Wednesday, April 1, 2020

Nokia swimming against judicial tide with its dogged refusal to license automotive component makers

Not only has the European Commission's Directorate-General for Competition (DG COMP) resumed its preliminary investigations of Daimler's and four of its suppliers' antitrust complaints over Nokia's refusal to license automotive suppliers, but the former handset maker may come under pressure in a variety of jurisdictions.

Nokia apparently hopes to gain leverage from a German court ruling scheduled for next week's Thursday (earlier this week, the Munich I Regional Court's press office confirmed that the decision was, for now, still slated for that day), though the coronavirus crisis may limit the immediate impact on Daimler's German sales while the appeals court would review a hypothetical Nokia win. Daimler brought an extremely strong invalidity contention, fulfilled its obligations under the Court of Justice of the EU's Huawei v. ZTE ruling to be shielded from an injunction, and couldn't have been sued by Nokia in the first place had the Finnish company lived up to its FRAND licensing promise and licensed Daimler's suppliers. Furthermore, banning an entire car over one of thousands of little elements of a wireless standard would not be a proportionate remedy in accordance with Article 3 of the European Union's IPR Enforcement Directive.

The third point--the obligation to grant an exhaustive component-level license on FRAND terms to suppliers at any level of the supply chain--is what the dispute is all about. In addition to those ten Nokia v. Daimler patent infringement cases (of which Nokia has already lost one and will likely lose many more), let's not lose sight of Huawei's German antitrust lawsuit aiming to obligate Nokia to make a component-level FRAND licensing offer. That case will presumably go to trial later this year. The Dusseldorf Regional Court has taken favorable positions on component-level licensing before, and as I mentioned in the post I just linked to, the presiding judge of one of the patent-specialized panels of its appeals court (Judge Thomas Kuehnen of the Dusseldorf Higher Regional Court) explained in an article last year that SEP holders have an obligation under Art. 102 TFEU (the abuse-of-dominant-position paragraph of EU law) to license any implementer of a standard who so requests.

Assuming Nokia loses in the two Dusseldorf courts, it could appeal the matter further to the Federal Court of Justice (the highest German court to hear patent cases since the Federal Constitutional Court would deal with only a narrow set of constitutional questions such as the right to be heard). The Dusseldorf Higher Regional Court could allow a further appeal. Otherwise Nokia would have to petition the top court first (comparable to a cert petition in the U.S.).

Nokia's chances at the top level are waning, though. I'm not aware of a single statement by a patent judge of the Federal Court of Justice endorsing a refusal to license component makers, but at least two of them have endorsed Judge Kuehnen's theory of a right to sue for a FRAND offer:

  • On November 5, 2019, Judge Fabian Hoffmann gave a talk at a Munich conference entitled "FRAND 2019" and presented a slide that contained the following ringing endorsement of Judge Kuehnen's article on a duty to license component makers (click on the image to enlarge; this post continues below the image):

    The highlighted word means "compelling" or "persuasive." The context is that of a "license to all comers" and the second line states that licensing anyone who asks for it is simply in line with Art. 102 TFEU. I respect copyright, so I copied only the part of Judge Hoffmann's slide that was necessary to show his endorsement of Judge Kuehnen's position.

  • I have heard from a perfectly reliable source that another member of the patent division of the Federal Court of Justice--and notably a member known for being extremely sympathetic to patentees (which also applies to Judge Kuehnen, by the way)--stated in a conversation at a relatively recent conference that he, too, agrees with Judge Kuehnen.

Any of those German courts could refer the question of component-level licensing to the CJEU in Luxembourg. It's doubtful whether that would be necessary given the clarity of CJEU's Huawei v. ZTE ruling with respect to the obligation to grant a license any implementer.

Share with other professionals via LinkedIn: