Wednesday, September 2, 2020

Mercedes sales ban over standard-essential patent not being enforced in Germany: Nokia can't afford giving security and/or fears regulatory backlash

Two weeks after the Mannheim Regional Court granted Nokia's request for a Germany-wide Mercedes sales ban, assembly lines at Daimler are still humming, salespeople at Mercedes dealerships are still hustling, and customers are still picking up their new cars day after day.

Much ado about nothing? For now, that's right.

There's much to be criticized about the rationale underlying the Mannheim court's Second Civil Chamber's (Presiding Judge: Dr. Holger Kircher) decision. The patent isn't infringed (as one key supplier explained to an unreceptive court), its validity is doubtful, the sense of urgency for enforcement prior to expiration is not just generally misguided but doesn't make any sense at all when a patent has seven more years to go, Nokia was only able to bring that lawsuit against Daimler because of its dogged refusal to grant exhaustive component-level licenses to Daimler's suppliers, and above all, the court found that Nokia had failed to make Daimler a licensing offer on FRAND terms, in which case the Court of Justice of the EU envisioned--in the landmark Huawei v. ZTE decision--that no injunction would come down.

It would have been a tragedy if Nokia had managed to coerce Daimler into a settlement under those circumstances. But for the time being Daimler doesn't have a reason to cave. The court determined that Nokia would have to provide security to the tune of seven billion euros, which is presumably unaffordable to a company in steady decline.

Meanwhile, Daimler's attorneys of the Quinn Emanuel firm have already filed their appeal with the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court)--and not merely a notice of appeal, but simultaneously a full-fledged appellate opening brief and a motion to stay enforcement.

Resolving that motion for an enforcement stay will be the first task in the current wave of "automotive patent wars" for a judge this blog mentioned countless times (and mostly favorably, apart from an occasional--and, I hope, respectful--disagreement): Presiding Judge Andreas Voss ("Voß" in German), who used to preside over the Mannheim court's Seventh Civil Chamber.

While sitting on the lower court, Judge Voss wasn't a fan of the FRAND defense, to put it mildly. I remember him telling counsel for a defendant: "First you say the patent doesn't read on the standard. Then, when we tell you it does, you say you don't 'really' implement UMTS [the 3G standard in question]. You furthermore dispute the validity of the patent. And when all else fails, there comes your last resort: you allege an antitrust violation."

But that was years before Huawei v. ZTE. Even prior to that CJEU ruling, what gave Judge Voss pause were formal investigations by the European Commission of Samsung's and Motorola's assertions of standard-essential patents against Apple and Microsoft.

I already look forward to reading his decision on Daimler's motion to stay enforcement.

Judge Voss and his side judges are in no rush. Nokia stipulated to refrain from enforcement while the appeals court is weighing the motion. That's an unusual sign of weakness for the ruthless bully that Nokia is (as its dealings with Ford also prove). Besides being unable to provide security (which is Nokia's own fault because it would be much cheaper to enforce its patents against chip makers), Nokia may also be afraid of competition watchdogs. There comes a point at which even the European Commission might start to worry about losing whatever little is left of its reputation in this context, and the Federal Cartel Office of Germany need not forever content itself with filing amicus briefs. Regulators could strike down on Nokia anytime if necessary.

Things are not working out for Nokia. For now at least.

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