Monday, November 2, 2020

Lenovo wins, Nokia loses in Munich appeals court: patent-in-suit most likely invalid, FRAND issues *may* exist on top

On Friday (October 30), the Munich I Regional Court (Landgericht München I) ordered its third standard-essential patent (SEP) injunction in the same calendar month, and the second against car maker Daimler over the course of eight days. Each of these decisions was based on the same clearly erroneous application of the Court of Justice of the EU's Huawei v. ZTE guidance, and each came with a determination of a negligible security amount that is an insult to human intelligence and calls into question whether the rest of the world should take any Munich patent decision seriously anymore or just attribute it to some judges' burning desire to attract patent infringement complaints to their venue, no matter the damage to device makers and to innovation itself.

But the tide may turn. At least there is hope based on certain dicta of an order by the Munich appeals court.

Today Lenovo's public relations agency sent out a press release (which others have already quoted) according to which the Munich Higher Regional Court (Oberlandesgericht München) has granted the computer maker's motion to stay the enforcement of the H.264 video codec SEP injunction Nokia had obtained on October 1 and which the Finnish company (whose products were way too bad to stay competitive in the consumer electronics market) had recklessly started to enforce a couple of weeks ago.

What is known about the Munich appeals court's decision is that the panel (Presiding Judge: Konrad Retzer) concluded unusually quickly that the lower court's ruling most likely cannot stand. Unlike in the United States, where the enforcement of an injunction may be stayed if the defendant establishes irreparable harm and generates significant doubt about whether the court below got it right, the standard in Germany is pretty one-dimensional: short of the possibility of a company going bankrupt, only the likelihood of success on the merits determines whether a motion for an enforcement stay is granted.

The lower Munich court even states in a document outlining its Patent Local Rules that it strives to satisfy patentees' demand for swift injunctions without previously staying case pending a parallel validity determination in another forum. But in this Nokia v. Lenovo case, the patent-in-suit appears to extremely likely to be invalidated that the Munich appeals court based its decision to stay the enforcement of the injunction just on the lower court's abuse of discretion with respect to its ignorance of the high likelihood of invalidation.

The appeals court no longer had to reach any other questions (infringement and FRAND) in order to resolve the motion for an enforcement stay. But as the same court has done in some other contexts, it did elect to comment on infringement and, which has ramifications for various automotive SEP cases, write a few more pages about FRAND.

I haven't been able to obtain a copy of the decision yet (will keep on trying, of course). What I have found out is that the Munich appeals court is full well aware of that its counterparts further up north--the Karlsruhe Higher Regional Court (which hears all patent appeals originating from Mannheim) and the Dusseldorf Higher Regional Court--have applied Huawei v. ZTE to the effect that a SEP holder who fails to make a FRAND-compliant licensing offer is not entitled to injunctive relief regardless of the implementer's counteroffer. By contrast, the Munich I Regional Court's recent SEP injunctions were all based on a holding that the respective implementer was an unwilling licensee, without a full-blown assessment of the SEP holder's original offer.

The Munich appeals court has not indicated whether it intends to overrule or affirm the lower court in that particular regard. But it does realize that affirmance would result in what is called a circuit split in U.S. appellate law.

Even if the Munich Higher Regional Court opted for a circuit split, it might still reverse the lower court's FRAND stance in one or more other respects, which could open the door to successful FRAND defenses.

The question now when and in what case the Munich appeals court will ultimately have to address the questions it outlined in Friday's order:

  • Lenovo can avert the continued enforcement of Nokia's injunction by posting security to the amount of approximately $5 million, affording the computer maker the opportunity to further litigate this case. But there is a potential risk of any of the four other Nokia v. Lenovo cases forcing the latter into a settlement. Nokia lost its first case (of six) in Mannheim, now won in Munich, and has four more cases pending, with decisions expected in the coming months.

  • Daimler is seeking an enforcement stay of both Conversant's and Nokia's Munich injunctions. Presumably, the two patent trolls (Nokia is one with respect to Daimler as it never made cars and isn't even in the user equipment business anymore) will soon enforce their injunctions against Daimler. The car maker will then depend on the Munich court acting about as swiftly as it did in the Lenovo case. If those cases can be stayed on other grounds (such as validity), FRAND won't be reached, but at some point it probably will be--unless Daimler settles again, like it did with Sharp.

Nokia is now sitting on two injunctions it can't currently enforce: one against Daimler that it won in Mannheim in August but with respect to which the Karlsruhe Higher Regional Court is weighing a motion for an enforcement stay, and the Munich injunction against Lenovo.

Nvidia intervened in support of Lenovo, and one of Lenovo's defenses is that Nokia owes Nvidia an exhaustive component-level SEP license, which would cover Nvidia's customer Lenovo by extension. Component-level licensing wasn't relevant at this procedural juncture, but may become key further down the road in the Nokia-Lenovo dispute. It certainly does play a major role in the Daimler SEP cases, and on next week's Thursday the Dusseldorf Regional Court will most likely (based on what Presiding Judge Sabine Klepsch indicated at the trial in early September) refer to the Court of Justice of the EU certain questions concerning component-level access to SEP licenses. That may make it much harder for Nokia and Conversant to enforce their SEP injunctions against Daimler, depending on how the various regional appeals courts will rule on motions for enforcement stays once such fundamental questions have been submitted to the Luxembourg-based top court of the EU.

Apart from the FRAND defense, another problem badly needs to be addressed in Munich: the lower court has recently determined security amounts based on the patentee's royalty demands as opposed to the actual harm to a defendant's business. In this particular Nokia v. Lenovo case, the appeals court no longer needs to deal with that part as the injunction has been stayed for the duration of the appellate proceedings.

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