Friday, January 28, 2022

Biden Administration backs Epic Games against Apple in Ninth Circuit #FreeFortnite antitrust appeal (though brief is formally filed 'in support of neither party')

Wow, this Epic Games v. Apple thing is getting better and better...

In my previous post I already described the tremendous support Epic Games got against Apple in its Ninth Circuit antitrust appeal from amici curiae (most notably, 35 U.S. states, Microsoft, and the Dean of American Antitrust Law) as an 8 out of 10, and said the following:

"It would only have made the case stronger if companies like Facebook or even Tesla (Elon Musk is clearly on Epic's side, though Tesla would have had to come up with a good explanation as to why it cares) had made submissions, and if the Biden Admistration had stepped in, though 35 states (red and blue ones alike) are a powerful political alliance and make this a bipartisan issue." (emphasis added)

My #1 wish was granted--I just didn't know it when I wrote the above sentence :-)

The Antitrust Division of the United States Department of Justice, speaking on behalf of the United States of America, has filed the following brief, formally in support of neither party but practically supporting some of the most important elements of Epic's appeal (this post continues below the document):

22-01-27 United States Acb ... by Florian Mueller

I'm so happy. But why is this great if the front page says "in support of neither party" instead of overtly backing Apple? Let me explain:

  • A brief in support of Epic has to urge reversal on the Sherman Act counts. The filing by the federal government on behalf of the United States says: "The Court should ensure that the Sherman Act is not unduly narrowed through legal error." In other words, the district court should have side with Epic on more legal questions than it did.

  • It's politically always easier in an inter-company conflict for the U.S. government to just focus on issues and not throw its weight behind one party.

  • Technically speaking, Apple could still win even if the United States Court of Appeals for the Ninth Circuit agreed with the United States government on all of the issues it addresses. A chain is a strong as its weakest link, and the U.S. government addresses almost everything that matters, but Apple would still have a path to victory under the rule-of-reason analysis (while all the amicus briefs in Epic's favor also urge reversal of that one). It's not, however, like the DOJ-ATR filing would automatically make Apple a winner: the government simply doesn't address certain other aspects, which doesn't mean it agrees with Apple on them (most likely, it doesn't).

Like others, the DOJ-ATR argues that Section 1 of the Sherman Act should apply even to contracts of adhesion that are unilaterally imposed by one player. I still don't agree, but I wouldn't mind if that was the ultimate outcome.

But the United States also helps Epic with respect to Section 2, disagreeing with the district court's market-power analysis.

And market definition comes up. That's the strategic battlefield here, really, also with a view to other App Store issues than just Epic's case. Now, one can reasonably read the federal government's submission as being--between the lines--sympathetic to even a single-brand market definition. That's because the very first step of the single-brand market analysis (Kodak, Newcal) also relates to whether Epic was right when it said there was an operating system (iOS) foremarket (and then an app distribution aftermarket). On this one, the United States supports Epic, though other hurdles remain and are not addressed by the brief. Furthermore, the DOJ supports Epic on tying.

Jonathan Kanter, the Assistant Attorney General in charge of the Antitrust Division, did not sign the brief in his own name. People working for him did. I attribute this to a simple fact: he used to be (until his appointment to his current post) counsel of record for the Coalition for App Fairness, an Epic-founded organization that supports Epic in this context. By becoming a signatory in his own name, he'd have invited allegations of a conflict of interests. Similarly, his predecessor Makan Delrahim didn't put his name on the DOJ's filings in support of Qualcomm (his former client). Apple is a bit out of luck with Antitrust AAGs: when their main rival was Qualcomm, Makan Delrahim was at the helm of DOJ-ATR; and now that Apple's primary rival is Epic, there's a former CAF counsel in charge.

What an incredible backing Epic has received. I upgrade my rating from 8/10 to 9/10. I'd still have liked to see companies like Facebook, Tesla, Activision-Blizzard chime in. But can't have everything. And there's still a couple more hours for more filings.

Apple should alter course. Why does it have to be the Evil Empire? The tyrant who makes app developers' lives miserable? Time for change, and I don't see why such change couldn't still happen under Tim Cook.

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Thursday, January 27, 2022

35 U.S. states and Microsoft support Epic Games against Apple in Ninth Circuit, breathing new life into #FreeFortnite antitrust appeal

[Update] The Biden Administration is also supporting Epic. [/Update]

Apple just reported record numbers. Its luxury-goods business model and its abuse of market power against suppliers and app developers are wildly profitable. The former is legit; the latter must be stopped, and it is under pressure around the globe. "Pressure" is an understatement. Change is coming, the question is just when and where, with Match Group's Dutch case so far having the greatest potential of all enforcement actions under existing law (as it could have EU-wide ripple effects and easily apply to all--not just dating--apps).

Epic Games faces an uphill battle (here's my take on its opening brief), but it's getting some amazing support:

35 U.S. states led by Utah and Microsoft have officially thrown their weight behind Epic's appeal through amicus curiae briefs filed with the United States Court of Appeals for the Ninth Circuit.

Those filings are not just a "nice to have." This kind of support is mission-critical, as I explained a few days ago. And a few hours before those filings, I was already impressed with the fact that "the Dean of American Antitrust Law" (as the New York Times called him), Professor Herbert Hovenkamp, signed a world-class amicus brief submitted by Professor Michael Carrier.

The state attorneys-general ("state AGs") supporting Epic here are basically the ones suing Google alongside Epic in the Northern District of California. The states--led by the Beehive State--are (in alphabetical order): Alaska, Arkansas, Colorado, Connecticut, Delaware, D.C. (I'm not taking a position on the controversial question of statehood here), Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah (submitter), Vermont, and Washington.

All of the most populous states except California--which might still support Epic, though probably just with respect to the state Unfair Competition Law consolation-prize part--are on that list of signatories. Interestingly (but this doesn't weaken the effort in the slightest) Epic's home state of North Carolina is not among them.

Here's the 35 state AGs' amicus brief (this post continues below the document):

22-01-27 Utah Et Al. Acb Is... by Florian Mueller

As for the states' legal argument, it's largely about Section 1 of the Sherman Act. The district held (very reasonably in my view) that Apple's conduct must be analyzed under Section 2--which is about unilateral conduct--with its higher hurdles, as Apple imposes contract terms on developers, so it's not like there's an Apple-plus-developers cartel in play, which would be a Section 1 case if developers acted voluntarily. I understand that some say Section 1 should apply even to unilaterally-imposed contracts, but come down on the same side as the district court (and believe Apple should be held in violation of Section 2).

The states' focus on Section 1 is motivated by their Google case, which involves business terms Google imposes on Android device makers on the one hand and on developers on the other.

Epic wouldn't automatically win the case if Section 1 applied. The second and shorter part of the states' amicus brief addresses the rule-of-reason analysis that would still have to be reversed for Epic to win. The professors' brief (previous post) has the same focus, and does a superb job. The states make fairly similar arguments (interestingly also citing to NCAA v Alston a few times), but that's still helpful.

A submission by Microsoft is perfectly complementary to the other filings because it shows that even another "Big Tech" company is profoundly concerned over, and negatively impacted by, Apple's conduct--and because of the arguments Microsoft's very well-crafted brief makes (this post continues below the document)

22-01-27 Microsoft Acb Iso ... by Florian Mueller

Those who have read my previous commentary on the issues in that case can easily see why I like Microsoft's brief so much. First, while Microsoft does not specifically urge reversal of the market definition (which is what I'd like to see happen), its argument about "Apple's extraordinary gatekeeper power" as well as its arguments on tying come pretty close to it. Microsoft even cites to Eastman Kodak, though not as a high priority and only with respect to tying. In my commentary on Epic's opening brief I clearly stated that I believe Epic is right on tying, though I worry about whether the appeals court will want to set a tying precedent that Apple will argue would allow tying theories to apply to indivisible service offerings.

Microsoft's testimony at last year's trial led Apple to contradict itself: Apple argued that Epic was a Microsoft puppet, but also that Microsoft was somewhat dependent on Epic (which is absurd because Epic, with the greatest respect for Fortnite's success, isn't that powerful). Epic can't be in Microsoft's pocket and Microsoft simultaneously in Epic's. That illogicality just showed Apple's concern over the impact of Microsoft's testimony.

Also, the Electronic Frontier Foundation (which agrees with Google on most issues, but not on all, and this here is a relatively rare exception) made a submission, and that one actually overlaps with my take to the greatest extent of all the briefs I've seen. The EFF makes the single-brand market argument, it explains why Epic is right on tying (app distribution and payments are separate markets; this is, by the way, also key with a view to cases in the European Union), and addressed the rule-of-reason analysis, which Epic must win regardless of market definition and everything else.

Here's the EFF's brief (this post continues below the document):

22-01-27 EFF Acb Iso Epic G... by Florian Mueller

Other amici could still make submissions, but even if nobody did, the kind of support Epic got is about a 9 out of 10. It would only have made the case stronger if companies like Facebook or even Tesla (Elon Musk is clearly on Epic's side, though Tesla would have had to come up with a good explanation as to why it cares), or maybe Activision-Blizzard, had made submissions. And let's not forget that California still has the chance to declare itself in support of the 35 other states' brief when it makes its own submission at a later stage with a view to state UCL.

Epic's appeal is very much alive. Apple will use its market power and money to get support from all sorts of "friends of the court" as well, possibly even ridiculous astroturfing organizations. But it won't be able to counterbalance the support Epic received from 35 states, Microsoft, the EFF, and America's most cited and most authoritative antitrust law professor. It will probably be easy to see for the Ninth Circuit that those who support Epic do so because it's the right and necessary thing to do, while those who will support Apple are just going to have reasons to do Apple a favor.

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The 'Dean of American Antitrust Law' signs amicus brief backing Epic Games against Apple, as do 37 other profs: Ninth Circuit appeal

Earlier this week I expressed my view that even superstar appellate lawyer Tom Goldstein may not be able to turn Epic's case against Apple around unless there's a lot of support for Epic Games in the form of amicus curiae briefs to be filed with the United States Court of Appeals for the Ninth Circuit. The spectacular turnarounds Mr. Goldstein achieved for Qualcomm (against the FTC) and Google (against Oracle) depended in no small part--the latter to a hugely greater extent than the former--on such dynamics.

The first amicus curiae brief filed in support of Epic's appeal is a great start. That's because the most famous and influential U.S. antitrust scholar of our times, Professor Herbert Hovenkamp, is among the 38 law, business, and economics professors who signed a brief submitted by Professor Michael Carrier. I don't know if I've ever seen a pleading or judgment in a U.S. antitrust case that doesn't cite to the following book:

Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application

The New York Times dubbed him "the Dean of American Antitrust Law." Not even an exaggeration.

Here's the professors' brief with Professor Hovenkamp being the most prominent one of more than three dozen signatories (this post continues below the document):

22-01-27 Amicus Brief ISO E... by Florian Mueller

While the brief does not address market definition (which I consider the key battlefield), it's still helpful even from my perspective, as Apple will undoubtedly argue that even under a single-brand market definition (rare, but the only appropriate one in this context), Epic would lose. The professors' brief is all about rule-of-reason balancing:

"In applying the Rule of Reason after the first step, the court below committed three fundamental errors. First, it accepted business rationales that do not promote competition or economic efficiency and are, as a matter of law, not cognizable antitrust justifications. Second, it failed in its legal conclusions to credit a less restrictive alternative to Apple’s restraints that it recognized in its factual findings. And third, in dismissing the case based on its conclusion that the plaintiff failed to show such an alternative, it never engaged in the required analysis of net competitive effects."

What the brief does very persuasively is to draw parallels between how Judge Yvonne Gonzalez Rogers applied the Rule of Reason and the behavior of certain antitrust violators (such as the NCAA in the Alston case).

There are some interesting statistics: Epic's ability to show substantial anticompetitive effects was no small achievement. Epic took the hurdle that was too high for the vast majority of all U.S. antitrust plaintiffs:

"Since 1977, courts have decided 90% (824 of 915) on this ground, with the figure rising to 97% (406 of 420) after 1999."

As the professors note, it's not just pricing but even innovation that the court actually (and accurately from my perspective as an app developer) found to have been affected by Apple's conduct.

In the second part the amicus brief says that Apple's security and privacy arguments were whatever they were, but cognizable antitrust justifications they were not.

The third part supports Epic's view that the availability of less restrictive alternatives was not properly taken into consideration by the district court:

"Such an alternative ensures that there is nothing to balance and that the court need not reach an assessment of net competitive effects. The existence of a less restrictive alternative disposes of the case."

And like Epic, but in a different way, the professors highlight some of the contradictions in the court's factual findings.

The fourth and final part, like Epic, criticizes the district court's judgment for not performing the kind of balancing (harms vs. claimed benefits) that would have been necessary if the court--contrary to what the professors would have considered correct--did not consider the less restrictive alternatives acceptable.

It's a strong brief signed by credible people--and one living legend among them. Hopefully this will make an impact. Let's see what support Epic will get in total, as amici can make all the difference in this case.

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MPEG LA announcement of VVC patent pool: major patent holders still undecided, fragmentation of licensing landscape potential impediment to adoption

I've recently written about Access Advance's High Efficiency Video Coding (HEVC, H.265) pool (one post discussing the logic of the recent Dusseldorf ruling against Access Advance, and another on how the problem appears to persist).

Today there's an announcement (PDF) by a more reputable pool administrator, MPEG LA, of a Versatile Video Coding (VVC, H.266) pool. So let's look at VVC, but start with Access Advance, which was first to announce its initial group of licensors.

On its homepage, Access Advance says about its VVC Advance Licensing Program that its terms are FRAND, "providing rates that balance both Licensor and Licensee interests and complying with worldwide laws applicable to patent pools." (emphasis added) The highlighted part of that quote is "rich." I mean, either they haven't read their own website in a while or they still haven't read the writing on the Dusseldorf court's wall.

The only patent pool administrator (to the best of my knowledge) to license patents (HEVC in that case) on terms that a court even thought entitled unlicensed implementers to damages is not in a great position to assist the rest of the world with FRAND compliance. It happened to them in a court in which MPEG LA had dozens of successes, and still has a clean white shirt when it comes to FRAND.

At this early stage, Access Advance's VVC pool (named VVC Advance) has support from 28 licensors (listed in a January 11, 2022 press release) vs. MPEG LA's initial 11 (b<>com; British Broadcasting Corporation; Digital Insights Inc.; FG Innovation Company Limited; Hanwha Techwin Co., Ltd.; Koninklijke KPN N.V.; Nippon Hoso Kyokai; Orange; Siemens Corp.; Tagivan II LLC; Vidyo, Inc.).

While IPlytics explained how hard it is to estimate the strength of VVC-essential portfolios at this stage, they nevertheless presented a slide last summer that listed 21 major VVC patent holders. Some of them are on Access Advance's list of licensors (Dolby, SK Telecom, Toshiba). But the other 18 out of the 21 listed by IPlytics are either companies who rarely join pools (like InterDigital) or, which is quite telling, they are in the HEVC Advance pool but not--or not yet--VVC Advance licensors, such as Samsung, Google, Microsoft, Huawei, Canon, and LG.

It would take only a few major VVC SEP holders who join MPEG LA's pool, and they'd take the lead. That's why it's too early to call the game. Access Advance is in a difficult position now, and can't explain away the Dusseldorf disaster. Maybe even some of its initial 28 licensors would have made a different decision if the Dusseldorf rulings in the Vestel cases had come down a month or two earlier (before the internal decisions on which pool to join were made).

Implementers will be concerned about the fragmented licensing landscape. There are now two pools, lots of undecided major portfolio owners, and I've heard from industry players that a third pool is being formed.

MPEG LA's AVC/H.264 pool was a huge success, and it made the AVC standard successful. With HEVC, things didn't work out, mostly due to patent licensing issues. What will happen to VVC? Will it ultimately be less popular than some alternatives? Will there be a lot of litigation (by Access Advance licensors more so than anybody else)? It's too early to tell.

One year ago, MPEG LA announced the development of a VVC pool license. Today, they reached the next milestone and listed the first 11 licensors, one of which (Digital Insights) is--quite interestingly--an HEVC Advance licensor.

While VVC Advance--by virtue of being early and not having to poach MPEG LA licensors--may be able to avoid some of Access Advance's HEVC-related FRAND problems, my concerns are still structural. The unfair refund terms are not the root cause of their problems. The fundamental issue is that Access Advance optimizes all of its terms for the purposes of its four owners, only one of which (Dolby) appears on IPlytics's list of 21 major VVC patent holders. If they operated their pools more independently and transparently, they could also have acted more constructively with respect to refunds. But the cut taken by Access Advance and those special deals with companies who are both licensors and major implementers (like Samsung) complicated everything. In some other way, shape or form, that root cause may lead to problems--if not for Access Advance, then at least for the standard in question.

It's a rhetorical question which of these two patent pool administrators has always understood (and which one still doesn't seem to realize) that if licensing terms are reasonable, a standard is more likely to be adopted by many implementers, which in turn makes the licensing revenue cake bigger for patentees than a scenario of high fees and low adoption.

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Munich I Regional Court confirms reassignments: Judge Pichlmaier to lead antitrust senate, Judge Dr. Fricke promoted to preside over 44th Civil Chamber

Juve Patent was first to report that Judge Tobias Pichlmaier, who is still presiding for a couple more days over the Munich I Regional Court's 21st Civil Chamber (a patent-specialized division), will become the antitrust-specialized 37th Civil Chamber's new Presiding Judge next week, triggering one promotion and one reassignment among his current colleagues. He told Juve Patent that he personally requested this reassignment.

A spokeswoman for the court just confirmed that one as well as two other parts of that reshuffling to me:

  • Presiding Judge Dr. Georg Werner (presently 44th Civil Chamber) will replace Presiding Judge Pichlmaier on the 21st Civil Chamber.

  • Judge Dr. Werner's deputy on the 44th Civil Chamber, Judge Dr. Anne-Kristin Fricke, will be promoted to Presiding Judge.

Nothing is changing for now about the 7th Civil Chamber under Presiding Judge Dr. Matthias Zigann. I photographed the 44th Civil Chamber on the occasion of its first-ever hearing in November. Now you can see two of the judges presiding over the three patent-specialized divisions of the Munich court in that picture. Judge Dr. Zigann's face is probably familiar to many of you, either because you've been to his courtroom or have listened to one or more of his eloquent and always very well-structured webinar presentations. Seriously, you can't be professionally interested in German or cross-jurisdictional patent litigation and not know Judge Dr. Zigann...

Unlike Juve Patent, I don't have the slightest concern over the timing of this chain of reassignments. Without a doubt, the court's patent divisions will operate just as smoothly and efficiently as we know them. They have the talent pool there--and the expertise--to keep going at the same pace, and render high-quality decisions.

That is not to say that Judge Pichlmaier's career choice is not a loss for the patent divisions. Clearly, he's a great patent judge--and the only problem I ever had with him related to COVID prevention rules, where Judge Dr. Zigann, for instance, prefers to err on the side of caution, which I considered appropriate. Other than that, Judge Pichlmaier is brilliant. One can't blame him for being interested in more fields of law than just patents. I remember seeing him at the regional appeals court, the Munich Higher Regional Court, where he served on a non-patent division (called "senate" at that level).

My only concern is that Judge Meinhardt's appointment as Presiding Judge to the appeals court's 6th Civil Chamber could demotivate the patent judges doing such terrific work on the lower court. It's possible that Presiding Judge Meinhardt will be great, but the intuitively right thing to do would have been to promote either Judge Dr. Zigann or Judge Pichlmaier to the appeals court. Patent law is a highly specialized field, and there's nothing wrong even at the level of an appeals court to have maybe one judge on the panel who hasn't previously handled patent infringement litigation, but the presiding judge should know the subject inside out from Day One. Litigants and their counsel would also benefit from knowing more specifically what to expect from the appeals court. Just my two cents.

One may wonder whether Judge Pichlmaier's rather restrictive application of antitrust law to patent cases means the 37th Civil Chamber, which handed down some pretty interesting decisions (such as against Google and the German government last year), will have a more conservative perspective on competition law. I don't expect that to happen. A judge can be in favor of competition and at the same time be (or have been) reluctant to apply competition law expansively to patent cases--given that patents are government-granted time-limited monopolies by definition (also according to Article I, Section 8, Clause 8, of the United States Constitution).

Interestingly, Judge Dr. Fricke actually went in the opposite direction: after adjudicating antitrust cases for some time, she joined a patent-specialized division. I always considered her and Judge Dr. Hubertus Schacht the obvious front runners for the next promotion (and yes, I'd bet on Judge Dr. Schacht--a meticulous jurist who knows how to keep hearings efficient--should the court need a new patent-specialized presiding judge in the not too distant future).

I know from members of the German legal community that they were truly impressed with the quality of certain per curiam opinions Judge Dr. Fricke had presumably authored.

Judge Dr. Werner will get to spend 100% of his time on patent cases now, while the 44th Civil Chamber was originally set up as only "half" a patent division (in the sense of devoting only half of the judges' time to patent cases), though patent plaintiffs flock to the Munich court, so this may change.

Munich is set to become a key Unified Patent Court venue, too--with some of the same judges involved.

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Daimler-style strategic breakthrough for Nokia (and by extension Avanci, Ericsson, Qualcomm): Nordic Semiconductor arranges end-product-level SEP licensing for its customers

Nokia and Nordic Semiconductor--a company that makes wireless communications chips for the IoT industry and one of whose executives spoke at my 2019 Brussels conference--just announced a "pioneering new approach to licensing the use of cellular IoT Standard Essential Patents": IoT device makers (specifically, those building smart meters, payment terminals, and vehicle telematics) who incorporate Nordic's chips into their products can now opt in and take a pre-negotiated standard-essential patent (SEP) license from Nokia covering their devices.

Nordic Semiconductor celebrates the "added transparency and predictability early in the design process, giving the increased clarity and certainty Nordic cellular IoT customers have been seeking over the past three to four years." Nokia calls it "a win-win for Nordic’s customers and Nokia, simplifying the SEP licensing process in the IoT space and making it easier for licensing agreements to be concluded amicably and efficiently."

Like in that Hot Chocolate song, "Everyone's a winner, baby, that's the truth." Is it? I mean, is it equally great news for both sides? And more broadly speaking, looking beyond this particular deal, is it equally positive for SEP holders as it is for SEP implementers?


There's a winner here and a loser, a winning side and a losing side. Let's tell it like it is (just like I told everyone who lost the German patent reform battle, which yesterday's Dusseldorf presentation validated once again).

Just like Daimler before it, Nordic Semiconductor--which wasn't embroiled in litigation with Nokia but was certainly a vocal critic, speaking out at plenty of webinars against those who refuse to grant exhaustive licenses to chipset makers--has surrendered to Nokia's licensing model.

Sure, this is now a kind of partnership, a deal, it looks consensual. But it was Nokia who imposed its model on Nordic. The fact that Nordic won't have to disclose to Nokia those of its customers who elect not to opt in and take a license is of limited value: Nokia is one of the most sophisticated patent holders in the world and knows how to track down unlicensed implementers.

It's not a license. It's just a group deal. Just like when Sisvel negotiated with RPX, and RPX invited its members to take a license on the terms it had negotiated. In the end, Nordic's customers have to take a license from Nokia, one way or the other. It may be simpler now, streamlined, efficient, whatever buzzword we may want to use. But Nordic would no longer have any credibility if it wanted to go out and bash SEP holders who say they want to license end product makers. This is it.

I have no information on how the talks between those parties went, or whether Nokia was about to sue any of Nordic's customers, but I doubt that Nordic entered into this agreement without having to fear in the slightest that its customers could be sued (and would in turn seek indemnification from Nordic, depending on whether their chip supply agreements made that a possibility). This prenegotiated option for Nordic's customers came into being in the shadow of Nokia having all the leverage. For Nordic, the outcome is not even face-saving because when you spend years advocating certain positions and then recognize that you had made unrealistic demands, you lose more than you gain, though at least you can tell your customers that you tried to secure the best possible deal for them.

Some IoT products are very cheap and have low margins, though volumes can be high. I would assume that Nokia is prepared to offer them a license on different terms than the royalties it gets from a Daimler or Apple. Also, 5G does not appear to be included: it's up to LTE-M (4G).

The fact that automotive components are one of the product categories the agreement covers is another parallel between today's announcement and the Nokia-Daimler settlement.

And now let's look at the transcendental impact of this.

A few months after Daimler settled with Nokia, it took an Avanci license. It had previously taken direct licenses from Sharp and Conversant as well, so an Avanci license became the most efficient choice.

Today's Nokia-Nordic announcement is a trailblazer: the future may be an Avanci IoT patent pool. The "marketplace" page of Avanci's website has the headline "Enabling the IoT" followed by "Wireless connectivity for the Internet of Things." The licenses listed on that page are car makers. But there is also a high-volume potential in other IoT categories than connected cars, such as the ones the Nokia-Nordic arrangement relates to.

Nokia's strategic breakthrough benefits companies like Ericsson (whose SEP portfolio is considered even stronger than Nokia's by many experts) and Qualcomm, who have taken the same position as Nokia on component-level licensing--and, by the way, have always been at loggerheads with Apple over that question.

Nokia is playing it smart, and Nordic couldn't turn the tide. Now Nordic's customers are facing a licensing offer they can't realistically refuse unless they have particular reasons to assume they can get a better bilateral deal (for example, because they might take a Nokia license with respect to different types of products, or because they bring patents to the table that make a cross-license the better choice for Nokia).

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Wednesday, January 26, 2022

Patent holders don't have to be afraid of proportionality defense to injunctive relief in Dusseldorf, much less in SEP cases: judges outline their thinking

I have good news for patent holders who like to enforce their rights in Germany, and not only in Munich and Mannheim but (at least in some cases) also in Dusseldorf. Based on what two of the three judges presiding over patent-specialized divisions of the Landgericht Düsseldorf (Dusseldorf Regional Court) said in a joint presentation today, patent injunctions are going to be just as available in Dusseldorf as before last year's "reform" bill. This was certain for Munich and Mannheim, but I must admit there were some residual doubts on my part concerning Dusseldorf, which in some contexts made defendant-friendlier decisions in recent years than other German courts. Not anymore after today's presentation.

Other than the risk of outlier decisions in Dusseldorf, the situation was already clear last year:

Today the Heidelberg Academy, a major organizer of patent conferences, hosted a webinar on the hypothetical disproportionality of patent injunctions in particular cases. The two speakers were Presiding Judge Dr. Daniel Voss ("Voß" in German) of the Dusseldorf court's 4b Civil Chamber and his counterpart from the 4c Civil Chamber, Presiding Judge Sabine Klepsch. I've mentioned both judges very recently: Judge Klepsch and her side judges made a landmark decision against the Access Advance video codec patent pool (from which Access Advance is not really drawing the appropriate conclusions), and I thought Ericsson was fortunate to have two patent infringement complaints against Apple assigned to Judge Dr. Voss, whom I described as particularly patentee-friendly and jokingly called "Dusseldorf's answer to the Munich and Mannheim judges."

The joint presentation by those two judges left no doubt whatsoever:

  • The new injunction statute is materially consistent with the Federal Court of Justice's Heat Exchanger case law.

    There may be some exceptional cases (which have yet to be identified) where use-up or workaround periods are warranted.

  • An outright denial of injunctive relief is, however, next to inconceivable. The presentation said: "Dauerhafter Ausschluss des Unterlassungsanspruchs nur in absoluten Ausnahmefällen" (translation: "permanent denial of injunctive relief only in absolutely exceptional cases")

  • Third-party interests are realistically only going to be relevant if some patients' lives depend on pharmaceutical products or if a fundamental threat is posed to critical infrastructure. Even in such cases, third-party interests are not a get-out-of-jail-free card for infringers: they have to act reasonably. In practice, this means "license or die." Take a license and no third party is harmed. It's what I've been saying for a long time: the "Keep It Simple, Stupid" test.

    Third-party interests ultimately won't matter in the vast majority of cases (in which the patent holder just wants to get compensated and doesn't really want to shut down infrastructure or remove products from the market). Where there is a licensing offer on the table, there is no hardship unless the terms of the license are downright insane.

  • In standard-essential patent (SEP) cases there's a FRAND defense, which is all about an infringer's access to a license. There is no disproportionality defense on top of the SEP-related antitrust defense as the implementer can simply take a license.

    If a declared-essential patent turns out not to be actually essential (i.e., in a case involving an overdeclaration) and if, as a result, the implementer is not deemed to be entitled to a license on FRAND terms, the disproportionality defense may come into play (with the hurdle then being as high as previously discussed).

    I've talked to a Dusseldorf-based patent litigator with tremendous expertise in SEP cases, and what I learned is that since that German patent "reform" bill entered into force in mid-August 2021, the Dusseldorf Regional Court has consistently declined to entertain a disproportionality defense on top of a FRAND defense. So those judges not only talk the talk, but actually walk the walk.

One of the things I've been telling people in the legal community and the technology industry for about two years is that the first German court to deny an injunction on disproportionality grounds is going to scare away all plaintiffs. They're just going to sue elsewhere, and that court can close its patent divisions. The Dusseldorf court is not going to be an outlier. Just like Munich and Mannheim, it's going to stay the course. German patent litigation is all about leverage from injunctions.

It's been more than five months since the "reform" bill was published in the Federal Law Gazette. Not a single case has been reported from any German patent infringement case in which the outcome was impacted in the slightest by the reworded injunction statute. The ones who advocated reform would have had to push for a true paradigm shift. That effort could have failed. It would have seemed exceedingly ambitious. But at least it would have been worth fighting for. What those losers got out of the whole reform process--by contenting themselves with a solution that fails to address the actual problem--was editorial in nature. In legal terms, they got nothing other than making it even more expensive to defend.

Today's presentation by the Dusseldorf judges also validates what I stated in an article I contributed to a recent Wolters Kluwer publication.

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Apple's appellate forum strategy against Ericsson: Federal Circuit rather than Fifth Circuit for review of FRAND determination

This is a follow-up with some additional thoughts on the intra-venue fight between Apple and Ericsson over their respective FRAND actions in the Eastern District of Texas (on top of whether they should litigate infringement matters in the Eastern or the Western District, with Apple actually wanting neither but preferring the Northern District of California, just that it has no promising pathway to get there).

For a quick recap (for details and links that take you to the relevant complaints and motions, may I refer you to the post I just linked to),

  • Ericsson brought FRAND claims last year (initially just seeking a blessing of its own licensing offers, and with its most recently-proposed first amended complaint additionally attacking Apple's negotiation conduct);

  • Apple wants those thrown out,

  • but brought its own FRAND action in E.D. Tex.,

  • which additionally comes with declaratory judgment claims relating to three Ericsson 5G SEPs;

  • Ericsson defends its own FRAND case and

  • wants Apple's thrown out or wants the FRAND claims severed from the patent-specific DJ claims and consolidated into its case.

Apple's course of action did nothing to accelerate the process, but at this stage the court is probably going to resolve both motions to dismiss at the same time. There are, however, two questions of strategic importance involved, the answers to which depend on the outcome of that fight over the two competing E.D. Tex. FRAND actions:

  1. Who will be the plaintiff/counterclaim-defendant and who will be the defendant/counterclaimant? Right now either party wants to be the plaintiff. Especially in a jury trial, it can be a major advantage to be the plaintiff. I remember Qualcomm trying to convince Judge Curiel in the Southern District of California that it (the chipmaker)--not Apple, the original plaintiff--should get to make its case to the jury first. There are psychological reasons, though the defendant who is also a counterclaimant will get to reply in support of its counterclaims and, therefore, has the last word in that sense.

  2. After the previous post it came to my mind that Ericsson's proposal to sever the DJ claims has to do with appellate jurisdiction. I'll share my thoughts on that aspect below:

It would be unprecedented for an Ericsson v. Apple dispute to reach that stage, but Ericsson's disputes with TCL and HTC did get there. It could happen in the Apple case, too.

By pretty much randomly attacking three Ericsson SEPs with DJ claims, Apple can't achieve anything meaningful other than injecting claims into the case that would make the entire case subject to appellate jurisdiction by the Federal Circuit. Without the presence of such claims, the case would go up to the Fifth Circuit. And while Apple would prefer the Northern District of California at the trial stage, I believe it wouldn't even want to be in the Ninth Circuit at the appellate stage in light of FTC v. Qualcomm.

It's not like Ericsson would have to be afraid of the Federal Circuit, which is reasonably patentee-friendly, but the Fifth Circuit is more likely to affirm an E.D. Tex. ruling in Ericsson's favor, while the Federal Circuit has slashed damages awards coming out of E.D. Tex. on various occasions and might be inclined to also deem a lower SEP royalty rate (than whatever E.D. Tex. determines) appropriate.

If the case got appealed to the Federal Circuit, it would theoretically have to apply Fifth Circuit law (including the Ericsson-HTC decision) wherever applicable. However, the Federal Circuit has a reputation for very much prioritizing its own case law. When it comes to FRAND licensing issues, that would be a mix of SEP-specific decisions and, more generally, its application of the Georgia-Pacific factors to patent damages. Again, that's not necessarily bad for Ericsson, but it is more likely to get a better outcome in the Fifth Circuit.

Judge Gilstrap has some leeway here if he decides to separate the FRAND claims from the DJ Claims. He, too, knows how the Fifth Circuit has treated him versus what happened to some of his decisions in the Federal Circuit. If he dismissed Apple's separate case, Apple could appeal the dismissal to the Federal Circuit because of the presence of some patent DJ claims, but if the only issue before the Federal Circuit is whether Apple's claims were compulsory counterclaims to Ericsson's earlier-filed FRAND action, that wouldn't really be an appeal out of which Apple could get a lot of mileage, especially not if Ericsson's own FRAND case goes forward in the meantime (as would Ericsson's various infringement actions around the globe).

Severance of those claims would be justified. Ericsson's SEP portfolio is huge and whether those three patents are actually essential is not the answer to the real questions in that dispute. In the Apple v. Qualcomm case in the Southern District of California that I mentioned further above, Apple also brought DJ claims (two rounds of a dozen patents each). Qualcomm solved the problem by simply giving up on one set of patents (which Judge Curiel figured out was total gamesmanship, but legally possible) and the court did not let Apple challenge another set of patents. It's a "gambit" to sacrifice patents with respect to one implementer, but Ericsson might do what Qualcomm did--if it has to, as Judge Gilstrap might simply consolidate the two FRAND cases and keep those DJ claims on a separate track (where Ericsson could then safely bring compulsory counterclaims of infringement). Apple could then try to bring some DJ (counter)claims, but the court might not even grant Apple leave for such a tactically motivated amendment that just inflates the case.

Just for the avoidance of confusion, this here is really just about appellate jurisdiction over the mutual FRAND claims. Any infringement cases, including ITC investigations, or PTAB IPR decisions (Apple has started to challenge various Ericsson patents through IPR petitions) would have to be appealed to the Federal Circuit anyway.

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Apple: Eastern District of Texas preferred over Western -- Ericsson: with pleasure IF you make a binding commitment to it -- Apple (deafening silence)

Apple has a serious problem with Ericsson having made all the right venue-related decisions so far: the ITC for potential U.S. import bans; the Eastern District of Texas for FRAND issues (where Ericsson won a landmark case against HTC); and the Western District of Texas for damages (companion complaints to import ban requests). Ericsson is also enforcing its rights in four other countries, with preliminary injunction requests pending in Brazil and the Netherlands. In Germany, Ericsson hedged its bets by filing cases with the three leading regional courts for patent cases. Munich and Mannheim are safe choices for plaintiffs, and Ericsson was so lucky as to have both of its cases assigned to Judge Dr. Daniel Voss ("Voß" in German), who is widely regarded as the plaintiff-friendliest of the three judges presiding over patent-specialized divisions (called "civil chambers") of the Dusseldorf Regional Court. Judge Dr. Voss is basically Dusseldorf's answer to the Munich and Mannheim judges.

Now Apple is jockeying for a better position. Part of that effort is a PTAB IPR campaign piggybacking on Samsung's 2021 challenges to many Ericsson patents, taking aim at patents Ericsson hasn't even asserted against Apple. And very surprisingly, almost shockingly, Apple proposed to have the whole dispute resolved by means of a rate-setting decision in the Eastern District of Texas, a venue Apple dreads so much that it even closed its stores there (Apple Stonebriar in Fisco, TX, and Apple Willow Bend in Plano, TX) after the Supreme Court's TC Heartland decision that made it a lot easier to get patent infringement cases moved out of a district unless the defendant has a permanent business presence there (as opposed to merely selling products or offering services nationwide).

Oh well, it now looks like Apple still doesn't really love the Eastern District of Texas...

A week ago, Apple filed a request for an early case management conference in the Eastern District and accused Ericsson of trying to undermine that court's jurisdictions through cases filed elsewhere (including overseas enforcement actions). The next day, Ericsson's counsel contacted Apple's counsel (PDF on Scribd), describing that "characterization [as] both misleading and ironic" as Ericsson "would have preferred to file its patent cases in the Eastern District of Texas, but [Ericsson's] filing in the Western District was necessitated by Apple’s highly publicized closing of all its retail stores in the Eastern District." And then Ericsson made Apple the following proposal:

"Nonetheless, Ericsson is willing to dismiss its Western District suits and refile in the Eastern District if Apple is willing to stipulate to venue in the Eastern District for this dispute and waive any objection under TC Heartland."

In other words: Ericsson is fine with either the Eastern (preferred) or Western District of Texas, but will move its case form the Western to the Eastern District provided that Apple promises not to request a venue transfer to the Northern District of California.

Apple can always bring such a request in the Western District of Texas as well, but it has a strong presence there with many thousands of employees, making a denial of a transfer motion pretty much a given.

The only thing Ericsson didn't want to do was to give Apple an opportunity to avoid Texas altogether.

Apple declined. While there's plenty of rhetoric in a reply (PDF on Scribd) Apple's counsel sent four days later, Apple simply isn't willing to make a binding commitment to the Eastern District of Texas. All that Apple really appears to love about the Eastern District is that it's a gateway to California because of TC Heartland.

On Monday, Ericsson filed its opposition to Apple's request for an early case management and, on that occasion, demonstrated to Chief Judge Gilstrap in the Eastern District of Texas that Apple doesn't truly want to litigate there if it can avoid it. Here's Ericsson's opposition filing, to which the documents I previously linked to serve as exhibits (this post continues below the document):

22-01-24 Ericsson Oppositio... by Florian Mueller

Ericsson's position on an early case management conference is that Apple should firstly specify the issues to be addressed and try to resolve them with Ericsson through meet-and-confer. Only if any issues remained, they could be raised with the court, and the court may not even consider a hearing necessary to resolve any motions resulting from procedural disagreements.

That Ericsson filing also mentions Apple's PTAB IPR campaign (the first five filings, and I've discovered two more that came after Ericsson's opposition brief).

For Judge Gilstrap it's now easy to see what Apple really wants: it wants no enforcement action to take place (which is unrealistic since a FRAND determination is only appropriate for SEPs, but Ericsson is also entitled to royalties on its non-SEPs), and at least not in the Eastern or Western District of Texas. When Ericsson's FRAND action in the Eastern District became known a few months ago, I already wrote that "[i]f Apple wants to go west, it will want to go much further west, i.e., to the Northern District of California, its home district." (emphasis in original)

In addition to the Eastern-Western-Northern thing, Apple and Ericsson also disagree sharply on how to treat the two competing FRAND actions in the Eastern District of Texas. In December, Apple moved to dismiss Ericsson's FRAND case and instead brought its own, which besides four FRAND claims also contains three declaratory-judgment claims against the following Ericsson 5G standard-essential patents (at a time when Ericsson wasn't even suing Apple over patents as a license agreement was still in force for about another month):

Declaratory Judgment Patents

  1. U.S. Patent No. 10,374,768 on "efficient SRS resource indication methods"

  2. U.S. Patent No. 10,644,724 on "shift values for quasi-cyclic LDPC codes

  3. U.S. Patent No. 11,039,312 on "handling of multiple authentication procedures in 5G"

Last week, Ericsson filed its opposition to Apple's motion to dismiss Ericsson's FRAND case (this post continues below the document):

22-01-19 Ericsson Oppositio... by Florian Mueller

Ericsson points to the fact that Apple's FRAND claims pretty much mirror Ericsson's, so Apple itself doesn't really seem to believe that those types of claims weren't justiciable. Also, Ericsson says the license agreement that was in force at the time of filing the complaint did not preclude Ericsson from bringing a FRAND action regarding a future license agreement.

Apple has already replied in support of its motion to dismiss, but that filing is sealed for now. (It also took me a while to find some of last week's filings, probably for the same reason.)

Not only does Ericsson defend its own FRAND case against Apple's motion to dismiss, but it is requesting the dismissal of Apple's FRAND claims or, in the alternative, the consolidation of those claims into Ericsson's case (this post continues below the document):

22-01-19 Ericsson Motion to... by Florian Mueller

Note that this motion to dismiss relates to Apple's FRAND claims, not to the three patent-specific declaratory-judgment claims listed above.

Ericsson argues that Apple's FRAND claims should have been brought as counterclaims to Ericsson's FRAND claims, i.e., they were compulsory counterclaims. The worst-case scenario for Apple would be that its decision to bring a separate complaint--instead of counterclaiming in a pending one, regardless of whether Apple moved to dismiss it--waived those claims. But Ericsson doesn't rely on that theory alone. As a fallback (and that may be the more realistic outcome), Ericsson proposed to sever those FRAND claims from the patent-specific declaratory-judgment claims and to consolidate them into Ericsson's earlier filed Texas FRAND case.

Given that the parties will ultimately have to work out the terms of a cross-license, it wouldn't make sense to have two parallel complaints. And they seem to agree on that, too: it's just that the most extreme position either party can take is that its own complaint should survive while the other should fall. But my guess is we'll see a single FRAND case in the Eastern District of Texas that will involve both parties' FRAND claims.

For the near term I expect to find out about more infringement countersuits by Apple such as the one in Mannheim, but the most interesting question will be whether Ericsson can land a "lucky punch" with its preliminary-injunction requests in Brazil and the Netherlands.

Yesterday, an Ericsson financial report gave an indication as to how much (or how little, if you will) Apple paid Ericsson under the expired license agreement.

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Apple piggybacking on Samsung's 2021 campaign to get Ericsson patents invalidated, drive up litigation costs: seven PTAB IPR petitions discovered

After the expiration of the Ericsson-Samsung patent cross-license agreement, Ericsson went to court about a year ago, and Samsung's response included 30 petitions with the Patent Trial & Appeal Board of the United States Patent & Trademark Office, each taking aim at an Ericsson patent. We're now seeing a similar development, though on a smaller scale so far, between Ericsson and Apple, and once again it looks like a net licensee is using some of its vast resources to drive up litigation costs.

Over the course of the last seven days, Apple brought seven IPR petitions against Ericsson patents, and will likely file more in the days or weeks ahead. None of those seven U.S. patents has been asserted by Ericsson against Apple (or is the subject of a declaratory-judgment action by Apple), but each was challenged by Samsung last year. It's somewhat ironic that Apple, which for many years denounced Samsung as a copycat, is actually building on Samsung's 2021 inter parties review (IPR) campaign against Ericsson, even rehashing invalidity contentions previously advanced by Samsung.

I'm a longstanding supporter of robust post-grant review of issued patents, but there's no denying that the process sometimes does get abused by deep-pocketed players to the detriment of innovators challenging patents because they can afford it, not because there's a need. Ericsson has so many patents that it will always find some others to assert regardless of how many Apple challenges. The problem is that such petitions clog the PTAB system and slow down the resolution of objectively urgent cases.

These are the seven Apple v. Ericsson IPR petitions I've found so far:

  1. IPR2022-00455 (of January 19, 2022)

    Petition (Scribd)

    U.S. Patent No. 10,165,601 on "methods and apparatuses for performing preamble assignment for random access in a telecommunications system"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

  2. IPR2022-00459 (of January 19, 2022)

    Petition (Scribd)

    U.S. Patent No. 8,798,658 on "minimizing drive test logged data reporting"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

  3. IPR2022-00464 (of January 19, 2022)

    Petition (Scribd)

    U.S. Patent No. 10,193,600 on "codebook subset restriction signaling"

    (not yet asserted by Ericsson against Apple; asserted against Samsung--and challenged by Samsung--in 2021)

  4. IPR2022-00465 (of January 19, 2022)

    Petition (Scribd)

    U.S. Patent No. 8,731,124 on "signaling of sequence generator initialization parameters for uplink reference signal generation"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

  5. IPR 2022-00340 of Januar 21, 2022

    Petition (Scribd)

    U.S. Patent No. 10,470,203 on "scheduling request resource configuration"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

  6. IPR2022-0458 (of January 25, 2022)

    Petition (Scribd)

    U.S. Patent No. 9,888,486 on a "method and arrangement in a telecommunication system"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

  7. IPR2022-00468 (of January 25, 2022)

    Petition (Scribd)

    U.S. Patent No. 10512027 on "on-demand request for system information"

    (not yet asserted by Ericsson against Apple; challenged by Samsung in 2021)

According to an Ericsson reference to those filings, at least the first five of those petitions target patents declared essential to an ETSI standard. Apple may hope to use any PTAB decisions (even if only to institute an investigation) as an argument against Ericsson in the FRAND context, claiming that large parts of the portfolio are invalid. But how much merit would that argument have? Ericsson can always argue that Apple did not attack a representative sample, but cherrypicked certain patents for this purpose.

Again, there'll be more of this, and presumably in short order. And one couldn't blame Ericsson for doing somthing similar now, except that they can't recycle arguments previously made by Samsung or some other party: Apple has no track record of SEP assertions.

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Tuesday, January 25, 2022

Can superstar lawyer Tom Goldstein turn Epic Games v. Apple around like he did FTC v. Qualcomm and Oracle v. Google?

Here's a short follow-up to my take on Epic's opening brief in its Ninth Circuit appeal of Apple's App Store antitrust acquittal. The previous post focused entirely on the legal issues, but I did also want to highlight that Epic Games has hired the man who may have been the most successful Supreme Court attorney in recent history: Thomas C. "Tom" Goldstein of Goldstein & Russell.

The profile on his firm's website mentions the two cases in which I saw him achieve major victories for his clients: FTC v. Qualcomm and Oracle v. Google. In the Qualcomm case, I predicted a reversal even ahead of the hearing, and was amazed at Mr. Goldstein's performance. Qualcomm was represented by Cravath--Epic's firm against Apple (and Google)--at trial. The combination of Cravath and Mr. Goldstein was dynamite. I view his work on Google's behalf much less favorably on the truth-o-meter, and agree with the dissent by Justices Thomas and Alito to a far greater extent than with the per curiam opinion.

The question is now whether he can do it again. I very much hope for the sake of competition, innovation, and essential app developer freedoms that he will indeed convince the judges of this being one of those rare cases in which a single-brand market--and only a single-brand market--is warranted. Then Google and Qualcomm are not only way bigger but also a lot more sophisticated than Epic when it comes to high-stakes litigation. There were success factors in place--which are not meant to downplay the brilliance of Mr. Goldstein's lawyering--that may be missing this time around.

In FTC v. Qualcomm, Mr. Goldstein was able to benefit not only from the state of affairs of U.S. antitrust law in general but also from the defendant-friendly stance of Republican judges. In that case, even the lone Democrat on the panel was philosophically a Republican. For Epic it would be best to have at least two Democrats on the panel.

Arguably, Makan Delrahim--then the Antitrust Assistant Attorney General--deserved no less credit for Qualcomm's antitrust acquittal than Mr. Goldstein. His Antitrust Division's amicus briefs combined with national security arguments raised by other departments of the federal government got the FTC's injunction stayed, and the court agreed with his position that patent issues should be addressed under patent law if they can be. Qualcomm also got a number of other amicus briefs in support of its cause.

It would be terrific if the Biden Administration could now side with Epic against Apple, but I wouldn't hold my breath.

In Oracle v. Google, the Supreme Court made a decision that went beyond what Google was looking for (Google just tried to prevent Oracle from winning judgment as a matter of law (JMOL) against its fair use defense, but emphasized deference to the San Francisco jury rather than seriously believing it was entitled to JMOL). That fair use JMOL is grossly consistent with the entire body of fair use case law in the United States concerning transformative use and the impact of a derivative work on the original creator. Justice Thomas correctly pointed out that the majority of the court didn't even want to take an explicit position on copyrightability because it would have run into fundamental inconsistencies with its fair use finding.

With the greatest respect for Mr. Goldstein, I consider it highly unlikely (less than a 3% chance) that he could have achieved this result--even with the falsehoods and fallacies I criticzed--if the Supreme Court majority had not simply made a political and institutional decision: Google had mobilized software developers and industry players (on fair use--unlike on copyrightability--even Microsoft supported Google, though I'm sure Microsoft made that decision without being influenced by Google), and academics. The Supreme Court majority feared that the sky would fall down on the software developer community and therefore turned fair use law on its head. Only Justices Thomas and Alito were not going to buy the crap. Let's face it: all software developers access APIs, but the fewest of us clone APIs. Oracle's case was only about the latter, not at all about the former, but Google's supporters conflated the two, either intentionally or incompetently.

Google and Mr. Goldstein prevailed on FUD and alarmism. And on falsehoods and fallacies, as I mentioned more than once before.

They manipulated the majority of the Supreme Court for their purposes, but they couldn't have done so with their own written and spoken words alone. They needed a massive outpouring of support, and Oracle's management had clearly made the strategic mistake not to understand that the case might be--as it ultimately was--decided by 100% extralegal considerations. What makes Oracle's strategic mistake even worse is that they actually did run a very successful campaign (lots of customer engagement included) to obtain regulatory clearance of the acquisition of Sun Microsystems, without which they'd never have owned Java (it was, however, MySQL and not Java that threatened to scupper the deal). While complainants (in one case against my explicit advice) very much relied on facts, Oracle played the kind of game that worked out for Google against Oracle more than a decade later.

Epic may find it hard to orchestrate a comparable groundswell. First, it's really difficult for companies who are at Apple's mercy each and every time they upgrade an existing app or submit a new one to take an aggressive stance against Apple in this context. Second, Epic will need far, far broader--and even more impressive--support than its Coalition for App Fairness alone. That is tricky. They need a mix of app developers of all sizes who are not afraid to speak out (and academics and consumer organizations). But without comprehensive mobilization, Mr. Goldstein will lack the single most important success factor that enabled Google to defeat Oracle.

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Ericsson's Q4 report provides indication of impact of Apple patent dispute and potentially other non-renewals of licenses: $100-150 million per quarter

Ericsson just released its report for the fourth quarter and the full year of 2021 (PDF). It's the first written communication to investors on Ericsson's financials since the outbreak of renewed patent litigation with Apple (BTW, a German Apple v. Ericsson countersuit was discovered yesterday), so I wanted to take a look at the numbers.

First, Ericsson's overall financial situation appears more than strong enough to duke it out with Apple if need be:

"Free cash flow before M&A was [USD 3.5 (2.4) billion] for full-year 2021, the highest in Ericsson’s history, further strengthening the net cash position to [USD 7.1 (4.5) billion]." (emphasis omitted; Swedish krona figures converted to U.S. dollars based on current exchange rate; figures in parentheses relate to previous period)

That picture looked rather different when Ericsson was forced to settle with Apple in 2015.

It does seem that Apple isn't really paying Ericsson a huge amount of royalties, as the combined impact of the dispute with Apple and some other (unnamed) non-renewals is limited:

"Ericsson’s IPR licensing revenues continue to be affected by several expiring patent license agreements pending renewal and 5G license negotiations. This will lead to estimated revenues from IPR licensing of [USD $110-150 million] in Q1, unless renewals are signed in the first quarter. The actual financial impact will depend on the timing as well as terms and conditions of new agreements." (Swedish krona figures converted to U.S. dollars based on current exchange rate)

How does that projection compare to how the previous quarter and the same (first) quarter panned out a year earlier?

"IPR revenues [in the quarter that just ended] amounted to [USD 260-280 million], including a new smaller agreement with retroactive impact." (Swedish krona figures converted to U.S. dollars based on current exchange rate)

So the Q1 estimate (unless there's a quick settlement) is about $120-150 million lower than the actual Q4 figures (while Apple was still paying its license fees). But Q4 is the strongest one for smartphones, so let's also check on the situation of a year ago (PDF):

"IPR licensing revenues amounted to [USD $85 million ($270 million)] in the quarter. The decline is mainly related to expired contracts pending renewal and lower volumes with one licensee. For the largest contract under renewal, both legal and negotiation processes are continuing." (emphasis omitted; Swedish krona figures converted to U.S. dollars based on current exchange rate; figures in parentheses relate to previous period)

The main reason was the dispute with Samsung (which ended shortly thereafter), and the "lower volumes with one licensee" relate to Huawei as everyone in the industry knows. Generally speaking, Ericsson managed to replace the lost revenue opportunity with Huawei by concluding various other agreements.

So, all in all, it looks like the non-renewal (for now) with Apple and some other parties--whose names are not known--costs about $100-150 million per quarter.

I've seen estimates by others according to which Apple only paid about $200 million per year (or about $50 million per quarter) to Ericsson under the previous agreement. I believe it's more, as Apple presumably accounts for well over half of the negative revenue impact from non-renewals Ericsson is talking about. But it's not a whole lot more, and the next agreement will likely be a lot bigger in light of 5G, favorable case law, and Ericsson's stronger financial situation. It's just hard to tell how long it will take Ericsson to get there. A "lucky punch" with a preliminary injunction in Brazil and/or the Netherlands could resolve the dispute pretty soon, but it could also take years.

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Monday, January 24, 2022

First overseas countersuit by Apple against Ericsson discovered in Mannheim, patent-in-suit relates to network bandwidth allocation

More and more details of the Ericsson-Apple patent dispute become known. Yesterday I provided an update on Ericsson's patent assertions against Apple, which include (inter alia) that Ericsson is seeking a preliminary injunction in Brazil over three patents and told Apple's counsel it would seek preliminary injunctions in the Netherlands, too.

Apple countersued last week. The first 2022 Apple v. Ericsson case to be discovered was a complaint with the United States International Trade Commission, requesting an import ban on Ericsson base stations over three mmWave-related patents.

Juve Patent today found out from the Mannheim Regional Court that Apple brought at least one case there against Ericsson: case no. 2 O 9/22 (which means that it has been assigned to the Second Civil Chamber under Presiding Judge Dr. Holger Kircher) over EP2945332 on an "apparatus and methods for network resource allocation." It's a homegrown Apple patent with a 2008 priority date, and the "network resource" whose allocation the patent focuses on is bandwidth. It's about dynamic bandwidth allocation in a network such as "a routed wireless IP network." It's entirely unrelated to the patents Apple is asserting in last week's ITC complaint.

In Mannheim, Apple is typically a defendant. About ten years ago Apple was asserting six patents there against Samsung, all of which were assigned to the Seventh Civil Chamber (under Presiding Judge Andreas Voss ("Voß" in German) at the time), and Apple won none of those cases. The patents-in-suit of then were unrelated to dynamic network bandwidth allocation.

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