakers) having secured the relevant licenses.

Honest and consistent competition enforcement is always the best choice. Once an antitrust authority allows itself to be swayed by what's going on in the world of corporate finance, there's an increased risk of making bad decisions. There's always going to be some kind of volatility, and buyout offers are one typical imponderability. But what the EU should focus on is what its highest court decided in Huawei v. ZTE (in terms of everyone's access to a FRAND license), and take a principled stance. Next time, the SEP holder in question may not be European: European companies hold fewer than one in six 5G declared-essential patents.

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Tuesday, April 14, 2020

Make Trolls Great Again: Antitrust Assistant Attorney General Makan Delrahim serves Patent Trolls, not President Trump

As the most vocal Trump supporter among intellectual property bloggers, I want Four More Years for #45, but should "Quid pro quo Joe" win, I would take some comfort in the fact that Antitrust AAG Makan "Macomm" Delrahim would have to return to private practice. His shameless and increasingly distasteful pro-patent-troll lobbying is a disgrace for the entire Donald J. Trump Administration. Instead of supporting America's innovation economy and protecting American consumers (all of which is even more important in the face of the coronavirus crisis), he's advancing an agenda that runs counter to the President's focus on creating jobs. Patent trolls are all about rent-seeking for a few shrewd businessmen--Judge Posner likened them to "highwaymen"--and don't create or sustain jobs; the real economy--with Apple and Intel being two particularly good examples--needs to be protected against patent abuse, but the United States now has an "antitrust chief" who couldn't care less about innovation, competition, jobs, and consumer welfare. He's a lobbyist for patent trolls--not because he's got any connection to trolls, but because his former and presumably future client, Qualcomm, shares many strategic interests with trolls, which is why Qualcomm is a member of pro-troll lobbying groups whose membership consists mostly of trolls.

Last month, probably for the first time in U.S. history, the federal government threw its weight behind a dubious foreign organization against two of America's most innovative companies. The DOJ's antitrust division filed a Statement of Interest (i.e., an amicus curiae brief in the name of "the United States") supporting Fortress and its various patent trolls, such as Uniloc, against Apple and Intel. The Uniloc group (just one part of foreign-owned Fortress's holdings) has brought about 600 (!) lawsuits, and courts have exposed some its lies. Just two examples--the first one is about Uniloc's connection to the Eastern District of Texas, which they made up in part just to keep a lawsuit there:

"Mr. Burdick, Uniloc's only party witness residing within the Eastern District of Texas, does not spend the majority of his time in the Plano office. [...] Mr. Burdick spends equally as much time in Plano, as he does in Boise, Idaho and in southern California. [...] In addition, Mr. Etchegoyen [the CEO of Uniloc Luxembourg] spends about twenty percent of his time in either Newport Beach or Irvine, California and owns a residence in Newport Beach, which he uses when he 'is doing business in Orange County.' [...] Both Mr. Burdick and Mr. Etchegoyen have held around one hundred 'top-level strategy meetings' in southern California, for Uniloc business purposes. [...] Mr. Etchegoyen separately travels to southern California every month to meet with Mr. Turner, Uniloc Luxembourg S.A.'s CFO. [...] All of these facts fly in the face of Uniloc's prior representations: that Uniloc had only one full-time employee, Tanya Kiatkulpiboone, working at its office in Irvine, California as of April 2017 [...]; that Mr. Etchegoyen has lived in Hawaii since well before the filing date of the Complaint and does not maintain a residence in California [...]; and that Mr. Burdick does not work in California [...] ; and that Apple 'attempts to exaggerate Uniloc's ties to California'" (emphasis added)

Source: Memorandum Order and Opinion at 16-17, Uniloc USA, Inc. v. Apple Inc., No. 2:17-cv-00258 (E.D. Tex. Dec. 22, 2017)

A judge also suspected that Uniloc creates shell entities only for the purpose of letting them go bankrupt in case a prevailing defendant obtains an award of legal fees:

"The Court suspects that Uniloc's manipulations in allocating rights to the patents-in-suit to various Uniloc (possibly) shell entities is perhaps designed to insulate Uniloc Luxembourg from any award of sanctions in the event Uniloc loses this litigation (or some substantial part thereof)." (emphasis added)

Source: Uniloc 2017 LLC v. Google LLC, No. 2:18-cv-00553 (E.D. Tex. Jul. 1, 2019), Dkt. 28 Exhibit V

When a company--particularly a foreign organization--engages in such shady practices, "the United States" (federal government) should not intervene--much less at the district court level--to support that kind of party. But "Macomm" Delrahim is out of control, and Attorney General Barr may not even be aware of what's going on (and, especially, going wrong).

Apple and Intel have replied to the DOJ's brief, but not on the basis of the issues I just raised. The purpose of Apple and Intel's submission is to point out some major inconsistencies

  • between positions taken by the DOJ in the past in similar contexts and the pro-foreign-troll anti-American-innovators brief filed last month;

  • between the DOJ's current merger guidelines and the position taken in the pro-foreign-troll anti-American-innovators statement; and

  • even between two sections of that pro-foreign-troll anti-American-innovators submission (which is just absurd and shows that the DOJ's Antitrust Division is now only seeking to support certain types of parties as opposed to defending overarching principles).

On the first part of Apple and Intel's responsive filing, a footnote provides examples of AAG Delrahim's "expanded amicus program through which the Department increasingly files amicus briefs":

  • Motion for Leave to File Statement of Interest, Continental Automotive Systems, Inc. v. Avanci, LLC, No. 3:19-CV-02933-M (N.D. Tex. Feb. 27, 2020);

  • Statement of Interest of the United States; Lenovo (United States) Inc. v. IPCOM GMBH & CO., KG, No. 5:19-CV-01389-EJD (N.D. Cal. Oct. 25, 2019); and

  • Notice of Intent to File a Statement of Interest of the United States of America, U-Blox AG v. Interdigital, Inc., No. 3:19-CV-0001-CAB (BLM) (S.D. Cal. Jan. 11, 2019.

The Apple-Intel brief doesn't even mention the DOJ's interventions on Qualcomm's behalf, but Qualcomm is not a troll. In the three cases listed above, the DOJ supported trolls (Avanci is a pool/platform company, some of whose members are trolls).

Whatever Judge Edward Chen ultimately decides, Apple and Intel's reply may have helped to mitigate the impact of the DOJ's Statement of Interest. But Mr. Delrahim will likely continue to make such disgraceful and distateful filings with courts all across the United States, unless and until he gets replaced.

Finally, here's the Apple-Intel brief:

20-04-13 Apple Intel Respon... by Florian Mueller on Scribd

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Wednesday, April 8, 2020

Mannheim Regional Court stays Nokia v. Daimler case over likely invalid patent -- and two Munich trials have been vacated due to corona

Most of the time, Nokia signs license agreements without having to sue, and when they sue, they typically manage to settle quickly. That's why the Finnish company's standard-essential patent (SEP) portfolio is largely untested. The former handset maker that still sells cellular network infrastructure (base stations) touts the size of the portfolio, but has yet to prevail on a single SEP in court. Maybe they won a SEP case a long time ago, but I can't remember such an outcome during the ten-year history of this blog.

Three SEP assertions by Nokia have been adjudicated in Germany so far. There's this saying that "two out of three ain't bad," but Nokia's score for the time being is ZERO out of three, and that is arguably not "bad" but more accurately described as a disastrous score.

After losing a case against ViewSonic earlier this decade and its first case against Daimler two months ago, Nokia has just suffered another de facto defeat as it felt forced to stipulate to a stay of case 2 O 36/19 over EP2145404 on a "method and apparatus for providing control channels for broadcast and paging services," which was originally scheduled to go to trial on March 17.

Presiding Judge Dr. Holger Kircher stayed the case--with Nokia's consent--pending the Federal Patent Court's adjudication of nullity actions (complaints seeking the invalidation of the patent) by Daimler and an intervening supplier, TomTom. Those proceedings before the Federal Patent Court typically take years, and the vast majority of patents in this area are either declared invalid in their entirety or they end up being narrowed. A narrowing of the claim scope has the potential to render a declared-essential patent clearly non-essential.

It's constructive of a patentee to stipulate to a stay after the court has indicated a strong inclination to order a forcible stay in the alternative. It simply conserves court resources as a stipulated stay doesn't require a written rationale. Still, it's a concession that a patent was weak in the first place.

Originally, it looked like the period between December 2019 and May 2020 was going to be an extremely busy one for the Nokia v. Daimler patent assertion campaign. But the combination of Daimler defending itself (with help from its intervenors) very well and that force majeure that starts with a "c" has so far prevented Nokia from getting leverage. What's much worse for Nokia is that its dismal track record against Daimler so far will be held against it in future licensing negotiations (with smartphone makers as well as the car industry):

  • Besides the two Mannheim cases of which Nokia lost one and had to stipulate to a stay in the other, a third one was already scheduled to go to trial in December, but then Nokia made a mediation offer and the court pushed the trial date back to March 17. However, shortly before that new trial date, Nokia modified its infringement theory, which is not a sign of strength. That trial got vacated.

  • A Munich ruling was scheduled for tomorrow (April 9), but has been postponed to May 20.

  • Two Munich trials scheduled for April 22 (the related first hearings took place on October 30, 2019) have been vacated due to the coronavirus crisis. New trial dates have yet to be determined.

Theoretically, "it only takes one bullet to kill" as another SEP holder once told a court. However, with every single Nokia case that goes nowhere--and stipulating to a stay is tantamount to throwing the towel--its portfolio-based royalty demands lose credibility. What's happening to Nokia's SEPs here is not much different from what other SEP holders have experienced. The hit rate is very low. The only factor that makes it a little more surprising in Nokia's case is that the patent litigation knowledge they have in-house (including lawyers as well as litigation-savvy engineers) is second to none, and it goes without saying they hire some of the very best firms to represent them. With so much expertise, how come they can't find stronger SEPs? They picked ten patents for the campaign against Daimler, some if not all of which they previously asserted against Apple (though that dispute got settled prior to any trial). They apparently thought those ten were the best they had. And look what's happening...

Policy makers must take the following into account: SEP holders (and Nokia is just one example of many) always want to talk about portfolio royalties rather than about merit, but that is a recipe for overcompensation that results in a misallocation of resources and has quite the opposite effect of incentivizing innovation. When a defendant like Daimler doesn't bow to coercion of whatever kind and lets the judges do their job, it turns out time and again that it's one thing to declare thousands of patents to be essential to cellular standards and another to prove in court that those patents are valid and, actually, essential.

Nokia's greed--they want Daimler and other car makers to pay a multiple of the per-unit royalty they get from smartphone makers--has given rise to this dispute, which now threatens to devalue Nokia's SEP portfolio, with severe implications on Nokia's current and future licensing negotiations.

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