Thursday, April 22, 2021

Intel doesn't infringe VLSI patents-in-suit: jury verdict in second VLSI v. Intel case (Western District of Texas)

Reuters reports--as do other media--that a jury in Waco (Western District of Texas) has found for Intel. According to the verdict, which I haven't found on the electronic docket yet, the semiconductor company infringes neither of the two patents asserted by VLSI Technology, a non-practicing entity funded by Fortress Investment.

In early March, Intel had lost a trial over two other VLSI patents, and the damages award amounted to $2.175 billion.

There'll be a third VLSI v. Intel trial in June, and should jurors or their friends or relatives inform themselves on the Internet of the wider dispute, the picture will be more favorable to Intel than last time.

This outcome is in line with my observations. I noted the burden of proof on infringement and that there were reasons that might very lead a jury to doubt the infringement allegations. I wrote: "I think Intel may avoid an infringement finding, but even if it happened, I can't imagine it would be another billion-dollar amount."

Just like Intel is appealing the March verdict, VLSI may appeal the April decision.

Law.com's Scott Graham reported on an interesting change regarding damages-related evidence. While this jury never reached the point of a damages determination, we may see somewhat more rational damages awards in Waco going forward. That's of the utmost importance not only to Intel but also to numerous other technology companies with a presence in that district.

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Wednesday, April 21, 2021

Retired UK judge: ETSI FRAND pledge requires component-level licensing of cellular standard-essential patents

Today's IPKat/LSE Joint Event was entitled "The CJEU's billion-dollar questions -- who gets a SEP license and when should an injunction be granted?" One of Europe's most famous patent judges, recently-retired Lord Justice Sir Christopher Floyd, gave a clear answer to the first question: in his interpretation, ETSI's standard-essential patent (SEP) licensing pledge entitles every maker of equipment, including suppliers of components, to a license on FRAND terms.

That conclusion didn't surprise me. The ETSI agreement must be interpreted under French law, and at my Brussels conference on component-level SEP licensing in November 2019, French law professor Philippe Stoffel-Munck took the same position. What made the judge's position today particularly noteworthy is that he previously criticized the ETSI FRAND pledge for containing only about half the clarity that he'd like to see in it. He provide one example of such a shortcoming: the pledge doesn't specify in what forum any disputes over licensing terms should be resolved.

While some major cellular SEP holders--such as InterDigital, whose licensing chief Eeva Hakoranta also spoke today--argue that licensing at the end-product level is the standard in their industry, two industry representatives at today's webinar--though it's important to note they all expressed only their personal opinions--explained why component-level licensing is key to the ability of standardization to serve its purpose. Intel's IP policy chief Dr. Rebekka Porath mentioned that Intel, a member of approximately 300 standard-setting organizations, does grant SEP licenses at the component level. Last summer, a component-level SEP license deal between Huawei and Sharp became known (neither Huawei nor Sharp spoke today). Automotive supplier Continental's IP chief Dr. Roman Bonn explained the supply chain for connected cars, where cellular standards are implemented in the baseband chipset. What corroborates this view is what WilmerHale's patent and antitrust attorney Tim Syrett explained: he's litigated various SEP cases in the U.S. involving SEPs, and the infringement analysis always focused on the source code of the baseband chip. (This is a structural difference between SEP litigation in the U.S. and Germany; in the latter country, infringement allegations are typically based on the specification of a standard, not on what the accused products actually do.)

With respect to industry practice, SEP litigants, particularly Nokia, frequently point to the Avanci patent pool, which licenses end-product makers (and to the extent it has anything to offer to tier 1 suppliers, i.e. car makers' direct suppliers, that's not a full and exhaustive license). In today's IPKat/LSE webinar, Mrs. Hakaronta from InterDigital mentioned that 20 automotive brands had taken an Avanci license (while complaining in no uncertain terms about the attitude of other auto makers to SEP licensing, with a particular emphasis on Daimler).

The number of 20 (Avanci-licensee brands) is an overstatement because some of them have licenses that don't cover 4G (just up to 3G). Volkswagen's chief patent counsel Uwe Wiesner was among the speakers of yesterday's patent pools webinar, organized by the European Commission's DG GROW. His presentation quoted an October 2020 paper according to which "[t]he automakers that have taken a license represented approximately 12% of the total worldwide vehicle production in 2019." Volkswagen's high-volume brands apparently don't have a 4G license from Avanci.

Mr. Wiesner's Avanci "case study" painted anything but a rosy picture. He criticized Avanci's rule of licensing only car makers for not meeting the needs of potential customers. To put it differently, Mr. Wiesner didn't quite sound like a perfectly happy customer: at least it's fair to say he sees a lot of room for improvement, and isn't fully sold yet on Avanci's terms, despite being generally sympathetic to pools.

The Dusseldorf Regional Court's preliminary reference of access to component-level licenses to the European Court of Justice won't be decided in webinars. But such events shed light on the underlying facts and on industry realities. Plus, today a fomer high-profile judge took a crystal clear position on access to component-level SEP licenses based on the ETSI FRAND pledge.

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Tuesday, April 20, 2021

Waco jury in VLSI v. Intel starts deliberation: Intel vehemently denies infringement and attacks $3 billion damages claim

In my previous post on the VLSI v. Intel patent trial in the Western District of Texas, I asked the question of whether the jury will be persuaded that, should it find an infringement, Intel would have paid a $3 billion royalty on two patents that are part of a portfolio that was at some point valued at $7 million. The answer is just a question of days, if not hours: counsel for both parties--Irell & Manella's Morgan Chu and WilmerHale's Bill Lee--just delivered closing argument.

A week ago, Intel's opening argument emphasized the semiconductor company's independent research and development. VLSI's lawyer told the jury that this is irrelevant under patent law: you can infringe whether or not you know the patent. Mr. Chu called this argument "a red herring" and "a signpost in the desert"--but the strict-liability nature of patent law is separate from whether jurors will feel that Intel has committed a wrongdoing it needs to be penalized for, or whether there is, at best, an accidential infringement at issue.

The "signpost in the desert" was not only the "post" metaphor: Mr. Lee compared VLSI's efforts to allege an infringement despite a patent having been narrowed on reexamination as "moving the fencepost" in order to develop an infringement theory regardless.

Most of the argument was very technical, and counsel for both parties tried to put testimony, particularly expert testimony, into a particular context. For example, a point that Mr. Lee made and which might resonate with the jury was that VLSI got an Intel witness to confirm that a page from a document was consistent with one of VSLI's arguments, but the headline of the document showed that it was just some general technical description and not specific to the accused products. What I consider even more likely to bear weight with jurors is an Intel position on claim construction: Mr. Lee said that this morning he "walked from [his] hotel to the court": "'from' means 'from', 'to' means 'to'." Those kinds of non-infringement arguments appeal to common sense. By comparison, VLSI's lawyer's explanations of the meaning of "when" were much more technical--that was necessary in the context, but it just wasn't as easy to understand as Intel's interpretation of "from" and "to." VLSI's explanation of "determinism" was funny: if you boil an egg for 10 minutes, then you always know what the result is going to be like.

Yet another point that jurors can easily understand was that the companies who previously owned these patents had lots of lawyers, lots of licensing executives, and lots of engineers, but didn't decide to sue Intel.

Throughout the trial, from opening to closing, Mr. Chu sounded like someone who was really tired of hearing Intel's non-infringement and damages-related arguments. Mr. Lee's role was that of a voice of reason. What he said and the way he said it described this case as one in which a company that had just been created to acquire those patents and sue Intel was looking for a payout orders of magnitude greater than the purchasing price of the patents.

Intel's lawyer may also have managed to persuade jurors that Intel's licensing expert, who worked on microprocessor patent licensing for decades while at IBM, had a stronger background than VSLI's royalties expert.

Mr. Lee pointed to testimony according to which Intel would have generated the relevant sales anyway, with or without the alleged patent infringement.

Interestingly, VSLI's lawyer changed his tone a bit during the initial part of his rebuttal today. Mr. Chu sounded concerned that some of Intel's defensive arguments could really get traction. He started his rebuttal saying that Intel made it sound like VSLI accused Intel's witnesses of being liars ("liar is a schoolyard term"), but tried to put this into perspective. As he went on, he sought to show his frustration (over Intel's arguments allegedly not making sense) to the jury.

Mr. Chu criticized Intel's invalidity contentions by saying Intel came with one prior art reference, then added another, and yet another. As a patent litigation watcher I've seen countless attacks on the validity of a patent that argue a patent is invalid ofter a single reference, but if one disagreed, the combination of two--or maybe also three or more--references would do the job. There are also many cases in which defendants will start with a combination of two or three references. This is case-specific. I don't disagree with Mr. Chu that a combination of seven references is a lot, but there's no formal legal limit on the number of elements of a prior art combination. Mr. Chu also stressed that those prior art combinations involve patents from major corporations, and argues this weighs against obviousness.

Juries rarely invalidate patents, even though most patents aren't valid as granted. In this jury trial, the emphasis was also clearly more on (non-)infringement and on the hypothetical damages.

In his closing argument, Mr. Chu reminded jurors of NXP receiving a share of what VLSI may be awarded. That is a double-edged sword: on the one hand, it addresses Intel's "VSLI doesn't invent or make products" argument, but it may also reduce the witness of any testimony from NXP, and jurors may indeed ask themselves why NXP didn't bring an action against Intel itself while it owned those patents.

Toward the end, Mr. Chu did his best to deliver a passionate, patriotic argument about the United States having been the leaders in technology for more than 200 years "in every facet of life." And he thanked the jury for paying attention to both sides: "You've been fabulous." That was an emotional closing, but the question for the jury to decide is not who was most grateful for their attention. Now the jury will have to weigh what it heard, after getting a late lunch, and it will have to take into consideration that VLSI bears the burden of proof on infringement. I think Intel may avoid an infringement finding, but even if it happened, I can't imagine it would be another billion-dollar amount. The history of those patents, their age, their prior owners, their past valuation--that's a combination of arguments, any single one of which has the potential dissuade a jury from rendering a ginormous damages verdict.

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Similarities and differences between #AppRising and #ClubRising (Super League)--the two hottest antitrust topics at the moment

[Update] Apparently some clubs are trying to withdraw, and it remains to be seen whether that is even contractually possible. Should the SuperLeague project come to an end now because of political pressure and fan protests, that would obviously moot the (otherwise interesting) antitrust aspects. But if it's true that all 12 founding members signed a binding 23-year contract, that may give rise to major contract damages claims. [/Update]

In direct response to--and partly even as a pre-emptive strike before--the announcement that 12 of the most popular and successful soccer clubs are going to set up their own international break-away league, The Super League, European soccer body UEFA and various national associations and league bodies threatened with retaliation, including but not limited to banning those clubs from domestic tournaments and their players from representing their nations. The founders of the Super League had obviously prepared for that scenario, and they are going to file antitrust lawsuits against those sports bodies. At the same time, some observers predict that the associations will allege that the Super League constitutes an anticompetitive cartel.

The European Commission's Directorate-General for Competition (DG COMP) is not at all inclined to act. Instead, the Commission points to other forms of dispute resolution, such as arbitration (though the Switzerland-based Court of Arbitration for Sport farcically ignores even the most basic principles of competition law as its "judges" are handpicked by association officials).

The first national court decision has already come down: further to a motion reportedly filed by CMS's Manuel Sánchez-Puelles, the Juzgado de lo Mercantil nº 17 of Madrid, a commercial court, has entered "medidas cautelares" (basically an ex parte preliminary injunction) barring UEFA and FIFA from adopting or threatening any measure that "prohibits, restricts, limits, places any condition on, directly or indirectly," the creation of the Super League. This is an anti-retaliation decision comparable to a U.S. court preventing Apple from terminating Epic's developer account for Unreal Engine.

In an unmistakable sign that existing competition laws in the EU, its Member States, and the UK (from which 6 of the 12 Super League founding members hail) actually favor the clubs, not the associations, politicians especially in France (Le Parisien: "la France prête à se pencher sur le droit européen pour aider l'UEFA à sanctionner les dissidents") and the UK are already talking publicly about modifying competition law to legalize the assocations' envisioned sanctions.

This means the Super League founders have to win a game not only against their opponents and public sentiment, but also play their most important match on a field with moving goal posts...

As for this blog's focus, rest assured this will be both the first and the last article about the Super League on FOSS Patents. Even with respect to app store issue, I'll have to make a decision very soon. Its historical roots notwithstanding, this blog has over the years evolved into a wireless IP and antitrust blog. Both IP and antitrust often overap in a case, and they are key to innovation policy. Nevertheless, I've received feedback from some people whose views matter a great deal to me and who believe it might be better to start a separate blog for app store issues. At this point, I envision my next post on App Store matters on May 3, when the Epic Games v. Apple trial starts, and it will focus on issues that to the best of my knowledge are not in the trial record but which I consider highly relevant to the issues to be decided. Come May 3, I'll also know whether, where, and how to continue my commentary on App Store issues, taking into account the interests of readers with a narrower focus on patent topics. Occasional digressions into other topics of interest (such as when I wrote about Apple's EU "state aid" case a few times) may occur, but some kind of decision must be made on the focus.

Getting back to the topic of this post, there are some striking parallels, but also some key differences, between the #AppRising (complaints over the current app store tyranny brought by large app developers like Epic, Spotify, and Match Group, but also smaller ones like my own company) and what I'd analogously call the #ClubRising by my former client Real Madrid and its 11 Super League co-founders against the dictatorship of the soccer associations.

What Apple and UEFA have structurally in common is that both are private-sector entities who are regulators (of entire ecosystems) and operators at the same time, and they are monopolists. A top-notch soccer club needs to compete at the highest level, and if the Super League wasn't put in place, the UEFA Champions League would be the only game in town, just like the App Store on iOS. When regulators (and gatekeepers) are also economic operators, or "undertakings" as EU law calls those types of entities, they have an inherent conflict of interest, which leads to self-preferencing. Major self-preferencing allegations in the App Store context relate to how iMessage competes with the likes of WhatsApp, Apple Music with Spotify, or Apple Arcade with other game services. In soccer, the associations run tournaments of national teams (like the World Cup and the Euro), and while the clubs pay the players' salaries, they have to make them available.

It also appears to be an economic law that in scenarios of operator-regulator identity, tying will inevitably happen. All sorts of business terms are imposed on app developers, with Apple purposely now trying to reduce in-app advertising revenues. Clubs participating can't even sell perimeter advertising in their stadia during Champions League matches but have to leave that to UEFA.

Governmental regulators may have other shortcomings, but at least they're typically not revenue-oriented. When the regulators are private-sector entities, they make rules designed to maximize their profits: Apple's App Store tax, and unfair revenue-sharing terms for the Champions League.

Apple is a publicly-traded company, and its management must and does optimize for shareholder value. Those sports bodies are organized as clubs with a "one member, one vote" rule. The problem with "one member, one vote" is that majorities are quite often formed against an economic majority. That is also an issue with the European Patent Office, whose leadership often makes decisions over large countries' objections. For an EPO or UEFA or FIFA leader, the name of the game is to curry favor with many small and (relatively speaking) poorer members. Sometimes those representing governments or sports bodies from small and poor countries within such organizations are more interested in the "perks" (such as the EPO paying for medical services used by Administrative Council members during their visits to Munich) than their more privileged colleagues from large and rich countries. Apple doesn't have any such governance issues, of course.

Many Fortnite gamers were and still are disappointed they can't download the game, or any updates, with their iPhones. Many Apple "fanbois" defend the iOS tyranny. And Apple argues that Epic is not a David, but another Goalith. A Politico newsletter today notes that "Epic recently hit a $28.7 billion valuation and another founding member [of the Coalition for App Fairness], Spotify, boasts a valuation of $72 billion — in other words, not exactly 'the little guys.'". But a major advantage that Epic and other complaining app developers have is that what they're fighting for would ultimately benefit all developers. Apple's Small Business Program (the 15% cut) wouldn't have been implemented if not for Epic's and Spotify's efforts--and doesn't solve all the problems that alternative app stores would do away with for good. By contrast, the backlash against the Super League--from the general public and some of Europe's most powerful politicians--is huge, and for now even many of the founding clubs' fans appear to favor the status quo. There's a lot of debate over whether the viability of the so-called "football pyramid" is in danger. Clubs like Everton FC, who have not been invited to the Super League as co-founders (though they could still qualify as five sports will be available to non-founders), are adamantly opposed. However, I don't know any app developer who'd have to fear any negative impact if Epic won. Apple suggests that the viability of the App Store is at stake, but the numbers clearly show it's not. The Super League has committed more money to grassroots soccer and women's soccer than the Champions League is generating for those activities at the moment, yet the common perception is that the rich will get richer and the others won't be able to compete.

With respect to legislative initiatives, there's another interesting difference. Soccer associations may benefit from new legislation, including that the UK government may penalize Super League participants through a restrictive application of immigration laws to work permit requests. With respect to app stores, however, the "rebels" are pushing for new legislation, and lawmakers appear to increasingly understand app developers' concerns. The Antitrust Subcommittee of the United States Senate will hold an app store hearing tomorrow. Apple will send an in-house lawyer, but didn't want to let any its star witnesses at next month's Epic trial testify on Capitol Hill. Apparently, all of the witnesses at tomorrow's Senate hearing will be lawyers.

Apple's critics can coordinate their political activities and lawsuit to some degree. They appear to tread carefully. For example, if all major games companies were to gang up on Apple and demanded different App Store terms left they'd stop publishing iOS apps, there might be a cartel issue in that hypothetical scenario. The Super League does constitute horizontal cooperation of economic significance. That doesn't make it per se illegal, nor do some people's policy preferences for the "football pyramid" change the standard for competitive harm. With five spots available to non-founders, the Super League has a strong argument that access to that new tournament is fair, reasonable, and non-discriminatory (FRAND). That is more than the UEFA Champions League can say. Its qualification system is inherently discriminatory, and utterly unfair and unreasonable. It's designed to please the representatives of smaller countries' soccer associations for the "one country, one vote" reason I explained further above. In terms of strength, there really is no reason why only four English Premier League clubs should participate in the Champions League, while clubs from small countries may qualify through matches against rather weak opponents.

Alternative app stores, such as a hypothetical iOS version of the Epic Games Store, would have to become wildly successful before they would have an antitrust duty to deal on FRAND terms. That wouldn't practically happen--but they'd simply face competitive constraints, unlike Apple, the feudal ruler of the iOS kingdom.

The "to be or not to be" question in the mobile ecosystem is whether an app is available on Apple's App Store and the Google Play Store. In soccer, it's the Champions League at the European level, and leagues like the Premier League in England or Primera División, also called La Liga, in Spain. The alternative to the app store monopoly is to have multiple app stores. In soccer, it would not be possible to run numerous parallel competitions. The same app could, however, be available via multiple iOS app stores, possibly with some features allowed on one store but not on another, or prices differing.

Both types of "rebels"--the Epics of the world and the Real Madrids of the world--face major challenges. #OpentheAppStore will likely take years, as Apple will see those disputes through. The Super League plans to kick off (literally) in the late summer of next year, as UEFA doesn't own all stadia and soccer balls (while Apple holds all the keys to the iOS kingdom), the main threat being UEFA's and its allies' coercive efforts, competition authorities not wanting to act against public sentiment, and lawmakers potentially moving the goal posts.

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Friday, April 16, 2021

VLSI Technology v. Intel: patents from a portfolio valued at $7 million allegedly created $3 billion in value--will the jury buy that?

Another post, another dispute involving a non-practicing entity (NPE) financed by Fortress Investment. The previous post was about a couple of additional VoiceAge EVS v. Apple cases I just learned about. While Munich is the world's #1 patent injunction venue, at least for the tech sector, the Western District of Texas is where parties go to seek Texas-size damage awards, such as in the second VLSI Technology v. Intel trial in Waco before Judge Alan Albright. That trial will continue on Monday.

It seems to me that many technology industry and patent professionals have sympathy for Intel because it already suffered so much last month when the first VLSI trial ended in a $2.2 billion damages award. At the same time, hardly anyone expects that first VLSI award to be upheld, simply because appeals courts typically reverse such decisions (sometimes reducing damages to zero by finding no infringement or holding the asserted patents invalid). For example, just yesterday Apple--Intel's ally against Fortress Investment--convinced a Texas judge (Eastern District in that case) to order a retrial, setting aside a $506 million jury verdict. The only thing that is unusual about that decision in Optis Wireless v. Apple is that a judge from a plaintiff-friendly federal district in Texas did so. Most of the time, those decisions are made by the United States Court of Appeals for the Federal Circuit.

On Monday, the parties' lawyers delivered their opening arguments. In the meantime I have occasionally dialed in to listen to the proceedings. What I found very helpful and informative is a series of podcasts by Winston & Strawn's WacoWatch blog.

I learned from the podcast that VLSI and Intel both act similarly to their previous courtroom clash, but obviously a number of facts are specific to this case. Different patents, different issues, and an even larger damages claim: $3 billion.

Jury trials are extremely hard to predict. A lot depends on whom (whose lawyers, whose witnesses) jurors trust. Patent cases are tough for juries though they are fun for some judges. Judge Albright is so eager to attract patent cases to Waco that he makes it very hard for companies like Intel to defend themselves. On Twitter, Mike Masnick (who also comments on tech law) pointed out that Judge Albright brags about the many patent cases he gets to preside over:

Mike Masnick doesn#t mince words. On Tuesday, he published an article about Judge Albright with the following title: Patent Loving Judge Keeps Pissing Off Patent Appeals Court, But Doesn't Seem To Care Very Much (I'm just quoting--not endorsing--that language)

Jury duty is anything but rewarding, and jurors are really out of luck when they are selected for a patent case. Every time Judge Albright has fun, jurors lose precious time, for which they get paid so little it's not even worth mentioning. A waste of time for jurors, whether or not their verdicts get overturned, but Judge Albright thoroughly enjoys those trials...

Intel has non-infringement as well as invalidity arguments, and VLSI can't even count on the inventors of the patents-in-suit. The fact that the claimed inventions were originally made for an entirely different purpose may make jurors skeptical of the allegation that Intel started infringing those patents a decade later.

Not because I would predict it to happen, but because it might, the jury may have to think about the damages figure should it find one or both of these patents to be valid and infringed. VLSI's damages expert arrived at a $3 billion amount. He basically concluded that the infringing products generated $4 billion, and then apportioned less than a quarter of that total value to Intel's own work. Intel has tried--and will continue to try on Monday--to convince the jury that its own engineers created the products in question. If I were on the jury, I definitely wouldn't conclude that almost 80% of the value is in those patents. Intel pointed out that one of the temporary owners of those patents valued that entire Freescale portfolio (which includes the two patents VLSI is asserting now, but also many others) at $7 million.

Just like in the previous VLSI trial, the plaintiff's damages expert arrived at a huge claim based on what is called hedonic regression. Intel's lead counsel, WilmerHale's Bill Lee, asked VLSI's damages expert a number of questions relating to the Georgia-Pacific factors, a framework for reasonable royalty-type patent damages determinations that isn't absolutely mandatory, but it's the safest approach with a view to appeals. It's possible that the jury itself will attach importance to certain Georgia-Pacific factors. If not, the Federal Circuit might hold that Intel's Daubert motion had merit.

Having watched how some other U.S. district courts handle patent infringement cases, I have serious doubt that VLSI would have been cleared by a judge to present its $3 billion claim to a jury in, for example, the Northern District of California.

For Intel, failure is not an option. For VLSI, this here is a gamble where the cost of suing Intel is a tiny fraction of the potential reward. I don't mean to doubt that Fortress is very good at what it does, and my commentary here on VoiceAge EVS's cases shows that I don't generally discount anything Fortress does--one has to look at the issues dispute by dispute, case by case. But the prior owners of the VLSI v. Intel patents-in-suit were also very sophisticated organizations who were prepared to enforce their intellectual property rights through litigation. They didn't sue Intel, much less did they believe Intel owed them billions.

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Two more VoiceAge EVS v. Apple patent infringement cases pending in Munich

On Tuesday I listed a number of standard-essential patent (SEP) infringement cases brought by VoiceAge EVS against Apple, Lenovo, Motorola Mobility, and Nokia trademark licensee HMD in Munich. Two of the patents-in-suit have been asserted against all those parties, but there are also three cases against Apple over different patents. Those three cases will all be decided by the 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier).

I had already mentioned that a first hearing in case no. 21 O 13503/20 would take place on April 28 unless the COVID pandemic necessitates a postponement. I've meanwhile learned from the court that the patent-in-suit in that case is EP2707687 on a "transform-domain codeblock in a CELP coder and decoder." CELP stands for code-excited linear prediction, a linear predictive speech coding algorithm.

Case no. 21 O 13505/20 had an even earlier first-hearing date: April 21. This one may already have been pushed back, but I will try to find out again next week. In that case, VoiceAge EVS is asserting EP2162880 on a "method and device for estimating the tonality of a sound signal."

The fifth patent over which VoiceAge EVS is suing Apple in Munich is EP1509903 on a "method and device for efficient frame erasure concealment in predictive based speech codecs." The case no. is 21 O 13504/20, and the court scheduled a hearing for May 12.

VoiceAge EVS is also enforcing patents in the United States, such as against Xiaomi. According to an RPX Insight report, VoiceAge faces challenges to its standing in its U.S. cases. That's just a non-issue in Munich.

VoiceAge EVS generally appears better and stronger than Uniloc, which is the most infamous patent licensing firm funded by Fortress Investment because it countless complaints.

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DOJ downgrades Delrahim letter to IEEE on standard-essential patents: inter-agency rapprochement with FTC on SEP enforcement?

The language of diplomacy and other governmental communications is very nuanced, like the British Queen's spokespersons saying she's "not amused" when she's actually outraged. The Antitrust Division of the United States Department of Justice ("DOJ-ATR") has taken this concept to a higher level. In what could be described as a digital form of body language, the Biden Administration's DOJ has unequivocally dissociated itself from the Trump Administration's position on standard-essential patent (SEP) enforcement without saying or writing a single word: just by relegating a link to a document (with the PDF remaining in the same place as before) to a long list of links that is, for the most part, merely an archive. Parts of that archive are little more than the dustbin of DOJ-ATR history.

Look at it this way: if a colleague of yours had a picture of her sweetheart on his desk, but all of a sudden decided to put it into a dark storage room, wouldn't that tell you something?

On September 10, 2020, less than two months before the election Donald Trump lost, Qualcomm-aligned Antitrust Assistant Attorney General Makan Delrahim tried to use his remaining time in office--he was going to leave anyway, and he knew what the polls said--tried to deal one final blow to net licensees of SEPs. He supplemented, updated, and appended the DOJ-ATR's 2015 Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineers (IEEE). An IEEE standard all of us use in our everyday lives is WiFi (IEEE 802.11). IEEE has been a strategically important forum at the forefront of how standard-setting organizations could set more specific rules governing SEP enforcement than, for example, ETSI, whose FRAND pledges (which must be interpreted under French law wherever in the world they are enforced) come with a lack of clarity that is fully intended (though some interpretations are still clearly less reasonable than others).

Mr. Delrahim's BRL 2.0 was meant to make the IEEE change course by giving companies like Qualcomm--which in all fairness is a tremendous WiFi innovator--ammunition for IEEE-internal discussions. Qualcomm executives publicly predicted on various occasions that the IEEE was going to make its rules more patentee-friendly under pressure from the federal government. Last month, MLex's Khushita Vasant reported on a recent clash between Qualcomm, Apple, Huawei, and other companies at an IEEE patent policy meeting. It was a clash between the progressives like Apple--who wanted to continue on the path of setting implementer-friendly rules--and those seeking a revision, led by Qualcomm.

What I mentioned at the start of this post obviously doesn't apply to the Trump Administration. Mr. Delrahim's letter to IEEE suggested that the Obama Administration's 2015 BRL to IEEE had been misinterpreted. But Mr. Delrahim also disparaged his predecessor's work by claiming that "[t]he Department's assessment in 2015 of the 'direction' of U.S. law interpreting FRAND commitments on royalty rates and damages assessments was not well-supported and has not proven accurate."

In late March, I was wondering whether the DOJ and the FTC would continue to fundamentally disagree on the application of antitrust law to SEP abuse, given that the FTC didn't seek a Supreme Court review of the Ninth Circuit's FTC v. Qualcomm ruling and mentioned its coordination with the DOJ. But that was just a question, not speculation. Also, the Solicitor General would have had to represent the FTC before the Supreme court, not DOJ-ATR.

Apparently, the Biden Administration is inclined to undo at least some of Mr. Delrahim's SEP policy initiatives. The full extent will become clearer with time. But it's already certain that change has come to DOJ-ATR.

Currently, DOJ-ATR is being run by Acting Assistant Attorney General Richard Powers. Just like we've recently seen quadruple-antisuit injunctions, which I abbreviate as A4SIs and others as AAAASIs, Mr. Powers has a quadruple-A title: he's the Antitrust Acting Assistant Attorney General. What an alphabet soup.

Mr. Powers could have done his own "update" to the 2020 Delrahim letter. That update could simply have stated that the 2020 letter was an aberration, and the 2015 letter was in full force and effect again. But doing so would have required a communication style closer to that of the Trump Administration.

That's where the hierarchical structure of the DOJ-ATR website came in handy. There's one section where one can find the currently valid BRLs. From that one, Mr. Delrahim's letter has been silently removed. His letter to the Avanci patent pool is still there, and it remains to be seen what--if anything--will change in that context. But the 2020 IEEE letter is no longer there. The 2015 BRL to IEEE can still be found on that page. That makes it the one that currently counts.

The original and now-restored BRL tends to strengthen those favoring component-level SEP licensing.

The Delrahim letter to IEEE is now on the page listing "comments to state and other organizations". That page is hidden deep down in the hierarchical structure of the DOJ-ATR website. The dark storage room I mentioned further above.

This move has been clearly interpreted by the tech industry. Cisco's Senior Director, Antitrust and Competition, Gil Ohana, replied to a tweet of mine that this marked the "end of an error":

A nice wordplay. Few people in California would refer to the Trump years as an "era" not only because #45's reelection bid failed but also for substantive reasons.

But let's also be realistic that there'll be a lof of wrangling over SEP issue now. The downgrade of the Delrahim letter to IEEE is a significant first step.

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Thursday, April 15, 2021

Discussion of Apple's alleged need to redesign iPhone to support third-party app stores continued--and expanded into why web apps don't help

This is a follow-up to yesterday's posts on Epic Games v. Apple, especially the third one (Apple expert incorrectly claims Apple would need to "redesign" iPhone hardware and software to allow alternative app stores ), which Apple Insider picked up.

That article drew additional attention to the discussion. A New Zealand-based developer, @hishnash, gave his explanation of what Apple's witness meant by a need to redesign even the iPhone's hardware. Epic Games founder and CEO Tim Sweeney then pointed to the fact that Apple's Enterprise program works on current iPhones:

We then discussed the technical aspects of installing and running apps on iPhones that are not installed via the App Store (but via the Enterprise Program, TestFlight, or Microsoft App Center). @hishnash noted that there are certain feature sets, such as CarPlay, that require special permission. My understanding of everything said up to that point was that it was "all just about Apple lifting lifting restrictions (some contractual, some technical) as opposed to really having to take its architecture to a higher level."

This here hinges on how one would reasonably understand the verb "to redesign" in connection with "software and hardware." There is another key term in this dispute--commission--that Apple clearly redefines in ways that no dictionary supports. In the case of to redesign, they also mislabel something, but one needs to consider the context:

"The duty upon Apple is more than the usual duty to deal; it would include a duty to redesign its hardware and software [...]" (emphases added)

The duty-to-deal case in U.S. antitrust law is Aspen Skiing, which must nowadays be understood in light of the warning in Trinko not to go too far, but Trinko didn't affect the part that is relevant in this redesign context. The Aspen outcome was that a larger ski resort had to (again) offer multi-area tickets together with its smaller competitor, which might otherwise have been forced out of the market.

So when Apple's expert says Epic wants more than the Aspen plaintiff and points to a "redesign" of hardware and software protected by intellectual property rights, the question is: is Epic really asking for (fundamentally) more? If yes, then "redesign" would mean Apple would have to make a huge architectural effort, and that wouldn't be fatal to Epic's case, but certainly involve a higher hurdle. Unlike Apple's witness, I don't see a structural difference. Here's why:

Epic's case, just like Aspen Skiing, is at the core about lifting restrictions, not about creating something new. The ski resorts didn't have to create a new skiing area. They just had to provide a ticket that gave customers access to both companies' existing areas. Apple doesn't have to invent something new: all those arguments about APIs, certificates, credentials etc. don't change the simple fact that Apple artificially put up barriers with a Gods may do what cattle may not attitude.

Apple's expert makes it sound like the Aspen Skiing defendant didn't have any obligation under antitrust law beyond signing a contract. But it definitely took more to implement the court-mandated cooperation. Even if you had a duty to sell someone potatoes, you'd have to do something to make it happen. Aspen Skiing was about issuing (in that case, printing) tickets, and about validating them (manually or electronically). Interestingly, the security architecture that ensures only authorized apps can access, for example, the CarPlay APIs is also about issuing "tickets" (in that case, digital certificates) and about validating them (@hishnash mentioned "root certificate chain validation" in connection with "the Entitlement system"). Also, even those ski resort tickets involved intellectual property (copyrights, trademarks)--plus real property.

It's a different jurisdiction, but when the European Commission obligated Microsoft to give developers of competing network servers (like the Samba open source project) fair access, Microsoft not only argued that it shouldn't have to grant a license but additionally complained about having to provide technical documentation. Then-competition commissioner Neelie Kroes "[found] it difficult to imagine that a company like Microsoft does not understand the principles of how to document protocols in order to achieve interoperability" and fined Microsoft for its (temporary) refusal.

Unlike the question of whether a "commission" is a "rebate" (it's a clear Boolean "false"), this here is one of degree. I stand by my criticism of the verb "to redesign" in this context because lifting unreasonable restrictions just means to fix a problem, not to take some technology to a higher level as "redesign" implies.

In particular, I'm unaware of Epic Games demanding access to Car Play at this stage. The types of apps one finds on the Epic Games Store don't need APIs that are subject to specific restrictions. In light of that, I summarized my understanding as follows:

Of course, even the second part (access to those other systems) could involve duties to deal. But it would be a first step to at least allow games like Fortnite to be installed via third-party app stores.

@hishnash acknowledged that "apps that could be replaced with PWAs (aka apps that do not use any key system apis could be installed through a third party apps store." (PWAs = HTML5-based Progressive Web Apps). In other words, the Epic Games Store could install Fortnite because--performance and other issues apart--Fortnite doesn't need to access APIs like CarPlay and could therefore be a web app (it wouldn't be playable, but again, no API access issue). Thereafter, the discussion was more about whether third-party app stores would be an effective remedy as developers would still need to use some of Apple's SDKs etc., and whether PWAs would be a workable or potentially even superior alternative.

Epic's proposed findings of fact and conclusions of law list a number of shortcomings that PWAs have. Mr. Sweeney described Apple's pointing to PWAs as "disingenuous" because Apple limits those APIs and doesn't allow third parties to fix the issues though they technically could. In addition, what I know from one of my own projects is that major ad networks don't even support in-app advertising in WebGL apps. So there are usability issues including but not limited to performance, and monetization issues. Mr. Sweeney noted that Apple itself tells developers to build native apps:

And in my favorite @TimSweeneyEpic tweet to date, he explained iOS is "an intermediation trap":

@hishnash thought Epic wanted exposure on the App Store and would therefore not even accept a workable PWA solution. He inferred this from Epic's decision to offer Fortnite via the Google Play Store despite sideloading being possible. Let's focus on Apple here, so I'll just note that sideloading on Android doesn't really work for consumer software in its current form: my own company even experienced problems because beta testers didn't manage to install our stuff via Microsoft App Center. As for Apple, I pointed @hishnash (whom I commend for his thoughtfulness and constructive attitude) to the fact that Epic Games v. Apple is not just a Fortnite case but the central issue is third-party app stores like the Epic Games Store (even though the early stage of the dispute was very much about #FreeFortnite).

The remainder of the remedies discussion basically was about weighing the pros and cons of two remedies--PWAs and third-party app stores. @hishnash thought that if Apple--in what I consider an alternative universe--sincerely made an effort to provide a great user experience for PWAs, developers would then at least be independent, while apps distributed via alternative app stores would still depend on some kind of IP license from Apple:

In other words, we were then talking about two different dependencies:

  • With PWAs, @hishnash assumed there was no licensing issue (and for simplicity's sake, I don't want to digress into the related IP questions here), and if usability issues came up, the solution would be to hold Apple to a hypothetical commitment to comply with a certain technical standard.

  • For apps distributed via third-party app stores, @hishnash assumed there was a need to take a license from Apple (which I again won't discuss from an IP perspective, though I'd be tempted to talk about the recent Android-Java API Supreme Court decision), and the terms might be unreasonable (as he suggested in the above tweet).

It's not that @hishnash would necessarily oppose both better PWAs and competing stores. At least on videogame consoles (which are an important topic, but can't talk about them or this post will never come to an end), he might even like the idea of going down both avenues. And he clarified he didn't mean to say that PWAs "worked well right now."

To make a long story short, the reason I don't believe PWAs could lead to a practicable and reasonably enforceable remedy is because user experience happens in users' minds. What's pretty doable (not trivial, but manageable) is to ensure compliance with a standardized protocol like 5G. What's already a lot harder is to measure purely technical performance: there are different benchmark programs for CPUs, for example. But what's absolutely impossible--except perhaps with 26th-century artificial intelligence--is to objectively quantify the user experience, especially of entertainment products like games. So even if Apple theoretically promised to do a better job on PWAs, or just made an announcement to that effect without a formal legal obligation, developers wouldn't have a reliable--i.e., justiciable--assurance of being able to compete outside Apple's App Store.

By contrast, if Apple clearly had to allow the distribution of apps via third-party stores that use the same APIs as those distributed via the App Store, the remaining area of potential dispute would come down to license fees for SDKs, for developer tools, for documentation etc.--which can be worked out. The EU solved that problem in the Microsoft network server protocol case. I follow standard-essential patent royalty disputes all the time (this blog has written more about them than about any other topic so far). Even if something went wrong, we could all develop, innovate, compete--and seek a refund later. Right now, Apple just says "no" and that's the end of the story (and of this post).

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Wednesday, April 14, 2021

Apple expert incorrectly claims Apple would need to "redesign" iPhone hardware and software to allow alternative app stores

Sooner than I'd have thought, here's my first follow-up to the publication of the summaries of Apple's expert witness reports in the Epic Games v. Apple App Store antitrust case.

When I read those summaries for the first time, I tweeted about some of the statements I found in them. This is my tweet about the claim that Apple couldn't support alternative app stores without not only software but even hardware changes:

The quote was from the following paragraph of Dr. Rubinfeld's rebuttal report:

"19. The duty upon Apple is more than the usual duty to deal; it would include a duty to redesign its hardware and software—both of which are covered by Apple’s intellectual property—to make the iPhone interoperable with alternative app stores and with apps that would not qualify under Apple’s app-review guidelines for distribution through the App Store."

My tweet prompted a strong reaction from Tim Sweeney, the founder and CEO of Epic Games:

(The term "baloney" relates to what that expert said, and fortunately not to my own comments.)

The people who have already liked Mr. Sweeney's tweet include many developers, among them the father of JavaScript.

I added another alternative way of installing apps on iOS devices that clearly works--without requiring new hardware--and is just made unnecessarily cumbersome by Apple:

UDIDs are unique device IDs. In order to find out one's UDID, one has to connect an iPhone or iPad to a MacBook with a USB cable and open the iTunes app; copy the UDID; paste it into a message to the developer; and the developer then has to actually integrate it into the app package. That's obviously not an option for large-scale distribution. Also, some functionality cannot be tested that way: one needs to build a "store app" and distribute it via Apple's TestFlight system. TestFlight comes with other limitations.

I have my doubts that the court will buy Apple's spurious argument about "a duty to redesign its hardware and software."

Similarly underwhelming is the following statement I found in another Apple expert report (authored by Ocean Tomo's Mr. Malackowski):

"The App Store itself is referenced in more than 250 U.S. patents and applications."

That is just meaningless. The fact that the App Store is "referenced" doesn't indicate that the App Store itself is protected by any patents. Apple has to deal with standard-essential patent (SEP) portfolio valuation all the time, where the question of essentiality (i.e., whether a patent covers a technique one needs to implement in order to comply with the specification of the standard) comes up. No one would seriously argue that a patent in which 5G is "referenced" is necessarily a 5G patent, much less that it is a 5G SEP.

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Apple submits summaries of expert reports seeking to rebut Epic Games' expert reports

A few weeks ago, Epic Games filed (in a publicly accessible form) summaries of its expert witnesses' reports in the App Store antitrust case against Apple. I wrote two blog posts discussing what I learned from those documents:

This morning Apple has also filed summaries of its expert witness reports. I need a bit of time to digest them, and fully intend to share observations on them as well. But for those who'd like to read those summaries now, I'm providing the documents below.

Dr. Aviel D. Rubin:

450-1 Rubin Rebuttal by Florian Mueller on Scribd

Dr. Daniel L. Rubinfeld:

450-3 Rubinfeld Rebuttal by Florian Mueller on Scribd

Dr. Dominique Hanssens:

450-5 Hanssens Rebuttal by Florian Mueller on Scribd

Dr. Francine Lafontaine:

450-7 Lafontaine Rebuttal by Florian Mueller on Scribd

Dr. Lorin Hitt:

450-9 Hitt Rebuttal by Florian Mueller on Scribd

Dr. Richard Schmalensee:

450-11 Schmalensee Rebuttal by Florian Mueller on Scribd

James Malackowski (Ocean Tomo):

450-13 Malackowski Rebuttal by Florian Mueller on Scribd

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Epic Games and Apple submit exhibit lists to U.S. court in preparation of May antitrust trial

Epic Games and Apple just submitted to the United States District Court for the Northern District of California their exhibit lists for next month's App Store antitrust trial. There are two lists per party: an exhibit list (text documents, such as emails), and an audiovisual exhibit list.

At the moment I don't have any particular comment, but with so many people being interested in the case, I just wanted to publish those lists here.

Epic's (non-audiovisual) exhibit list:

21-04-14 Epic Exhibit List by Florian Mueller

Epic's audiovisual exhibit list:

21-04-14 Epic Audio Visual ... by Florian Mueller

Apple's (non-audiovisual) exhibit list:

21-04-14 Apple Exhibit List by Florian Mueller

Apple's audiovisual exhibit list:

21-04-14 Apple Audio Visual... by Florian Mueller

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Tuesday, April 13, 2021

New battleground up north: serious challenge to Apple's App Store model must be brewing in Canada as Cupertino is in full defense mode

There are complaints over Apple's abuse of its App Store monopoly around the globe. When I made my own filings with regulatory authorities in January, they contained three pages that merely listed other complaints, investigations, and pending litigation. Less than three months later, I would now have to add a page just to update that list.

Yesterday it became known that Apple's and Google's abuse of their app distribution monopolies even impedes governmental efforts to control the COVID-19 pandemic, as both companies rejected an update to the UK's official contact-tracing app that would have been extremely useful.

I have no idea what's going on in Canada, but Apple must be very afraid of something...

Matthew Ball, a Canadian investor, authored a very comprehensive analysis of the App Store situation (and beyond) in February. That article is definitely one of the most informative and insightful writings on the subject. Yesterday he wrote on Twitter that Tim Cook's interview with the Toronto Star newspaper "suggests significant ongoing concerns" on Apple's part:

It's not just about privacy and Apple's plan to deal major damage the in-app advertising business (in order to force app developers to rely on subscriptions, in-app purchasing, and download fees--the types of revenues on which Apple imposes a tax). On the same day that Tim Cook's Canadian interview appeared, Apple posted a Canada-centric defense of its App Store business model to its website: Apple's iOS app economy drives economic growth and opportunity across Canada

The story mentions some smaller Canadian apps and app development companies: Sago Mini, Ground News, TRU LUV, FILM3D. Apple connects those success stories to Canada's economic recovery from the COVID-19 pandemic: "Canada’s dynamic app economy stands poised to be a competitive and powerful force for job growth as the country recovers from the COVID-19 recession."

What Apple does not say, of course, is that the Canadian app economy would do even better if #OpentheAppStore became a reality. Developers of all sizes would find more and greater opportunities that way. I can't think of anybody who would doubt that the app economy is huge and growing. But I also don't know a single developer who likes to be at Apple's (and Google's) mercy.

It is a bit out of character for Apple to publish a piece like that. Normally, Apple's lobbying takes place behind closed doors. But Apple has come under pressure in so many places--including app store bills in certain U.S. state legislatures--that it's now engaging in the public debate over its App Store model. That fact, in and of itself, shows how muc headway companies like Spotify and Epic Games have made in recent years.

After I saw Apple's Canadian App Store press release, I replied to Matthew Ball: "The combination of the interview AND that press release (see attached tweet) makes it pretty clear they expect one or more challenges to the App Store model in Canada." Mr. Ball apparently agrees with my interpretation of Apple's Canadian campaign (as he liked my reply).

Michael Acton, a San Francisco-based reporter for MLex (one of the leading sources of antitrust news), replied to my tweet on Apple's press release, and I completely agree with him on this:

I guess we'll know soon. Maybe not that soon, but I have a hunch that Canada will become an App Store battleground before the end of the year.

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Fortress-funded VoiceAge suing Apple, Lenovo, Motorola Mobility, HMD in Munich over standard-essential patents: next hearing scheduled for April 28 (Apple)

Intel is currently defending itself against another case brought by a Fortress-funded non-practicing entity (NPE) in the Western District of Texas, and last month the chipset maker filed a second amended antitrust complaint against Fortress in the Northern District of California. There's one particular Fortress entity that brought (literally) dozens of patent infringement complaints against Apple: Uniloc, whose former CEO is now running WSOU (doing business as Brazos), an entity that brought about 200 patent lawsuits last year in the U.S. alone (plus an unknown but likely staggering number in other jurisdictions). Whatever policy positions I've expressed on the NPE business model doesn't prevent me from recognizing that Fortress Investment has financed a number of different NPEs, and they aren't all like Uniloc.

I've done some research on NPE activity in Germany, and found out that VoiceAge EVS--which has offices in Newport Beach as well as Ratingen (near Dusseldorf)--is a big fan of the Munich I Regional Court (Landgericht München I). Munich has become the best forum choice for patent plaintiffs seeking injunctions.

The patents VoiceAge is asserting in Munich are

  • EP2102619 on a "method and device for coding transition frames in speech signals" and

  • EP3132443 on "methods, encoder and decoder for predictive encoding and decoding of sound signals upon transition between frames having different sampling rates."

Both have been declared essential to 3GPP TS (technical specification) 26.445, Codec for Enhanced Voice Services (EVS) (thus the "EVS" at the end of VoiceAge's company name).

Last June, the Munich court held an early first hearing in two cases (case nos. 7 O 14091/19 and 7 O 15350/19) against HMD, a company that makes phones with a Nokia trademark license (but is otherwise independent from Nokia). Rumor in the German patent litigation community has it that it went pretty well for VoiceAge. The second hearing--the actual trial--will be held on June 24. HMD has raised a FRAND defense.

On the same day, the court's 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) will also hear VoiceAge's cases over the same patents against Apple, Lenovo, and Motorola Mobility (which Lenovo acquired from Google). The case numbers are 7 O 8369/20, 7 O 11111/20, 7 O 7366/20, 7 O 8367/20, 7 O 10318/20, and 7 O 8368/20).

The court's 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier) scheduled an early first hearing in a VoiceAge v. Apple case (case no. 21 O 13503/20). It remains to be seen whether that hearing can be held. The Munich court postponed at least one other case scheduled for the week before that VoiceAge hearing (as you might have guessed, due to the pandemic). Whether it is responsible to go forward with patent hearings and trials depends on a number of factors. I'm far more concerned about automotive patent cases like Nokia v. Daimler, as they typically involve numerous suppliers and really have the potential to become superspreader events. If the room is large enough, ventilation is ensured, and people have to wear N95 masks, a hearing like VoiceAge EVS v. Apple might be possible.

Wildanger represents VoiceAge in Germany (see Juve Patent). I heard that Freshfields Bruckhaus Deringer represents Apple (Freshfields is Apple's go-to patent litigation firm in Germany).

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