Sunday, July 4, 2021

Patent plaintiffs in U.S. and Germany recently tried fragmenting their infringement claims for tactical reasons, but at least the Federal Circuit won't support such gamesmanship

I have a penchant for clever litigation tactics. That's why I've repeatedly credited Arnold & Ruess's Dr. Arno Risse ("Riße" in German) for obtaining the first (at least the first SEP-related) German anti-antisuit injunction in Nokia v. Daimler and getting it, together with lead counsel Cordula Schumacher, affirmed by the Munich Higher Regional Court. Fast forward by two years, and Munich is the go-to venue for anti-antisuit purposes. Talk about breakthrough innovations and agenda-setting.

While we're on the anti-antisuit subject, according to Juve Patent, the Munich I Regional Court just upheld an anti-antisuit injunction it had granted IP Bridge against Huawei. I haven't been able to obtain a redacted copy of the decision. According to the court's press office, they can't release it yet. I did, however, attend, and report on, the late-April injunction hearing.

Sometimes litigators go too far, and the courts decline to condone excessive gamesmanship. On Wednesday, the United States Court of Appeals for the Federal Circuit granted a mandamus petition by Samsung and LG against a patent holder named Ikorongo, which belongs to Concert Technology Corporation. The two Korean smartphone makers (though LG is in the process of exiting that business and will become more patent enforcement-oriented) succeeded in getting Ikorongo's patent infringement claims against them transferred from Judge Alan Albright's Waco division of the Western District of Texas to the Northern District of California.

I already indicated in a Thursday post that Judge Albright's reluctance to relinquish his jurisdiction over patent cases is controversial. He gets overruled from time to time, and the Samsung/LG petition raised a particularly interesting issue:

Ikorongo had set up an entity named Ikorongo Texas to which Ikorongo Tech assigned an exclusive license to the patents-in-suit with respect to a few counties in the Western District of Texas. Ikorongo Tech (which retained the rights with respect to the far larger rest of the country) and Ikorongo Texas then acted as co-plaintiffs, and hoped that the narrow geographic scope of Ikorongo Texas's rights (they might as well have named the entity "Ikorongo Albright") would weigh against a venue transfer as Ikorongo Texas would not have been able to bring its case in the Northern District of California (for lack of having any rights to assert there).

That scheme worked only in the lower court, as it was reversible error in the Federal Circuit's view that Judge Albright "disregarded the pre-litigation acts by Ikorongo Tech and Ikorongo Texas aimed at manipulating venue." In accordance with Supreme Court precedent, the Federal Circuit held that "manipulative activities of the parties" must be "disregarded." Citing to a decision the appeals court made in 2011, the "incorporation, office, and documents in Texas" of Ikorongo Texas "were recent, ephemeral, and a construct for litigation and appeared to exist for no other purpose than to manipulate venue . . . in anticipation of litigation."

This part was not dispositive in its own right. The Federal Circuit also found that Judge Albright had not properly considered some other factors. But Samsung and LG firstly needed to overcome that Ikorongo Texas construct in order to have any chance of getting the case moved out of the Western District of Texas.

If the Federal Circuit had not put a stopper on this kind of gamesmanship, the "market share" of the Western District of Texas would have grown as other patent holders would have set up shell companies with geographically limited rights. Also, the same would then have worked in the Eastern District of Texas, which is a shadow of its former self thanks to TC Heartland, but could quickly have become just as popular as the Western District, if not more.

There's also a fragmentation scheme that has recently been tried in Germany.

The same creative lawyers I mentioned further above still had three patent infringement cases brought by Nokia against Daimler awaiting adjudication in Munich by the time the parties settled. Two of them had previously been filed in Dusseldorf, but were withdrawn there only to resurface in Munich shortly thereafter. The enforcement of a previous Munich injunction turned out unaffordable for Nokia after the Munich appeals court roughly multiplied the amount of the required security (a bond or a deposit, whichever the plaintiff chooses) from $22 million to more than $2 billion. It's not a cheap thing to shut down all Mercedes sales nationwide (plus some exports to other countries that Daimler makes out of Germany).

In order to get leverage over Daimler by being able to afford the enforcement of an injunction during the appellate proceedings (thereafter, no collateral needs to be provided anymore), Nokia tried a different kind of prayer of injunctive relief: instead of the common format, which bars a defendant from further infringement of a given patent claim on German soil, Nokia targeted combinations of (i) patent claims and (ii) particular Mercedes models. Presumably, Nokia would then have focused its enforcement on where the damage to Daimler would have been most hurtful, such as the most profitable line and flagship: the S Class.

I heard from one source that the Munich court was skeptical of the admissibility of such fragmentation. But due to the settlement, no formal decision was made, and maybe someone at Daimler was scared of the prospect of Nokia's strategy working out, and therefore preferred to take a license.

We will see whether this gets tried again in some other cases, whoever the plaintiff may be. Another question is whether the required security is still going to be a concern to patentees in 2022, when Munich may be the appellate circuit with the most consistent patent jurisprudence in Germany.

Geographic fragmentation like in the Samsung/LG case is a non-issue in Germany as there are no venue transfers if an infringement occurs nationwide (no forum non conveniens rules).

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