Tuesday, September 1, 2020

Ford entered into short-term patent license agreement with Nokia "under duress" in March 2019, terminated it as per 31 January 2020

At some of those Nokia v. Daimler patent trials in Germany, an unnamed American car maker was mentioned as a Nokia patent licensee, as I most recently wrote in April. I thought it was Tesla, but wasn't sure. With all that's going on in that context, such as last month's Mannheim injunction and this week's Dusseldorf trials, I asked around and learned from a U.S. source (which I obviously can't disclose) that the provisional license had actually been granted to, but terminated by, the Ford Motor Company.

This is the chronology of that short-term standard-essential patent (SEP) license agreement, which was merely meant to buy Ford time to negotiate a long-term license:

  • the original agreement was executed on 20 March 2019;

  • it was amended as of 18 September 2019;

  • on 29 December 2019, Ford sent a notice of termination to Nokia; and

  • said termination took effect on 31 January 2020.

As far as I know, no new agreement has since been concluded between Nokia and Ford. From what I hear, Ford denounced the terms of that interim agreement as non-FRAND in the strongest terms, and called it a "Tolling Agreement" (not "Trolling," though that may be just what Ford meant).

Ford blames the unsuccessful outcome of the negotiation effort on Nokia's unwillingness to make an offer on fair, reasonable, and non-discriminatory (FRAND) terms, while Ford claims that its counterproposal was FRAND in consideration of applicable law and relevant facts. What Ford particularly took issue with is that Nokia wanted to base the royalty amount on the value of a car, though according to Ford the SEPs in question are practiced by the mobile chipset.

The only reason Ford acceded to Nokia's demands on a provisional basis was to negotiate rather than litigate. According to my source, Nokia's licensing executives had repeatedly and aggressively threatened their counterparts at Ford with the immediate filing of an avalanche of lawsuits in multiple jurisdictions, and stressed that Nokia would pursue injunctions in different key markets (sales and/or import bans). Therefore, Ford told Nokia it only signed the provisional license agreement "under duress."

I don't find it hard to believe what I learned from my undisclosed source, knowing that Nokia's approach to patent licensing borders on racketeering, especially when Nokia doesn't have to fear retaliation. In public statements, Nokia and its lawyers make it sound like this was all just about Nokia getting fair compensation for its contributions to "innovation." But most of its SEP infringement cases fail on the merits as the dispute with Daimler shows (and it even happened to Nokia against ViewSonic years ago, a company that couldn't even afford challenging the validity of Nokia's patents-in-suit).

Nokia's licensing business is all about intimidation and crapshoots. They thought they could prey on automotive companies, but it turns out that neither Ford nor Daimler were the kinds of soft targets the failed Finnish handset maker had hoped.

If the European Commission was committed to competition enforcement on the merits, as opposed to being a protectionist political body, it would already be formally investigating Nokia's refusal to license component makers. But the solution may come from certain courts.

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