Friday, September 4, 2020

Germany's most prominent patent judge disagrees with Mannheim court's Mercedes sales ban on three out of four counts

Last month's Germany-wide Mercedes sales ban--a final (though appealable and actually being appealed as we speak) judgment by the Mannheim Regional Court in a Nokia v. Daimler case--is already the most controversial German patent ruling since a December 2018 iPhone injunction that was later reversed on multiple independent grounds. It may even have contributed to a surprising change of mind on the part of the Federal Ministry of Justice of Germany regarding the injunction part of a patent reform bill. While the rationale provided by the ministry is still the same as in January, the statute--and that's what really matters, as the commentary will only be adduced if there's a lack of clarity--would definitely do away with automatic patent injunctions. The way it's written, injunctions would still come down in most cases, but no longer in all of them--and certainly not without a fair amount of analysis if a defendant demonstrates harm to itself and/or third parties.

At this point, Nokia is not enforcing that Mannheim injunction. German patent injunctions are not self-executing, so it takes action on Nokia's part in order to take effect.

It has meanwhile been confirmed to me by the spokesman (himself also a judge) of the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court) that the panel of judges hearing the appeal (Presiding Judge: Andreas Voss, "Voß" in German) proposed that Nokia agree to refrain from enforcement while the appeals court is weighing Daimler's motion for an enforcement stay.

Germany's most prominent patent judge is Dr. Thomas Kuehnen ("Kühnen" in German) of the Dusseldorf Higher Regional Court, as he's the author of the leading reference work on patent infringement litigation in Germany (which other German judges cite to all the time), and a frequent public speaker. While I disagree with his generally very patentee-friendly stance (such as on the standard for stays pending parallel nullity actions), he's been amazingly receptive in recent years to the concerns of implementers of industry standards.

Judge Dr. Kuehnen regularly organizes webinars at which he discusses landmark decisions with attorneys and other experts. Very recently, he briefed and commented on the Mannheim Regional Court's Nokia v. Daimler injunction.

In the second part of his presentation, Judge Dr. Kuehnen expressed his views on four different "theses" found in the Mannheim ruling. All four of those "theses" are about the application of antitrust law to the enforcement and licensing of standard-essential patents (SEPs), and Judge Dr. Kuehnen agrees with the Mannheim court's Second Civil Chamber (note that the same court's Seventh Civil Chamber has its own perspective) on only one of them:

  1. Unlike the Mannheim court's Second Civil Chamber, Judge Dr. Kuehnen reads the CJEU's Huawei v. ZTE opinion as merely requiring an implementer to indicate a willingness in principle to take a license on FRAND terms in response to a patentee's mere notice of infringement.

    The Mannheim panel held, however, that an implementer--like under the German Orange-Book-Standard doctrine that is no longer good law (and never really was)--needs to make an offer to the patentee to take a license on terms, and that offer only helps to avert an injunction if a court later finds that its terms were FRAND. (Here, the court deemed neither Nokia's demands nor Daimler's counterproposal to be FRAND.)

    According to Judge Dr. Kuehnen, the Mannheim decision turns the CJEU case law (Huawei v. ZTE) on its head.

  2. Closely related to the first issue is that the Mannheim panel then deemed it irrelevant that Nokia's proposed licensing terms weren't FRAND. Judge Dr. Kuehnen, however, begs to differ. His reading of the CJEU case law is that the focus must be on the patentee's licensing offer. If the implementer requested such an offer, then that's all the implementer had to do that stage. Therefore, according to Judge Dr. Kuehnen, an implementer's offer only needs to be analyzed by a court if the SEP holder's demand was FRAND. If it was FRAND, then the implementer must either accept that offer or may make a counterproposal, but the counterproposal would have to be within the FRAND range, too.

  3. The only item on which Judge Dr. Kuehnen agrees with the Mannheim ruling is that the amount of license fee should be based on the value a patented invention adds to the end product as opposed to the purchasing price of the smallest salable patent-practicing component. On this one, I don't generally agree with Judge Dr. Kuehnen: the market for a particular type of component has its own supply-and-demand dynamics, and if an invention is particularly useful downstream, that fact will drive demand. I would agree with Judge Dr. Kuehnen if he argued that the manufacturing cost of the component (without any intellectual property being licensed) isn't relevant.

  4. Finally, Judge Dr. Kuehnen disagrees with the Mannheim court's holding that SEP holders can just sue end-product makers even if that one's suppliers are willing and able to take a license, barring exceptional circumstances under which it would not be reasonable to expect a SEP holder to deal with a hypothetical multitude of suppliers.

    In all likelihood, that part is now going to be put before the Court of Justice of the EU, as the Dusseldorf Regional Court (below Judge Dr. Kuehnen's appeals court) appears determined to refer the component-level licensing questions in both a Nokia v. Daimler patent infringement case as well as in a Huawei v. Nokia antitrust case to the Luxembourg-based top EU court.

Judge Dr. Kuehnen can merely discuss--but not reverse--the Mannheim ruling. We'll see what the Karlsruhe Higher Regional Court is going to do. At this stage, the Karlsruhe appeals court has not yet scheduled a decision on Daimler's motion to stay enforcement. I guess that will happen this year, but the actual appellate hearing will presumably be held in mid-2021.

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