Wednesday, March 3, 2021

Arizona House of Representatives adopts law untying in-app payment method from mobile app store monopolies: now on to the State Senate

Here's a follow-up to my very recent commentary on HB2005, a legislative proposal preventing Apple and Google from requiring developers to use only one payment system per mobile app store. Republican state lawmakers Dr. Regina Cobb and Leo Biasiucci sponsored the bill.

Today, the Arizona House of Representatives--one of the two chambers of the state legislature--PASSED the bill!

This screenshot is from the status webpage (click on the image to enlarge; the "PASSED" information may not be visible otherwise):

The result of the third reading vote was 31-29. There are 31 Republicans and 29 Democrats in the Arizona State House, and one member per party crossed the aisle, thereby canceling each other out.

A couple of proposed amendments failed, while a proposal by Dr. Cobb (enabling app developers to complain to Arizona's Attorney General about any failure by Apple or Google to comply) was adopted. (Technically, the App Store part of HB2005 was an amendment to a multi-purpose bill, which amendment then in turn got amended in the way just described.)

The Coalition for App Fairness is pleased, but notes that this is merely a first step toward a level playing field for all:

In order for this measure to be passed into law, the Arizona Senate would have to adopt it as well, and the Governor would have to sign it (as opposed to vetoing it). The (counter)lobbying onslaught by Apple and Google has been massive already, and may further intensify. There are 16 Republican and 14 Democratic senators. It is counterintuitive that Arizona Democrats have such strong reservations concerning this measure, considering that the Democratic majority in the United States House of Representatives took a clear position on tech monopolies and walled gardens in October.

This remains interesting, and meanwhile there are initiatives in various other states. Today, the Minnesota Reformer website published an opinion piece by Justin Stofferahn and Pat Garofalo, calling on the Minnesota state legislature to "curb anti-competitive tactics" in order to become, once again, "an innovation center."

And in precisely two months from today, the Epic Games v. Apple antitrust trial will start in Oakland, California.

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Samsung asks federal court in Texas to throw out Ericsson's FRAND claims: no subject-matter jurisdiction over foreign patents

After a post on a Texas-size patent damages verdict in the Western District, we're now hopping over to the traditional patent (troll) litigation hotspot, the Eastern District of Texas.

In Judge Rodney Gilstrap's court, Ericsson brought a FRAND action against Samsung in mid-December, not even knowing that the Korean electronics giant had pre-empted it by filing suit in China, and the Swedish former handset maker amended its Texas case in early January, right after the expiration of the previous cross-license agreement, by throwing in eight standard-essential patent (SEP) infringement claims. Yesterday (Tuesday, March 2) Samsung had to respond to Ericsson's complaint. It decided

  • to move for the outright dismissal of Ericsson's FRAND claims, at least with respect to foreign patents, and

  • to respond (i.e., dispute and deny) Ericsson's infringement claims.

The answer and counterclaims to the infringement part, which I uploaded to Scribd, do not contain any surprise or reveal any particularly interesting information. If anything from that document is worth quoting here, it's the following passage:

"In the last two years, SEA [Samsung Electronics America] has provided thousands of 5G base stations to U.S. carriers including Verizon, Sprint/T-Mobile, and AT&T [...]"

That competitive situation between Samsung and Ericsson presumably complicates the patent licensing dispute. Ericsson would like to tax its competition. It asserts patents against everyone, but in the base station market, there's a strategic aspect to it. It's also possible that Samsung's increasing success in the base station market makes some decision makers on Ericsson's side even more determined to maximize the license fees it can siphon off.

Let's now look at Samsung's above-mentioned motion to dismiss Ericsson's FRAND claims, as this is related to the wider issue of extraterritoriality in patent litigation, a high-priority topic for this blog. Last week, Samsung filed the opening brief in its Federal Circuit appeal of Ericsson's anti-antisuit injunction from Texas, and earlier this week, six law professors explained that the Chinese approach to antisuit injunctions is actually pretty consistent and--as far as I can see--perfectly compatible with U.S. antisuit injunction case law (Gallo and Unterweser). Samsung's motion to dismiss is not based on the fact that Ericsson brought those claims in contravention of the Wuhan antisuit injunction, but on the lack of subject-matter jurisdiction even under Judge Gilstrap's own case law (this post continues below the document):

21-03-02 Samsung Motion to ... by Florian Mueller

In the introductory part, Samsung explains from its perspectives why pre-litigation renewal negotiations failed:

"With the expiration of the cross license looming, the parties entered into a confidential NDA to negotiate a new cross license, including for 5G cellular technology that is currently being introduced into the marketplace. Ericsson made a proposal with emphasis on its unilateral 4G and 5G rates for its SEPs and accorded minimal weight to any cross license for Samsung's patents."

Now, the key thing here is that whatever licensing offers the parties made each other during those negotiations were of a global scope. According to Samsung's motion, there never were "any offers directed specifically to U.S. patents." And that's why Samsung argues a U.S. district court doesn't have jurisdiction--at least not with respect to the majority of foreign patents the parties hold.

Ericsson's objective in Texas is, as Samsung describes it, "to eliminate any obligations [Ericsson] owes to Samsung as a third-party beneficiary to Ericsson's ETSI contract, and thus leave Ericsson unfettered ability to seek worldwide injunctions on SEPs and damages not limited by FRAND." At the moment, of course, Ericsson's access to injunctive relief is not unfettered at all, but that's because of the Wuhan antisuit injunction. If Ericsson managed to neutralize the Chinese antisuit injunction, and simultaneously obtained the declaratory judgment it's seeking in Texas, it could do what Samsung says and extort even supra-FRAND royalties (through the pursuit and actual or threatened enforcement of injunctive relief).

A recent filing indicated that injunctions are so far being sought only over non-SEPs, while all SEP claims are apparently merely damages claims. However, in the U.S., Germany, and other jurisdictions, Ericsson could always amend its prayers for relief and throw in an injunction request.

Samsung points not only to Federal Circuit case law (Voda v. Cordis), according to which U.S. courts shouldn't adjudicate claims over foreign patents, but also to Judge Gilstrap's own Optis v. Huawei decision in July 2018:

"[A]ny portion of [a FRAND claim] that seeks a declaration that Plaintiffs have complied with their obligations under foreign laws or as they relate to foreign patents, or that [the defendant] may not raise a FRAND defense in a foreign jurisdiction, are dismissed."

In Optis v. Huawei, the absence of licensing offers for U.S.-only patents also made it impossible for the district court to "determine whether [the plaintiff] complied with its FRAND obligations as to their U.S. SEPs and [the defendant}."

Samsung's legal argument involves questions of diversity and supplemental jurisdiction. In connection with diversity jurisdiction, Samsung argues--and substantiates by means of a sworn declaration attached to its motion--that any of its SEPs are assigned to Samsung Electronics in Korea, and never to a U.S. subsidiary.

I'll go into more detail on the jurisdictional questions when Ericsson has filed its opposition brief. For now it is quite conceivable that Ericsson's original December case may go away soon, or be narrowed substantially, while its early-January infringement claims will continue to be litigated.

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Wac(k)o record verdict: jury in Western District of Texas says Intel owes Softbank-owned patent troll $2.175 billion over two patents

Texas has a reputation for being big and going big. With respect to patents, it's unfortunately also notorious for going off the deep end at times--not all parts of the Lone Star State, but two of its federal districts. For a long time, the Eastern District was synonymous with patent troll-friendly pretrial rulings and juries. More recently, the Western District's Waco division has put into evidence that nothing is ever so bad it couldn't get worse.

What happened in Waco yesterday is shocking for most of us while it's precisely what patent trolls' political friends like Senators Thom Tillis (R-N.C.) and Chris Coons (D-Del.) would like to see on a monthly if not weekly basis: the potential of money being sucked out of companies that make innovative products by those in the business of patent assertion. VLSI, which used to make products decades ago, went out of business, and whose empty shell formed the basis for a patent troll belonging to the Softbank-owned Fortress Investment group, has won a jury verdict worth (unless overturned or adjusted) $2.175 billion against Intel (click on the image to enlarge):

As the above screenshot shows, this is the sum of a $1.5B damages award for U.S. Patent No. 7,523,373 on a "minimum memory operating voltage technique" and $675 million for U.S. Patent No. 7,7254,759 on a "system and method of managing clock speed in an electronic device."

Intel will obviously appeal. Theoretically, District Judge Albright could set aside or adjust this verdict, but that would be a huge surprise. So it will all depend on the Federal Circuit. In this case, there won't be damages enhancements (up to "treble damages") either, as the jury did not find Intel's infringement to be willful. It's astonishing that a jury practically agrees with a patent troll's damages theory all the way over an incidental infringement (while Intel argued that even if it was found to infringe, the amount should be on the order of a couple million). Intel is a large and deep-pocketed company, but it's not an Apple or Google. If one extrapolates the outcome of this jury trial to a hypothetical case in which similar claims would have succeeded against Apple, you could add another zero on the right side of the damages figure...

The '373 patent was found to be literally infringed; for the '759 patent, the jury found an infringement under the doctrine of equivalents, and rejected Intel's invalidity contentions.

The judge was so eager to hold this trial that he conducted an in-person patent trial despite the COVID-19 pandemic.

The verdict is the highest one ever in an information technology patent case. Only one patent damages verdict in U.S. history was larger; it was about a pharmaceutical patent and, as Professor Mark Lemley (Stanford) notes on Twitter, was "erased on appeal."

The verdict comes just a week before Intel and Apple will file their second amended complaint (i.e., "version 3.0" in total) in their antitrust action against Fortress in the Northern District of California. Last year they already amended the complaint once, but the case has to be narrowed further.

This week's Texas verdict makes next week's filing in California even more significant. The same law firms (Irell & Manella for Fortress/VLSI, and Wilmer Hale for Intel and, in California, also for Apple) are working on the infringement cases as well as the antitrust action.

Here's the complete verdict form:

21-03-02 VLSI v. Intel Jury... by Florian Mueller

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Epic Games v. Apple App Store antitrust case: written order confirms May 3 trial date, further details of trial format

No surprises here: Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California entered a written order confirming what she already discussed with counsel for Epic Games and Apple on Monday. According to Pretrial Order No. 1, the App Store antitrust bench trial will start on Monday, May 3, 2021 (this post continues below the document):

21-03-02 Epic Games v. Appl... by Florian Mueller

Just like on Monday, it's still unclear how many trial days will be required. Over the next 16 days, the parties will provide different versions of their witness lists to the court. The deadlines for those filings are March 12 (Epic's tentative list), March 16 (Apple's tentative list), March 18 (Epic's supplemental list), and March 19 (either party's consolidated list). There will be another pretrial conference on March 26, and I guess at that one the judge presiding over this landmark case--to me, the most important smartphone litigation ever, eclipsing even Apple v. Samsung and FTC v. Qualcomm--will indicate how many trial days are needed. On Monday, different numbers of weeks were tossed out as hypothetical possibilities. It's hardly going to be shorter than three weeks, I guess.

Trials in that district often have a rhythym that leaves one, two or even three days per week to the court for other matters. That is particularly the case when there are urgent criminal trials that must be held. In this case, however, Judge Gonzalez Rogers expects to be able to hear Epic Games v. Apple every day Monday through Friday.

They'll start early (at 8 AM and finish at 3:15 PM, giving her enough time in the afternoon for orders (related to this case and to others she's presiding over). Considering the time zone from which I'll be following the proceedings, this schedule makes it easy for me to listen to the entirety of the public proceedings.

They will presumably have to "seal the courtroom" on a few occasions, but unlike in a patent licensing dispute, there won't really be too many--if any--private agreements to talk about. This is largely about facts that are public, such as Apple's exceedingly restrictive App Store terms and policies. Third parties like Valve may, howevever, seek protection of some of their sales data.

The order says "[p]ublic access shall be by way of telephone access." The court actually broadcast the audio of Monday's case management conference via its YouTube channel, and my guess is that a YouTube audio stream will be provided again for the actual trial, sure to set a new record for the number of concurrent listeners at least in that district and probably far beyond. As the order notes, "video access is not an option for evidentiary proceedings including trials." In the Ninth Circuit, appellate hearings and sometimes also district court hearings (I remember at least one TRO/PI hearing in the Western District of Washington) are livestreamed with pictures. But in those cases, there are only legal professionals speaking in the courtroom (judge and counsel), not witnesses.

Besides the March 26 pretrial conference, April 7 is also an important milestone. On that day, the parties will file their Proposed Findings of Fact and Conclusions of Law. Those documents will provide an outline of what the parties seek to prove, and how--and, ultimately, what the legal relevance the proven facts should have. The single most important battle here is about market definition, which may create a situation in which Apple would have no chance of successfully defending itself (short of a successful appeal).

In the very short term, the Arizona state legislature is going to vote on an App Store bill introduced by Republican state lawmakers Dr. Regina Cobb and Leo Biasiucci (the majority whip in the Arizona House of Representatives). I wrote about that initiative a few days ago. Apple and Google are fighting against it, but I hope the Grand Canyon State will make technology policy history. I've read that "free market" groups are lobbying on Apple and Google's behalf, but as an app developer I'd like to tell them that those app store regimes are--in their current form--antithetical to the notion of a "free market." Those groups have either failed to understand the problem or they have incentives not to understand.

It's similarly absurd to suggest that the Arizona state legislature would somehow insert itself into the Epic Games v. Apple dispute. Further above I was talking about proposed findings of facts and conclusions of law. None of them would be affected by the Arizona decision in any way. A federal antitrust action in the Northern District of California is not controlled by Arizona state law. "Don't legislate while they litigate" would allow anyone to delay or derail an important piece of legislation by suing someone over the same issue in anticipation of a legislative proposal.

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Tuesday, March 2, 2021

Law profs to Federal Circuit: China's antisuit injunction case law is consistent and compatible with U.S. approach, Ericsson's anti-antisuit injunction against Samsung should be overturned

Many people in other parts of the world, especially in Europe, don't like to hear this, but this world isn't as multipolar as some would have it. Instead, there are simply two economic superpowers, the U.S. and China, who are rivals in many ways and whose political systems are fundamentally different, but quite often it is in their interest to work together. Coopetition, so to speak.

Ignorant of that reality, the anti-antisuit injunction Ericsson obtained in the Eastern District of Texas against Samsung's antisuit injunction from the Wuhan Intermediate People's Court is premised on a disdain for China as a patent jurisdiction--and the underlying assumption that what's good for China must be bad for the U.S., and vice versa. Like a zero-sum game. The Texas court also wrongly accused Samsung of hypocrisy due to a misunderstanding that happened to me as well: Samsung's requests for U.S. import bans (in response to similar petitions by Ericsson) didn't involve SEPs.

Antisuit injunctions (ASIs), anti-antisuit injunctions (A2Sis), anti-anti-antisuit injunctions (A4SIs) and recently even anti-anti-anti-anti-antisuit injunctions (A4SIs; see this Juve Patent article of Februar 26 on a Munich ruling) are a mess--if not mayhem--that needs to be addressed through an international treaty sooner or later (sooner if you ask me, but definitely not in the form of mandatory arbitration). Until a sustainable solution has been put in place, the question is when a national court should defer to a foreign court--or keep escalating until someone will issue an A5SI, A6SI or whatever else might earn an entry in the Guinness Book of Records.

Are U.S. interests served by the Federal Circuit lifting the A2SI from Texas, or by affirmance?

Affirmance would mean to accelerate the race to the bottom--a race that U.S. courts couldn't win in the end due to constitutional constraints. Someone else would always find ways to impose more drastic sanctions. The U.S. has a well-respected jurisdiction and a huge market. It stands more to gain from de-escalation.

De-escalation, however, involves deference. In Ericsson v. Samsung, that's deference to a Chinese court's ASI (and A3SI) that came down in an earlier-filed case, and under circumstances where Ericsson doesn't really have strong arguments why a dispute between a European and an Asian company, at the heart of which you have a FRAND licensing pledge under French law, must be resolved in Texas. If two American companies were embroiled in a FRAND dispute, and one of them went to Germany and obtained an ASI (and additionally an A2SI, A3SI, A4SI, ...), questions would have to be asked. Similarly, if a company generated most of its sales of SEP-implementing products in the U.S. market, and the SEP holder was a non-practicing entity, a U.S. court might simply be the logical forum. But Ericsson v. Samsung is not the kind of dispute that U.S. courts absolutely have to adjudicate.

It may be counterintuitive, but there actually are reasons for which the U.S. judiciary would have less of a problem with Chinese antisuit injunctions than, for example, their German counterparts. An amicus curiae brief filed yesterday with the Federal Circuit by six law professors (Jorge Contreras of the University of Utah, Ann Bartow of the University of New Hampshire, Michael Carrier of Rutgers Law Schooo, Chrstia Laser of the Cleveland-Marshall College of Law, Joshua Sarnoff of DePaul University, and Peter Yu of Texas A&M University) explains just how consistent and compatible Samsung's Chinese antisuit injunction is with the U.S. Gallo and Unterweser case law (this post continues below the document):

21-03-01 Professors' Am... by Florian Mueller

In connection with Nokia v. Continental I already criticzed in 2019 that German courts have a pretty one-dimensional perspective on anti-antisuit injunctions. Basically, they hold that a patentee's interests in enforcement are sacrosanct, and any interference by other jurisdictions is unacceptable. Therefore, the Munich appeals court upheld Nokia's A2SI despite the fact that German courts cannot enter ASIs, without conducting any Gallo/Unterweser type of multifactorial analysis. Just black or white. Antisuit is always bad, so let's do anti-antisuit.

China's more differentiated approach to antisuit injunctions bears a strong resemblance to Gallo and Unterweser, including that the impact on international comity is considered. By contrast, German courts simply consider any antisuit injunction, no matter how well-reasoned by U.S. standards, to represent a terrible and unacceptable encroachment. From that one-dimensional (if not zero-dimensional) analysis they conclude that they're free to retaliate.

China's antisuit injunction regime is just as differentiated and balanced as the standard applied in the U.S., while Germany has yet to develop a more sophisticated approach than its current "an eye for an eye, a tooth for a tooth" anti-antisuit regime. Of course, Germany is just an example, but a particularly relevant one in the context of patent litigation. Others will do the same, or even worse. In those cases, there's a pressing reason for U.S. courts to retaliate--but not when a jurisdiction, even if a country's political system may be distinct from Western democracies, adjudicates antisuit injunction motions in a manner consistent with the U.S. Gallo and Unterweser case law.

The professors have a point. The Federal Circuit could lift Ericsson's Texas A2SI based on a finding that the Wuhan Intermediate People's Court rightfully protected its jurisdiction on a basis that is materially consistent with how a U.S. court could have arrived at the same decision. In doing so, the Federal Circuit would set an example, and the U.S. could then expect China to honor American antisuit injunctions under comparable circumstances. The alternative is chaos--if we want to call chaos an alternative in the first place.

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Monday, March 1, 2021

Epic Games v. Apple trial scheduled to start on May 3: exact duration and in-person vs. video testimony to be determined

Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California said at the outset of today's Epic Games v. Apple case management conference that this is a very significant case, so the judiciary should give it the best it has to offer, which is an in-person trial. But under the circumstances of the COVID-19 pandemic, it may be necessary to conduct the trial, in whole or in part, via Zoom. Even if it's fully in-person, the number of persons simultaneously present in the courtroom will be very limited.

The judge won't take it lightly if someone who's a "COVID denier" on Facebook or goes on extensive travel for other purposes asks to be excused from showing up in person for the trial. She expects counsel for the parties to "investigate" the witnesses in that regard.

For now the plan is that witnesses won't have to wear masks when testifying. Judge Gonzalez Rogers mentioned that the court has plexiglass shields. Actually, experts doubt or even ridicule the effectiveness of such shields as I reported last summer. But Judge Gonzalez Rogers explained she would be closer to the witnesses than anyone else, and by May she'd be "fully vaccinated." While I remain skeptical of plexiglass shields, I don't doubt at all that this judge is very committed to preventing COVID infections in the courtroom. She is in contact with Judge Albright in the Western District of Texas, who is holding patent trials all the time despite the pandemic.

The trial will start on May 3, 2021. This appears to be a pretty definitive plan, though the judge also noted one would have to keep looking at "the [infection] numbers." The exact length of the trial depends on the number of trial exhibits etc. the parties plan to present. Based on the potential durations the judge tossed out, it sounded like the length of the trial will most likely be somewhere between three and five weeks. At some point she said she'd give three weeks, but that was apparently just a hypothetical example.

Today's case management conference was audio-livestreamed via the court's YouTube channel, with only about 25 concurrent listeners when I checked. A YouTube audio stream will apparently also be the basis on which the general public will be able to follow the May trial.

Epic Games v. Apple will be a bench trial (i.e., no jury), while some other App Store antitrust cases against Apple will be put before juries a few months later.

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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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