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.

Share with other professionals via LinkedIn: