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 M√ľnchen 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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