Friday, April 29, 2022

Epic Games requests preliminary injunction against Google that would prohibit enforcement of Google Play policy change with respect to music marketplace Bandcamp

I haven't commented on Epic Games v. Google in quite a while, but here's an interesting development. A couple of hours ago, Epic moved for a preliminary injunction. For whatever the reasons may have been, Epic didn't do so with respect to Google's 2020 removal of Fortnite from its app store (it sought a TRO/PI only against Apple, which was denied by a judge whose shocking misconceptions regarding Epic's single-brand market definition in legal, economic, and technical terms are well-documented by now). But it now has an interesting fact pattern to show with respect to music marketplace Bandcamp, an app that Epic acquired just last month--and let's keep in mind that this is not just an Epic v. Google case, but three dozen state attorneys-general are suing Google as well.

Here's Epic's PI motion, on which I'll comment further below:

22-04-28 Epic Motion for PI... by Florian Mueller

Epic and other developers have been warned by Google that the Google Play app tax now also applies to any sale of digital content consumed outside the app. The motion describes Bandcamp as "an online record store and music community used by more than 500,000 independent artists and 11,000 independent labels to connect with their fans online." In reliance upon an exemption from Google's app distribution terms, Bandcamp has for more than a decade used "the payment solution of its choice--tailored to the needs of its business--to allow artists and labels to sell music and merchandise directly to their fans through its Android app." The custom payment system was needed "because GPB does not provide Bandcamp with the services it needs and comes at a price that Bandcamp cannot afford." But Google confirmed just about a week ago that a new policy (which Google mischaracterizes as a mere clarification of an existing policy) would be enforced against Bandcamp, which would result in the removal of the app from the Google Play Store on June 1, 2022, unless Bandcamp uses Google's in-app payment system.

Epic would have a much harder time making an irreparable-harm case if it was just about the 30%. In the end, any overpayment could be refunded later. Google's about-face really leaves Epic with only the choices of leaving Google Play altogether (making it much harder to distribute Bandcamp to Android users), reducing it from a marketplace to a "window shop" (obviously not a viable option), or bowing to Google's demand to use the Google Play in-app payment system, which would raise the following issues described in the motion:

  1. It's Bandcamp's unique selling proposition (a term Epic doesn't use, but that's how I understand it) that artists are paid within 24 to 48 hours of a sale. Google's developer payouts come 15 to 45 days after a sale. To close the gap, Epic would have to advance those payouts or delay payments to the detriment of the artists, some of whom depend on Bandcamp to make a living.

    I don't consider this point the strongest. Epic could afford to pay artists sooner, especially in these low-interest or no-interest times. There would be issues such as with canceled purchases, but it's not like it wouldn't be doable at all.

  2. Bandcamp currently gives artists "around 82% of the revenue earned from their sales." The motion acknowledges that "Google has offered Bandamp a revenue share of 10% (in exchange for other concessions)," but Epic says this would still force it to change Bandcamp's business model or to "operate at a long-term loss."

    Here, Epic argues that adjusting its terms for content creators (the musicians using Bandcamp) accordingly would be perceived as a "violation of [Bandcamp's] core principles within three months of Epic's acquisition."

    I'm wondering whether Google would allow Epic to communicate clearly to Bandcamp's content creators that and why a change of those terms would have nothing to do with Epic's acquisition of Bandcamp, and everything to do with Google's policy change.

  3. Epic argues that "Bandcamp's existing payment solution is fully integrated with PayPal," which enables Bandcamp's support term "to offer quality customer support without leaving the Bandcamp payment system." Epic does not claim that integrating Google's payment system would make it impossible to provide customer service of the same quality, but it "would require significant time and effort to build a new infrastructure" for that purpose.

    A more interesting point here is that PayPal can be used for the sale of both digital and physical goods (music downloads as well as merchandise such as T-shirts), but Google's system cannot. Therefore, there would have to be two different payment systems. What I like about this argument is that it exposes the illogicality of Apple and Google mandating in-app payment systems for digital goods, while online retailers like Amazon or transportation services like Uber use their own payment systems--which reduces to absurdity any security and privacy concerns related to alternative payment systems anyway.

  4. Like Apple, Google requires "itemized pricing catalogs for every item available for purchase in the app." App developers have to edit that catalog using the developer-facing websites of those app stores. I've done such edits myself. But Epic argues that for Bandcamp, this is not possible without serious harm, as Bandcamp-using "artists and labels add and edit thousands of digital and physical items each day and have full control over pricing, including the ability to allow fans to name their own price for items and thea bility to set the price of an item in the currency of their choiced."

    Epic also notes that Google's payment system (Google Play Billing) "is only designed to pay out developers--it does not support running an open marketplace or faciliate a developer seeking to pay out thousands of merhcants (e.g., artists)." It seems to me that Epic could still make it work, but there would be some effort involved.

  5. Epic considers Google's policy change a threat to its "ability to grow the Bandcamp Android app into a global platform with more fans and artists, which is essential to building the audience base and momentum necessary to conect musicians with creators in search of high-quality music."

    What isn't clear to me here is how this disadvantages Bandcamp as compared to any rival marketplace.

For the purpose of securing a PI, Epic's motion must be focused, and Epic had to carefully avoid that Judge Gonzalez Rogers's decision in the Apple case--no matter how flawed in at least some areas--would serve as binding precedent in Google's favor. Judge YGR held (and I actually agree with her in that regard, though I do understand the other side, too) that Sherman Act Section 1 should not be read to apply to unilaterally-imposed agreements (contracts of adhesion). Unless overturned by the Ninth Circuit, that holding would doom a similar Section 1 argument here. So, Epic focuses on Section 2 (unilateral conduct).

The relevant theory here is tying, which requires a tying product (where the defendant has monopoly power) and a tied product (which others are forced to buy in order to get the tying product they need). The alleged tying product here is "Android app distribution," a single-brand market definition that I absolutely concur with. Judge YGR rejected a single-brand market in the Apple case, but as I said in the first paragraph of this post, she made unbelievable mistakes on that basis. Also, it's a more case-specific determination involving a number of relevant facts, while her take on Section 1 not applying to contracts of adhesion would clearly be apposite here.

Among the things Judge YGR held against Epic's claims in the Apple case was her finding that Apple had not imposed the challenged terms only after acquiring monopoly power. One can disagree with that because Apple has over the years changed a number of terms to the detriment of developers, and Epic on appeal challenges that it even is a legal requirement for a single-brand market definition. But here, in Google's case, Epic credibly characterizes Google's conduct as "bait and switch" tactics.

Also, Epic points to typical monopoly-maintenance tactics such as exclusive-dealing agreements between Google and third parties such as carriers, device makers, or app developers.

All in all, I can anticipate various ways in which Google will oppose this motion, and it's not a slam dunk, but it does raise some very interesting questions. Unlike in the Fortnite context, where Epic changed an app in order to provoke its removal from Apple's App Store and Google's Play Store (self-inflicted harm), this is now just about requiring Google to tolerate that an app continues to operate in the same way it has been for more than a decade--as opposed to forcing Google to accept a departure from its own longstanding policy. Here it's about not having to modify--in some ways almost cripple--an app in order not to be ejected from an app store.

When Epic was denied a PI against Apple over Fortnite, the trial was already so close that an appeal to the Ninth Circuit wouldn't have made sense at that stage. Here it is much more likely that Epic would immediately appeal a denial of a PI, and predictably Google would appeal an order granting a PI. The timing could work out in such a way that there could even be "synergy effects" between the Ninth Circuit appeal of the final judgment in the Apple case and the PI decision in the Google case (be it Epic appealing a denial or Google appealing a PI) with respect to single-brand market definition and tying theories.

Toward the end of its motion, Epic notes the "sliding scale" that the Ninth Circuit applies, which basically means that the irreparable-harm theory doesn't have to be all that strong if the likelihood of success on the merits makes up for any potential shortcomings (or the other way round). Here, I consider the likelihood of success on the merits much stronger indeed than the irreparable-harm argument, but Epic does raise issues concerning the impact of Google's policy change on itself as well as on third parties, with both the district court and the appeals court likely being rather sympathetic to the musiciains who need daily/weekly income from Bandcamp in order to make a living or at least in order to continue making music. Plus, Epic will get massive support and has presumably coordinated this motion beforehand with the 36 state AGs and other key parties and stakeholders.

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Thursday, April 28, 2022

European Court of Justice opens floodgates to preliminary patent injunctions in major victory for Munich I Regional Court's patent-specialized judges

Today the European Court of Justice (ECJ), the upper division of the Court of Justice of the EU (CJEU), handed down what may be its most consequential patent-related decision ever (or, at a minimum, after Huawei v. ZTE, its seminal decision on FRAND-encumbered standard-essential patents). It is presently available only in German (the language of the proceedings) and French (the court's primary working language). The gist is that preliminary injuntions over patents will now be more readily available than before, even if a patent is not battle-tested in the sense of having survived an opposition or nullity proceeding.

Companies that often get sued over patents will think or say: "Bummer!"

What makes this decision even more important is that it will govern the grant or denial of preliminary patent injunctions by the Unified Patent Court (UPC), which is expected to be no less (in my view, even more) patentee-friendly than Germany's patent courts.

Before I elaborate on this, I wish to extend my congratulations to the three judges who, on behalf of the court's 21st Civil Chamber, masterfully crafted the request for preliminary ruling (also called a "preliminary reference") that gave rise to today's ECJ decision:

Early last year, the lower Munich court decided to leapfrog its appeals court, the Munich Higher Regional Court, which like its counterparts in the other major circuits for German patent infringement litigation (Karlsruhe, which is the appeals court for patent cases originating from Mannheim, and Dusseldorf) imposed a rather exacting requirement: a patent-in-suit had to be affirmed in an adversarial proceeding (i.e., a nullity case before the Federal Patent Court of Germany or an opposition proceeding before the European Patent Office or the German Patent & Trademark Office, whichever office had granted the patent in question) in order to be able to underly a preliminary injunction. Not just that: if a new challenge to a patent raised invalidity contentions (such as by presenting new prior art) that had not been previously addressed, the fact that the patentee had managed to fend off a different challenge didn't count in this new situation.

Judges Pichlmaier, Dr. Fricke, and Dr. Schacht got exactly the outcome they wanted. They had strategically phrased their question in such a way that the ECJ couldn't have answered in any other way unless there had been qualms over whether it is proportionate to allow preliminary patent injunctions over battle-untested patents when considering the high invalidation rate in adversarial proceedings. But even if the court had wanted to take that position (for which there is no indication anyway), I believe it couldn't really have promulgated a per se rule like that. What would have been achievable if those advocating weaker patent enforcement rules had done a better job would have been for the court to acknowledge that high invalidation rates--even though the law isn't a matter of statistics--may go into the proportionality analysis.

The abject failure of efforts to reform German patent remedies law is demonstrated by today's decision, which cites § 139(1) of the German Patent Act (PatG), but does not even go on to quote or discuss a potential proportionality defense.

The ECJ ruling is lopsided: the court's emphasis is overwhelmingly on the need to protect right holders, with the interests of defendants being taken into consideration only to the extent that collateral must be provided in order to enforce.

The court's reading of the EU's IPR Enforcement Directive and its purpose is particularly clear in paragraph 38, which I will now translate as follows:

"Therefore, Directive 2004/48 merely sets forth a minimum standard for the enforcement of intellectual property rights, which does not preclude Member States from enacting measures affording stronger protection (Judgment of January 25, 2017, Stowarzyszenie Oławska Telewizja Kablowa, C‑367/15, EU:C:2017:36, para. 23 and the case law cited therein)."

The decision stresses on more than one occasion that the purpose of the Enforcement Directive is to ensure a high level of protection of intellectual property rights throughout the bloc.

The ruling culminates in the following short-form answer to the Munich I Regional Court's question (this is now my translation):

"Art. 9(1) of Directive 2004/48/EC of the European Parliament and the Council of April 29, 2004 on the enforcement of intellectual property rights is to be interpreted to the effect that it disallows national jurisprudence according to which the grant of a preliminary injunction over the infringement of a patent is generally denied if the patent-in-suit has not been affirmed, at a minimum, in an opposition or nullity proceeding of first instance."

What's going to happen now?

This is a clear signal from the top EU court to the national courts in its 27 Member States as well as additional countries that are members of the European Economic Area--and even to the UK, which is no longer bound by ECJ case law but whose judges must have been watching with great interest--that patentees should have better access to preliminary injunctions.

Munich is now going to be Ground Zero for preliminary patent PIs, simply because the judges of the Munich I Regional Court's patent divisions (not only the ones who ordered the preliminary reference) have a certain judicial philosophy that has just been validated by the ECJ. But the ruling applies EU-wide.

An aggressive but far from unjustifiable reading of the decision is that if a court anywhere in the EU concludes at the preliminary-injunction stage that a patent is likely valid and infringed, a PI should issue--and defendants are not entitled to more than a bond or a deposit that ensures they can be made whole in the event they can later establish wrongful enforcement. The reason why this reading would be pretty reasonable is that the ECJ states very clearly that the purpose of the EU's IPR Enforcement Directive is to enable right holders to quickly shut down any infringing actions.

It is, however, too early to predict how exactly the case law will evolve in Germany and other EU Member States. The per se requirement of a patent having been affirmed in an adversarial proceeding is history, but this doesn't mean that courts might not still decide to exercise some restraint when granting patent PIs. It also remains to be seen how this will play out in connection with standard-essential patents (SEPs), though the German Sisvel v. Haier approach to Huawei v. ZTE could be applied to PI decisions as well.

In the short term, it's a given that patent holders seeking to enforce their rights will now be emboldened and encouraged to request PIs, especially but not only in Munich.

In the mid term, we will see patent PIs that will be enforceable in all UPC Member States at the same time. Those PIs will put enormous pressure on infringers to settle.

In the long term, only a revision of the EU's IPR Enforcement Directive could result in a trend reversal. But after that miserable failure of an attempt to "reform" Germany's patent injunction statute and considering that the same organizations didn't really do anything that could have effectively influenced the decision that finally came down today, I don't see legislative action weakening patent enforcement anytime soon.

For the net licensors among this blog's readers, today's ECJ decision is fantastic news. And it comes only two days after World Intellectual Property Day.

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Via Licensing's exit from wireless patents leaves Sisvel as only game in town with respect to cellular SEP pools for consumer electronics gadgets

Yesterday, IAM reported that Via Licensing was going to discontinue its wireless patent pool business in order to focus on its wildly successful codec pools--and said Sisvel, the sole remaining pool of wireless standard-essential patents (SEPs) for mobile devices, as "throwing open its doors to former Via licensors." Sisvel itself issued the following statement, which sounds like "yes, but not so fast":

"On April 26, 2022, Via Licensing announced that they were dissolving certain wireless pools and will likely contribute the wireless patents owned by Via to a 5G pool under formation by Sisvel [pointing to IAM]. Sisvel is in the process of initiating discussions with Via pool members regarding joining the Sisvel 5G pool.

"Sisvel feels that a single pool incorporating key patents from the Via and Sisvel pools will create more value for licensees and accelerate adoption by 5G implementers. This, in turn, will accelerate royalty revenue back to the patent owners and enable further innovation for future cellular generations."

It is indeed interesting that Via made this decision as the industry is transitioning to 5G. This is now the time either to go all in on 5G, the To Be Or Not To Be standard of the 2020s, or to get out of the market. It's easy to see why Via's management looked at how one category of pools was performing for them versus another. The ROI of dedicating precious management bandwidth to a sluggish cellular pool just can't compete with the alternative of focusing on where they have momentum. That's how a market economy picks winners and losers within a portfolio.

By contributing the cellular patents it actually owns (as opposed to third-party patents it administered as part of the pool) to Sisvel's pool, Via endorses through meaningful action the alternative to its licensors that Sisvel's pool represents. If they issued a mere recommendation, people would wonder why they don't put their patents where their mouth is. Via's decision regarding its own patents represents meaningful peer recognition for Sisvel.

Still, it is now up to each and every one of those roughly 30 Via licensors to decide. Maybe some believe the time has come for them to focus exclusively on bilateral licensing (like the Ericssons and Nokias of the world, which transact directly with consumer electronics makers), while others will determine that they can actually have it both ways by joining Sisvel's pool and still doing direct license deals (which is also the way it works with Avanci).

In addition to the statement I quoted from, Sisvel published a two-page Q&A (PDF) on the implications of Via Licensing's decision to exit from cellular SEP licensing. In that PDF, Sisvel emphasizes that "there is the unique opportunity to create a single, more effective and powerful license proposition that will be better for both the patent owners and implementors [...] unlocking to the maximum extent the transactional efficiencies that patent aggregation allows for."

In my observation, there is empirical evidence besides Via's codec pools that the industry benefits when it can converge on a single pool in a given field. It took Avanci some time to build serious momentum, but it's now on a roll (though some automotive naysayers like Continental refuse to acknowledge it). Sisvel interestingly contributed its own (assigned, not administered) patents to the Avanci pool, which was probably a first in the world of patent pools as Sisvel technically competes--as a pool administrator--with Avanci's parent company, Marconi. Historically, the MPEG LA codec pools that were one-stop solutions also delivered outstanding results, while the HEVC and VVC situation is an unmitigated disaster for the industry at large.

Why would or wouldn't Via's cellular SEP licensors join Sisvel's pool?

As someone who closely monitors cellular SEP litigation and licensing, I would be surprised if "migration" from Via's defunct pool to Sisvel's more successful one didn't happen on a substantial scale. If the current situation had hypothetically arisen about a decade ago, I'd probably have had compatibility concerns. Not so anymore.

In 2015, I commented on Google joining Via Licensing's LTE pool and interpreted that decision as Google distancing itself from its prior FRAND abuse (for which it was even ordered to pay Microsoft damages). A number of Via's major contributors clearly prioritize implementers' interests, though just like any pool, Via, too, depended on its licensors' willingness to enforce if need be (such as against TCL, a dispute I discussed last summer).

The Sisvel of now has painstakingly built a reputation of being an organization that willing and even not-so-willing licensees can get along with. A couple of weeks ago, Sisvel announced an agreement with Vivo that was struck without having to resort to litigation, which also applies to last year's deal with Samsung. Last summer, Sisvel successfully settled patent infringement disputes with Xiaomi, OPPO, and ZTE. Those are no small achievements, not only but also in light of the unit volumes involved--and Sisvel points to them in that Q&A document on the fallout from Via's decision.

In that document, Sisvel stresses that the terms for former Via licensors joining the pool now will be just as advantageous as for Sisvel's longstanding partners--and "Sisvel will also accept existing third-party essentiality evaluations as relevant evaluations under its 5G multimode and cellular IoT pool, which should eliminate any concerns for double costs." So IAM had a point when describing the situation as Sisvel "throwing open its doors to former Via licensors." It does look like they're committed to a smooth transition for all parties with an interest in making it work.

Of course, if Sisvel's pool grows, its royalty rates will increase, and then it wil have to be worked out with existing and future licensors to what extent they may already be licensed, be it through Via's pool or bilateral agreements. That's the bread-and-butter business of patent pools. Avanci worked it out with Daimler despite Daimler previously having taken a direct license from Nokia, Sharp, and Conversant. I venture to guess Sisvel has addressed such situations, too.

I'll keep an eye on announcements of Via licensors joining Sisvel's cellular SEP pool for consumer electronics products. The question is an important one for this industry, and the time may be just right for consolidation.

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Wednesday, April 27, 2022

Deadline for EU Commission consultation on SEP framework approaching--and progress report on implementation of IP Action Plan

This is the third post in a row on the Auto IP & Legal World Summit in Frankfurt, though it goes beyond the narrow question of patent licensing in the automotive industry.

The previous two posts commented on a Volkswagen keynote on the licensing process and on a panel debate (with a particular focus on a lawyer's prediction that certain German judges, whose positions are very well known, will hand down patentee-friendly rulings once they serve on the Unified Patent Court). I'd just like to add a clarifying nuance to Volkswagen IP chief Uwe Wiesner's position on license fees. The concern Mr. Wiesner reiterated was that standard-essential patent (SEP) holder might capture value beyond the specific technical contribution of their patents to the standard, such as downstream investments in other types of innovation. In my opinion, that comes down to the smallest saleable patent-practicing unit (SSPPU) and royalty base argument we've heard from others, particularly Apple.

SEP holders counter this argument by pointing to the value-add enabled by cellular telecommunications technologies. Nokia's litigation chief Clemens Heusch mentioned yesterday that after a couple of years of using certain mobile data services, the car maker told him he needed to pay for a subscription. I've experienced that more than once, and in fact keep receiving Mercedes ME emails though I even emailed them and asked them to delete me from the distribution list. It's only human that SEP holders want their fair share.

As we're in the middle of a policy debate, let me share an update that Elena Kostadinova of the European Commission's Directorate-General for the Internal Market (DG GROW) provided at the Frankfurt conference on the implementation of the Commission's IP Action Plan (this post continues below the document):

Kostadinova - Auto IP &... by Florian Mueller

The part about SEPs still isn't very specific, but that's because the consultation is still open. So if you haven't provided your input to the Commission yet, now's a good time. The deadline is on May 9 (midnight Brussels time). Click on this link, and on that page you find a yellow "Respond to the questionnaire" button.

To the extent that the initiative and the ongoing consultation have been discussed in IP-specialized media, the Commission has been urged to take a hands-off approach at this critical juncture. Europe's most important wireless patent holders are currently dealing with outstanding as well as upcoming renewals of key license agreements, above all with Apple. Anyway, whatever side you may take, make sure the Commission hears your views.

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Tuesday, April 26, 2022

Lawyer at Auto IP conference: German judges will take patentee-friendly tendencies to Unified Patent Court, standard-essential patent holders will have upper hand again

This is my second post on what's happening at the Auto IP & Legal World Summit in Frankfurt today. The previous post summarized, and commented on, Volkswagen's outgoing IP chief Uwe Wiesner's keynote.

Mr. Wiesner was also a panelist, discussing automotive standard-essential patent (SEP) licensing with Nokia's litigation chief Clemens Heusch (clearly one of the most knowledgeable and experienced patent litigators in the wireless sector), Meissner Bolte partner Philipp Rastemborski, and IPlytics founder Tim Pohlmann. Continental's Roderick McConnell had to cancel on short notice.

At the most abstract level, licensor representative Clemens Heusch and licensee representative Uwe Wiesner agreed that their companies--both of which are European--want the best for the European economy. It is as regrettable as it is unsurprising that they don't agree on much more than that. And Mr. Wiesner stated repeatedly today--during his keynote as well as the panel debate--that the real issue in connection with the licensing level (components or end product) is price.

In the end, the price on which the parties agree depends on leverage in litigation. In that regard, SEP holders have an advantage, especially if they can gain leverage over implementers in Germany.

Earlier this month I explained that the Munich I Regional Court's new approach--a pilot project for the time being--of identifying a "lead case" among a set of related SEP cases--provides SEP holders with an even better opportunity to maximize their royalty income, if they are willing to take their time and their chances.

Mr. Rastemborski, who appears to advise automotive companies (and his firm does a lot of work for Deutsche Telekom, another major implementers), stated in no uncertain terms that the Munich and Mannheim courts give SEP holders a great deal of leverage. He said that those courts essentially say they can't really determine what royalty rate is FRAND, so in the end there is pressure on implementers to reach an agreement with licensors--or they will face an injunction.

He said that the Dusseldorf court used to have a different approach, but its preliminary reference to the ECJ was withdrawn because Nokia and Daimler settled. In Mr. Rastemborski's opinion, the Dusseldorf could "should have just decided." I disagree because German judges are not bound by precedent, not even within their own district or circuit. There is no way that a Dusseldorf decision to the effect of--for instance--denying Nokia an injunction over its refusal to license Daimler's suppliers on certain terms would have dissuaded the judges in Mannheim and Munich from anything. I also disagree with Mr. Rastemborski's criticism of the European Commission not taking a sufficiently global position so far (which he voiced in connection with the question of whether the Commission should bless licensing negotiation groups). The Commission does define markets as global when it is warranted, and it is clearly conscious of its influence on the global stage.

Mr. Rastemborski predicted that the Unified Patent Court (UPC), which is expected to commence its operation in early 2023, is likely going to create additional opportunities for patentees to gain leverage. I agree with that prediction. Mr. Rastemborski specifically mentioned that the Munich court's 7th Civil Chamber's Presiding Judge Dr. Matthias Zigann is going to serve on the UPC, and said he and other German judges (he also mentioned Federal Court of Justice judge Dr. Klaus Grabinski) would bring their well-known, patentee-friendly judicial philosophy to the UPC.

As a result, I wouldn't be surprised if Munich and Mannheim became the two most popular UPC venues of first instance, at least in the beginning.

Net implementers already tried almost a decade ago to influence the UPC's future case law, but their lobbying was focused on the UPC's Rules of Procedure. It is the UPC Agreement that really matters. They missed the opportunity to influence that one. I consider the efforts of that UPC Industry Coalition about as misguided as the attempt to soften Germany's patent injunction regime: more than eight months after the entry of a "reform" bill into force, not a single case is known in which a German court denied or substantially delayed the grant of an injunction because of a disproportionality defense...

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Avanci licensee Volkswagen continues to advocate automotive patent licensing negotiation groups without alleviating cartel concerns in any way

At the Auto IP conference in Frankfurt that I mentioned in a recent post, Volkswagen's IP chief Uwe Wiesner delivered his first public speech since the appointment of his successor--Silke Reinhold--was made official (see yesterday's Juve Patent article)--and possibly also since VW upgraded its Avanci standard-essential patent (SEP) license to 4G on a group-wide basis.

Mr. Wiesner, who was accurately introduced as a very well-respected figure in the IP community, portrayed VW's attitude as follows: "Don't complain, don't go to courts, find acceptable solutions." While VW may not have formally lodged complaints, it is a fact that the car maker has been lobbying competition authorities and policy makers in multiple jurisdictions in an effort to secure green light for an exemption from cartel law. This blog has discussed the concept of licensing (or "licensee") negotiation groups (LNGs) on a few occasions, such as when one of Qualcomm's most senior executives said everyone involved in such buyers' cartels "should go to jail." In its patent infringement complaint against VW (one of several cases that were settled by VW upgrading its Avanci license to the cellular standard it had already been implementing for years), Acer pointed to this blog for a more detailed discussion of the legal and policy concerns that LNGs would raise.

In today's presentation, Mr. Wiesner did give Avanci some credit for its efforts to bring cellular SEP licensors and car makers together, but he then called for different measures and developments he would consider prerequisite to a more balanced framework for automotive SEP licensing. In an effort to make the case for change, he pointed to the fact that there are approximately 10,000 components in a car, any single one of which could be patented in one way or another, and the multiplicity of patent owners, with Huawei and Qualcomm towering above all other contributors to cellular standards according to the numbers Mr. Wiesner relied on. He then went on to raise the issue of informational asymmetry, though I, quite frankly, don't think that Continental--the most vocal one of all tier 1 (= direct) automotive suppliers to demand exhaustive SEP licenses for its components--is really a match for the likes of Ericsson, Nokia, and Qualcomm (to name but three major Avanci licensors) when it comes to cellular standards and SEP licensing.

Mr. Wiesner is clearly dismayed at the patentee-friendly leanings of the German judiciary and, in today's context (SEP licensing), primarily with the Sisvel v. Haier case law. He called for a return to the pre-Sisvel v. Haier application of Huawei v. ZTE, and mentioned a challenge to Sisvel v. Haier that is pending before the Federal Constitutional Court of Germany. What sets the Federal Constitutional Court apart from the U.S. Supreme Court, however, is that it is not a court of final appeal with broad in rem jurisdiction. It only deals with a narrow range of questions, and in context like patent law, this mostly comes down to alleged violations of the right to be heard. One may or may not agree with Sisvel v. Haier, but I'd be very surprised if the Federal Constitutional Court overruled the Federal Court of Justice. It would be unprecedented in German patent law. Most likely, the constitutional complaint will go nowhere.

Part of VW's strategy is to describe automotive SEP licensing as a "pilot" for the wider IoT industry. I wouldn't deny that there are parallels, but there are also some important differences. In particular, many IoT companies are tiny compared to even niche automakers. Also, things are very much in flux and I expect some interesting developments in IoT SEP licensing this year and beyond.

The most aggressive demand continues to be that "licensor pools should negotiate with LNGs." In today's 30-minute presentation, there was nothing new that would address or assuage patentees' and competition authorities' legitimate concerns over LNGs being tantamount to buyers' cartels and leading to a group boycott. It also appears that negotiations between pools and LNGs would still give potential licensees the option to decline to take a pool license and pursue bilateral licensing instead, entailing further holdout.

Arguably, another one of his proposals is comparably radical: no non-disclosure agreements (NDAs) in SEP licensing negotiations. Mr. Wiesner rightly noted that the specifications of the standards in question and the declared-essential patents are public documents. That is just a limited part of the picture (and, at any rate, I believe every NDA I've ever signed or seen defined what constitutes Confidential Information, clearly excluding public documents from the scope of the term). What I would agree is that NDAs should not get in the way of working out solutions to the problem of duplicative royalties. But neither patentees nor car makers or their suppliers would really want to negotiate without at least some degree of confidentiality.

In sum, there's quite some discrepancy between the far-reaching proposals and demands that Volkswagen makes on the one hand and the specifics it states in public--on such occasions as this week's Frankfurt conference--about how it wants to make all of that work without wreaking havoc to the licensing process. I would encourage VW to publish a position paper that lays out what the company has in mind, how it would work, and addresses the concerns that have been raised (not only, but also by this blog). The alternative would be to just abandon the idea altogether, given its conspicuous lack of support from antitrust watchdogs.

VW's patent department has grown from a small team (when he started, they were just about a dozen people) to--if I recall correctly--approximately 100 professionals. The fields of technology relevant to the automotive sector changed a lot during his 30+ years with the company.

Are VW's C-level execs are fully aware of how important IP will be to the future of the entire company? Is the world around VW possibly changing faster than its approach to IP? Those are important questions. The jury is still out on them.

Mr. Wiesner's successor--Mrs. Reinhold--will take over in July and has most recently been in charge of "electronics, mobility, designs and SEPs." She graduated in "material science," which is quite far from the digital space, but I don't know her and by now she may understand wireless technologies and artificial intelligence extremely well. The alternative (which I believe management consultants would have seriously recommended at this transformative stage) would have been to bring in new IP leadership from the industry with which the auto sector is converging, such as someone from Apple, Google, Samsung, Qualcomm, Ericsson, or Nokia, and to grant the new IP chief significant autonomy to adapt to the needs of our times, which has structural implications and should also involve substantial investments in the creation and acquisition of IP in certain fields. That opportunity for deliberate discontinuity--in order to accelerate developments that Mr. Wiesner had already put in motion--was probably missed.

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Saturday, April 23, 2022

Despite Sprint settlement in Texas, Deutsche Telekom is pursuing farcical 'antitrust' case against IPCom in Mannheim

While another standard-essential patent (SEP) dispute is just escalating from 5 to 21 patents-in-suit (Sol IP v. Ford Motor Company, see my previous post), three SEP infringement actions brought by IPCom in the Eastern District of Texas settled out earlier this month. The defendants were AT&T, Verizon, and Deutsche Telekom-owned Sprint. Their network infrastructure suppliers (Nokia in Sprint's case) were also involved.

Here's the IPCom-Sprint settlement notice (this post continues below the document):

22-04-06 IPCom & Sprint... by Florian Mueller

Back in November, Presiding Judge Dr. Holger Kircher (Mannheim Regional Court, Second Civil Chamber) made an assumption: after explaining that Deutsche Telekom's attempt to reclaim royalties (plus interest) to the tune of approximately 200 million euros from IPCom on "antitrust" grounds was far from meritorious, he urged the parties to stipulate to a (revocable) stay as they might settle their overall dispute ahead of an upcoming spring 2022 infringement and damages trial in the Eastern District of Texas. Indeed, many U.S. cases settle ahead of a jury trial, sometimes just a day or two before.

With tens of millions of dollars in play in the Texas infringement action, and the German "antitrust" case being fatally deficient on multiple independent grounds, it appeared to be a no-brainer and almost a law of economics that an agreement doing away with the Texas lawsuit would also be the final nail in the coffin of that crazy Mannheim case. That would have made even more sense when considering that it was actually a disagreement between the Fortress-funded patent licensing firm from the Munich area and the country's leading carrier on whether Sprint--which was acquired later--was a beneficiary of that old license agreement that gave rise to the Mannheim complaint in the first place. So, Judge Kircher thought his court would never have to author a formal judgment should there be a global settlement ahead of the Texas trial.

But no.

After I contacted the Mannheim court to find out about the state of affairs in that litigation, I received an answer that defies logic: the case came out of hibernation and continued in a written format (i.e., no additional trial), with the ruling now scheduled for May 31.

The outcome is really a foregone conclusion. The truth is simply that in 2013, Deutsche Telekom's then-outgoing CEO wanted the case settled no matter the cost to avoid personal liability without having to negotiate some hold-harmless clause in his severance agreement. It was a settlement for convenience, not under pressure. Later, in the Sprint context, Deutsche Telekom decided to turn around and claim it was all the result of blackmail and discrimination.

Maybe Deutsche Telekom hoped little IPCom would be driven out of business by a judgment in the partly (originally entirely) stated-owned monopolist's favor. But when I attended the trial, I saw that IPCom and various intervenors supporting it weren't going to give in. Quinn Emanuel partner Jérôme Kommer vigorously defended IPCom whilst making it perfectly clear that the case was not only legally baseless but even wrong on the facts as IPCom--contrary to what Deutsche Telekom alleged--was indeed actively--even very actively--pursuing license agreements with other carriers (in the form of those Texas lawsuits, and possibly in ways that are not publicly discoverable).

So this case is apparently bound to go up to the Karlsruhe Higher Regional Court (presumably to the Sixth Civil Senate under Presiding Judge Andreas Voss ("Voß" in German)), where I'm sure the outcome won't be different--and then Deutsche Telekom can petition the Federal Court of Justice to take a look, where the antitrust senate is actually being chaired by another former Mannheim judge (Patricia Rombach) who understands SEP issues extremely well. The prospects of finding a "Greater Fool" are bleak.

The Mannheim court could dispose of the case just on the basis that Deutsche Telekom signed a license agreement that explicitly did not require IPCom to do anything with respect to Deutsche Telekom's competitor. Back then, the attorney who led those licensing negotiations for IPCom, Dr. Roman Sedlmaier, rejected a demand by Deutsche Telekom for a clause that would impose such a requirement on IPCom--and not only that: Dr. Sedlmaier then had a premonition (rightly so) that Deutsche Telekom might later challenge the agreement and therefore inserted a clause under which Deutsche Telekom clearly gave up its rights to base any claims on IPCom's potential failure not to license its patents to other carriers. So Deutsche Telekom accepted the opposite of what it was seeking, which was a remarkable success for Dr. Sedlmaier, the importance of which is understood only now. I'm not aware of any other case in which a single aspect of a complex licensing negotiation ended up getting so much attention--and so many years later.

On that basis, the Mannheim court wouldn't even have to reach the multiplicity of other defenses presented by IPCom. However, when an appeal is a given, courts sometimes make their decision particularly appeal-proof by dismissing a case on a plurality of grounds. A good example that also involves absurd "antitrust" claims is Continental v. Avanci, which Chief Judge Barbara Lynn (Northern District of Texas) threw out based on a lack of antitrust standing as well as the legal deficiencies of the automotive supplier's Sherman Act Section 1 and 2 claims (to which the Fifth Circuit then added that Conti even lacked basic Article III standing--the ultimate shortcut). While there wasn't a detailed discussion of the other defenses as the Deutsche Telekom v. IPCom trial in Mannheim in November, Judge Kircher's introductory remarks suggested to me that IPCom was going to win one way or the other.

My guess is that someone at Deutsche Telekom is just pursuing this case for internal reasons, not because anyone would seriously believe that such a farcical and frivolous case could ever get the telecommunications network operator anywhere. Germany's loser-pays system would normally discourage such conduct, but when you own a telecommunications network that was funded by taxpayers and the government (which remains a large shareholder) makes sure you won't face major competitive constraints, you can afford this.

I'm genuinely sorry for Judge Dr. Kircher and his side judges that they have to devote more time to that case. All of the other Mannheim cases that I am watching appear to be pending before the Second Civil Chamber, such as Nokia v. OPPO/OPPO v. Nokia (with the first Nokia-OPPO trial having been rescheduled to May 3) and Ericsson v. Apple/Apple v. Ericsson. They don't need Deutsche Telekom for an occupational therapist.

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Sol IP adds 16 more standard-essential patents to infringement lawsuit against Ford Motor Company in Eastern District of Texas: now 21 patents-in-suit (potentially new record)

If the Guinness Book of Records had category for the largest number of standard-essential patents (SEPs) asserted in a single infringement action, Korea's Sol IP--one of at least five Avanci licensors currently asserting SEPs against Ford Motor Company--might claim the crown.

Ford hasn't even responded to the recently-filed original complaint (over five SEPs) yet, but Sol IP has already amended it and is now asserting not only the five original SEPs-in-suit but also 16 more in the Eastern District of Texas. I'll list all 21 patents-in-suit and discuss the implications, especially with a view to litigation economics, but let me firstly show you the amended complaint (this post continues below the document):

22-04-22 Sol IP v. Ford Ame... by Florian Mueller

These are the five original SEPs-in-suit, which continue to be asserted:

  1. U.S. Patent No. 10,938,534 on "carrier aggregation in wireless communication systems"

  2. U.S. Patent No. 10,231,211 on a "method for paging information in cellular system

  3. U.S. Patent No. 10,932,298 on a "method for transmitting uplink control signal in mobile communication system"

  4. U.S. Patent No. 8,320,571 on a "method for generating downlink frame, and method for searching cell"

  5. U.S. Patent No. 10,148,477 on a "method and apparatus for transmitting ACK/NACK" (ACK = acknowledgement; NACK = negative acknowledgment)

Here are the new ones:

  1. U.S. Patent No. 10,206,207 on an "error control method, medium access control (MAC) frame designing method, and terminal registration method in wireless communication system, and recording medium"

  2. U.S. Patent No. 10,244,559 on a "method for transmitting up link control signal in mobile communication system"

  3. U.S. Patent No. 8,311,031 on a "cell search method, forward link frame transmission method, apparatus using the same and forward link frame structure"

  4. U.S. Patent No. 9,496,976 on a "cell search method, forward link frame transmission method, apparatus using the same and forward link frame structure" (same title as previous patent)

  5. U.S. Patent No. 10,080,204 (same title as previous two patents)

  6. U.S. Patent No. 8,320,565 on a "method for generating downlink frame, and method for searching cell"

  7. U.S. Patent No. 10,749,722 on a "method and apparatus for transmitting ACK/NACK" (ACK = acknowledgement; NACK = negative acknowledgment) (same title as '477 patent (#5 on the list))

  8. U.S. Patent No. 10,271,349 on a "scheduling apparatus and method for multicast broadcast service"

  9. U.S. Patent No. 10,687,351 on a "scheduling apparatus and method for multicast broadcast service" (same title as previous patent)

  10. U.S. Patent No. 8,593,936 on "carrier aggregation in wireless communications systems" (same title as '534 patent (#1 on the list))

  11. U.S. Patent No. RE48,101 on a "method of transmitting downlink channel rank information through physical uplink shared channel"

  12. U.S. Patent No. 10,405,277 on a "method for reducing power consumption of terminal in mobile communication system using multi-carrier structure"

  13. U.S. Patent No. 10,863,439 on a "method for reducing power consumption of terminal in mobile communication system using multi-carrier structure" (same title as previous patent)

  14. U.S. Patent No. 10,462,776 on a "method for transmitting and receiving control information of a mobile communication system"

  15. U.S. Patent No. 10,009,896 on "methods for transmitting and receiving of control channel in wireless communication systems"

  16. U.S. Patent No. 10,893,525 on a "method for transmitting and receiving control channel in wireless communication systems" (almost identical title as previous patent)

Judge Gilstrap presumably won't let Sol IP put that many patents before the jury, as the trial would take very long and then disrupt jurors' lives for months. Even though those 21 patents are not from 21 different families (patents from the same family relate to largely the same technique, yet each must have a unique scope of protection), it would still take a whole lot of technical explanation.

But to the extent that those patents cover distinct inventions, the court can't force Sol IP to drop them. A frequently cited precedent in that regard is the Federal Circuit's 2011 opinion In re Katz Interactive Call Processing Patent Litig.. Sol IP may not even have to narrow its complaint at all (by dropping patents, which it could also do without prejudice in order to be able to reassert them subsequently) until we get a lot closer to a jury trial.

If Ford wants to properly defend itself, it will have to spend tens of millions of dollars. Based on Avanci's published 4G rate, that would cover a whole lot of cars with respect to 49 patent portfolios, of which Sol IP's is just one. I'm sure that some people at Ford have already done the math.

There is an asymmetry because Sol IP can assert all those patents without having to--for example--search prior art. Also, Sol IP likely has access to the inventors and the patent attorneys who prosecuted the original application, and those individuals are already quite familiar with the inventions in question.

Ford is in the business of making cars (as it has been for well over a century), not in the business of defending against cellular SEP infringement complaints. Sol IP's 16 additional SEPs-in-suit have probably simplified Ford's calculus.

Ford was not directly involved in the amicus brief campaign surrounding the en banc petition in Continental v. Avanci. It is, however, a member of the Alliance for Automotive Innovation, which filed an amicus brief together with the VDA (German Association of the Automotive Industry). Car makers Tesla (a presumptive Avanci licensee), Toyota, and Honda finally managed to file their own brief (as opposed to the wrong one), as I discussed in my previous post.

Continental is so far from making even the slightest headway against Avanci--they're not even going to be able to start discovery anytime soon--that Ford may already have given up on the prospects of that case. It now has to make the right decision for itself, realistically coming from the assumption that Continental's complaint is beyond salvation, and that Ford itself will sooner or later be enjoined in Germany and face at least substantial damages claims (if not also injunctions) in the United States, where the Biden Administration's new SEP policy statement that is currently in the works won't make much impact (if any) in the near term either.

Henry Ford famously said: "Half the money I spend on advertising is waste, and the problem is I do not know which half." When it comes to SEP litigation, defendants often find that more or less 100% of the money they spent defending themselves against patents was wasted.

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Tesla, Toyota, Honda finally file correct amicus brief--which doesn't say that Tesla is presumptive Avanci licensee

Just a quick follow-up to my previous post, which was about Tesla, Toyota, and Honda's failure to file their own amicus curiae brief (in support of Continental's petition for rehearing en banc of the dismissal of its "antitrust" case against Avanci, Nokia, and others), and also addressed the fundamental shortcomings of some other filings.

Tesla, Toyota, and Honda have meanwhile been allowed to submit a brief, and they finally uploaded their own brief as opposed to Thales's (this post continues below the document):

22-04-20 Tesla Et Al. ACTUA... by Florian Mueller

What the brief doesn't say is that Tesla is an Avanci licensee. Now, I don't have definitive knowledge of that. But IAM deduced from the near-simultaneous voluntary dismissal of multiple U.S. patent infringement lawsuits by Avanci licensors against Tesla that those cases were all settled in one fell swoop by taking a car-level 4G license from Avanci. The parallel German cases were also dismissed. And since then, no infringement action by any of Avanci's licensors (a total of 49 companies) against Tesla has become known. As an Apple lawyer once famously said, "I'm old enough not to believe in coincidences anymore." It's not impossible, but practically inconceivable, that Tesla wouldn't have taken an Avanci 4G license--that just hasn't been publicly announced, and all 49 Avanci licensors have apparently honored the NDA that is presumably in place.

It's somewhat strange that Tesla files an amicus brief against a patent pool from which it has a license--a license that bailed it out of multiple infringement actions. Tesla would have been free to pursue bilateral licensing instead.

The arguments in the brief add nothing to what the other amici had said before.

That's not the only mystery related to the amicus briefs filed in that case. A group of professors--including some I actually respect a great deal--made a filing one day ahead of the deadline, but should actually have taken that time to correct some typos and other mistakes that come across as hasty, if not sloppy, making me wonder whether the academics even knew what they were signing (this post continues below the document):

22-04-19 Professors' Ac... by Florian Mueller

The heading of the first section is... well... creative:


There's also a redundancy between the first two footnotes:

"1 Undersigned counsel for amici curiae certify that this brief was not authored in whole or in part by counsel for any of the parties. No party or party’s counsel contributed money for the brief. No other person contributed money that was intended to fund preparing or submitting the brief." (emphasis added)

"2 This brief is submitted under Federal Rule of Appellate Procedure 29(a). This brief was not authored in whole or in part by counsel for any of the parties. No party or party’s counsel contributed money that was intended to fund preparing or submitting the brief. No other person contributed money that was intended to fund preparing or submitting the brief." (emphasis added)

They also say the brief was "opposed" without stating who opposed it (there are multiple appellees here) and why...

The professors' brief does Conti the favor of elaborating on something that footnote 1 of its petition already stated briefly. The professors seek to reinforce Conti's point with the following passage:

"Moreover, based on a review of ETSI public records, Continental Automotive GmbH (CAG), the parent company of Plaintiff-Appellant, is a full member of ETSI and a CAG representative currently serves on ETSI’s Board of Directors. While CAG is not the named Plaintiff-Appellant in this case, Plaintiff-Appellant is ultimately owned by CAG. Thus, for all practical purposes, Plaintiff-Appellant is a member of at least one relevant SSO."

In antitrust cases it's key to pick the best plaintiff from the start. Footnotes in en banc petitions and amicus briefs don't make a party a plaintiff at this stage of proceeding.

I was wondering from the start how Conti seriously thought (and I'm also saying this with a view to its Delaware case against Nokia) that a U.S. subsidiary could somehow secure a global license for a Hungarian Conti subsidiary. Conti's corporate structure is a jungle of nth-degree subsidiaries. If they think that's cool or smart (as opposed to just unnecessary bureaucracy), that's their choice. But they have to streamline things in antitrust enforcement or they'll run into standing issues like here.

The professors' footnote 15 also makes a point that doesn't withstand scrutiny: with respect to the panel's mentioning of Broadcom being a Qualcomm competitor when those two companies had their seminal FRAND dispute, they say "at least one licensor member of Avanci (LG Electronics) is a direct competitor of Continental in the market for TCUs." But LG joined Avanci only a couple of months ago, making it an irrelevant fact in this case, which they conveniently (euphemism intended) omit.

Even if one took that fact into consideration now, it actually serves to show that even automotive suppliers believe that car-level licensing is workable and that Avanci's terms aren't an issue. Chances are that Conti itself would be an Avanci licensor if it had invested in the kind of research and development that is required to build a SEP portfolio. But Conti's management lacked the competence and foresight to make that investment while there was a window of opportunity with a view to (for instance) 4G. Instead, they wanted to free-ride on other companies' R&D spend. LG has the benefit of being not only a licensee but also a licensor of SEPs. Avanci itself is not a cross-licensing club, but LG can sometimes cross-license directly with other companies, and for the purposes of its internal financial planning LG can offset some of its automotive division's inbound licensing costs with revenues from outbound licensing. But that's not the result of foul play. It's because LG invested in that area, unlike Conti, a company that is more than 150 years old and better at making tires than at contributing to telecommunications standards, so it's trying to devalue other companies' SEPs instead of respecting them.

The Fifth Circuit will almost certainly figure out what's going on. The question is just whether those alarmist amicus briefs by automotive companies and "Apploturfers" will result in the waste of time that a rehearing en banc of that fatally-deficient "antitrust" case would represent.

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Thursday, April 21, 2022

#FAIL: Tesla, Toyota, Honda file WRONG amicus brief as auto industry, Apploturfers urge Fifth Circuit to resuscitate Continental's 'antitrust' case against Avanci, Nokia, others

Before I forget, let me remind you of next week's Frankfurt Auto IP conference where various of the players mentioned below will be present, some of them even as keynoters and panelists.

Oh my. Tesla, Toyota, and Honda wanted--but failed miserably--to submit an amicus curiae ("friend of the court") brief in support of Continental's petition for rehearing en banc (full-court review) of a panel decision not to revive Conti's self-described 'antitrust' action against the Avanci patent pool and some of its licensors, most notably Nokia. The deadline was a couple of hours ago (midnight Central Time).

The problem is that instead of filing a Tesla-Toyota-Honda brief, they actually attached to their motion a brief that was separately submitted by French industrial conglomerate Thales (this post continues below the document):

22-04-20 Tesla Honda Toyota... by Florian Mueller

The first seven pages of the PDF are Tesla, Toyota, and Honda's motion for leave to file an amicus brief. And then, starting on page 8, there's a "Brief of amicus curiae Thales in support of Plaintiff-Appellant's petition for rehearing en banc" (which Thales filed in its own name, too). Conti itself also misfiled because it failed to comply with the Fifth Circuit's rules (for example, it forgot to provide a statement of facts).

Not only is it uncertain whether the Fifth Circuit will mercifully allow Tesla and its allies to correct their oversight, but there is a serious issue here that cannot be undone:

This misfiling exposes that what was meant to look like broadbased support for Conti is nothing but a coordinated ploy at worst, or an echo chamber at best. The amicus briefs submitted in support of Conti's petition--which would be duplicative enough even without Tesla and its Japanese friends inadvertently having refiled Thales's brief--can be traced back to orchestration by the automotive industry on the one hand and organizations funded by Apple (to advocate the devaluation of standard-essential patents (SEPs)) on the other hand.

Auto + Apploturfers. That's quite an unholy alliance. By "Apploturfers" (Apple astroturfers) I mean essentially the same bunch of Apple-bankrolled organizations that launched the Save Our Standards campaign (they couldn't come up with a more alarmist name, could they?). I recently exposed SOS's highly deceptive advocacy: they sponsored an "interview" with one of their member companies that untruthfully claimed to be a small app developer having issues with SEP owners, when in reality that company never implemented a standard itself, thus never had to license a SEP!

This has become absurd. They keep making themselves ridiculous. And it's not just because of misfilings and astroturfings. The real issue relates to the substance of this (or lack thereof).

Conti's petition and the amicus briefs filed in its support urge the Fifth Circuit to rearrange deck chairs on the Titanic. All that brouhaha about the alleged need for automotive suppliers like Conti to secure exhaustive component-level patent licenses aside, the Fifth Circuit--one of the nation's busiest appeals courts--would just be wasting its time on a rehearing because Conti's complaint is ripe for dismissal on multiple grounds.

The case has had problems from the start. Judge Lucy Koh in the Northern District of California (now, thankfully, on the Ninth Circuit) denied an antisuit injunction and disposed of that case by dumping it on the Northern District of Texas. There, a very experienced judge--Chief United States District Judge Barbara Lynn--dismissed it for two reasons, any single one of which is sufficient in its own right: lack of antitrust standing, and no Sherman Act claims (neither Section 1 nor 2). Conti apparently didn't fully believe in its appeal as it started a parallel and partly duplicative action in Delaware (Chancery Court). After the Fifth Circuit's panel decision, the complaint is even "deader" than before. As I explained, the panel majority held that Conti didn't even have basic Article III standing to begin with. The single judge in the minority joined the majority for what was a unanimous dismissal, but clarified in a footnote that he'd have simply upheld Judge Lynn's decision.

This means that for Conti even to be allowed to conduct discovery, the judges who have previously looked at the matter would have to be overruled in three ways:

  1. Article III standing

  2. antitrust standing

  3. actionable claims under Sherman Act 1 and/or 2

Even if all of that happened (which would frankly amount to a long shot), does anyone seriously believe that Conti could ultimately win this? That a court would ultimately find that Avanci is responsible for most SEP holders declining to grant a certain type of license to component makers, when the key players among them already had that policy long before Avanci was created and--which makes Conti's case completely meritless--Avanci's contracts don't in any way restrict its licensors' ability to extend such licenses? In fact, some Avanci licensors (Sharp, Conversant) have demonstrably granted exhaustive component-level SEP licenses.

Conti is desperately trying to explain with a conspiracy theory what can be adequately explained with long-standing industry practice.

The en banc petition and the amicus briefs place the emphasis on how certain FRAND licensing pledges should be interpreted for all sorts of reasons. But that's the wrong focus.

I've been watching and criticizing this dumpster fire of an "antitrust" case for almost three years. Conti had some contract law claims based on those FRAND declarations. Judge Lynn declined to entertain them after the federal antitrust claims had died. The 5th Cir. panel's casual remark about Microsoft being a member of the relevant standard-setting organizations (SSOs) in its landmark FRAND case against Motorola and about Broadcom being a Qualcomm competitor in another historically important case doesn't change the fact that Conti failed to establish antitrust, not contract law, standing.

If Conti wants to make a contract-law argument, it can do so in that case it brought in Delaware (and which hasn't been a particularly productive effort either, at least so far).

But where's the antitrust injury? How come none of the five judges who have dealt with the case so far--all five of them being really distinguished federal judges--found Avanci's licensing terms quite as outrageous as Conti and its auto-and-Apple amici claim?

There won't be any such harm until some Avanci licensors prevent Conti from supplying its component to its car-maker customers. But they all leave Conti alone. If they ever were to sue Conti, Conti could raise all sorts of defenses. If Conti's customers are licensed (as some of them like Daimler and Volkswagen are), or can elect to take a license, the whole argument comes down to a conclusory allegation that car makers end up paying more--for the same patents used in the same end product--than component makers. Not only is that (as I said) conclusory, but it wouldn't mean Conti gets treated worse than other suppliers, so if anyone had a problem here, it would be the car makers, and patent law provides ways to defend oneself against excessive royalty demands. If amici like Tesla want to pay less, they have every opportunity in their own cases to dispute the reasonableness of certain royalty rates.

Conti has always just talked about indemnification claims in the abstract. It still can't point to a case where a car maker actually had Conti pick up SEP license fees.

The question of whether Conti lacks Article III standing or "only" antitrust (Sherman Act) standing is really academic. Even whether Conti has any kind of standing is not going to make a difference. The petition and all those amicus briefs fail to convince me that Conti could ever win. On one basis or another, that complaint belongs on the federal judiciary's dustbin.

Automotive suppliers are not even consistent when it comes to their stated desire to secure component-level licenses. Case in point, Thales--which is pursuing its own ill-conceived case against Avanci (in Munich)--points in its amicus brief to its litigation with Philips, which is an Avanci licensor. That dispute is not specific to connected vehicles. And that dispute actually shows that Philips wants Thales to take a license, just that Thales isn't prepared to pay what Philips demands.

The Fifth Circuit panel was pragmatic, and that's what I strive to be, too. Avanci has signed up dozens of SEP holders and has licensed dozens of automotive brands. I was skeptical a few years ago, but in the end you can't argue with success. It works. Has the world descended into chaos as a result of this? The automotive industry has its problems. It has to deal with the transition from combustion engines to electromobility, and with a chip supply shortage. SEP licensing is a non-issue for car makers. Some of them just don't like to pay.

At least one of those amicus briefs stresses the enormous economic importance of 5G. And the Save Our Standards brief (ACT | The App(le) Association, CCIA, and HTIA) states how many patents the members of one of those organizations own. When it comes to 5G patents, Avanci has most of the major contributors--with Huawei and Samsung being the only heavyweights missing from the list (for now)--on board. Those who seek to bring down SEP royalty rates and facilitate hold-out by unwilling licensees may very well be innovative in other fields and own a lot of patents. But their contribution to 5G is either next to nil (automotive industry) or very limited (Apple mostly just acquired such patents from the likes of Intel and Nortel) compared to what those Avanci licensors like Ericsson, Qualcomm, Nokia, and that rising star named OPPO--have brought and continue to bring to the standard-setting table.

If the Fifth Circuit figures out that those amicus briefs are just a campaign that doesn't make Conti's case any more meritorious, then it's possible that the court won't even have to hold a vote.

While this is also unrelated to the merits, I did want to mention something in closing. The Alliance for Automotive Innovation, which claims that its members make 98% of all cars sold in the United States, and the German VDA (Association of the Automotive Industry) submitted a brief that lists one of this blog's recent articles in its Table of Authorities. Below you can find a screenshot of that passage followed by the actual document.

22-04-20 VDA AllianceAutoIn... by Florian Mueller

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Wednesday, April 20, 2022

Another patent lawsuit against Ford discovered -- and a great automotive IP conference taking place in Frankfurt next week

There has been steady progress concerning automotive patent licenses, but there's still some debate--and enforcement litigation. Further below I'll tell you about an upcoming automotive IP conference, which will take place in Frankfurt, Germany, next week. You can click here to go straight to the part about that conference, but first some news from the patent litigation front (below the conference banner).

MiiCS v. Ford: fifth Avanci licensor to sue Ford

By now there are at least five Avanci licensors (out of 49) asserting 4G standard-essential patents against Ford Motor Company. In addition to actions brought by Sisvel (Delaware and Munich), IP Bridge (Munich), Longhorn IP subsidiary L2 (Delaware), and Sol IP (E.D. Texas), I've found out from the Munich I Regional Court today that a patent licensing firm named MiiCS is suing Ford there (case no. 7 O 14689/21; Presiding Judge: Dr. Matthias Zigann). A MiiCS v. Ford trial will finally take place on February 2, 2023. It may play a role that the patent-in-suit (EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method") has come under significant invalidation pressure as a result of OPPO's defense against Sharp, which previously owned the patent and obtained and enforced an injunction against Daimler over it. OPPO and Sharp have since settled, but other defendants may still benefit from the headway OPPO made.

I must say that I'm increasingly skeptical of how Ford seeks to defend itself against those patent infringement lawsuits. Not only does its Qualcomm-related patent exhaustion defense fail a plausibility test, but I've also learned from a couple of SEP holders that Ford has tried to pressure certain automotive suppliers among Avanci's licensors to use their influence to get the aforementioned five (if not more) complainants to withdraw their lawsuits. Bullying of that kind is not the behavior of a willing licensee--and appears unlikely to solve the problem.

Auto IP Conference in Frankfurt (April 26 and 27, 2022)

For many years, Frankfurt used to be the venue of automotive trade show IAA. Now the city in the heart of Germany has an automotive IP conference that already drew an interesting audience (car makers, automotive suppliers, and patent holders) last year. This year's AUTO IP & LEGAL World Summit on April 26 and 27 (Tuesday and Wednesday of next week) is sponsored by OpSec Security, Avanci, patsnap, Questel, Meissner Bolte, Nokia, and IPlytics. You can download the brochure from this webpage, but let me say which sessions I believe are going to be of particular interest to this blog's audience:

  • Uwe Wiesner, the chief patent counsel of Volkswagen (which recently upgraded its Avanci license to 4G for the entire group), will give the opening keynote on automotive patent licensing and make "proposals for a balanced licensing process."

  • Shortly thereafter, Mr. Wiesner will join Nokia's litigation VP Dr. Clemens Heusch and Continental patent counsel Dr. Roderick McConnell as well as IPlytics CEO Tim Pohlmann and Meissner Bolte partner Philipp Rastemborski for what could be a lively panel debate on FRAND litigation and licensing negotiations.

  • Conti's Head of IP/SEP Dr. Michael Schloegl ("Schlögl" in German) will deliver a presentation on "best practices, negotiations, and the changing SEP ecosystem," followed by an update on "progress in the implementation of the EU's IP Action Plan" by DG GROW official Elena Kostadinova.

I've secured a discount promo code for my readers, so if you plan to register, please use this link and you'll get a better rate. There could hardly be a more interesting juncture in the automotive patent licensing and litigation context for a conference to be held. While many 4G licensing issues have yet to be sorted out, car makers are increasingly implementing 5G.

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