With respect to patent licensing firm IPCom, Deutsche Telekom has a propensity to do things that make observers shake their heads in disbelief.
I still remember overhearing a conversation at the Mannheim courthouse on June 21, 2013. That Friday, the court held a Motorola v. Apple FRAND rate-setting trial that drew huge interest from the German patent litigation community. During a break, lawyers involved with Nokia's and HTC's defenses against IPCom just couldn't fathom the WHY and the WHEN of the Deutsche Telekom-IPCom settlement that was announced earlier that week. At that juncture, there was no injunction looming large--there wasn't even one on the horizon. By settling for sheer convenience, Deutsche Telekom unnecessarily complicated things for Nokia and HTC by giving IPCom substantial new resources and a comparable license agreement with a view to the ND in FRAND.
The amount was described by Reuters sources as being in the "low to medium triple-digit" million euro range. What I heard at the time was roughly 200 million euros. Later there was speculation that Deutsche Telekom's then-outgoing CEO had simply instructed the patent department to settle the dispute, period, just so he wouldn't have to negotiate a hold-harmless clause for that case as part of his exit package.
Fast forward by eight years, and Deutsche Telekom wants all of that money back. With interest on top. A total of about 300 million euros.
The legal basis? An-ti-trust. Sorry, but . . . WTF?
This move is more bewildering than the decision to settle was in mid-2013. The notion that someone could take a license--presumably just in order to simplify the departure of a CEO--and later turn around and claw back all the royalties just flies in the face of all I know about the intersection of intellectual property and competition law. Deutsche Telekom even seeks to turn the entire deal into a nicely profitable investment by seeking interest way in excess of market rates during the relevant period.
Even without access to the complaint itself, I'm pretty sure antitrust law just doesn't have scope for Deutsche Telekom's cloud-cuckoo-land claims. The Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) will have to hear the matter in two weeks from today, but that's because German civil procedure doesn't provide such instruments as a motion to dismiss for failure to state a claim.
This may very well be the most meritless patent-related antitrust case ever to have been brought in Germany, yet Deutsche Telekom's course of action raises serious policy concerns.
Licensing is the most common way to settle patent infringement disputes. I have consistently advocated a balanced approach to SEP enforcement: defendants must have rights. But when a license agreement is reached, that is supposed to be the end of the story. That's the whole point of a settlement.
Deutsche Telekom appears to be bullying, driven by buyer's remorse and using its gigantic resources to put pressure on a small company. Even if the magenta-colored carrier just came close to prevailing on a fraction of its claim, it would shake the foundations of patent licensing with profound implications for the entire innovation economy.
Normally, the term "unwilling licensee" means in a SEP context that a party should be enjoined because it isn't seeking a license on FRAND terms in good faith. Deutsche Telekom now shows that one may be a willing licensee for many years only to turn around later.
It's hard to imagine that the contract in question has a loophole that allows for such a refund with interest. The agreement was undoubtedly drafted and signed by people who knew exactly what they were doing. That makes it all the more worrying that Deutsche Telekom is now attempting to get its money back.
Deutsche Telekom portrays itself a purely defensive player of the patent game, but it has a reputation for bullying. Its suppliers always have to fear getting a call that gives them an ultimatum to take a license to some third-party patents (St. Lawrence is an example) lest they lose the magenta giant's business. Might makes right? Maybe in the telecommunications market, but presumably not in the Mannheim court.
It's highly doubtful that this here benefits Deutsche Telekom on the bottom line. They may seek retribution against IPCom for suing Sprint (which effectively got acquired by Deutsche Telekom/T-Mobile) in the Eastern District of Texas. But Deutsche Telekom has to deal with so many patent holders all the time--and they aren't all non-practicing entities, by the way. All patentees want their licensees to honor their license agreements. Not only doesn't Deutsche Telekom's IPCom "antitrust" case make sense in its own right but why would a company risk losing the trust of all its current and future licensors?
This conduct gives private antitrust enforcement a bad name.
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