Monday, December 5, 2022

Split FTC may very well clear Microsoft's $69B purchase of Activision Blizzard now: New York Post article on commissioner Slaughter's stance passes plausibility test, appears to have substance

Rumors keep flying over the merger review process in the U.S. relating to Microsoft's $69B acquisition of Activision Blizzard King. Last week, Politico's Josh Sisco reported that the staff of the Federal Trade Commission (FTC) would likely issue a recommendation against the deal, and discussed when and where (in-house court first, or federal court right away) the FTC would sue. There was a lot of speculation in it, and the article made it clear that it was too early to tell.

I totally disagreed with only one part: the notion of a "black mark" on Microsoft's reputation as a Big Tech player who cooperates with regulators. Seeking approval of a merger is not comparable in the slightest to actual misconduct (be it monopoly abuse, as Microsoft knows from about 20 years ago, or cartelization). If I ask a government agency whether I'm allowed to do something, I'm not breaking a law until I do it regardless of a negative answer. And if I believe I have the right to do it and I seek judicial review of a no, I'm still not breaking any law and exercising a fundamental right that is essential for the system to function (and not to descend into arbitrariness). So, I think the "black mark" part was off base, and it surprised me from a reporter with considerable experience covering antitrust matters, but that doesn't mean that Politico's sources weren't right about the staff's inclination.

MLex--Mr. Sisco's previous employer--reported at around the same time that the FTC was not interested in whether Microsoft and Sony would reach an agreement. It is now widely known that Microsoft offered a ten-year deal for Call of Duty to be available on the PlayStation. And there were rumors of Microsoft and Sony having met about a week ago to negotiate.

Just before the weekend, Bloomberg then cited an unidentified source saying that Microsoft was "gearing up to contest" a blocking decision in court.

There was information in the Politico article on how the commissioners are inclined to vote. On Sunday, however, the New York Post claimed to have sources indicating a spit among the presently four commissioners. In order to sue, the FTC needs a majority; a split means the deal is approved, and the article speculates that FTC chair Lina Khan may want to avoid a situation like that as it could undermine her authority if one of her fellow Democrats declines to follow her.

Does the New York Post know more--and does it know something more important (as the commissioners vote while the staff merely recommends)--than Politico and possibly even MLex? It may seem counterintuitive, but in this case the New York Post may just have scooped on other media, even including specialized media.

To be honest, my initial reaction was not to attach too much importance to the NY Post story, but it changed when I read it and reflected on its content. Let me start with why I had some initial reservations before explaining why I overcame them and now believe there is a decent chance that the article correctly describes the situation:

  • It is fair to say that the Wall Street Journal and the New York Times are far more influential and less controversial than their neighbor NY Post.

  • The NY Post is not on the best terms with Democrats, which is a limiting factor when trying to find out about the Biden Administration's inclinations.

  • The NY Post doesn't have antitrust-specialized reporters. Josh Kosman, who wrote the article I just linked to, reports on business topics, but is not an expert on regulation.

  • It's been less than a month since two other NY Post reporters published an article on the same regulatory matter that didn't seem credible at all. They said that people inside Activision Blizzard were concerned about Microsoft not having offered remedies at that stage and that the deal could fall apart. First, why would Activision Blizzard insiders--almost all of whom are on the West Coast--talk to the NY Post and not the L.A. Times? Second, why would an acquirer who knows that there is no legally defensible theory of harm with which any regulator could block the deal offer remedies at an early stage of proceeding (as opposed to a little later when it's really about just getting the deal done without complications)? Third, it looked to me like someone on Wall Street was using the NY Post for an agenda (a shortseller trying to drive the stock price further down to cash in on that movement, or someone who placed a "long" bet on ATVI and wanted to up the pressure on Microsoft to offer concessions).

So when this new article appeared bullish on the deal, I wanted to be sure I wasn't being misled by a confirmation bias. My stance on the deal is clear, and I've been very forthright about not only my Microsoft and Blizzard connections (which do not change anything about my desire to provide correct analysis and maximize my prediction hit rate) but, above all, my interest as an app developer in Microsoft creating a cross-platform mobile app store that competes with Apple's App Store and the Google Play Store (provided that legislative measures or regulatory or judicial decisions enable third-party app stores to compete with the incumbents on a level playing field).

The NY Post article is not too good to be true. It has too much substance to be discounted--more specific and potentially relevant information than the previous NY Post article on the deal, but also more than what I've seen from others reporting on the FTC approval process--and this time around it is possible that the NY Post had access to a great source about things that happen between New York City and Washington DC.

The FTC is currently one commissioner short (four members instead of five). The Biden Administration has not been very efficient at running its nominations through Congress, and in this case, the next commissioner would have to be a Republican anyway. So there presently are three Democrats (Lina Khan, Rebecca Kelly Slaughter, Avaro Bedoya) and one Republican (Christine Wilson).

Mrs. Wilson is clearly not on the same page as Chair Khan, and she's made it clear in various contexts. She was also a vocal dissenter from the FTC's pursuit of the case against Qualcomm (and in the end the Ninth Circuit supported her opposition to that one). The NY Post says Mrs. Wilson "has signaled support of the deal," and there is no particular reason to doubt that. So all it takes is one of the Democrats to vote in favor of clearance.

The NY Post says "the identity of the dissenting Democrat couldn’t immediately be confirmed, DC sources following the situation pointed to [Mrs.] Slaughter."

Clearly, Mrs. Slaughter would have had reasons to resign from the FTC when President Biden appointed 33-year-old Lina Khan--based only on her academic work--not just as a commissioner (which would already have been a bold move) but as chair. At the time, Mrs. Slaughter was the Acting Chair. Frankly, many others in her place would have resigned (and become a partner at a Big Law firm), not because Mrs. Khan couldn't have been a great FTC chair further down the road, but because it would have made more sense to let her serve a first term as just another commissioner. The obvious Democratic choice for the top job would have been Mrs. Slaughter.

Mrs. Khan's appointment was criticized by Senator Mike Lee (R-Utah). I found it inconsistent that someone who wanted to serve on the Supreme Court without a judicial career warned against an FTC commissioner "learning on the job." But at the time it wasn't clear Mrs. Khan was going to become chair right away, and in the same post I also said that Sen. Lee's reference to Mrs. Khan "being less than four years out of law school" would be valid "[i]f the average number of years of professional experience of all FTC commissioners was brought down to four years, or even to eight years." I would compare this to the sitaution at Google, where long-time non-founder CEO Eric Schmidt quipped that "adult supervision" was no longer needed when he stepped down and founder Larry Page took over.

At the current FTC, it is Mrs. Slaughter who can help with "adult supervision" in the sense of preventing the agency from making mistakes for the relative lack of the (otherwise probably brilliant) chair's professional experience. She can play that role not only through persuasion (or, in this case, dissuasion), but if all else fails, she can cast the decisive vote.

To be clear, Mrs. Slaughter is not "the anti-Khan." There is every reason to believe that--despite having been passed over for the promotion--she is loyal and, above all, she appears principled. For example, in May I commented on a submission that Mrs. Khan and Mrs. Slaughter jointly made to the U.S. International Trade Commission in connection with standard-essential patent enforcement. There was a potential procedural issue because the two submitted that letter without following standard FTC practice of seeking internal approval (which they could have obtained shortly thereafter anyway once Mr. Bedoya was confirmed). What matters in the Microsoft-ActivisionBlizzard context is that when Mrs. Slaughter agrees with Mrs. Khan, they will work together, and in that SEP context they even did it in a way that drew harsh criticism from Mrs. Wilson for having broken with FTC tradition.

The Microsoft-ActivisionBlizzard merger review process is not about anyone wanting to make Mrs. Khan look bad. If anything, the NY Post leak gives the FTC an opportunity to build a consensus rather than risk a split vote.

The NY Post quotes former FTC chair William Kovacic:

"The way out is to say, ‘We got a great deal and only got it because we’ve been badasses.'"

A ten-year commitment to Call of Duty on the PlayStation would be an exit strategy for sure. It would be only a question of semantics whether that is a structural remedy (as the FTC has recognized, licensing can be structural, like a divestment) or a behavioral one. I would argue that a short-term license deal that still requires good-faith compliance because the desired effect cannot be achieved through justiciable commitments is probably more of a behavioral remedy, but a long-term license deal with a very clear standard (here, requiring that CoD be just as good and playable on the PlayStation as on the Xbox) is indeed a structural remedy, or at minimum tantamount to one. Ten years is really an eternity in this business, though I recognize CoD has been around for quite long. Ten years gives Sony every opportunity to improve its products and to acquire further exclusive content that Microsoft will have no reason to reduce its commitment to the PlayStation even thereafter.

The NY Post also plausibly says the Biden Administration may take it consideration "that Microsoft can be trusted to keep its promises because of its past history of responsible behavior."

The former FTC chair gave the NY Post a lot more information than the quote on the "great deal." With a source like that being disclosed, while other sources are not named, it is not just wishful thinking to believe that the NY Post really had some first-rate sources this time.

In my opinion, it is not clear why Mrs. Khan would be opposed to the deal at all, given that the mobile app store element of it actually has the potential to further her own agenda of limiting Big Tech's power. She could look at this like England's "balance of power" doctrine from the 16th century on: they didn't want a single continental European power to pose a threat. A Microsoft-ActivisionBlizzard mobile app store will make a key contribution in that regard.

What I can understand is that neither the FTC nor other competition enforcers (particularly the European Commission and the UK Competition & Markets Authority) want to embolden Big Tech companies to make aggressive acquisitions that cement monopolies. That is totally understood. I wouldn't want a Netflix-Disney merger (or Apple to buy both of them), Google to buy Toyota, Apple to buy Spotify, or Amazon to buy Wal-mart. But almost a year has passed since Microsoft and Activision announced their agreement, which still hasn't been consummated. That timeline tells something. The legal framework for merger control just doesn't support a blocking decision here, and it's hard to think of a Big Tech acquisition that can credibly help to open up a market (here, mobile app distribution).

There has been almost a year of uncertainty as evidenced by the spread between the price offered by Microsoft and the price at which ATVI stock is currently trading. That alone should serve as a lesson for Big Tech. Would it be an even stronger and clearer message if the FTC elected to sue? Not really, because it would likely be counterproductive. A lawsuit would further delay the process, and the stock market might get nervous about it if it happened. But losing such a high-profile merger case would be a disaster for the FTC and her chair. It would weaken the agency; it would make it harder to build majorities to bring cases; and at the end of the day, a defeat by the FTC could really encourage Big Tech players to make bold moves on the acquisition front, factoring in substantial delay but assuming that the FTC (and the DOJ) will lose in all likelihood.

The FTC should indeed take a tough stance on major Big Tech acquisitions, but it should also preserve its credibility as a competent competition authority.

All things considered, the scenario outlined in the NY Post makes more sense than any other that is on the table right now. That's why I wouldn't rule out that the NY Post got something right, and found out about something, that others didn't. Quite often, Politico and MLex have scoops, and I respect many of their reporters. But they are not games industry experts, and I believe none of them would claim to be.

As someone whose name once appeared in the credits of three of Blizzard's four most important franchises, I have my own perspective on this (as does Richard Hoeg, a lawyer who owns the Virtual Legality YouTube channel, where he comments on the intersection of games and the law). In this case the NY Post's take convinces me a lot more than what I've seen from, and heard about, the specialized publications' commentary, where I never got the impression that they ever understood how clear a case this one is for clearance if one considers all the publicly available facts and applies the legal standard to them. The Emperor has no clothes, and if it takes a court of law to tell that to the world, it will only get worse.

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Sunday, December 4, 2022

UK Intellectual Property Office acknowledges 'widely reported link between ACT and Apple' ahead of panel on standard-essential patent enforcement

Astroturfing is a disease, and relentlessly exposing it is the cure. I make my little contribution to the fight against astroturfing, and I'm grateful to several Members of the European Parliament for having officially complained to the European Commission about certain manifestations of the problem (with more to come).

ACT | The App Association, a group that claims to represent the interests of small app developers and IoT startups but is in reality just a lobbying front for (and overwhelmingly funded by) Apple working against app developer interests and promoting the devaluation of standard-essential patents (SEPs). On Friday I noticed that ACT | The App(le) Association will host a panel on "global licensing of SEP's [sic] and its broader impacts" on Tuesday (December 6). They announced two speakers:

I informed Professor Nazzini of what ACT is all about, so he knows about the astroturfing problem, but he may be more interested in whatever relationship he has with Apple, just like Charles River Associates recently published a paper commissioned by ACT (i.e., paid for by Apple). Obviously, Professor Nazzini's participation in that event means that one has to view him as an Apple ally (to say the least) whenever he speaks out on, or writes about, SEP policy.

However, I don't consider it appropriate for a government agency to engage in anything that could be interpreted as lending legitimacy to astroturfing. To be clear, there would be nothing wrong with the UK Intellectual Property Office (UKIPO) speaking

  • at an Apple event that is properly labeled as such (provided that it then also speaks at events hosted by various other companies, which would keep a UKIPO official busy for some time),

  • at an event hosted by a lobbying agency or other service provider (such as Charles River Associates) that takes money from Apple (again, provided that the actual backers are properly disclosed and that the other side of the debate will get equal treatment), and

  • even at an ACT event if ACT finally admits that it is not an "App Association" but simply an Apple Association.

While ACT itself is probably not going to make that admission until it is dissolved, I appreciate that that the UKIPO's press office responded to my inquiry on Friday. A spokesperson for the UKIPO said:

"We can confirm that an IPO representative will participate in a third party organised event on 6 December 2022. Neither the IPO, or its representatives, are affiliated to ACT. We are also aware of the widely reported link between ACT and Apple." (emphasis added)

That awareness was presumably lacking when two members of the busy cabinet of EU competition and digital policy chief Margrethe Vestager met with ACT shortly before Bloomberg reported on what ACT is all about.

The UKIPO spokesperson went on to explain:

"The IPO’s aim is to gather robust evidence on SEP policy through good evidence gathering principles. This means reaching a wide audience of industry and sectors across the UK. At each stage of engagement in this area, we continue make clear the need for appropriate evidence before the government proposes any policy interventions.

To date, we have heard extensively from SEP holders and major implementers. We also need to reach others including smaller businesses, researchers and key sectors such as the automotive industry." (emphasis added)

Well, if the UKIPO wants to engage with smaller businesses, ACT is certainly not the right platform. But to their credit, they have acknowledged the ACT-Apple link. Now they just shouldn't believe that Apple is paying ACT to represent small business interests. Much to the contrary, ACT is the enemy of small app developers in the App Store antitrust context.

Small businesses rarely have to deal with SEP issues anyway. ACT has been desperately trying for a while to find any example of a small business that actually received royalty demands or threats of litigation, which is why ACT--under the Save Our Standards label--presented a service provider as a potential victim of SEP abuse, but the example that the company in question gave was clearly an app that couldn't infringe SEPs.

The UK IPO statement concluded as follows:

"We are currently participating in a range of engagements including speaking opportunities from implementer representatives, standard development organisations and other relevant events.

"We continue to engage with all parties with an interest in SEP policy and the wider regulatory environment so we can achieve a balanced approach for innovation in the UK."

Laudable though the objective of engaging with all sorts of stakeholders may be, astroturfers do not deserve the participation of government officials in their events, much less as keynote speakers.

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Elon Musk prioritizes Twitter's present over Tesla's future in peace deal with Apple, accepts App Store tax in exchange for ad spend: TSLA investors should keep an eye on this

Long-term Tesla (NASDAQ:TSLA) investors should be concerned about a manifest conflict of interest between Elon Musk's troubled Twitter buyout and his role with the automaker that goes far beyond the enormous distraction that his intense crisis management at the social network entails. A few hours ago, Mr. Musk made a public statement that Apple--Twitter's largest ad customer--has resumed its Twitter ads, which in combination with his visit to Apple Park a few days ago suggests that he gave up his public resistance to Apple's monopoly abuse--which had massive political repercussions--only to secure a short-term cash influx for Twitter.

The day before Mr. Musk confirmed that Apple had resumed its Twitter ads, I already viewed this as one of only two possible explanations for Mr. Musk's recent tweet that it had all been a misunderstanding and Apple never actually considered "removing" Twitter from the App Store:

Now, Matt Stoller reasonably believes that what happened is exactly the bargain I had outlined as the second possibility:

This is unsurprising as Mr. Musk's series of tweets antagonizing Apple started with ad budget allocation and then raised App Store issues. That would have been inconducive to Twitter's credibility in a hypothetical antitrust clash. But it was, as we now know, simply Mr. Musk's agenda to use one as a bargaining chip for the other.

Even if the potential for a Twitter-Apple clash over the App Store monopoly (app tax and app review) lingers on as the rejection of a single major Twitter update by Apple's app reviewers could make the conflict flare up again, Apple has been able to appease Mr. Musk--arguably one of the most formidable App Store opponents--at a critical time. The Congressional term is almost over, so the Open App Markets Act--which the White House would like to see adopted now--may slip into the next term. It's not just about another ten months or so that Apple might be able to delay the OAMA's enactment, and the risk that the next Congress might not do anything about it. There's a lot happening around the globe, with the EU now beginning to implement, step by step, its Digital Markets Act (which I've previously described as the kind of legislative-regulatory intervention that is automakers' only chance to prevent Apple and Google's "carjacking"); with antitrust investigations in various jurisdictions; with the UK's DMU plans; and with the Ninth Circuit working on its Epic Games v. Apple appellate opinion. U.S. legislation would not be a requirement for any of the foregoing to do away with the App Store monoppoly, but would definitely pave the way. At this pivotal juncture, Mr. Musk could have kept up the pressure and maximized the chances of the OAMA being passed into law this very month.

Instead, he sold his birthright for a bowl of stew like a Biblical character. Or as the famous Spanish saying goes, pan para hoy y hambre para mañana (bread for today, hunger for tomorrow).

As long as those who backed Twitter's reprivatization are in favor, there is nothing wrong with Twitter prioritizing today's revenues over tomorrow's app tax load--but what if Mr. Musk either had to promise to Mr. Cook that Tesla, too, would refrain from challenging Apple's platform monopoly abuse or Tesla's strategic interests in combating Apple's "digital carjacking" (before it's too late) were not discussed, but Mr. Musk is restricted in his ability to vigorously defend Tesla's interests because Twitter needs Apple's advertising dollars?

That's where the apparent horse trade between Twitter and Apple becomes a serious problem for Tesla.

No company poses a greater threat to Tesla than Apple. Google is number two, while the aggregate of all other car makers is a distant third: they can only compete (more or less), but they can't leverage monopoly power.

Mr. Musk's repeatedly stated concerns that Twitter might go bankrupt make him personally somewhat dependent on Apple and Google. In the short term, this won't impact Tesla's revenues or earnings. What is at stake, however, is Tesla's ability to defend its turf against a future Apple Car and Tesla's control over the cockpit and all the digital revenue streams in the self-driving vehicles of the future. Moreover, if Mr. Musk strikes a deal with Mr. Cook that gives Twitter a short-term influx of cash but compromises Mr. Musk's ability to defend Tesla's turf and its long-term strategic interests against the mobile operating system duopoly, there is considerable risk that other third parties may also influence Tesla's decisions through their dealings with Twitter.

For the avoidance of doubt, I am not at all saying that Mr. Musk should do what's bad for Twitter because it's good for Tesla, such as waging war on Apple over the app tax because it benefits Tesla in the long run to loosen the duopolists Apple and Google's death grip on their respective mobile ecosystems. The cooncern here is that Mr. Musk had three reasons to fight Apple's and Google's app distribution monopolies, and the third one of them--which is arguably the most important one for the long haul--is all about Tesla. It seems that Twitter, which has huge problems because many advertisers have defected or slashed their spend (which is why Mr. Musk now has to be grateful to those advertisers who return to Twitter), is on intravenous life support from a part of Apple's ad budget, and that this compromises his ability to do what's best for Tesla, given that at the end of the day he can only speak with one voice and even he can't say "I'm wearing Twitter's hat now and we still have an entente with Apple" and subsequently raise issues concerning Apple's monopoly abuse (and the way it is impacting the automotive industry) in Tesla's name.

While Google does secret deals with potential challengers to its app distribution monopoly all the time, Apple has so far given sweetheart terms only to the likes of Amazon. Now Tim Cook has sort of applied Google's "Project Hug" approach to Elon Musk. (I'll talk more about Google's Project Hug later or tomorrow: it also involves advertising, but in a different way.)

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Friday, December 2, 2022

BATTLEMAP: 17 months after Nokia sued OPPO, litigation is pending in 20 venues around the globe--either party has won some and lost some

When Nokia sued OPPO in early July 2021, I wouldn't have predicted that they were still going to be embroiled in litigation at this point. But they are. In fact, they are keeping 20 courts around the globe (19 infringement courts plus the USPTO's PTAB, but not even counting appeals courts) busy.

It's been about a decade since I last produced a battlemap of patent enforcement actions (as opposed to antitrust battlemaps such as in 2018). But the Nokia v. OPPO/OPPO v. Nokia patent dispute is so big that I thought it was worth the effort. Here it is, first as a PDF and then four images (click on them to enlarge), followed by a recap of the key events:

Nokia-OPPO: The patent battlefield as of 02 Dec 22 (four pages)

Page 1 (Germany):

Page 2 (Europe apart from Germany):

Page 3 (China):

Page 4 (Rest of the World, i.e., anything other than Europe and China)):

So the venues of this dispute include four infringement courts in Germany (plus the Federal Patent Court for validity challenges; it is not shown on the battlemap because it is the normal course of business to challenge patents in the Federal Patent Court unless they are young enough that one must first file an opposition with the patent office), six in other European countries, six in China, and one each in India and Indonesia--plus the PTAB as I mentioned further above. Temporarily there were cases in Russia, but they were withdrawn earlier this year for obvious reasons.

The battlemap always shows the last three digits (unless more are needed) of each patent-in-suit. In Europe, all of them are EPO patents ("EP"). You can just follow the lines all the way to each line's final arrow to see in which venues they are asserted against which companies or brands.

The first decision was that the Munich I Regional Court granted Nokia an anti-antisuit injunction (the same month that the dispute started, July 2021) on an ex parte basis. Jurisdictional issues were also raised in the UK. In November 2021, the High Court of Justice in London (formerly known and still often referenced as the England and Wales High Court) declined to stay the UK proceedings initiated by Nokia, but indicated a willingness to afford some deference to a Chinese rate-setting decision. OPPO appealed the denial of a stay, but the appeals court affirmed the lower court, and the UK Supreme Court declined to deal with the matter.

In September 2021, the Supreme People's Court (SPC) of the People's Republic of China affirmed a jurisdictional decision (over global FRAND terms) in an OPPO v. Sharp case. Nokia was not a party to those proceedings, but later (i.e., 2022), the same jurisdictional decision came down in OPPO v. Nokia.

In May 2022, the Munich I Regional Court held a first hearing (not yet a full trial) in an OPPO v. Nokia case. OPPO appeared likely to win that countersuit.

In June 2022, Nokia won a Mannheim case over a WiFi-related, but non-standard-essential, patent. The following month-July 2022--Nokia also obtained a SEP injunction in Mannheim. And another month later, in August 2022, Nokia won two SEP injunctions in Munich.

That same month, it became known that OPPO decided to also seek injunctions in Germany (sales bans on Nokia's base stations).

It all seemed to be going according to plan for Nokia, apart from an Indonesian court's dismissal of all four Nokia v. OPPO complaints before it (in July 2022), but then OPPO decided to exit the German market, not forever but indefinitely.

In September 2022, a Dutch court ruled in Nokia's favor over the same two SEPs that won Nokia the Mannheim injunction in July. OPPO had brought a declaratory judgment action in the Netherlands, and a finding of non-infringement and/or invalidity would have increased the chances of an enforcement stay in Germany. But Nokia brought infringement counterclaims and requested (and obtained) an injunction.

Nokia's first setback on the infringement litigation front was when the Dusseldorf Regional Court stayed two of its cases in August 2022. The same happened in Munich in September 2022.

In October 2022, Nokia felt forced to withdraw an infringement case in Mannheim, and it became known that the USPTO and the EPO doubt the validity of a key Nokia patent.

In late November 2022, the Delhi High Court deemed a motion by Nokia for interim patent royalty payments "fundamentally misconceived." Shortly thereafter, Nokia won a third Munich injunction, but on the same day the Dusseldorf court rejected a Nokia complaint (no infringement).

Yesterday (December 1, 2022), the Dusseldorf Regional Court stayed another Nokia v. OPPO case.

It's a monumental patent spat, and the entire industry now knows that suing OPPO or being sued by Nokia is not for the faint of heart...

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Over Apple's objection, ITC judge allows Ericsson to defend telecommunications carriers' right to repair mobile base stations: mmWave patent trial starts next week

Apple knows that sooner or later Ericsson will have decisive leverage from some of its numerous patent enforcement actions, and while there will always be a huge asymmetry in exposure, the iPhone maker would like to get at least a little bit of mileage out of its countersuits. That's easier than done, though. Earlier this week, a German court threw out Apple's first patent lawsuit against Ericsson, over a patent that was granted to Tony Fadell, who oversaw the development of the iPod and is one of the co-creators of the iPhone (before he went on to co-found Nest) as I mentioned yesterday.

Apple's pursuit of a U.S. import ban over three mmWave patents raises public interest questions: that's critical network infrastructure, a factor that the United States International Trade Commission (USITC, or just ITC) has to take into account. Apple brought a motion in limine, asking the Administrative Law Judge (ALJ) presiding over the investigation of Apple's countercomplaint to exclude any argument Ericsson might make at next week's trial for a service-and-repair carve-out (should an exclusion order issue at all).

The Office of Unfair Import Investigations (OUII, commonly referred to as the "ITC staff") actually recommends a superset of a service-and-repair carve-out: the ITC staff says that geographic areas in which Ericsson base stations are already in use should not be affected. In addition, the ITC staff filed a response to Apple's motion in limine and said "Ericsson could have more clearly expressed its intention to request a service-and- repair exemption in its contention interrogatory responses," but "it was reasonably foreseeable that Ericsson would request a service-and-repair exemption." Therefore, the staff also opposed that motion in limine.

On Thursday, ALJ Monica Bhattacharyya ruled on the parties' motions in limine. She denied either of Apple's motions: the one I just mentioned (service and repair), and one targeting Ericsson's defenses to Apple's indirect infringement theories. Those two are somewhat related: as Ericsson explained in one of its filings, the majority of the accused products are actually assembled in the U.S., but certain components are imported. Apple needs an indirect infringement theory in order to obtain an import ban on such components. The fact that Ericsson makes base stations in the U.S. (unlike its main competitors) is another reason for which the ITC may just be the wrong forum for what Apple is trying to accomplish.

Ericsson's only motion in limine has been granted in part. Ericsson said some of Apple's claim construction and validity arguments were untimely.

ALJ Bhattacharyya's decisions are sealed for the time being, but the following screenshot from the ITC docket shows the outcome (click on the image to enlarge):

This is not a good pretrial outcome for Apple.

Starting Monday, the United States District Court for the Eastern District of Texas will hold an Ericsson v. Apple FRAND trial. It is the first situation in this dispute where a settlement would make a lot of sense, but it depends on how far apart the parties' positions are. That's what I also replied to someone on Twitter who wrote he had the feeling the Texas trial wasn't going to take place. The time would be right for a settlement, but sometimes a dispute isn't ripe for settlement because the parties can't bridge their disagreement on the terms. And then those trials go forward and verdicts and rulings come down...

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Thursday, December 1, 2022

Professors, former judges and government officials make the case against the case against the DOJ's Avanci Business Review Letter: 'Critical Function of Patent Pools in Consumer Electronics'

When we talk about cellular standard-essential patents (SEPs) and how to license them to the automotive industry, it bears remembering that car makers generate rapidly increasing levels of revenues from connectivity itself (annual fees, after the first few years, for continued access) and premium features that would be unthinkable without connectivity. Here's a very recent headline that I found on Manufacturing.net (click on the image to enlarge):

$1,200/yr. for faster acceleration is just the latest example of this trend. In the summer, BMW already had to respond to criticism over charging $18/mth. for heated seats.

In light of the gold mine that connectivity is for the automotive industry, one would think that SEP royalties in the low double-digits per car are a total non-issue. Not so. While Continental finally gave up on a meritless U.S. "antitrust" lawsuit in October, frustrated critics of the Avanci patent pool sent a letter to the Assistant Attorney General in charge of the Antitrust Division of the United States Department of Justice, Jonathan Kanter. They asked him to revisit and somehow nuance or downgrade his predecessor Makan Delrahim's July 2020 Business Review Letter that identified no competition concerns over Avanci's envisioned 5G patent pool.

AAG Kanter presumably has some more pressing issues on his to-do list. By far the best way to help the U.S. automotive industry through antitrust enforcement would be to prevent an "autocalypse": Apple and Google--who may indirectly have a hand in that anti-Avanci letter--are trying to take control over future automotive revenue streams (which I call "digital carjacking"). Senator Elizabeth Warren (D-Mass.) wrote a letter to AAG Kanter as well as FTC Chair Lina Khan about it.

But those advocating SEP devaluation are begging for attention: on Tuesday, Bloomberg Law published an opinion piece by the two principal authors of the anti-Avanci letter, Professor Michael Carrier and the Public Interest Patent Law Institute's Executive Director Alex Moss: Protect the Supply Chain From Patent Trolls Before It’s Too Late

If non-practicing entities are the paramount concern, the authors should actually welcome patent pools that have a diversity of licensors (not just Avanci, but generally speaking). For instance, Avanci has at least one important member of the--allegedly imperiled--automotive supply chain among its licensors: LG Electronics. If Avanci can bring the likes of LG, Qualcomm, Nokia, and Erisson together with licensing firms (some of which conduct their own research & development while others enable innovators to transfer assets and the related monetization risk to them), the compromise that results from it will be better for implementers than having to deal with individual NPEs.

It's a safe assumption that the few SEP holders who are not among the 50+ contributors to Avanci's 4G pool include NPEs that ask for a lot more money (relative to portfolio size) than Avanci.

Avanci is just an option. An optional one-stop shop. Car makers can take an Avanci license; they can also seek bilateral licenses if they believe the benefits of doing so outweigh the incremental transactional costs. Automotive suppliers, too, can seek licenses, including exhaustive component-level SEP licenses. One of the key reasons why the DOJ issued its Avanci BRL in the first place was that participants are not restricted from anything. Avanci members have, in fact, granted exhaustive component-level licenses to automotive suppliers.

IP Watchdog was first to report on a November 30 letter by "[t]wenty-five former judges, government officials, legal academics, and economists [...] in support of the DOJ’s 2020 business review letter." Here's the actual document:

November 30, 2022 letter to Assistant Attorney General Jonathan Kanter

The letter was authored by Professors Adam Mossoff (a frequent witness on Capitol Hill) and Jonathan Barnett. The signatories include former judges and government officials:

  • Alden Abbott (Former General Counsel, Federal Trade Commission)

  • Ronald A. Cass (Former Vice-Chairman and Commissioner, United States International Trade Commission)

  • Judge Douglas H. Ginsburg (Senior Circuit Judge and Former Chief Judge, United States Court of Appeals for the District of Columbia Circuit)

  • Damon C. Matteo (Former Chairperson, Patent Public Advisory Committee, United States Patent & Trademark Office)

  • Judge Paul Michel (Chief Judge (Retired), United States Court of Appeals for the Federal Circuit)

  • Judge Kathleen M. O’Malley (Circuit Judge (Retired), United States Court of Appeals for the Federal Circuit)

The key message is that the 2020 Avanci BRL got it right, and there is no compelling reason to break with the tradition of BRLs relating to patent pools:

"Any reconsideration of the 2020 business review letter, as proposed in the October 17 letter, would give rise to significant uncertainty concerning the Antitrust Division’s commitment to the aforementioned sequence of business review letters that have been issued concerning other patent pools in the information technology industry, as well as the larger group of patent pools that did not specifically seek guidance through the business review letter process but relied on the legal template that had been set forth in those previously issued letters."

Case in point, a business review letter gave patent holders the necessary confidence, back in 1997, to start MPEG LA. Earlier today I commented on a shameful lawsuit by a small minority of licensors trying to renege on their commitments to MPEG LA's HEVC patent pool. That one poses a threat to the legal certainty and transactional efficiencies that pools can provide, but so does the October 17 letter urging the DOJ to revisit the Avanci BRL. Patent pools are under attack from both sides: a small minority of unreasonable licensors as well as implementers and those beholden to them.

Yesterday's letter is highly instructive, and if you have a professional interest in this topic, I recommend you to read it. The actual letter spans little over 10 pages. The rest is the list of signatories and an appendix that lists academic papers.

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Dusseldorf Regional Court stays Nokia patent case targeting OnePlus devices--parallel case in Mannheim targets OPPO itself

A spokeswoman for the Landgericht Düsseldorf (Dusseldorf Regional Court) has just informed me that a case brought by Nokia against OPPO affiliate OnePlus has been stayed pending the resolution of a parallel nullity action before the Federal Patent Court. In case no. 4c O 64/22, Nokia is asserting EP1700183 on a "method for secure operation of a computing device." It's a non-standard-essential patent.

Nokia is asserting this patent in Mannheim, too, but against OPPO itself. The Dusseldorf decision is not binding on the Mannheim Regional Court, but may have a persuasive effect (though the Dusseldorf court typically stays cases without stating the reasons for which a patent is deemed likely to be invalid).

Last week, the Dusseldorf court rejected a Nokia complaint against OPPO over a different patent, while Nokia won a third Munich case.

With all that's going on, I will soon publish an overview of what has happened to date in the earth-spanning Nokia-OPPO dispute.

In other German patent litigation news, Apple lost its first offensive case against Ericsson in Mannheim earlier this week. In that case, Apple was asserting a patent that had been granted to Tony Fadell, who oversaw the development of the iPad and was one of the co-creators of the iPhone, and went on to co-found Nest (which was acquired by Google). According to Wikipedia, "Fadell has authored more than 300 patents and was named one of Time's "100 Most Influential People in the World" in 2014."

Tomorrow, the Mannheim Regional Court will hold a preliminary injunction hearing in a DivX v. Netflix case over a patent that DivX is already enforcing against Netflix' Netherlands-based European HQ. The PI motion takes aim at Netflix Services Germany GmbH (case no. 7 O 111/22, provided by a spokeswoman for the Mannheim court). Judge Dr. Peter Tochtermann, who was presiding over the Mannheim Regional Court's 7th Civil Chamber, has left to become a full-time Unified Patent Court judge. For the time being, Judge Thomas Schmidt is filling in as Acting Presiding Judge, and will preside over the PI hearing tomorrow. I remember Judge Schmidt from the time when he was a side judge to Presiding Judge Andreas Voss ("Voß" in German), who is now serving on the Karlsruhe Higher Regional Court.

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MPEG LA seeks dismissal of ETRI, SK Telecom complaint threatening 'the utility, benefit, and public trust underlying [patent] pool licenses': Supreme Court of the State of New York

If litigants try a long shot, it may every once in a while contribute to the evolution of the caselaw. At times, the term "long shot" is a euphemism, especially when a complaint goes against a crystal clear contract. Deutsche Telekom's "antitrust" action against patent licensing firm IPCom was thrown out by the Mannheim Regional Court six months ago as I had predicted. At least Deutsche Telekom didn't deny that the contract said what it said (they waived their right to bring antitrust claims over how other implementers would be treated later): Deutsche Telekom "only" argued that an unambiguous written commitment, made when no injunction was in force or imminent, should be held unenforceable anyway.

Worse than that, the Electronics and Telecommunications Research Institute (ETRI) and SK Telecom brought a suit in September that comes down to claiming that the relevant contract--an agreement among patent pool contributors--doesn't say what it says. The two are suing MPEG LA--a patent pool administrator in good standing that has been around for more than a quarter century (Wikipedia article)--in the Supreme Court of the State of New York (County of New York, case no. 653232/2022, Electronics and Telecommunications Research Institute (ETRI) and SK Telecom Co., Ltd. v. MPEG LA, LLC (PDF)). ETRI and SK Telecom accuse MPEG LA of "falsely claiming to license to others hundreds of valuable patents owned by ETRI and [SK Telecom] when MPEG LA has no right or authority to do so"--but as I'll show further below, that's preposterous. If they won against all odds and common sense, a large number of MPEG LA licensees--from numerous small companies to the likes of Xiaomi--would subsequently face duplicative royalty demands and potentially infringement litigation over patents they are lawfully using (and paying for) under an existing pool license.

It's an attack on a bedrock principle of the patent pool system: that licensees can rely on being licensed to all patents that are essential to the relevant standard and belong to any of the licensors of a pool from which they take a license. I don't understand why two companies who contribute to various pools (with SK Telecom presumably also having taken many pool licenses) decided to bring that complaint, apart from being virtually certain to waste money on legal fees. They are making themselves ridiculous because of the absurdity of their theory and at the same time untrusthworthy:

  • How can other pool managers trust ETRI and SK Telecom that they won't challenge unambiguous clauses in other patent pool agreements?

  • How can licensees trust that if they license ETRI and SK Telecom patents from a pool, they won't later be sued over those patents (unless they pay again, and possibly a lot more than they paid the first time)?

Case overview

Patent licensing is a complex business, so there could be a legitimate question of contract interpretation here, right? Actually...no. One does have to read the Agreement Among Licensors Regarding the HEVC Standard that ETRI and SK Telecom attached to their complaint as Exhibit 3 (PDF). Then it's pretty clear that the issue the complaint attempts to make up simply doesn't exist.

ETRI and SK Telecom left the MPEG LA HEVC pool about three years ago (and instead joined Access Advance's HEVC Advance Pool, as did some other Korean companies, most notably Samsung). The complaint says: "For ETRI, termination became effective on January 2, 2020. For [SK Telecom], termination became effective on January 27, 2020."

What does such termination mean for licensees? One distinction is really key:

  • timely licensees (those who signed up before termination taking effect)

    vs.

  • tardy licensees (those who signed up after termination became effective)

"Timely licensees" and "tardy licensees" is just how I call them here.

The problem is that ETRI and SK Telecom emphasize another distinction, which one can make for academic purposes but which ultimately changes nothing about the contractual situation:

  • pre-termination patents (HEVC-essential patents of which ETRI and SK Telecom became owners before termination taking effect)

    vs.

  • post-termination patents (HEVC-essential patents of which ETRI and SK Telecom became owners after termination became effective)

A two-by-two matrix shows what the dispute is about, i.e., whether a given MPEG LA licensee is licensed to certain ETRI and SK Telecom patents:

Timely LicenseesTardy Licensees
Pre-Termination Patentslicensed
(undisputed)
not licensed
(undisputed)
Post-Termination PatentsMPEG LA says: licensed
ETRI/SK say: not licensed
not licensed
(undisputed)

In other words, tardy licensees get no benefit with respect to any of ETRI's and SK Telecom's patents; timely licensees remain licensed under pre-termination patents; and the question is now whether a timely licensee remains licensed to ETRI's and SK Telecom's HEVC portfolios including post-termination patents.

On November 7, MPEG LA brought a motion to dismiss (PDF). Contract interpretation is a matter of law, and if the contract is clear, the case must go away, based on documentary evidence alone.

The first contract clause to look at here is § 2.3 of the Agreement Among Licensors:

"Non-Exclusive Licenses or Sublicenses. Each [Licensor] shall hereby grant to [MPEG LA and any successor] a worldwide, nonexclusive, non-transferable license or sbulicense under all HEVC Essential Patents, which the [Licensor] and its Affiliates presently or in the future [emphasis added] has the right to license or sublicense (without payment to any third party which is not an Affiliate), with a right of [MPEG LA] to grant sublicenses which are identical in form to the sublicense in Attachment 1 hereto [i.e., the pool license agreement]. ..."

What does the termination clause (§ 7.2) say?

"Voluntary Termination. At any time after January 1, 2020 each [Licensor] shall have the right, effective upon thirty (30 days' written notice [...], to terminate with respect to itself all but not less than all of the following: (1) this Agreement [Among Licensors]; (2) the right of [MPEG LA] to grant additional sublicenses [i.e., pool licenses] (excluding renewals of sublicenses existing at such time) under its license or sublicense granted by such terminating [Licensor] pursuant to Section 2.3 herein; and (3) the Licensing Administrator Agreement entered into pursuant to Section 2.2 herein. [...] For the avoidance of doubt, such termination shall not affect the grant of the license, including renewals, or sublicenses contemplated pursuant to Section 2.3."

MPEG LA's motion to dismiss notes that ETRI and SK Telecom's complaint doesn't even quote the key passages, such as the "For the avoidance of doubt" part ("shall not affect the grant of the license, including renewals. Instead, the complaint makes it sound like "additional sublicenses"--which just means that MPEG LA can't give subsequent licensees any license to patents owned by licensors who have left--also included cases in which a timely licensee becomes licensed to post-termination patents.

Xiaomi is a great example here. Their license agreement with MPEG LA was announced (PDF) on January 9, 2020. Let's assume that the announcement wasn't delayed too much after the signing of the agreement, then they presumably became an MPEG LA HEVC licensee after ETRI's effective termination date, but undoubtedly prior to SK Telecom's. If Xiaomi or MPEG LA claimed that Xiaomi was licensed by MPEG LA to SK Telecom's HEVC patents, that would presumably be wrong, and I could see a case for declaratory judgment. But Xiaomi clearly got a license to all of SK Telecom's HEVC patents, including the ones SK Telecom obtained after termination ("in the future" as Section 2.3 as said). If SK Telecom was granted an HEVC-essential patent in, say, February 2020, Xiaomi is licensed, and the "For the avoidance of doubt" part applies--including that Xiaomi can perpetually renew its MPEG LA license agreement without losing those benefits.

Policy considerations

Implementers understandably expect legal certainty--peace of mind--with respect to the standard-essential patent (SEP) portfolios of the licensors they see on the list when they take a license. Why take a pool license at all if you may still face royalty demands and infringement litigation over patents from a party with which you thought you already had a deal in place?

Pools provide transactional efficiencies, but they can only do so with reasonable legal certainty.

ETRI and SK Telecom have a problem: anyone who negotiates an HEVC Advance license (a pool they joined because they thought they'd get a better deal than from MPEG LA) but already has a (timely) MPEG LA license will argue that certain parts of the Advance pool must not be paid for again. Access Advance--through its licensors that were asserting patents against Vestel--lost a case in Dusseldorf about a year ago because of the duplicative-royalties issues.

They're now trying a Hail Mary in a New York state court.

Another South Korean company, Samsung, also filed a lawsuit against MPEG LA there: a complaint (PDF) over royalty redistribution. Various cases by MPEG LA licensors against Samsung are pending in Dusseldorf. I don't want to disgree into the Samsung situation here. The cases aren't identical, but the root cause is the same and the issues are at least adjacent--and the complaints similarly meritless, though ETRI and SK Telecom's complaint has set a new absurdity record.

What Samsung has in common with ETRI and SK Telecom is the root cause of their grievances: they thought it was a smart move to join the Access Advance pool and leave the MPEG M;LA pool, and it's not going well. There are potential signs of piecemeal resolution by licensees such as Xiaomi, taking bilateral licenses rather than a pool license.

Those companies wish they could have left MPEG LA without existing licensees retaining any kind of license. But that's not what the contract says, nor would it be good policy. MPEG LA notes that what is at stake here is "'the utility, benefit, and public trust underlying [patent] pool licenses'."

The issues even go slightly beyond patent pools. Capture clauses in bilateral license agreements frequently include patents to be granted or acquired after certain key dates. Many bilateral license agreements resulting from individual negotiations as opposed to a standard agreement being signed by many parties. That is an important difference, but it is always unacceptable when licensors try to get out of their commitments in hopes of being able to charge more.

Federal courts deal with patent license agreements all the time because of license-based defenses to patent infringement complaints. State courts do have jurisdiction over contract law, including patent-related agreements, but don't see the practical implications in infringement cases. I suspect that ETRI and SK Telecom just hope that a state court can be fooled by them, but the contract language appears too clear--and the Supreme Court of the State of New York (County of New York) does adjudicate interesting commercial disputes on a daily basis. So my prediction is that the complaint will be dismissed.

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Wednesday, November 30, 2022

Apple loses first patent case against Ericsson: Mannheim Regional Court rejects Apple's first offensive patent complaint that has come to judgment since 2014

The first final judgment (as opposed to a preliminary injunction ruling such as the one in Colombia) in the current multijurisdictional Ericsson-Apple patent dispute came down yesterday--and Apple lost an offensive case in Germany. Apart from design patent cases, it's the first judgment in an offensive technical (utility) patent case brought by Apple since the second case against Samsung that went to trial in San Jose in 2014.

As a spokeswoman for the court just informed me, the Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) of the Landgericht Mannheim (Mannheim Regional Court) yesterday handed down a judgment in Ericsson's favor, rejecting Apple's patent infringement complaint and imposing all costs on the iPhone maker. Apple can appeal this decision to the Sixth Civil Senate (Presiding Judge: Andreas Voss ("Voß" in German)) of the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court).

The case no. is 2 O 9/22; the trial was held on October 18; and the patent-in-suit is EP2945332 on an "apparatus and methods for network resource allocation."

Ericsson was successfully defended by the Dusseldorf-based law firm of Kather Augenstein. I've found out now that Ericsson's lead counsel defending against this particular Apple lawsuit was Christopher Weber, who was supported by Dr. Christof Augenstein and Sophie Prudent.

The patent specification describes EP'332, which has not been declared essential to any cellular standard, as being "directed to a computer networking device (e.g., a router) which is adapted to allocate portions of a communications network or its available bandwidth between different uses." While the specification also says the claimed invention "relates generally to the field of data networks," it appears that Apple couldn't show that Ericsson's cellular (4G/5G) base stations infringe this patent that clearly has its roots in the WiFi space. That is obvious from the use of typical WiFi terminology such as "access point" in the claim language (emphases added):

A method for allocating a collective bandwidth of a plurality of wireless access points, the method comprising:

at a first wireless access point of the plurality of wireless access points

  • receiving a request for a first use from a wireless client device;

  • in response to the request for the first use, allocating a first portion of the collective bandwidth to the first use based at least in part on a bandwidth allocation rule that is dynamically set and that implements in part a bandwidth allocation of the collective bandwidth, wherein the bandwidth allocation rule is based on a level of network security associated with security requirements for different types of traffic;

  • allocating a second portion of the collective bandwidth to a second use different from the first use based at least in part on the bandwidth allocation rule; and

  • servicing the request for the first use using the first portion of the collective bandwidth,

  • wherein each of the plurality of wireless access points dynamically allocates one or more portions of the collective bandwidth to at least the first use or the second use based at least in part on one or more bandwidth allocation rules to maintain the bandwidth allocation of the collective bandwidth.

In theory, a patent stemming from WiFi research could cover such a foundational technique and be so broad that even cellular (4G/5G) base stations infringe it. But a patent holder would be lucky in that case, and Apple wasn't.

None of Ericsson's cases against Apple has come to judgment yet, but it's going to happen in the not too distant future. The Munich I Regional Court held two hearings (not yet full trials) in September and is inclined to find that the iOS version of WhatsApp (which Apple exclusively distributes due to its app distribution monopoly abuse) infringes an Ericsson non-standard-essential patent (non-SEP) as well as a standard-essential patent, with respect to which the Munich court denied Apple's motion to dismiss the complaint at this stage. Three weeks ago the Mannheim Regional Court heard an Ericsson v. Apple SEP case and appeared inclined to deem the patent infringed and likely valid. The FRAND part was discussed behind closed doors, but Apple would be the first defendant in a Mannheim or Munich SEP case in the post-Sisvel v. Haier era to be deemed a willing licensee.

A FRAND trial in the Eastern District of Texas will start on Monday, and it won't be easy for Apple to persuade the jury that the royalties it pays to Qualcomm should be ignored.

The United States International Trade Commission (USITC, or just ITC) will also hold an Apple v. Ericsson trial starting next week. Apple is seeking a U.S. import ban on Ericsson's base stations. Whether that would actually happen and (should it happen) make an impact is questionable. The ITC staff opposes an untailored import ban (while Apple even opposes telecommunications carriers's right to repair). Yesterday a public redacted version of an Ericsson filing with the ITC became available, and it states that "[t]he vast majority of the Accused [Ericsson] Products are manufactured and assembled in the United States from [REDACTED] of individually imported components." Apple's strategy is to "[rely] on indirect infringement allegations to demonstrate a violation through Ericsson’s imported components."

While the first Ericsson v. Apple injunction is just a matter of time, it looks like Apple can't easily find patents in its portfolio that can do damage to Ericsson's business. And Ericsson is a lot smaller than Apple anyway, especially in unit volumes, which means its exposure to patent assertions is dwarfed by Apple's.

The dispute is now entering a very interesting stage, and Apple has just suffered a setback in the form of the rejection of its Mannheim countersuit.

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Musk-Apple clash puts conflation of Section 230 and antitrust issues on full display: left and right agree on need for Open App Markets Act, but not for identical sets of reasons

The most fascinating aspect of political alliance and majority building is that people--or political parties--may agree on the adoption or rejection of a proposal for reasons that can be disparate or, in some cases, seemingly irreconcilable.

That is what could get the Open App Markets Act (OAMA) over the finish line now during the "lame duck" session of Congress. In the end, Apple and Google's national security and privacy pretexts and the pandering of a very few politicians may fail to prevent the OAMA from being passed into law. It could be--and I keep my fingers crossed--that Democrats who have long wanted to reverse the constant gutting of the antitrust laws will form a solid majority with Republicans who are normally not in favor of governmental intervention, but are weary of Silicon Valley "wokism."

In the end, a majority is a majority regardless of individual reasons. That even applies to judicial decisions, but those are not just a vote: it can be a huge challenge for a majority of a panel or full court to author a decision. The Federal Circuit's en banc decision in the Alice case (patent-eligible subject matter) came down to each judge taking a different position from the rest, and they then had to figure out a way to identify just enough of an overlap to identify a majority. In politics, that's not needed: they cast their votes, and tell their voters why they did what they did, but the vote itself is a straightforward yay/nay count.

Elon Musk is antagonizing Apple for a mix of reasons. Let's separate the App Store issues from the ad spend part (the "odd man out" in that mix). So, there is a problem with the app tax but also one with app review. Epic Games focused on the app tax in its litigation with Apple, but app review was also discussed in last year's trial. The OAMA would address both issues at the same time: the app tax will go down, and review guidelines and their application will become much more reasonable, if there is competition between app distribution channels.

According to Mr. Musk, Apple didn't even clarify why Twitter might be ejected from the App Store. We don't even need to know: it's bad enough that Apple has the power to do this over one or both of the possible reasons (Mr. Musk's resistance to the app tax and/or his vision of free speech). Whether an app is kept out of the App Store or economically unsustainable due to the app tax has the same effect. It now looks like Twitter already wanted to launch its new Blue subscription on Tuesday, but the unresolved app tax issue is the reason for further delay.

At a very important time--shortly before the end of the current Congressional term--immense political momentum is building. If it came to worst, the bill could always be re-introduced in one form or another. But with what's going on now, I'm increasingly hopeful that the OAMA may indeed be enacted in the coming weeks. Some Republicans such as Senator Marsha Blackburn (Tennessee) and United States Representative Ken Buck (Colorado) have been in favor of the OAMA for some time. But now more and more powerbrokers throw their weight behind the OAMA. At a press conference, Florida Governor Ron DeSantis--probably the next Republican presidential candidate--called on Congress to take action against Apple's monopoly power:

Governor DeSantis emphasized free speech. There is an interesting phenomenon in U.S. politics with Section 230 (the rule that allows Big Tech to claim free speech rights for itself, but to silence others exercising them) and antitrust issues getting conflated by conservative politicians. My theory is that they know exactly what they are doing, but the Section 230 controversy gives them an excuse for supporting stronger antitrust enforcement in areas where they know it's needed. It bridges an ideological gap. Antitrust enforcement as a means of combating cancel culture.

Defendants of Sec. 230 argue that everyone remains free to express any opinion--but not free to actually reach a given social network's or other type of platform's audience. But that argument has one fundamental flaw: short of fictional mind control in George Orwell's 1984, where thoughts were potential crimes and the Thought Police used surveillance devices, no dictatorship has ever been able to completely supress opinions: one could always say something in the privacy of one's home. What matters, however, is the ability to actually share those thoughts with others. The Constitution is about limiting government's ability to censor, but if a reasonable application and/or limited amendment of the antitrust laws ensures that private companies can't engage in censorship the way they currently can, that is also in line with the spirit of the First Amendment.

Senator Mike Lee (R-Utah) has a very principled approach to antitrust. And he states very clearly on his website that he doesn't want politicians to give in to the "temptation in Washington to expand the federal government’s regulatory role over the private sector and attempt to centrally control our innovation." But he does "believe[] a responsible approach to technology policy is one where the federal government restrains itself to its limited constitutional authorities and even then only acts in a manner that is narrowly tailored to address the specific challenge." Well, the OAMA is such a narrowly tailored measure to deal with a particular problem.

Some media reported yesterday that Senator Lee tweeted in support of Elon Musk's criticism of Apple, but the related tweet is not from Senator Lee's verified and official account, so it may just have been a misattribution:

It would, of course, be great if Senator Lee indeed supported the OAMA. No matter the reason. We need the votes now.

The OAMA situation reminds me of my own political work. I only did a limited amount of lobbying (during limited periods from 2004 to 2007), and in my last project, which was about soccer broadcasting rights and the related revenue distribution, I built a majority for an amendment (sponsored by Chris Heaton-Harris, who is now the UK's Secretary of State for Northern Ireland) to a European Parliament resolution by presenting two different sets of arguments. In fact, I even authored two distinct position papers. Some voted for the amendment because they shared my economic policy position--but we wouldn't have had a majority if not for others who simply supported it for subsidiarity's sake (limiting the EU's influence over matters that are better addressed at the national level). I was perfectly transparent about that, and everyone was glad to see that others would support the same cause.

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Apple's biggest problem at next week's Ericsson FRAND trial in Texas: Qualcomm deal will be evaluated as comparable license agreement

I am still trying to find out what happened in Mannheim, where the court had originally scheduled the announcement of an Apple v. Ericsson ruling for yesterday (Tuesday, November 29). The response I received from a spokesman for the court (himself a judge, but not on this case) was that the court is not presently in a position to provide information on that case. The court's Second Civil Chamber was in session all day yesterday, so maybe I will hear something today.

There are no clear signs of the parties having settled. Therefore, it is still a possibility that next week's FRAND trial in the Eastern District of Texas (before Chief Judge Rodney Gilstrap) will go forward. Given the complexity of the case, it's difficult to describe it as an uphill battle for the iPhone maker, but it is fair to say that Judge Gilstrap's pretrial rulings have been significantly more positive for Ericsson. I already made that inference from the minutes of the pretrial hearing: there was no breach of the 2015 contract by Ericsson, and Ericsson is under zero legal obligation to license non-standard-essential patents (non-SEPs) to Apple. Apple can point to the fact that the 2015 agreement included non-SEPs, but that was simply a voluntary inclusion of additional IP and has nothing to do with what Ericsson "owes" Apple under its commitments to ETSI.

That Apple can mention non-SEPs (while not being able to claim an entitlement to a non-SEP license when a new agreement is negotiated) is one of the things I learned from Judge Gilstrap's order on numerous pretrial motions:

Ericsson v. Apple, case no,. 2:21-CV-00376-JRG, Eastern District of Texas: Order on Pretrial Motions and Motions In Limine

Another thing that is clearer now is how Apple's Count IV will be adjudicated. Apple wants the court to set a FRAND rate. But as Judge Gilstrap explains, "[t]he jury need only concern themselves as to the prior conduct between the parties and whether that conduct comports with FRAND and good faith" and "the Court will tell the jury that it will set a rate that is fair, reasonable, and non-discriminatory between the parties as to these patents at a later date and that the jury need not be concerned about what an appropriate rate is."

So there won't be a jury verdict that states a specific FRAND rate. But, of course, what the jury says about Ericsson's FRAND compliance will matter in various ways.

Having read Judge Gilstrap's order, the one part that strikes me as the biggest problem for Apple is that its motion in limine number two was denied--unsurprisingly so, but that doesn't make the problem any smaller:

[Apple]'s MIL 2

Exclude Reference to Apple-Qualcomm Negotiations, Litigations, And Agreements Because the Apple-Qualcomm Agreements Are Not Comparable.

The MIL was DENIED. (Dkt. No. 290 at 29:11–34:4.) The Court found that the comparability of licenses is a question for the jury.

Apple pays Qualcomm more than all other patent holders combined. At least that was the case a few years ago during the FTC v. Qualcomm litigation, where the U.S. government was challenging Qualcomm's licensing practices (but the appeals court determined that Qualcomm was free to charge patent royalties separately from, and as a precondition for, its chip sales). At the time, Apple was paying Qualcomm $7.50 per iPhone. I don't know what the rate under the 2019 settlement is, but Apple needed Qualcomm's 5G chips as we all learned later (because we can see that what was then Intel's chipset division and acquired by Apple shortly thereafter, still doesn't have a 5G chip ready that Apple could use. So, chances are that Apple is paying Qualcomm the same or a similar license fee as it did at the time--and Ericsson will presumably argue to the jury that its 5G patents are stronger than Qualcomm's. Even if the jury felt that Qualcomm's patents were gradually more valuable than Ericsson's, it's still hard to see why Ericsson couldn't just ask for $5 per iPhone.

Apple will argue that the Qualcomm agreement isn't comparable. But jurors will learn about the terms, and Ericsson will get to explain why the jury shouldn't buy Apple's attempts to distinguish one license agreement from the other, but focus on the rate.

Ericsson v. Apple is in no small part about the discrepancy between what Apple pays to Qualcomm versus what Apple pays everyone else.

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