Thursday, September 3, 2020

Dusseldorf Regional Court virtually certain to refer component-level standard-essential patent licensing questions to Court of Justice of the EU: Nokia v. Daimler

History repeats itself with the Landgericht Düsseldorf (Dusseldorf Regional Court) taking the lead again among German patent infringement courts of first instance on a key standard-essential patent (SEP) licensing question. More than seven years after the same court referred several questions of EU antitrust law relating to SEP injunctions to the bloc's top court in Luxembourg, another referral--and what follows may even be an understatement--looms large: the questions recently raised by the Bundeskartellamt (Federal Cartel of Office of Germany), or at least a largely similar set of questions concerning a SEP holder's duty to grant exhaustive licenses to component makers, will apparently be sent to Luxembourg.

That was the clear inclination of the 4c Civil Chamber of the Dusseldorf Regional Court (Presiding Judge: Sabine Klepsch) at today's Nokia v. Daimler patent infringement trial over EP2087629 on "a method of transmitting data within a telecommunications system." (The trial is still ongoing at the time of publication of this post.)

The referral makes a lot of sense, given that--as the court noted--there's even a split between German courts, with Munich and Mannheim being prepared to grant injunctions against a car maker whose suppliers are willing licensees and the Dusseldorf court leaning Daimler's way.

The only thing I find surprising about this development is that the question of fair, reasonable and non-discriminatory (FRAND) licensing was reached today at all. The patent is clearly invalid: a mirror image of its preferred embodiment was disclosed before its priority date. And Daimler made a strong non-infringement argument as well. Normally, Nokia should simply have lost the case on the technical merits.

Be that as it may, what's going to happen now in Dusseldorf--with the announcement of the decision having been scheduled for November 12, 2020--will produce ripple effects:

The Dusseldorf court approached Daimler's and its supplier's FRAND defenses in a fundamentally different way than the Mannheim and Munich courts. Not only do the Dusseldorf judges take the question of component-level licensing seriously (Presiding Judge Dr. Thomas Kuehnen of the Dusseldorf Higher Regional Court articulated his views on that question already last year), but they also focused their analysis on Nokia's conduct as opposed to Daimler's counteroffer.

Furthermore, the Dusseldorf court expressed some skepticism regarding the comparability of other license agreements. For an example, the license deal between the Volkswagen Group and the Avanci gang is not necessarily a useful point of reference given indications that VW might have acceded to Avanci's terms only under the threat of litigation. The court is, for the time being, unconvinced of Avanci's terms being FRAND.

With a view to Nokia's insistence on Daimler taking a license, and Nokia's refusal to license Daimler's suppliers, the Dusseldorf court noted that component-level licensing is definitely feasible as evidenced by the recent agreement between Sharp and Huawei, and similar agreements Huawei has apparently struck with multiple unnamed owners of significant SEP portfolios. The court also understood that there are actually far more OEMs (in this case, car makers) than component makers out there, a simple numerical fact that undermines Nokia's efficiency argument.

The court brushed aside Nokia's claim that patent exhaustion dynamics could have unacceptable practical consequences, or that a failure to account for patent exhaustion would result in double-dipping, given that any concerns could be satisfactorily addressed by the specific terms of a license agreement.

The judges also appeared sympathetic to the suppliers' interest in a full-fledged license, as opposed to a "have made" right or other extended-workbench type of agreement. So far, FRAND case law refers to "licenses," and only an actual license affords component makers the freedom to take their goods to market, the judges understood.

All in all, the Dusseldorf stance on FRAND couldn't be much more different from what the same parties, on the same set of legal theories and real-world facts, heard in Mannheim and Munich. Component-level licensing is not the only area of disagreement, but in some respects it is the most important topic in this context.

The EU's top court is now, in all likelihood, going to resolve one or more questions relating to component-level SEP licensing. Should the views expressed by the Dusseldorf court today, and previously by the Federal Cartel Office of Germany, be adopted by the CJEU, some judges in the south of Germany may face the biggest embarrassment of their careers. In that case, I believe it would be appropriate to say that whether or not they understand patent law, they'd have lost all of their credibility in the field of antitrust law--especially those who turned a deaf ear to counsel for suppliers at those Nokia v. Daimler trials. They'll either have been efficient, or it'll turn out their ignorance was an utter disgrace. In a couple of years we'll probably know the outcome.

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