Thursday, July 29, 2021

InterDigital's hole-in-one in UK court builds tremendous pressure on Lenovo (Motorola Mobility) to take global cellular SEP license pursuant to Unwired Planet

This the second SEP news today. The first one was Nokia's vehicle-level license deal (as industry sources meanwhile agree) with a car maker. And again, a standard-essential patent (SEP) holder has scored a breakthrough victory: InterDigital against Lenovo and its Motorola Mobility handset division.

With all that's going on, a rational analyst can't help but be bullish about the near-term and mid-term outlook for SEP holders. Car-level licensing and royalty rates consistent with the Avanci pool rate are the inevitable outcome of the "automotive SEP wars." And while Apple may be able to avoid taking a global portfolio license from non-practicing entity Optis unless the deal is right, Apple is what it is: unique. I'm a big Apple critic, but there's nothing else quite like Apple. By contrast, Lenovo's Motorola Mobility has far less brand loyalty, there's no shortage of Android-powered substitutes, and you're not going to see the likes of Vodafone lobbying the UK government for an amendment to the country's patent or antitrust laws only to bail out Motorola. They're probably not even going to inconvenience themselves and buy Moto phones abroad. If Lenovo decided to leave the UK market, it would lose almost all of its UK sales.

So I venture to guess that Lenovo will soon fold and pay InterDigital after today's ruling by Judge Richard Hacon, who is the Presiding Judge of the UK's Intellectual Property Enterprise Court (IPEC) and sitting by designation on the High Court of Justice. This is a high-ranking and specialized judge whose decision will have persuasive weight in other jurisdictions.

Further to a technical trial that took place in March, Judge Hacon found that Lenovo's phones infringe InterDigital's EP2485558 on a "method and apparatus for providing and utilizing a non-contention based channel in a wireless communication system" because it is valid and essential to the 4G (LTE) cellular communications standard.

This was just "the first in a series of trials concerning five patents." A hole-in-one for InterDigital. As a Motorola Mobility (oh, the irony!) expert wrote about a decade ago, "it only takes one bullet to kill." That SEP enforcement truth now comes back to haunt Motorola Mobility's current owner, Lenovo (temporarily the company belonged to Google).

The High Court's conclusion is that "[t]he Patent is valid, essential to Release 8 of LTE and is infringed. InterDigital’s conditional application to amend the Patent falls away." As a result, a FRAND trial will take place. Thereafter, according to the UK Supreme Court's Unwired Planet case law, Lenovo will either have to take a license to InterDigital's global 4G SEP portfolio on the court-determined rate or it will be enjoined and effectively forced out of the UK market.

I learned from InterDigital's celebratory press release that the FRAND trial is "scheduled for January 2022." So an injunction will come down next spring, and the question is just what the license fee will be. The patent will remain in force until 2026, so InterDigital has ample opportunity to enforce this patent not only against Lenovo (Motorola Mobility) but also against other companies it may elect to sue over it. And again, this was just the first of the five UK technical trials in InterDigital v. Lenovo. Like a first-round knockout. I'd be surprised if the FRAND trial really had to be held next year.

The winning lawyers are Douglas Campbell QC, Joe Delaney and Maxwell Keay (instructed by Gowling WLG).

Plaintiff-friendly SEP enforcement rules are settled case law not only in the UK after Unwired Planet but also in Germany, where Sisvel v. Haier I & II is a pair of rulings that the lower courts won't challenge anymore. Case in point, just this week it became known that one of the two patent-specialized divisions of the Dusseldorf Higher Regional Court (regional appeals court), under Presiding Judge Ulrike Voss ("Voß" in German), faithfully applied the Sisvel v. Haier case law in a dispute between Sisvel and TCL. German courts, like their UK counterparts, require losing defendants to take global portfolio licenses. The difference is that German courts don't set the rate, at least not beforehand.

InterDigital is embroiled in a parallel SEP dispute with Xiaomi, and that dispute involves litigation in Germany, where the U.S.-based licensing company secured an anti-antisuit injunction (and anti-anti-anti-antisuit injunction, or "A4SI") earlier this year. A web search pointed me to an SEC filing according to Item 8.01 of which the injunction patent is also one of three patents InterDigital asserted against Xiaomi in Munich this spring. The Munich court is in no way bound by the UK decision, but I do know that the Munich judges--and other German judges--are generally very interested in UK validity determinations. The fact that Judge Hacon held the patent to be valid, after a multi-day technical trial (while German infringement courts don't analyze invalidity defenses in full), makes it highly unlikely that the Munich I Regional Court would stay the German case against Xiaomi. The hurdle is basically that Xiaomi would have to convince the Munich court that the UK decision is clearly erroneous.

SEP licensing rates are going to up this year in light of 5G and favorable case law. The Biden Administration's implementer-friendly policies may make the United States less attractive a jurisdiction for SEP enforcement (though there may be zero impact on the ITC, which can order import bans and has previously given InterDigital leverage). Short of a global SEP agreement at the WTO/WIPO level, there's nothing the U.S. government can do to weaken SEP enforcement in the UK and Germany.

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