Thursday, October 8, 2020

Penny-wise and dollar-foolish: Daimler and other automotive companies almost literally invite the world's patent trolls to sue them

Knowing that the global automotive industry follows this blog closely, I might have to start a series of posts called "Avoiding Mistakes" or "Do's and especially DON'Ts." It's understandable that old companies need some time to adjust to the Digital Age, but neither the market nor patent abusers will give them that much time. Even politicians aren't prepared to anymore.

Last week, when I was zapping between radio stations, I heard David Bowie's "Absolute Beginners" for the first time in I don't know how many years, and if I were to produce a movie about the automotive patent wars, I'd seek to license it for the main theme.

I'm not going to repeat what I wrote yesterday about Daimler's insane decision to take a car-level standard-essential patent (SEP) license from Sharp instead of fighting on. May the link suffice.

Here comes a serious contender for the most stupid statement anyone ever made in a patent litigation PR context, taken from Juve Patent's report on the same transaction, citing an unnamed "market expert" and "insider" (the latter suggests he may be counsel, or otherwise close, to Daimler):

"After Huawei had concluded a licence agreement with Sharp, it was more favourable for Daimler to pay the remaining licence numbers than to continue the costly patent dispute."


Apart from the fact that the same Juve Patent article accurately notes (Nokia and others will argue that Daimler is actually willing to take SEP licenses, except from them), if this is what Daimler actually told people in the legal industry--and the article makes it a possibility--, then "unwise" would be an understatement. Should it just be speculation by someone who is not the "insider" that Juve Patent says he is (and I don't intend to say anything negative about Juve Patent here; I disagree with them at times, but view them as complementary, not a "competitor"), then it's still important for car makers to learn an important lesson:

The last thing you want to be is a soft target for patent plaintiffs that will settle for litigation economics--unless, of course, the overall circumstances are such that your adversary has lost and the "settlement" is not lucrative for the other side but merely conserves court and party resources that would be wasted on the funeral of a dead case.

Nothing is more appealing to patent trolls than a company that will settle at this stage only because it appears cheaper than litigation fees. Conversely, nothing serves as a greater deterrent to patent assertion entities than a defendant who will beat them at their own game and drive up the costs, such as by launching pre-emptive strikes against their patents in multiple jurisdictions, or petitioning for the invalidation of patents they haven't even asserted yet, or bringing declaratory judgment actions (which is more popular in the U.S. and the UK, but would also be possible in Germany, though near-automatic injunctions make it risky unless and until there is a major reform).

I've mentioned it before that there have been occasions on which I gave advice to patent trolls. They always knew I was going to continue to attack their business model in the public debate. Some just needed to know how receptive certain judges were to particular arguments and procedural tactics, and others needed specific help (research and otherwise) in a fundraising situation. There are some patent trolls I actually get along with quite well because I still say in public what I think and they mentally compartmentalize it from direct interaction.

So I've brainstormed with patent trolls about whom to attack, in what order, and in what jurisdiction(s). What I'm saying here is common sense, but I've heard it first-hand from trolls: they think more than twice before they would attack someone like Apple and Samsung. Obviously, Apple and Samsung are still among the most-sued companies in the world, because they're so big, rich, and famous. Compared to them, the whole German automotive industry would collectively just represent a medium-sized player. But if Apple and Samsung did not defend themselves vigorously, that would be tantamount to a Process Servers Full Employment Act.

I remember how one particularly experienced patent troll reacted when I just asked the non-rhetorical, non-suggestive question whether a particular Apple product might have a feature set that would lend itself to an infringement claim chart: he almost panicked. Seriously, I could hear how he dreaded the notion of taking on Apple. He asked me: "Haven't you been watching them for years?" He added: "When you deal with them, they will defend themselves tooth and nail, and they'll probably see it through. With the same investment of time and money, you can sue multiple other infringers. Easily."

That's the image you want to project. But if you display weakness, you're going to pay the price.

No, it's not financially prudent to settle a patent case at a stage where you still have every opportunity for a successful defense. It comes back to haunt you and you end up losing a lot more money that way.

Again, it's unclear how close to Daimler the person quoted by Juve Patent is. But even if that person overstated their proximity to Daimler by a huge factor, the problem is that Daimler's decision to cave speaks for itself anyway.

Someone at Daimler elected to bleed in a swimming pool teeming with piranhas--on top of sacrificing consistency on the question of component-level licensing, which is lamentable enough.

Up to yesterday's announcement, I actually think Daimler had done a great job in its legal defense against the abusive Avanci gang--though it has completely failed when it comes to its EU antitrust complaint (which went nowhere because they didn't make enough noise). In a way they were lucky. They chose a firm--Quinn Emanuel--that presumably gets more money from Nokia than from Daimler, given that they represent Nokia in U.S. cases, which are inherently more expensive. But to the extent that German judges didn't abuse their discretion to shut out the general public, I listened to some of Daimler's FRAND argument and found that Dr. Marcus Grosch, even though he delegated that part to Jérôme Kommer for the most part (who also made good points, though nowhere near as forcefully as Dr. Grosch), was highly persuasive, even though I've more frequently seen him argue just the other way on behalf of plaintiffs like Qualcomm. Still, with what's at stake Daimler shouldn't have taken its chances. Daimler and other automotive companies should make it a simple rule: if you represent SEP abusers and/or trolls, we're going to increasingly rely on other firms, as a matter of principle. That's the way some world-class American companies handle it: you're with us or against us. But that's another story, and I have far greater respect for American than German legal culture anyway.

Recently, one of Daimler's competitors also said some really stupid things in public (a podcast, to be precise). If they ever have to litigate cases in the U.S. where the question of component-level licensing or the proper SEP royalty base come up, their adversaries may play some of those soundbites to a jury, in which case his utterances may cost his employer 10 or 100 times more than he'll ever earn. But that was just one guy who previously worked for a SEP abuser (who hopefully didn't brainwash him, though he sounded much like it). I contacted a senior person in that organization, and I'm confident they won't make that mistake again. I specifically warned them that anything could and would be held against them in U.S. litigation, especially in U.S. jury trials.

Absolute Beginners.

Share with other professionals via LinkedIn: