Sunday, February 28, 2021

Could a single state legislature topple both mobile app store monopolies? At least it could make a historical contribution.

This is just my first post on legislative initiatives in multiple states concerning mobile app stores, so I've really just begun to research the topic and have a lot to learn.

A couple of weeks ago, the North Dakota state senate voted against a bill that would have required Apple's App Store and the Google Play Store to allow app developers to use other payment in-app payment systems. The fact that the state legislature decided against it doesn't represent a ringing endorsement of the status quo of mobile app stores. It's possible that many of the lawmakers who voted against the proposal simply didn't want their state, with not even a million inhabitants, to take such a fundamental decision against two of the country's largest and most powerful companies.

There definitely is broadbased political support for the fight against app store monopolies: last fall, the Democratic majority of the United States House of Representatives adopted a report on digital markets that condemns the current situation in pretty strong terms.

All three branches of U.S. government are dealing with the issue in different ways: the judiciary has various antitrust lawsuits against Apple and Google before it (with a case management conference in Epic Games v. Apple taking place tomorrow, Monday); the executive government (the DOJ's Antitrust Division and various state attorneys-general) may bring antitrust cases as well; and as far as lawmakers are concerned, there's the aforementioned House report (which is non-legislative, though it does recommend that measures be taken) as well as activities in multiple states.

As a developer who's experienced (and continues to experience) how tyrannical and harmful those app store monopolies are, I welcome any initiative that has the potential bring about change, or at least to raise the level of awareness. The situation is unsustainable. I've been in this industry for decades, and I remember the times when Microsoft was accused of expanding into other markets by abusing its control over Windows. What was alleged at the time was, seriously, negligible compared to the present setup. I remember computer book publishers who were unhappy about the creation of Microsoft Press; established office app makers like WordPerfect and Lotus complaining about Microsoft using secret Windows API calls, though I never saw any evidence for that (and, in fact, those companies initially didn't even want to make the transition from MS-DOS to Windows); and there were antitrust issues, but they affected only those competing with Microsoft at the operating system level, like Digital Research with DR-DOS, or at least at the network server level, like Samba, which got help from the European Commission. But the market was wide open then compared to what it is today. Microsoft didn't (as it couldn't) prevent anyone from publishing anything. Microsoft made itself comfortable at the top of the food chain, but a self-serving, arbitrary, or tyrannical gatekeeper it was not.

The fight against the abuse of app store monopolies is generally a marathon, not a sprint. In particular, antitrust enforcement and ligitation are time-consuming. But there can always be a sudden breakthrough somewhere that brings about change. To topple the app store monopolies thorough state legislation is rather ambitious, but my initial analysis is that the Coalition for App Fairness (CAF) has everything to gain and nothing to lose by playing that game. That's because even if a dozen state legislatures voted against such initiatives, the House report would still be far more persuasive--but if any single state enacted an app store law, app developers might find ways to benefit from it, such as by setting up shop in that state, and Congress would have a pressing reason to prioritize this subject at the federal level.

That said, it's just hyperbole that Apple claimed a measure like the North Dakota bill would be the end of the App Store as we know it. Shopping apps like Amazon or parking apps (I just used one a couple of weeks ago) are also allowed to use their own payment systems. Many users may still prefer to create just one account with Apple and to use it across all apps, but the market should decide. Apple's position is that because it made iOS, it shouldn't have to face competition in app distribution.

My own #1 (and #2, #3, #4, ...) issue with Apple and Google is about their rules relating to apps that mention COVID. I see the point, however, in some organizations' criticism of the restrictions those platforms impose on in-app payment systems. We can't solve all issues at the same time, and maybe the payment context is the one in which the cost to consumers is clearest (after all, the Supreme Court allowed a consumer class action against Apple to go forward). But it would be a misconception to believe it's just about "the 30%." In a twittersation on Thursday, the founder and CEO of Epic Games clarifies what this is fundamentally about. In response, I listed a handful of related issues:

For state legislatures, the in-app payment part is particularly intriguing because lawmakers can directly benefit consumers in their states and, potentially, attract app development companies. State-level initiatives have been reported from various states, such as Minnesota (StarTribune article) and Arizona (KAWC News).

The Coalition for App Fairness reported that the Arizona House Rules Committee "voted unanimously that [a bill including a part on app stores] is constitutional and in proper form." As a result of Apple's and Google's counterlobbying efforts (which show that they take those initiatives seriously), the question came ujp whether the proposal is allowed under the Commerce Clause, which gives U.S. Congress the power to legislate commerce. However, my research shows that the Commerce Clause doesn't prevent states from regulating commerce in their states as long as what they do doesn't run counter to federal legislation.

Of the three bills I've seen so far (Arizona, Minnesota, and North Dakota), my personal favorite is the language of the Grand Canyon State's version of the bill, which would make it illegal for Apple and Google to "require a developer that is domiciled in this state to use a particular in-application payment system as the exclusive mode of accepting payments from a user to download a software application or purchase a digital or physical product or service through a software application" (emphasis added). As Apple and Google are based in California, not Arizona, the argument is apparently made by the bill's opponents that this is interstate commerce and Arizona is just trying to favor its own companies, but again, the vote on constitutionality was unanimous and in favor of this proposal.

Assuming for the sake of the argument that Arizona (though it could also be any other state) passed such a statute into law, what would happen? Apple and Google could theoretically try to stop providing their app stores in that state, just so they would stop to meet the threshold (number of downloads, or revenue level) set forth in the bill. But after selling numerous iPhones in a given state, Apple could hardly stop serving those customers. The same applies to Google after its OEMs have sold tons of Android devcies somewhere.

Could Apple (or Google) stop doing business with app developers based in that state, especially if companies from other states set up offices in Arizona to benefit from the law? If they did so, they might be required under federal antitrust law or state UCL (unfair competition law) to make their essential facilities available to developers.

The first state legislature to enact such an app store state law could make history, and would benefit consumers and developers alike. I keep my fingers crossed, but there are so many other things going on that I'm sure it's not a question of if, but when, the app store situation will improve. When I campaigned against the EU software patent directive in 2004 and 2005, I thought it was the most fundamental threat to developers ever. It's how I became a campaigner for the first time in my life, and a little over a year after joining the fray, I received an award that went to Governor Schwarzenegger two years later, and I received more votes than fellow nominee Bono, which shows there were a number of people who thought I had made an impact on a major issue. But this app store cause is more important. I'm not going to be a full-time campaigner again, but I am determined to make my little contribution.

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Thursday, February 25, 2021

Automotive industry falls into political trap, allows patent reform opponents to portray concerns over injunctions as single-industry issue: German parliament hearing

The short version of what happened at yesterday's patent reform hearing in the German Bundestag (Federal Parliament) is that the positions taken by the seven panelists were materially consistent with how I had summed them up in advance, but the overall perception was even worse for the cause of patent injunction reform.

The video recording of the two-hour meeting of the Legal Affairs Committee became available today. If those seeking to preserve the status quo had scripted the hearing, it wouldn't have been less balanced.

The lone voice--among seven "experts" (who in a U.S. Congressional hearing would be sworn in and called "witnesses")--in favor of a proportionality defense to injunction claims was, as expected, the VDA (German automotive industry association). That fact alone supported the anti-reform camp's narrative, but politicians and co-panelists alike capitalized on the situation and reinforced their portrayal of proportionality as the cause of the German automotive industry plus a bunch of foreign infringers.

There actually is a reasonably broadbased coalition of companies who consider the near-automatic injunction regime unsustainable. That movement comprises not only car makers but also telecommunications service providers, Internet service providers, and even adidas. While the ip2innovate group succeeded in bringing a diversity of companies together, it has failed miserably to advocate the cause. It's been amateurish beyond belief, and the state of affairs in the legislative process speaks volumes--as does the fact that ip2innovate wasn't represented on the panel.

The pro-reform camp should have declined to participate in this farce. They should have demanded a more balanced composition of the panel. Failing that, they should have focused on delegitimizing the event. But they've been strategically misguided all along.

The performance of the automotive industry group's representative was uninspiring. He had prepared some talking points, and given that he's not an IP expert, this could have gone worse. Still, the fact that his understanding of the issue lacks breadth and depth became clear on some occasions. For example, when asked by a member of parliament to compare the German patent injunction regime to the situation in other jurisdictions, he just claimed that courts in other countries could order monetary compensation instead of injunctions, but wasn't able to substantiate this in any way. He didn't even explain the difference between common law and civil law jurisdictions.

When I listened to the anti-reform panelists' statements and, even more so, the parliamentarians' questions, it felt like watching something that must have happened in a parallel universe. It was all completely detached from the reality of patent litigation in Germany. Politicians probably didn't know because the pro-reform movement is too incompetent and uncapable to properly and convincingly explain the situation to them, and to debunk certain smokescreens. The anti-reform panelists described the world out there as one in which patent infringement is avoidable, and the scope of a patent is clear by reading its claim 1--when in reality even reasonable people can easily disagree on claim construction, and most patents aren't valid as granted, so they're either invalid or the valid scope is narrower. But in a field of technology where keyword searches aren't nearly as targeted as in chemistry, the problem is already where to start with patent clearance.

Two female patent attorneys stole everyone else the show: Dr. Alissa Zeller of BASF, speaking on behalf of the vci (German chemical industry association), and Dr. Renate Weisse, a Berlin-based patent attorney in private practice. I disagreed with virtually everything Dr. Weisse said, and when referencing her client base she conveniently omitted that it also includes large corporations and "institutions" (presumably patent troll Fraunhofer). Dr. Zeller's views just didn't reflect the reality of the information and communications technology industry; some of what she said may very well apply to her own industry. But the way they advanced their agenda was first-rate.

Dr. Weisse was far more aggressive and outspoken, but Dr. Zeller, too, came across as very assertive, effectively argued in favor of the status quo, and described the potential implications of the current proposal (notwithstanding the Federal Court of Justice already having stated clearly that near-automatic injunctions are here to stay) as if the world was about to descend into chaos.

The two of them could have faced any ten representatives of the pro-reform camp (as opposed to just one) and would have eaten them alive. Their statements at the hearing could be used for any video tutorial on effective IP advocacy.

By contrast, those advocating proportionality just don't have what it takes to win. Their objective--less leverage for patent holders in negotiations--could only be achieved through a systemic departure. But how can they be revolutionaries in the political arena if their own organizations don't even let them act outside 20th-century structures, such as industry associations?

More than a year ago I explained to them what it would take to win. I also created a chart to put the anti-reform camp's talking points into perspective (click on the image to enlarge):

What you see in that chart is the story that was told during yesterday's hearing.

I'm already looking past that reform bill (while still keeping an eye on the process) and profoundly concerned that Nokia and Ericsson may win the pan-European lobbying battle over component-level SEP licensing. In the worst case, the CJEU will even lower the bar for preliminary injunctions (over any category of patents, ultimately also SEPs). But for now I still hope that those who botched the patent reform effort will learn from their mistakes and do better next time. "Next time" is now.

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Tuesday, February 23, 2021

The Search for Scott (Forstall): Epic Games trying to locate former Apple software chief so he can testify in App Store antitrust case

According to Wikipedia, Scott Forstall "involuntarily" resigned as senior vice president (SVP) of iOS software in the fall of 2012. Since then, he's kept a very low profile. Based on his past responsibilities for iOS, Epic Games would very much like to ask him some questions. Interestingly, Mr. Forstall joined Steve Jobs in the announcement of the launch of the App Store "to explain the mechanics of app development for the iPhone" as Epic writes in a joint case management statement with Apple (this post continues below the document):

21-02-22 Epic Games v. Appl... by Florian Mueller

Mr. Forstall's testimony would be used in a couple of months when the big Epic Games v. Apple App Store antitrust case goes to trial in Oakland (Northern District of California).

According to Epic, Apple initially sounded like they were fine with Mr. Forstall testifying, and that they would take care of the logistics. But, according to Epic, "Apple now states that it never suggested it could compel Mr. Forstall to appear for a deposition," after "promising [for well over a month] it would provide a date for Mr. Forstall’s deposition." At some point, a deposition had been tentatively scheduled (for Febvruary 11), but the week before, "Apple revealed that Mr. Forstall had not responded to Apple's inquiries or confirmed that he will appear for a deposition." And the story goes on like this:

"When Epic requested that Apple provide Mr. Forstall’s last known address and contact information, Apple initially provided a PO box and a Twitter handle. Apple also represented that it was not authorized to share Mr. Forstall’s phone number, but later stated that it did not believe that it was in possession of Mr. Forstall’s current phone number. Epic therefore requested that Apple agree that (i) Mr. Forstall’s deposition may occur after February 15, 2021, and (ii) Epic may supplement its expert reports with information arising from his deposition. Apple agreed that Mr. Forstall’s deposition may occur after February 15, 2021, but imposed an arbitrary deadline of March 10, 2021, and refused to agree that Epic may supplement its expert reports. The Parties have not resolved these issues. Epic is currently attempting to locate Mr. Forstall, and hopes that the Parties may avoid the need for Court intervention on these issues."

In the same court filing, Apple admits that it had originally "indicated that it expected its counsel to represent Mr. Forstall at his deposition." Apple says it's OK with the deposition if it takes place before March 10, but doesn't want Epic to "hold discovery open indefinitely while it seeks to locate, serve, and depose another witness." The discovery cutoff date was last week.

If the parties can't work it out until then, this issue may come up during tomorrow's discovery hearing before Magistrate Judge Thomas Hixson (who is not presiding over the actual case but effectively handling certain matters, particuarly discovery-related ones, for Judge Yvonne Gonzalez Rogers. Judge Hixson has a strong antitrust background, which probably comes in handy with respect to Epic Games v. Apple.

March 10 is approaching fast, so the question is whether Epic can locate Mr. Forstall in time, and compel him to testify, ahead of that deadline given by Apple. Ultimately, it's for the court--not Apple--to decide. The trial is still on track to go forward in May, and Epic appears convinced that the trial date wouldn't be affected by this additional deposition.

Former executives are sometimes very reluctant to testify in cases involving their ex-employer. Two years ago, a former Qualcomm president duct-taped the gate to his home (and ultimately had to testify anyway).

Apple's behavior in this context may actually have served to strengthen Epic's resolve to hear what Mr. Forstall has to say. If it is true that he was forced out in 2012, he might not be 100% loyal to his former employer, more than eight years after having been (if true) fired. I don't think Apple is certain that Mr. Forstall's testimony would hurt its case. But if Apple could rely on him, and didn't have to fear that he might seize this opportunity to cleverly and truthfully (under oath) settle some accounts, why would Apple have played these kinds of games with Epic? This could get very interesting, though it's also possible that--once located and compelled--he'll just be evasive and obstructive.

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Ericsson-Samsung escalation led Judge Gilstrap and me to the same miscategorization of certain patents-in-suit: no SEP injunctions being sought YET

Every once in a while, Ericsson and Samsung have to renew their patent cross-license agreement, but those negotiations have become more complicated over time. The following timeline, included in a Samsung filing with the Federal Circuit, shows how the partes have periodically had to go to court (always on a cross-jurisdictional basis) before they struck the next deal (click on the image to enlarge):

The chart also shows a trend toward ever more protracted litigation. A trend reversal is possible: maybe they'll be able to settle sooner this time around, but I wouldn't hold my breath, given that Ericsson is ever more dependent on patent licensing revenues and now more concerned than ever about competition from Samsung in its core business (mobile base stations).

Samsung's approach to those disputes--including the one with Huawei a few years ago--is "tit for tat": if you sue them somewhere over X patents, they'll countersue (unless you have zero exposure for lack of products) over the same number in the same jurisdiction. Only against Apple, almost exactly ten years ago, Samsung was first to file infringement cases in some countries, responding to Apple's initial action in the Northern District of California with a bunch of intercontinental standard-essential patent (SEP) assertions. And even then, there was nothing that Samsung wanted more than to be left alone and compete on the merits of their products--something that Ericsson failed to do in the handset market and is increasingly struggling with in the network infrastructure business.

Yesterday evening by Eastern Time, Samsung filed its opening brief in the Federal Circuit appeal of Ericsson's anti-anti-antisuit injunction from the Eastern District of Texas (this post continues below the document):

21-02-22 Samsung Opening Br... by Florian Mueller

The 76-page filing contains the timeline shown further above and raises a number of issues concerning Ericsson's preliminary injunction. After Ericsson's opposition filing in early April, I'll discuss some of them in more detail. Samsung is hedging its bets, asking for reversal of the PI as a whole while also taking fallback positions that would allow parts of the PI to stand while potentially making it much less harmful.

Ericsson has empohasized strongly--and will presumably continue to emphasize--its criticism of the fairness of Chinese courts. In the court below, Samsung already presented a declaration by former Federal Circuit Chief Judge Randall R. Rader (whose predecessor, Paul Michel, filed an amicus brief in support of Ericsson's position). What may ultimately bear more weight with the Federal Circuit than the former chief judges' views, however, is the fact that Samsung can point to Supreme Court, Fifth Circuit (whose law is controlling here, even though the Federal Circuit has appellate jurisdiction as there are patent infringement claims in the same case), and other federal appeals courts "regularly defer[ring] to Chinese courts in forum non conveniens cases":

  • Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 435-36 (2007);

  • Innovation First Int'l v. Zuru, Inc., 513 F. App'x 386, 390 (5th Cir. 2013); and

  • Compania Naviera Joanna SA v. Koninklijke Boskalis Westminster NV, 569 F.3d 189, 199 (4th Cir. 2009).

What might impair Ericsson's chances on appeal more than anything else, however, is the fact that the appellate judges can easily see Judge Rodney Gilstrap didn't handle this matter as the neutral arbiter he should have been. There are details such as the fact he gave Samsung a deadline on New Year's Day for its opposition brief to Ericsson's PI motion or that he essentially copy-pasted Ericsson's motion for a temporary restraining order (the TRO was unbelievably overreaching). What may very well undermine the credibility of the court below more than anything else, however, is the fact that Judge Gilstrap incorrectly accused Samsung of "the height of inequity (and hypocrisy)." That's a huge #FAIL. And it's not just an oversight--as I'll explain in a moment, a mistake that I made as well a few days ago--but in Judge Gilstrap's case it's connected to his extreme bias in this context.

Samsung's opening brief clarifies that "[a]s of this writing, all such actions [pending between Ericsson and Samsung] either assert non-SEPs, or assert SEPs but without seeking injunctive relief." But Judge Gilstrap falsely based his accusation of hypocrisy on the misperception that Samsung was seeking a U.S. import ban--called a "limited exclusion order"--against Ericsson in the International Trade Commission, a U.S. trade agency with quasi-judicial powers, over a bunch of SEPs. It turns out the asserted patents are actually non-SEPs.

I readily admit that I made the same kind of mistake just two days ago as I commented on the four ITC complaints brought by these parties against each other (two by each party). Without digging deep enough to learn that those are all non-SEPs, the references to 4G and 5G appeared to indicate there were SEPs involved. Not so.

When Judge Gilstrap got this wrong on January 11 (in his PI order), Samsung immediately filed a notice to alert him to the mistake he had made. Just like him, I, too, should have actually read the complaint in detail before jumping to a conclusion. From now on I'm not going to categorize a patent assertion as a SEP assertion unless a pleading says so or a patent-in-suit can be found in a SEP database. But if I miscategorize some patents-in-suit in a blog post, especially at a point where pretty much nothing has happened in the related cases yet and the possibility of a presidential veto is still there (simply because mobile network infrastructure is critical), it doesn't matter nearly as much as when a judge goes on his own search for further facts (instead of just relying on the record of the case before him), gets it wrong, and then scolds a defendant.

Neither Samsung nor Ericsson had mentioned that ITC complaint in their filings by the time Judge Gilstrap entered his PI order. He might look up the ITC docket routinely from time to time, or he saw Ericsson and Samsung mentioned in the news, or he googled for further information on the dispute.

If you--as a judge (here, Judge Gilstrap) or party (here, Ericsson)--hope for an order by a district court to be affirmed, you want it to come across as a well-reasoned and correct decision by a neutral (and not agenda-driven) judge. Once an appeals court gets the impression that something went wrong below, reversal becomes much more likely. In this case, even a partial reversal would already make a huge positive difference to Samsung.

It's funny, by the way, that even Samsung's lawyers made a small mistake: that opening brief repeatedly and consistently refers to "the United Kingdom Patent Court." That's not the official name of any court. What they mean is the England & Wales High Court (EWHC). Those megadisputes involve so many issues, so many patents, and so many jurisdictions that sooner or later all of us get confused about something.

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Top-notch antitrust experts award five stars to preliminary injunction against Google by Munich I Regional Court

The Munich I Regional Court (Landgericht München I) is my subjective "Technology Court of the Month" (no matter how often I disagreed with it on other issues, which may happen again anytime) as it handed down two key decisions in February that have the potential to make tech law history with repercussions throughout and potentially beyond the European Union:

This post focuses on the Google antitrust case.

I asked the press office of the Oberlandesgericht München (Munich Higher Regional Court) yesterday whether Google's appeal already had a case number and, maybe, a hearing date. They said an appeal had not been filed yet. But I'm sure that's going to happen shortly. If Google's PI appeal failed, it would theoretically still be possible for the full-blown main proceeding to have a different outcome, but it would be unlikely in this case, where the facts are pretty straightforward and the legal questions are crystal clear. However, in the main proceeding Google would be able to seek the equivalent of cert, while the regional appeals court is the final destination on the PI track.

I'm admittedly biased here because my own app development company is going to sue Google and maybe also Apple in Munich with direct references to certain holdings in NetDoktor v. Google (which I guarantee will not change a thing about how I view Apple's and Google's patent cases--in fact, I continue to keep my fingers crossed for Apple and Intel's joint antitrust action against Softbank-owned Fortress Investment). Given my own interest in antitrust action over gatekeepers using the critical nature of public health as a pretext for treating web publishers (in the NetDoktor case) and app developers (both Google and Apple) unfairly, it's all the more reassuring to see that totally impartial experts, too, heap praise on the NetDoktor PI decision:

Professors Justus Haucap (an economist the former chairman of Germany's Monopoly Commission, which advises the federal government on antitrust matters) and Rupprecht Podzsun (a legal scholar who is by now the undisputed number one among German competition law professors with respect to technology markets) awarded five stars to the Munich decision in the latest edition of their competition law podcast.

Both professors teach at the University of Dusseldorf. I met Professor Podszun at his previous university (Bayreuth) in 2014. That day I also had the honor to speak at his then-university alongside Judge Dr. Klaus Grabinski of the Federal Court of Justice about certain patent litigation topics.

In that podcast on the Munich NetDoktor v. Google decision, the professors agreed that the German federal government effectively became an economic operator by running a health information portal at taxpayers' expense, competing with private-sector offerings on the very opposite of a level playing field.

They note toward the end that even the half-hour duration of that podcast wasn't sufficient to highlight all that's remarkable about the well-reasoned ruling. But they managed to touch on various aspects, including the one I care about most: that the critical nature of health information doesn't serve to justify forcing or keeping high-quality offerings out of a market. The vertical cooperation challenged in NetDoktor was formed and launched last year, but even the COVID-19 pandemic must not be used for a pretext. The rule of law does not get infected by any virus.

Legal industry news service Juve (whose English-language spinoff Juve Patent I sometimes link to) reported on who represented the parties. The winning firm is Hausfeld, a firm with offices in the United States and Europe. In the U.S., Hausfeld focuses primarily on damages claims, and is suing Google on an indie app developer's behalf in a parallel case to Epic Games v. Google (Northern District of California). According to Juve, NetDoktor's lead counsel is Dr. Ann-Christin Richter. It was apparently the first time (but I guess not the last) for Hubert Burda Media, the media conglomerate that owns NetDoktor, to retain Hausfeld, and Hausfeld partner Professor Thomas Hoeppner ("Höppner" in German) has for years been counsel of record to a couple of publishers' associations of which the Burda group is a key member. Notably, Professor Hoeppner represented complainants against Google in the DG COMP investigation that resulted in the Google Shopping decision.

When the Supreme Court of the United States allowed the Pepper v. Apple class action over elevated App Store payment commissions to go forward, Hausfeld took a pro-developer position: Taking a Bite at the Apple: Ensuring a Level Playing Field for Competition on App Stores (which is not only about Apple's Apple Store, but also addresses the Google Play Store).

Now that I've digressed into App Store Antitrust again, I'd just like to highlight--in closing--that this has been my most popular tweet in quite a while:

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Monday, February 22, 2021

Sisvel v. Haier II: no patent ambush defense against acquirer of standard-essential patent, Germany's Federal Court of Justice holds

The bad news is already in the headline: if you get sued in Germany over a standard-essential patent (SEP) and the original patent holder engaged in patent ambush (thereby defrauding the standard-setting process), but the party asserting the patent against you now acquired the patent subsequently to standardization, you don't have a patent ambush-based defense in Germany.

The good news--for me personally--is that the Federal Court of Justice of Germany has published a decision that validates something I wrote about two years ago.

In March 2019, Judge Dr. Thomas Kuehnen ("Kühnen" in German) of the Dusseldorf Higher Regional Court ruled on appeal brought by Huawei in the German part of its dispute with Unwired Planet, further to a hearing in which he had already lashed out the practice of privateering (operating companies assigning patents to trolls). In that March 2019 ruling, the Dusseldorf appeals court held that the ND (non-discrimination) part of FRAND precluded the acquirer of a patent from seeking royalties at a rate inconsistent with the licensing practices of a previous owner of that patent. In my commentary, I welcomed the result, but crticized the derivation very harshly as "legislat[ing] from the bench as if patent law were a parallel universe." I said so because Judge Kuehnen's theory involved the notion that the FRAND promise and all that goes with it attached itself to a patent just like "in rem" rights in connection real estate, where a right of way may allow neighbors to lay telephone lines on your property--as opposed to an inter partes agreement, which wouldn't give a future acquirer any rights.

Fast forward by almost two years, and the Federal Court of Justice--which is the highest court in Germany to hear patent infringement and related antitrust cases (unless someone raises a constitutional issue that the Federal Constitutional Court would hear)--has just published a decision it already made on November 24, 2020 in a Sisvel v. Haier case. The first Sisvel v. Haier ruling came down in May 2020, so this is now Sisvel v. Haier II.

Some of the new Sisvel v. Haier II holdings restate, reinforce, and clarify Sisvel v. Haier I. For example the court explains that both parties--SEP holder and implementer--have an obligation to contribute in good faith to the conclusion of a license agreement on FRAND terms, and that they have to do so "in a manner commensurate with the situation."

But there's also a new aspect that gets addressed in Sisvel v. Haier II:

"(c) Outside of the scope of the protection of successors in interest in accordance with Art. 15(3) Patent Act, affirmative defenses that the implementer of an invention was entitled to bring against a prior owner of the patent-in-suit cannot be raised against the patentee's successor. This particularly applies to the affirmative defense of a 'patent ambush.'"

Art. 15(3) Patent Act simply ensures that a licensee remains licensed even if the patent holder transfers the patent.

Statutory law doesn't say that a former patent holder's unclean hands--here, due to ambush tactics during development of the standard--can give rise to an equitable defense against a subsequent owner.

Judge Kuehnen's April 2019 decision wasn't about patent ambush. But it was based on the general notion--which I sharply disagreed with though I liked the case-specific outcome--that certain rights and obligations (beyond just an already-granted license) attach themselves to a patent and survive any number of patent transfers.

The Federal Court of Justice has now clarified that, other than Art. 15(3) Patent Act on licenses surviving patent transfers, the acquirer of a patent is not responsible in any way for what a prior owner of that patent did.

If a given SEP was previously licensed at a lower rate than the one an acquirer is demanding now, that may very well be taken into consideration by a court. The terms of comparable license agreements matter, and if a license deal involves the same patent and a similarly-situated licensee, it may be particularly comparable and, therefore, a court may afford it a lot of weight in the FRAND analysis. Nevertheless, an acquirer of a patent doesn't engage in discriminatory treatment of licensees only because an inconsistency between the terms it is seeking now and the ones on which a prior owner of the same patent granted someone a license.

If an implementer of a standard has a patent ambush defense, it may just have to bring that one as an antitrust damages claim against the original patent owner who participated in the standard-setting process. And if a prior holder of the patent contented itself with substantially lower royalties than its acquirer, that may inform the FRAND analysis, but does not all by itself constitute discrimination.

It's disappointing that the situation described in this post incentivizes privateering. A patent holder may formally "sell" the patent to an acquirer, though actually retaining most of the revenues, and implementers will find it harder to defend themselves against the acquirer than they could have defended themselves against the original owner. That's suboptimal to say the least. Maybe an EU SEP directive or some other piece of legislation could do something about it and could make privateering less profitable. But under the statutory framework as it stands, I can't disagree with the Federal Court of Justice on the availability of a patent ambush defense.

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UK competition court doesn't doubt the merits of Epic Games' antitrust injunction claims against Apple, Google--just forum non conveniens for Apple's U.S. corporate parent

As MLex's Lewis Crofts mentioned on Twitter, Fortnite and Unreal Engine maker Epic Games

At this stage, the UK court had to make a purely procedural decision: whether or not Epic's complaints should be served on non-UK-based entities Epic wanted to sue in the UK. The court has no problem with service on UK-based Apple and Google entities, and even some Ireland-based (not UK, but EU) Google entities as far as Epic is seeking injunctions against them. With respect to those Irish entities, what helped Epic is timing: it filed before Brexit took effect.

The ideal outcome for Apple and Google would have been if the court had held that there was no "serious issue to be tried." That would have been comparable to an outright dismissal of a case not well pled. No such deficiency was identified here with respect to the injunctions Epic is seeking--just with respect to mere declarations of breach. The court furthermore evaluated whether Epic had "gateways" (reasons for which to bring cases against non-UK entities in the UK). But what ultimately did result in the dismissal of U.S.-based Apple Inc. from the case is simply that the British court determined the Northern District of California was the forum conveniens, and that, at a minimum, London wasn't a better choice.

The court also held that some of its claims didn't entitle Epic to sue certain non-UK Google entities in the UK, but the remaining claims ("claims for breach of the Chapter I and Chapter II prohibitions under the CA 1998 as regards the alleged 'Restrictive Terms' in the DDA and the removal of Fortnite from the Google Play Store") still give Epic a potential path to victory there. The court determined that "there is no issue to be tried as regards the claims for the two declarations in the Apple and Google actions" (also noting that "it may be unfortunate that declaratory relief is not included as a remedy available in the [Competition Appeal] Tribunal").

In the Unwired Planet patent case, the UK Supreme Court actually took a very permissive approach to forum conveniens, holding that even if a smartphone maker generated only 1% of its worldwide sales in the UK, a UK court might nevertheless set a worldwide royalty rate for a standard-essential patent portfolio, and if the defendant didn't agree to a license deal on those terms, it would face a UK-wide sales ban. Here, however, a UK court exercised restraint in jurisdictional terms.

Even if Epic had received the go-ahead today to sue Apple Inc. in London, a decision in the UK would still have taken longer than the California case, in which the trial is only a few months away. The discovery cutoff date in the U.S. case was one week ago.

Today's UK decision doesn't help Google in any way, nor does it solve Apple's real problem, which is that its App Store monopoly is under pressure in multiple jurisdictions.

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Sunday, February 21, 2021

Ericsson's escalation strategy against Samsung may provoke another presidential veto against U.S. import ban--5G at stake

Ericsson v. Samsung is the first massive 5G patent spat in the industry. Unless the two "lovebirds" settle reasonably soon, the dispute threatens--or in some people's eyes perhaps promises--to raise a number of important issues. One of them involves antisuit injunctions, especially multiple-anti ones. Samsung's reply brief in support of an expedited Federal Circuit appeal of Ericsson's anti-antisuit injunction from the Eastern District of Texas reinforced the need for speed, but also revealed the kind of playing field on which Ericsson wanted to arbitrate the terms of a cross-license. Samsung's motion succeeded in part, and its opening brief is due tomorrow (Monday, February 22), but Ericsson will have until April 2 to respond--ample time, as it wanted.

Ericsson has been pursuing an escalation-centric strategy in the early stage of the parties' renewed (the last one get settled seven years ago) dispute. Ericsson has escalated in territorial terms by bringing patent infringement cases in Germany, Belgium, and the Netherlands (according to Juve Patent) after its initial infringement claims in Texas. In the U.S., Ericsson also went to the ITC at the earliest opportunity this year:

  • On January 4, 2021, Ericsson filed a request for a U.S. import ban against Samsung mobile devices and TV sets. On February 2, the ITC opened the related investigation (PDF).

  • Samsung--like in its dispute with Huawei a few years back--just keeps things symmetrical and matches any of Ericsson's patent assertions with offensive claims of its own. On January 7, three days after Ericsson's first complaint, Samsung filed an ITC complaint targeting Ericsson's mobile base stations. The U.S. trade agency with quasi-judicial powers opened the related investigation on February 8 (PDF).

  • It's not unheard of for a party to bring a second ITC complaint against a party while another one is pending. However, the ITC can provide its swift service to complainants only if they limit the number of claims, and a more conservative approach would be to file a second complaint about 6 to 12 months after the first one against the same party. Patience is not that much of a virtue in Ericsson's view, and maybe Ericsson thought that complaints targeting different device types wouldn't have to be spaced out anyway. On January 15, within less than a fortnight of its first complaint, Ericsson filed one targeting Samsung's mobile base stations.

  • On February 4, Samsung brought a second complaint as well. The accused products are, again, base stations; Ericsson's doesn't make consumer electronics products anymore, which is part of the problem because Ericsson has become a hyperaggressive patent monetizer since its exit from the mobile handset business.

The asserted patents are related to 4G and 5G, but so far they don't appear to be declared-essential patents.

The public interest factor at the ITC is more of a formality at the early stage: typically the ITC will institute an investigation regardless of whether the accused products are critically important. Still, some arguments are made, and here Ericsson claims that its own mobile base station as well as Nokia's could easily replace Samsung's, while Samsung says that its products and Nokia's are sufficient to serve the U.S. market even if Ericsson's products were banned.

In reality, Samsung doesn't favor SEP injunctions anymore. About ten years ago, they were countersuing Apple over SEPs, and at that point they were interested in maximum leverage from that category of patents. But even in the Apple-Samsung dispute, SEPs quickly lost relevance. Samsung is far more interested in a strong product business than Ericsson, which wants to have it both ways but increasingly relies on patent licensing revenues.

In that Apple-Samsung dispute, the ITC actually decided in Samsung's favor, but the import ban (which wouldn't even have impacted Apple's flagship products at the time) never took effect because the United States Trade Representative (USTR), to whom President Obama had delegated his veto powers against ITC import bans, vetoed the exclusion order as he was concerned over SEP enforcement harming the economy.

A presidential veto might happen again. With Ericsson and Samsung battling each other in the ITC, the theoretical outcome would be that--of the big three vendors in a market from which Huawei is excluded for trade-war reasons--only Nokia could import 5G-capable mobile base stations into the U.S. market. And occasionally even Nokia is under attack.

History might repeat itself in a way next year. And this time around, Samsung would welcome a presidential veto, provided that it's symmetrical, which I'm sure it would be.

Samsung's foray into the 5G mobile network infrastructure market makes it the primary beneficiary of Huawei's purely political problems--and a challenger Ericsson and Nokia must be very afraid of. Besides generally seeking to maximize the income stream from its patent portfolio, Ericsson presumably hopes to make an impact on Samsung's competitiveness. Escalation can be a showing of strength, and one of desperation. It's too early to tell for sure which one of the two is driving Ericsson's decisions, but there are signs of Ericsson being a bit nervous, such as its recent dissent from a totally non-binding European Commission SEP expert group report that was more of a collection of ideas and views than anything else.

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Saturday, February 20, 2021

Federal Court of Justice of Germany issues prenatal death certificate for patent injunction reform: change is NOT coming

Earlier ths month I reported on an academic write-up by Judge Dr. Klaus Grabinski of the Federal Court of Justice of Germany, according to which third-party interests are not going to be more relevant to patent injunction decisions after the envisioned reform than they have been so far. Judge Dr. Grabinski has been traditionally opposed to any softening of Germany's near-automatic patent injunction regime. But yesterday, the German legislature published a broader statement on reform that was written by a different (and more balanced) judge of the same court, Judge Fabian Hoffmann. The context makes it pretty certain that it is not just the opinion of one judge, but a "per curiam" in terms of the court's submission to the legislature.

That pre-hearing statement starts with the following two sentences (my translation):

"It is not to be expected that the proportionality analysis envisioned by [the proposed reform statute on injunctive relief] will result in any fundamental departure from the principles of the Heat Exchanger case law. The probability of a finding or, respectively, negation of proportionality in a given case is, therefore, not going to change with respect to the underlying principles."

There you have it again: the total failure of pro-reform lobbying efforts. They wasted time, money, and energy, and the result is going to be symbolical, but the situation won't really improve. That statement by the Federal Court of Justice will be cited by plaintiffs and, ultimately, by the lower courts.

On Wednesday, the German legislature is going to add insult to injury by holding a hearing with a panel selection that represents a total disgrace for a democracy, as those advocating (essentially) the preservation of the status quo outnumber the camp seeking real reform by 6-1 if you count the number of people, and by about 6000-1 if it's about IP policy expertise.

By way of contrast, when United States Senate or House of Representatives committees hold hearings on patent policy, they typically invite two witnesses from each side of the debate. On the side favoring strong patent enforcement and a broad scope of patent-eligible subject matter, one of the two seats is typically reserved for Professor Adam Mossoff (I often disagree with him, but he's great in his way).

There's no such thing as an even split in Germany, where the Legal Affairs Committee of the Bundestag (Federal Parliament) will hold a two-hour hearing on Wednesday, February 24, with reform opponents outnumbering proponents by a wide margin. That's because the parties advocating balanced patent policy there are doing an absolutely miserable job. German automotive companies don't have a single person with much expertise in IP policy, and foreign companies who do a better job at this in other jurisdictions have problems that are specific to German politics. It would take too long to discuss this on a company-by-company basis for all those foreign organizations, but take Apple, for example: they probably made a huge mistake by talking to the executive and legislative branches of government directly, as Apple doesn't do R&D in Germany--most of its employees there have low-paying jobs at its retail stores, so unless there are some "fanbois" among politicians, there's no reason they'd care about Apple's concerns over near-automatic injunctions.

The reform process is still completely on the wrong track because of dinosaur companies relying on 20th century lobbying techniques and structures. It's time for some people to wake up because otherwise Nokia and Ericsson will win the pan-European lobbying war over component-level licensing (as the top EU court will receive submissions form the European Commission as well as the governments of many member states), and in the worst case preliminary injunctions will become widely available over patents in th EU as a result of the Munich I Regional Court's referral (with which I disagree, but it's a first-rate piece of work, which is why I urge everyone to take it very seriously).

Let's take a closer look at the list of speakers (PDF) at that injunction reform hearing. Six of them want to preserve the status quo to the greatest extent possible, differing only on nuances. They'll "square off" with an automotive industry lobbyist who'll never learn half as much about patent policy as any single one of the other six panelists has already forgotten.

  1. Judge Fabian Hoffmann, Federal Court of Justice: he's considered to be the most balanced judge serving on the patent-specialized division of that court, but he won't speak out against the institution he's going to represent. The paper I quoted further above speaks for itself.

  2. Professor Mary-Rose McGuire, University of Osnabrueck: under her supervision, Maximilian Schellhorn wrote a doctoral thesis Siemens summarized in a submission to the German government as concluding that German patent injunction law allegedly already complies with the proportionality requirement of the EU's IPR Enforcement Directive (I disagree). Professor McGuire is certain to take that same position. In her pre-hearing statement (PDF), she speaks out against the reform proposal as she's concerned there might ultimately be fewer injunctions (despite what the Federal Court of Justice has already indicated). That's the position of reform opponents: they'd rather leave the injunction statute (Art. 139 Patent Act) untouched. Oddly, at this stage I actually think it would be better to have no injunction reform than the one that is proposed, meaning that pro-patentee extremists and I are in procedural agreement, though obviously approaching this subject from very different angles.

  3. Professor Ansgar Ohly, Ludwig Maximilian University of Munich: in a submission to the German government, he commented favorably on the UK Supreme Court's Unwired Planet decision, which says everything. His pre-hearing statement (PDF) is pretty consistent with that of the Federal Court of Justice.

  4. Dr. Andreas Popp, patent attorney, representing the patent bar: He used to run chemical giant BASF's IP department and wants patents to be as strongly enforceable as possible.

  5. Dr. Kurt-Christian Scheel, managing director of the German automotive industry association (VDA): he's a jack-of-all-trades-but-no-master-of-IP lobbyist, dealing (according to his web profile) with climate, traffic, transport, economic, trade, an tax policy. IP isn't even listed there. I don't doubt he's learned a bit about it in recent years, and maybe he's been provided with a few good talking points, but there's no way he could spar with any of the other six, every one of whom is IP-specialized. To the extent that he knows beforehand what questions he's going to be asked, he should be OK. But if parliamentarians opposing reform tactically elect to ask him questions that will expose his limited understanding of the subject (such as by referring to specific legal questions), he's going to be lost.

    By having an automotive industry lobbyist as the only speaker at the hearing in support of a more meaningful reform, the anti-reform camp can not only pretend to hear both sides of the argument (never mind the 6-1 split) but also buttress its own narrative that it's basically just German car makers and foreign companies who don't want to pay patent royalties and, therefore, lobby for injunction reform.

  6. Dr. Renate Weisse, a Berlin-based patent attorney: she claims to represent lone inventors and small companies, though she acknowledges that her clients include larger organizations, too. In her pre-hearing statement (PDF) she argues that trolls are a myth: the problem is just that infringers don't want to pay inventors. Therefore, as you might already have guessed, she's in favor of automatic injunctions, and against meaningful reform.

  7. Dr. Alissa Zeller, Sr. VP of IP at BASF and speaking on behalf of the German chemical industry association's IP committee: that organization (vci) has been anti-reform all along; and it's simply done a far better job than the automotive industry and its allies.

The recording of the hearing will be made available the following day (Thursday), and I'll comment on it then. But the outcome is already clear as the deck is stacked against reform. So, once again, I want to stress that the automotive industry and others must learn from their mistakes. They've been losers. Just laughable. If they don't do a better job now that the name of the game is to influence the positions the European Commission and the governments of 27 Member States will communicate to the European Court of Justice, they'll pay a high price in terms of costly settlements.

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Wednesday, February 17, 2021

Nokia's losing streak in appeals courts continues: injunction gets lifted after Daimler's licensing offer is considered FRAND-compliant

Nokia launched its standard-essential patent (SEP) assertion campaign against Daimler almost two years ago in hopes of gaining so much leverage that it could force Daimler to take a costly license either from Nokia itself or from the Avanci group. It took almost a year and a half before Nokia obtained its first injunction against Daimler, which was in fact its first German SEP injunction ever. On Friday, that one imploded as the Karlsruhe Higher Regional Court's Sixth Civil Senate (Presiding Judge: Andreas Voss, "Voß" in German) allowed Daimler to prevent the enforcement by providing security to the amount of 75 million euros. The injunction was not enforced for even one day.

This blog has mentioned Judge Voss many times, but that was almost a decade ago, when he was the presiding judge of the Mannheim Regional Court's Seventh Civil Chamber. A few years ago he became an appellate judge, and with so many disputes being settled relatively early on, I haven't been to that appeals court even once. But Judge Voss's order to stay the enforcement of that Nokia v. Daimler injunction from Mannheim is an extremely important one, not only with a view to that particular dispute but also with a view to many other SEP cases.

Those German appeals courts have generally given Nokia a hard time. The former handset maker was about to lose an interlocutory appeal in Dusseldorf and just withdrew its meritless appeal. That was apparently after Friday's Karlsruhe decision that is the main focus of this post. Previously, the Munich Higher Regional Court raised the security amount in another Nokia v. Daimler case, making any enforcement less likely. And in a Nokia v. Lenovo case (also in Munich), the patent-in-suit turned out to be likely invalid.

Some of those decisions, such as the one in the Lenovo case, are disappointing only for Nokia. But Friday's Karlsruhe ruling is of transcendental importance as it re-enables what used to be a reliable safe-harbor defense strategy in German SEP cases for a long time: a FRAND licensing offer (by the implementer) that does not specify a particular royalty amount, leaving its determination--unless the parties reach an agreement anyway--to a court of law. That approach is often referred to as an "Art. 315 offer" as Art. 315 of the German Civil Code provides this kind of mechanism, which is found in many contexts and not just SEP litigation.

For a long time, an Art. 315 offer used to be a surefire way for an implementer to avoid being enjoined. But more recently, some German courts, particularly the Munich I Regional Court and Mannheim Regional Court, have found each and every implementer of a standard to be an unwilling licensee, allegedly in line with the Federal Court of Justice's Sisvel v. Haier SEP ruling, which could actually be interpreted more narrowly given the special circumstances of that case.

Until the European Court of Justice handed down its Huawei v. ZTE decision, Germany had a more SEP holder-friendly doctrine named Orange-Book-Standard in place. But even under Orange-Book-Standard, an Art. 315 offer was sufficient (unless some terms were attached to it that a court would have found to be too disadvantageous for the patentee to have to accept).

So, more recently, implementers were actually worse off under Huawei v. ZTE, due to Sivel v. Haier, than they used to be, for example, a decade ago under Orange-Book-Standard. That's what I call a setback!

At least some judges in Dusseldorf have continued to apply Huawei v. ZTE the wayo the German courts used to in the first few years after the ECJ ruling. But in Mannhein and Munich, the SEP litigation situation has recently been a mess of unbelievable proportions. Just so there's no misunderstanding, it's one thing that I disagree with the positions taken by the judges on FRAND questions and another that they're very good at what they're doing (case in point, the Munich court's preliminary reference to the ECJ is clear, concise, and compelling, though its effects could be disastrous)--they're just too patentee-friendly.

The Munich Higher Regional Court has a motion for an enforcement stay in a Nokia v. Daimler case pending, and is aware of where the key issues in that case are. It hasn't decided on the merits of the case yet; so far it has merely ruled on the security amount. I'm somewhat optimistic that the Munich appeals court, too, will conclude that defendants to SEP assertions shouldn't be in a fundamentally weaker position post-Sisvel v. Haier than they used to be pre-Huawei v. ZTE. At least in Karlsruhe, and therefore in Mannheim (the patent infringement court below), the problem has now been solved, not only for Daimler, but for everyone else as well.

Judge Voss's decision spans 23 pages because it summarizes the case and addresses a number of questions that could potentially have given rise to a stay. Clearly, the court below can't complain that Judge Voss wasn't deferential. He didn't want to just substitute his opinion for that of the lower court--a court on which he himself served so many years. At this stage, it's about a motion for a stay, not yet about a final appellate opinion. After the appellate hearing (in a year or so), Judge Voss may very well conclude that multiple aspects of the Mannheim Nokia v. Daimler judgment need to be overruled. But for now, Judge Voss wanted to order a stay only if he identified clear legal error, and the Mannheim court's determination that even an Art. 315 offer didn't establish Daimler's willingness to take a FRAND license was categorized as clearly erroneous. On that basis, the court granted Daimler a stay.

While the injunction is stayed, Nokia is still allowed to enforce its claim for an accounting. If Nokia does so, Daimler has to provide a whole lot of documentation enabling Nokia to quantify its damages claim. That's a major administrative burden on Daimler, yet better than not being able to sell its Mercedes cars.

I may very well talk about this Karlsruhe decision again in the near term, and possibly translate some passages. One tidbit is worth sharing: when calculating the collateral Daimler as to provide, the appeals court mentions the possibility that it could take five years until a final decision--and in that context, the possibility of having to await the ECJ's decision on component-level licensing (as a result of the preliminary reference from Dusseldorf) is mentioned. I found that part very interesting. Nokia will not be amused.

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Nokia withdraws interlocutory appeal of ECJ referral of component-level patent licensing question: dilatory tactics, disrespectful style

We're witnessing the third stage of Nokia's decline. First it failed to stay competitive in the handset business. Then its business model turned ever more trollish and its patent litigation strategies ever more abusive. The third and latest downturn is that Nokia is now abusing not only its patents, but also its procedural options in litigation.

Throughout almost 11 years of blogging about patent litigation, I have acknowledged on numerous occasions when parties played the litigation game smart. Very recently, I even gave automotive supplier Continental credit for an interesting strategy in a Delaware state court, even though I bashed them in 2019 for their U.S. antisuit motion (which indeed went nowhere). Up to a certain point, litigants--whether plaintiffs or defendants--are simply in their right to exercise their procedural rights for tactical purposes. But beyond that point, such behavior is no longer legitimate, even if it is still technically legal. For example, trolls that file dozens of cases against a single defendant over the course of a few months--or simultaneously sue hundreds of defendants--give patent assertion a bad name. I still have the greatest respect for the skills of Nokia's in-house litigators and outside counsel, but in recent months it has gone a bit too far with its withdrawals of cases just on the eve of trials or decisions.

In December, Nokia dropped two patent infringement cases against Daimler in Dusseldorf just before trial (at a point where the court presumably had already spent a lot of time studying the pleadings and preparing the trial), only to refile in Munich. And now, just before Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German) of one of the patent-specialized divisions of the Dusseldorf Higher Regional Court was going to rule on Nokia's interlocutory appeal of the lower Dusseldorf court's preliminary reference to the European Court of Justice, Nokia has withdrawn its appeal. Today a spokesman for the Dusseldorf appeals court informed me by email (appellate case no. 2 W 21/21).

From the beginning, Nokia knew that this interlocutory appeal was a bit of a long shot. Its appeal talked in more detail about whether it was admissible at all than about the question at issue. After the lower court didn't reconsider, this went up to the regional appeals court, and was assigned to the Second Civil Senate, whose aforementioned presiding judge took a very clear position on component-level SEP licensing in an article he published in GRUR, the leading German IP law journal, in 2019. For Judge Dr. Kuehnen, the order on Nokia's interlocutory appeal, which he had presumably been working on for some time, would have been an opportunity to provide his input to the top EU court. Not so anymore. Nokia abused the appellate process to engage in stalling, and apparently never really wanted a decision by the regional appeals court.

When pursuing its infringement cases, Nokia can't wait to get rulings (with the exception of those infringement cases it dropped in Dusseldorf because it probably expected them to be stayed, if not rejected). It's typically the defendants to those infringement complaints who seek to extend filng deadlines, move to file post-trial briefs, and so forth. It would have been better for Nokia's credibility to act consistently, as opposed to stalling in Dusseldorf while insisting on speedy dispute resolution in other venues.

The question of component-level licensing is the key issue in Nokia's--and various other parties'--automotive patent cases. Whether one prefers one outcome of that ECJ referral or another, clarification will help, and if the ECJ ruling provides clarification (there is always a risk of a decision raising new questions), licensing negotiations will benefit from such guidance. Why does Nokia prefer to delay such resolution? Are they so worried they're going to lose? Is Nokia's plan to gain leverage over Daimler in some infringement case in the meantime? In light of a key appellate decision Nokia lost in Karlsruhe (where all appeals from Mannheim go) on Friday (which I'll discuss in the next post), it's just become even harder for Nokia to enforce any SEP injunction against Daimler in the near term.

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Epic Games files antitrust complaint against Apple with the European Commission's Directorate-General for Competition (DG COMP): media reports

Frankfurter Allgemeine Zeitung (FAZ) and the Financial Times report that Fortnite and Unreal Engine maker Epic Games has filed an EU antitrust complaint against Apple. Epic is being represented by Clifford Chance (the FAZ article quotes Mr. Ashwin van Rooijen), a major global firm that has been a key player in many EU tech antitrust matters over the years.

When asked why they filed this complaint against only Apple, and not simultaneously against Google, Epic's lawyers apparently said that Apple was presently the focus of EU antitrust enforcement in this context. There is an ongoing investigation of Spotify's complaint against Apple. Both Epic and Spotify are members of the Coalition for App Fairness (CAF), an organization whose positions on app distribution Microsoft has supported publicly without joining the organization.

For proper disclosure, I am a member of the informal #AppRising movement and brought my own complaints against Apple and Google in multiple jurisdictions last month (EU case numbers: AT.40747 Apple, AT.40748 Google). I consider this kind of topic to be the single most important tech antitrust issue of the 2020s. Standard-essential patent (SEP) issues continue to be very important, but are eclipsed by the #AppRising. But the concerns raised by app developers are diverse, and just like I haven't seen Epic comment on my complaint regarding COVID-related apps, I don't want to take a position on Epic's (and others') complaints over in-app payments--which doesn't mean that I necessarily disagree, just that at this point it's too early for me to speak out on a legally complex issue.

As I just mentioned my own complaints, a few hours ago iClarified mentioned me in connection with a new rule--or maybe it's more of a clarification of an existing rule--by Apple in connection with "health pass" apps (apps that enable users to show to others, such as airport security staff, that they have been vaccinated or have recently been tested negatively). So here's a bit of a clarification from my end in the context of iClarified's report on Apple's potential clarification regarding health apps: I don't envision my own app company to offer any "health pass"-like functionality and, therefore, prefer not to comment on that category of COVID-related apps other than noting that governments--rather than private entities--should regulate health passes, such as by ensuring that only health passes with a certain stamp of approval would be recognized at airports, sports venues, and so forth.

I don't mean to comment on Epic's choice of bringing a complaint against only Apple, not Google. I'm sure they had their reasons, and it's possible they previously talked to DG COMP and made their decision based on the feedback they got.

My company, however, seeks to resolve its issue with both major platforms at the same pace. Last week's decision by the Munich I Regional Court against Google, of which I've meanwhile translated the remaining 10% I just summarized a week ago, makes it clear that "gatekeepers" (the ruling already uses that key term of the upcoming Digital Markets Act) must not disadvantage high-quality health-related offerings just because they don't come from a governmental source. My company is going to bring a lawsuit in Munich on that basis pretty soon. The Munich court's holding is very clear, and Google's rule on COVID-related Android apps is fundamentally more abusive--because it results in complete foreclosure--than its preferential treatment of a government-run health information portal by its search engine. If Google doesn't take the Munich court's holdings seriously, it will just have to be enjoined again. After filing the complaint, I will publish an English translation on this blog.

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Sunday, February 14, 2021

Annotated translation of referral to ECJ of availability of preliminary injunctions over battle-untested patents: Munich I Regional Court

Earlier this week I translated what, if affirmed (as I hope), will be a landmark antitrust ruling by the Munich I Regional Court against Google in the health information context. Last month I had already reported on another key decision from Munich: a preliminary reference to the European Court of Justice of a question concerning the availability of preliminary injunctions over battle-untested patents. Note that the reasons for the two occurrences of the word "preliminary" in the previous sentence are independent of each other: the term "preliminary reference" describes the presentation of questions of EU law to the bloc's top court by a national court regardless of whether such reference occurs in connection with preliminary injunctions or (which is almost always the case) in a full-blown proceeding just prior to final judgment. "Preliminary" means that the ECJ answers the question, and then the national court resumes its proceedings and enters its judgment, as opposed to a traditional appeal from a final judgment.

When I saw the question referred to the ECJ, I already noticed that it was very well written, and I wish the Dusseldorf Regional Court had done a similarly good job in that Nokia v. Daimler case (I agree with the Dusseldorf court's intent, but in terms of craftsmanship, the Munich court's work is--though I oppose its objective and had serious issues with that Munich panel last year over what I considered to be insufficient coronavirus prevention measures--hands-down superior by virtue of its clarity, structure, and focus).

The companies and organizations advocating proportionality in patent remedies should think hard about whether this referral to Luxembourg presents an opportunity to raise proportionality issues under the EU directive in question. There may not be another opportunity to challenge Germany's near-automatic patent injunction regime before the top EU court for years, given that I don't expect any regional or higher regional court to refer a proportionality-centric question to the ECJ. A court of final appeal would theoretically have to refer questions of EU law to the ECJ, but practically there are reasons why that could also take many years or never happen at all, the most important one of which is that German patent cases are typically settled early on.

As almost always, my translations are not optimized for elegance as I take hardly any liberties, striving to stay true to the original. And where it appears appropriate, I add explanations in [brackets], especially where I draw comparisons to U.S. law.

UNOFFICIAL TRANSLATION

Munich I Regional Court

Case no. 21 O 16782/20

In the case brought by

[anonymized except for the legal form]

- Movant - [as I explained in the Google antitrust context, preliminary injunction proceedings in Germany are separate cases, so Movant in this case also means Plaintiff]

Counsel to Movant: [anonymized]

vs.

1) [anonymized except for the legal form]

- Non-Movant - [for the reason stated above, this also means Defendant]

2) [anonymized except for the legal form; both non-movants are from the same corporate group]

- Non-Movant -

Counsel to Non-Movants: [anonymized]

over a request for a preliminary injunction,

Presiding Regional Judge Pichlmaier, Regional Judge Dr. Schacht, M.A., and Regional Judge Dr. Fricke of the Munich I Regional Court - 21st Civil Chamber - enter the following

Order

Preliminary reference is made of the following question to the Court of Justice of the European Union in accordance with Art. 267 TFEU, for the purpose of interpreting Art. 9(1) of Directive 2004/48/EC of the European Parliament and of the Council of April 29, 2004, on the enforcement of intellectual property rights:

Is it compliant with Article 9(1) of Directive 2004/48/EC that certain higher regional courts, whose decisions cannot be appealed further in preliminary injunction proceedings, generally deny injunctive relief over patent infringement if the patent-in-suit has not survived an opposition or nullity proceeding in the first instance?

[Opposition proceedings take place before the European Patent Office or a national patent office, such as the German Patent and Trademark Office, if a party opposes the grant of a patent within a nine-month window of publication of the grant. Nullity proceedings can be brought before the Federal Patent Court of Germany with no such time limit. Regional courts hear patent infringement cases in the first instance, but defendants do not have a full invalidity defense: instead, under Germany's infamous "bifurcation" system, the regional courts assess the likelihood of invalidity, and if their standard is met, they order a stay pending the parallel validity determination. In that context, regional courts all too often decline to analyze certain invalidity contentions, particularly if a defendant argues that the claimed invention lacks an inventive step.]

Reasons:

Movant has requested this Court to enter a preliminary injunction that would prohibit Non-Movants from offering or distributing connectors that practice the teachings of European patent EP[number redacted] that was issued to Movant.

1. Legal framework [in fact, this section discusses purely the statutory framework, not yet the appellate case law]

[European] Union law

The following passages are excerpts from the recitals of Directive 2004/48/EC:

(1) The achievement of the Internal Market entails [...] [same omission as in original] creating an environment conducive to innovation and investment. In this context, the protection of intellectual property is an essential element for the success of the Internal Market. The protection of intellectual property is important not only for promoting innovation and creativity, but also for developing employment and improving competitiveness.

[Note that older EU laws refer to the Internal Market; at this point, it is called the Single Market.]

(2) The protection of intellectual property should allow the inventor or creator to derive a legitimate profit from his invention or creation. It should also allow the widest possible dissemination of works, ideas and new know-how. [...] [same omission as in original]

(3) However, without effective means of enforcing intellectual property rights, innovation and creativity are discouraged and investment diminished. It is therefore necessary to ensure that the substantive law on intellectual property, which is nowadays largely part of the acquis communautaire, is applied effectively in the Community. In this respect, the means of enforcing intellectual property rights are of paramount importance for the success of the Internal Market.

(22) It is also essential to provide for provisional measures for the immediate termination of infringements, without awaiting a decision on the substance of the case, while observing the rights of the defence, ensuring the proportionality of the provisional measures as appropriate to the characteristics of the case in question and providing the guarantees needed to cover the costs and the injury caused to the defendant by an unjustified request. Such measures are particularly justified where any delay would cause irreparable harm to the holder of an intellectual property right.

(24) Depending on the particular case, and if justified by the circumstances, the measures, procedures and remedies to be provided for should include prohibitory measures aimed at preventing further infringements of intellectual property rights. [...] [same omission as in original]

Directive 2004/48/EC sets out:

Article 9

Provisional and precautionary measures

1. Member States shall ensure that the judicial authorities may, at the request of the applicant:

(a) issue against the alleged infringer an interlocutory injunction intended to prevent any imminent infringement of an intellectual property right, or to forbid, on a provisional basis and subject, where appropriate, to a recurring penalty payment where provided for by national law, the continuation of the alleged infringements of that right, or to make such continuation subject to the lodging of guarantees intended to ensure the compensation of the rightholder; [...] [same omission as in original]

[The term "interlocutory injunction" that is found in the EU's Enforcement Directive would make more sense with respect to preliminary injunctions in U.S. proceedings, which are entered as an interim decision the very same case in which a final judgment will come down later. In Germany, it is theoretically possible to seek only a prelimininary injunction without ever litigating the same matter in a main proceeding (though either party is free to seek clarification in a main proceeding, and it would be disadvantageous with a view to a subsequent award of fees if a prevailing movant obtained a PI but didn't have it affirmed in a main proceeding.]

National law

Art. 58 of the German Patent Act (PatG) states in its current form:

The grant of the patent will be published in the patent journal. The patent document is published simultaneously. As per publication in the patent journal, the patent legally takes effect.

Art. 139 of the [German] Patent Act states in its current form:

(1) Against him who practices a patented invention in violation of articles 9 through 13, the holder of the infringed patent is entitled to an injunction if there is a risk of a recurring violation. This claim is also available if a first-time infringement is imminent.

Art. 935 of the [German] Code of Civil Procedure (ZPO) states in its current form:

Preliminary injunctions concerning the disputed matter are available when there is concern that an alteration of the status quo thwarts or substantially complicates the enforcement of a party's right[s].

Art. 940 of the Code of Civil Procedure states in its current form:

Preliminary injunctions are also available for the purpose of adjudicating a preliminary status quo with respect to a disputed matter, provided that such adjudication, particularly in the event of enduring legal relationships, appears necessary in order to avert substantial harm, or to prevent violent acts that threaten to be committed, or for other reasons.

2. Circumstances of the originating case [i.e., the case before a national court from which a preliminary reference to the top EU court is made]

a. Movant requested on December 14, 2020, to bar Non-Movants by means of a preliminary injunction from the infringement of European Patent EP[number redacted] (hereinafter referred to as the "Patent-in-Suit"). [Literally, it is called the "Injunction Patent" in the original, as--I'll repeat myself--a preliminary injunction proceeding in Germany is not a main proceeding; however, I chose the term that makes the translation as a whole easier to read, especially for the U.S.-based majority of my readers.]

The patent application from which the Patent-in-Suit was granted is dated March 5, 2013. In a letter dated May 8, 2020, counsel to Non-Movants, on behalf of the second Non-Movant, submitted to the patent examiner reasons for which the patent should not be granted. On November 26, 2020, the patent finally issued and the publication of its grant was scheduled for December 23, 2020. On January 15, 2021, the second Non-Movant filed with the European Patent Office an opposition to the grant of the Patent-in-Suit. This referring Court, based on Movant's pleadings, deems the enforceable patent to be infringed by certain products offered by Non-Movants. This referring Court deems the validity of the patent, starting from its examination by the European Patent Office as well as taking into consideration Non-Movants' pleadings with in their opposition filing [with the EPO] of January 15, 2021, not to be in jeopardy.

b. This Court considers itself to be prevented from the issuance of the requested preliminary injunction solely by the jurisprudence of the Munich Higher Regional Court, which makes the final decision. [Footnote 1 then explains: "Under German law, there are no appeals in preliminary-injunction proceedings from the second instance, the higher regional court; the Federal Court of Justice does not hear preliminary injunction appeals."]

According to the case law of the Munich Higher REgional Court it does not suffice for the grant of emergency relief in the event of a patent infringement that the asserted patent was granted by its issuing authority--here, the European Patent Office--after careful examination and that the question of validity undergoes a judicial assessment even in connection with a decision on a motion for a preliminary injunction. Instead, the Munich Higher Regional Court makes it a requirement that, beyond the qualified examination of patentability by the patent office at the prosecution stage, there must be a decision by the European Patent Office (EPO) in an opposition or appellate proceeding or by the Federal Patent Courtin a nullity proceeding, which decision must affirm the validity of the asserted patent. Therefore, the examination underlying the issuance of the patent should not be sufficient for the presumption of validity of a patent; instead, the validity of the examined and issued patent should have been assessed one more time by the issuing authority or, respectively, the Federal Patent Court.

The pertinent judgment by the Munich Higher Regional Court of December 12, 2019 (appellate case no. 6 U 4009/19; published in GRUR 2020, 385) contains the following passage:

"In accordance with common opinion [meaning jurisprudence and potentially also including academic papers] the grant of a preliminary injunction in patent infringement proceedings is an option only if both the question of infringement as well as the validity of the asserted intellectual property right must be answered so clearly in the moving party's favor that an erroneous decision, which would have to be corrected in a [full-blown] main proceeding cannot seriously be expected. In accordance with the Dusseldorf Higher Regional Court's case law (cf. citations in its judgment of December 14, 2017, appellate case no. 2 U 18/17, juris Tz. 18, as well as Kuehnen, Patent Litigation Proceedings in Germany, 12th edition, chapter G margin no. 42) and of the Karlsruhe Higher Regional Court (GRUR-RR 2009, 442 = InstGE 11, 143; GRUR-RR 2015, 509) there can generally be a sufficiently reliable presumption of validity of the asserted patent only if the asserted patent has survived an opposition or nullity proceeding in the first instance, i.e., there already must have been a decision confirming the validity of the patent in an opposition or appellate proceeding before the European Patent Office (EPO) or in a nullity proceeding before the Federal Patent Court. [...] [same omission as in original]"

Nowhere do the pertinent German statutes presuppose a first-instance decision in a validity proceeding as a requirement for emergency relief to prohibit the infringement of a patent. This would not be reconcilable with the fact that the legal force of a patent (such as its enforceability in court) take effect upon publication of its grant (Art. 58(1) PatG; Art. 97(3) EPC)--as opposed to entering into force only at a later point (first-instance decision in an opposition or nullity proceeding). German statutory law is therefore, in this referring Court's opinion, entirely consistent with Directive 2004/48/EC. However, not only do national laws have to be in conformity with [European] Union law, but the same requirement also obligates national courts to make decision or, respectively, interpret national laws in a form that is consistent with the objectives of a[n EU] directive; where that is not the case, jurisprudence needs to alter course (see, European Court of Justice (Grand Chamber), decision of April 17, 2018--C-414/165 (Vera Egenberger / Evangelisches Werk für Diakonie und Entwicklung eV).

[The previous sentence additionally--and particularly forcefully--opens the door to raising proportionality issues under the EU's Enforcement Directive, as the point one could and should raise here is that the injunction statute of German patent law, Art. 139 PatG, also needs to be interpreted in a manner consistent with the Enforcement Directive's proportionality requirement, which German courts clearly refuse to do.]

The [aformentioned higher regional courts'] case law derives the requirement of a first-instance decision in a validity proceeding, by way of interpretation, from Art. 940 Code of Civil Procedure; urgency (essential within the meaning of Recital 22 of Directive 2004/48/EC) to grant a preliminary injunction should only be presumed if the validity of the asserted patent has been validated by a first-instance opposition or nullity proceeding. However, in the opinion of this referring Court, such construction is irreconcilable with Directive 2004/48/EC and, therefore, contravenes EU law:

Art. 9(1) of the Enforcement Directive seeks to ensure that provisional measures can be ordered against a patent infringer in order to bar continued infringement. But the [appellate] case law this order is challenging by means of a preliminary reference does not enable such measures, as a just-granted patent--as here--cannot yet have undergone a validity proceeding (opposition or nullity proceedings can occur only post-grant). Even many of the patents that had been granted a long time ago have frequently not yet undergone such a validity proceeding by the time emergency relief is sought; naturally, the patentee cannot even influence in any way whether a patent is challenged post-grant by means of an opposition or a nullity complaint. A provisional measure is then, even in the event of an acute infringement issue, generally available only after a validity proceeding (to be initiated by a third party) has been completed in the first instance, which can take many months or even years. During all of this time, continued infringement would have to be accepted under the [appellate] case law challenged by means of this reference, even though a patent--unlike other intellectual property rights--is under the law subjected to a thorough and qualified examination before it is issued and can be legally enforced. [Footnote 2 then explains: "It is noted in this context that this referring Court, too, subjects a patent to a summary assessment of validity in the process of deciding on a motion for a preliminary injunction; if the non-moving party pleads substantial reasons for doubt in its validity, a preliminary injunction does not issue."]

The fact that the challenged [appellate] case law allows exceptions from the principle of having completed in the first instance an adversarial validity proceeding does not change this referring Court's view that the challenged [appellate] case law and, in particular, the interpretative approach discussed above contravene European [Union] law; an interpretative principle contrary to European [Union] law does not become compliant with European [Unio] law by granting certain exceptions and, thereby, restoring, at best, partial compliance with European [Union] law.

What the [appellate] case law (Munich Higher Regional Court, GRUR 2020, 385) contemplates is that the grant of a preliminary injunction without a first-instance decision in a validity proceeding is an option if

  • ["]the non-moving party already participated in the patent examination procedure with its own contentions, effectively converting prosecution into an inter partes proceeding, i.e., if the contentions presented have already been examined by a qualified examiner;

  • the asserted patent is generally deemed to be valid;

  • the invalidity contentions brought against the asserted patent prove untenable even on the basis of a summary determination; or

  • egregious circumstances, such as market dynamics, exceptionally make it unacceptable for the moving party to await the outcome of an opposition or nullity proceeding."

But in the present case, none of the exceptions applies, as the Munich Higher Regional Court applies them so restrictively that in practice--such as in this case--they are of purely theoretical relevance. While the second Non-Movant participated in the examination of the asserted patent with its own contentions, the Munich Higher Regional Court's case law (see its order of November 26, 2020; appellate case no. 6 W 1146/0; apparently not published yet) requires that the contentions presented in the examination proceeding are identical to those presented later at the preliminary-injunction stage. If a non-moving party--as in this case--also presents other contentions at the preliminary-injunction stage than those presented during examination, validity is deemed to be uncertain. The other exceptions listed above do not apply here either.

Therefore, this referring Court presently feels forced--contrary to its own understanding of Art. 9(1) of Directive 2004/48/EC--to deny emergency relief in this present case as the Patent-in-Suit has not yet survived an adversarial validity proceeding and none of the exceptions [appellate] case law allows from this principal requirement would apply.

With the following question, this referring Court requests an interpretation of Art. 9(1)(a) of Directive 2004/48/EC, particularly of the following passage:

"may, at the request of the applicant [...] issue [...] an interlocutory injunction intended to prevent any imminent infringement of an intellectual property right, or to forbid {...] the continuation of the alleged infringements of that right"

This step is taken as this referring Court concludes from the literal meaning of the statute that the possibility of provisional measures is not ensured under national law if such injunctions are denied because no first-instance opposition or nullity proceeding has taken place.

Question:

Is it compliant with Article 9(1) of Directive 2004/48/EC that certain higher regional courts, whose decisions cannot be appealed further in preliminary injunction proceedings, generally deny injunctive relief over patent infringement if the patent-in-suit has not survived an opposition or nullity proceeding in the first instance?

[Judges' signatures]

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