Tuesday, August 18, 2020

Mannheim Regional Court orders Germany-wide Mercedes sales ban over Nokia patent despite Nokia having violated EU competition law

The Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) has just ordered a Germany-wide sales ban against Daimler over a standard-essential patent (SEP) held by Nokia. The court issued a press release (in German) to announce this decision in case no. 2 O 34/19 over EP2981103 on an "allocation of preamble sequences").

What I'm still trying to find out is the amount of the security Nokia will have to give in the form of a deposit or a bond. According to Bloomberg, the court set the amount at €7 billion.

Unless this has changed since last time I checked, Nokia's litigation campaign against the Mercedes maker does not target cars that come with telematics control units (TCUs) supplied by Samsung subsidiary Harman. However, in parallel cases before the Munich I Regional Court, Daimler argued that a sales ban would still affect roughly half of its German sales during the relevant period.

The shocking part of the court's announcement is that the injunction came down despite both Nokia and Daimler having failed to make fair, reasonable and non-discriminatory (FRAND) licensing offers in the court's opinion. But the Court of Justice of the EU laid out a SEP injunction roadmap in Huawei v. ZTE five years ago under which the patentee firstly has the obligation to make a FRAND offer. For several years, German courts declined to enjoin an implementer of a standard in that situation without even looking at the implementer's counteroffer. However, very recently the positions of the Mannheim and Munich courts have changed in this regard by practically reverting to the old German Orange-Book-Standard approach of looking at the implementer's (counter)offer first--an approach they seek to justify by misreading EU case law.

From what I heard, the other patent-specialized division of the Mannheim Regional Court--the 7th Civil Chamber under Presiding Judge Dr. Peter Tochtermann--is still in line with CJEU case law.

Daimler will now have to petition the appeals court (Oberlandesgericht Karlsruhe = Karlsruhe Higher Regional Court) for a stay of the enforcement of the injunction Nokia just obtained. Nokia will certainly seek an adjustment of the security amount.

The Mannheim court also declined to refer certain component-level SEP licensing questions to the CJEU, a referral that Germany's antitrust authority (Bundeskartellamt, Federal Cartel Office) had recommended in a written submission. It's a disgrace that Nokia sues Daimler despite Daimler's suppliers all being interested in taking a license to Nokia's cellular SEP portfolio on FRAND terms. By contrast, Sharp, another major SEP holder and--like Nokia--a contributor to the Avanci pool, recently granted an exhaustive component-level license to Huawei, which indirectly covers Daimler.

Apart from having to give security, and besides the possibility of the Karlsruhe-based appeals court staying the injunction pending its appeal, Nokia faces significant risks on the antitrust front. Both the European Commission's Directorate-General for Competition (DG COMP) and the German Federal Cartel Office will now have to give serious consideration to taking immediate action against Nokia so as to prevent the enforcement of the injunction. They can slap Nokia with fines that would really hurt. If the EU Commission doesn't act, it becomes all the more obvious (as if it wasn't already) that EU competition commissioner Margrethe Vestager is merely a political opportunist and shameless protectionist who will go after any U.S. tech company even over absurd theories that the EU's own court disagrees with (such as the Apple tax case) while letting Nokia get away with clearly anticompetitive behavior.

So far, Nokia's patent infringement campaign against Daimler has been largely unsuccessful. Some patents were not infringed while various other cases got stayed pending validity determinations by the Federal Patent Court. Theoretically, a single successful enforcement effort could coerce Daimler into a settlement, but for the reasons outlined above, it's probably "too little, too late" for Nokia to get its way now--unless some antitrust watchdogs want to make themselves completely ridiculous, of course.

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