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He said that the Dusseldorf court used to have a different approach, but its preliminary reference to the ECJ was withdrawn because Nokia and Daimler settled.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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