Saturday, June 18, 2022

Quinn Emanuel scores huge EU win as German managing partner gets mixed press: Daimler's defeats hurt firm's reputation in standard-essential patent litigation in Germany

The most important court ruling of the week--at least for the tech sector, if not beyond--was Qualcomm's successful appeal of a European Commission antitrust decision. The San Diego chipmaker was represented by Quinn Emanuel's Brussel's office, a couple of whose partners already had a very good reputation before that landmark victory, but now they're really a go-to firm for appealing DG COMP decisions. It's a highly specialized field in which Jean-Fran├žois Bellis is arguably still the number one (I heard that the European Commission's lawyers fear him more than anybody, and they'll meet him again in the ECJ in the International Skating Union case on July 11).

QE is now undoubtedly playing in that league, the European Champions League, and was right to celebrate its enormous achievement--it's not just that they won, but also how--on social media with this banner:

There's not only light but also shadow when it comes to QE's German offices. They just opened another one in Berlin, which suggests they're still growing in Germany. However, next time a major business publication wants to write about them or their managing partner, they should seek out advice from professional public relations consultants...

On June 10, Wirtschaftswoche, the German equivalent of Bloomberg Businessweek (previously BusinessWeek), published a fair but thoroughly-researched article on Dr. Marcus Grosch, who built and still chairs QE's German offices. The headline, With Maybach and Karate, refers to his car (an upgraded S-Class that is basically Mercedes's answer to Rolls-Royce), in which he has a chauffeur drive him to courthouses, and his favorite sport, in which he won a regional championship in his youth.

Marcus Grosch has often been mentioned on this blog--in the early 2010s for his very effective work on Googlorola's behalf (Google and Motorola, the latter of which temporarily belonged to the former), but in less positive contexts in recent years: two serious cases raising the question of wrongful enforcement (one of them targeting Apple, the other one against a cigarette paper manufacturer), and because Daimler--relying on QE Germany to defend it--was slapped with four German patent injunctions within only 11 weeks (ultimately, Daimler took an Avanci license, so in retrospect it would have been way smarter for the Mercedes maker never to spend a single cent on litigation with Avanci licensors).

The Wirtschaftswoche article, too, mentions the four injunctions against Daimler in 11 weeks. As I revealed information from the highly secretive Nokia-Daimler mediation talks in 2020 (which drove the mediator crazy), it's obvious that I had sources--more sources than Nokia thought at the time--among the joint defense group. Never once during the Nokia v. Daimler dispute did I hear that any member of the joint defense group was enthusiastic about the work QE was doing. Instead, some members of that group were questioning Daimler's choice, given that QE Germany previously had a track record only in enforcing--not defending against--SEPs. At least two members of the joint defense group were constantly concerned that there was a conflict of interest, not so much because of QE having worked for Nokia in the U.S. on some occasions, but due to some of QE Germany's recent clients like Qualcomm and BlackBerry being interested in strong SEP enforcement.

Even when it comes to SEP enforcement, QE needs to excel in order to justify premium prices. The Wirtschaftswoche article says Dr. Grosch charges €1,200 (US$1,250) per hour, while even senior partners of large and reputable firms practicing patent law in Germany bill less than $1k. Talking about results, the champions of SEP enforcement campaigns in Germany have recently been certain Wildanger partners, with Arnold Ruess also having impressed me a great deal. And a "hidden champion" in that field is Dr. Christof Augenstein of Kather Augenstein--one of the largest and most sophisticated net licensors, Ericsson, relies on him and his team again and again, but as they typically win settlements early on, there haven't recently been any German patent injunctions involving Ericsson patents. Bird & Bird's Christian Harmsen consistently delivers results for Nokia as well as Huawei. I could name others, but wanted to just focus on the most prominent players in cellular SEP enforcement.

If QE's clients feel they get their money's worth, that's OK, but what I consider incompetent--even downright stupid--is when in-house litigators fail to insist on QE bringing patent attorneys along. QE is free to recommend whatever QE believes--in good faith, I'm sure--works best. In-house counsel, however, shouldn't take unnecessary risks. Samsung was smart; for them it was non-negotiable (and while they use QE in the U.S. all the time, they've actually relied on other firms in Germany, apart from a couple of Apple cases about a decade ago).

The Wirtschaftswoche article also mentions QE Germany's principle of not teaming up with patent attorneys. Dr. Grosch told the reporter that attorneys at law are just as capable of explaining technology to a court as patent attorneys. An unnamed lawyer told Wirtschaftswoche, rather diplomatically, that "there is the risk of failing to identify an argument." I don't even want to get into what else the article says, but let me just explain it from my vantage point as a litigation watcher:

  • In German patent infringement proceedings, patent attorneys are usually just listening--not delivering oral argument--when it comes to the infringement contentions. They typically come into play only when validity (with a view to a requested stay pending a parallel nullity or opposition proceeding) is discussed. One may indeed be led to believe that patent attorneys aren't critically needed if one looks at the infringement proceedings. But patent attorneys have certain advantages in the nullity or opposition proceedings. That's where some (nullity) or all (opposition) decision-makers have a technical background. It's where technical considerations such as whether an alternative solution might result in degradations or improvements--or whether it would work at all--gain importance (while the infringement courts are usually just interested in cases of clear non-novelty, not in the inventive step). Patent attorneys--identifiable by their partly blue robes--have the psychological advantage of sharing an engineering background with technical judges and patent examiners.

  • Dr. Grosch told Wirtschaftswoche that a plaintiff's or defendant's own engineers are in the best position to explain the technology at issue to litigation counsel. In some cases that's simply not true: for example, if a downstream customer gets sued (such as Daimler over cellular SEPs), only the suppliers have the relevant technical knowledge. But even in cases where it is true that engineers can better explain the technology at issue, patent attorneys have the advantage of understanding both the technology at issue and patent law. They look at the question from both angles, not just one--and they, too, get briefed by a client's engineers.

  • Top-notch patent attorneys involved in German patent litigation are all highly specialized. If a party or its litigation counsel asked an expert in telecommunications whether he or she would help them in a case over a medical device, he or she would refer them to a colleague in order to stay in his or her lane. They wouldn't claim to be generalists. It's simply not realistic to assume that highly specialized patent attorneys with a full engineering background (often a Ph.D. in a technical field) couldn't make contributions.

  • I heard about something that further illustrates why patent attorneys are not just dispensable in patent litigation. I know about one Munich-based patent attorney--who often helps Samsung with its German cases--who was advising a company that had sold some of its patents without retaining the right to practice those inventions. He then teamed up for a significant period with that company's engineers, and they jointly developed a workaround that ultimately even represented an improvement over the patented invention. Another example is that an in-house counsel I know very well once visited a patent attorney firm in Munich and noticed that there were LEDs on the wall of a storage room, shining extremely bright. The patent attorney then explained that they had set up that installation because of a photovoltaics patent infringement case and needed to conduct an experiment. I strongly doubt that QE Germany has ever done anything remotely similar.

When I see QE appear in a German patent case and they don't bring patent attorneys along, I know that their clients have simply elected to put themselves at a disadvantage. QE is to the best of my knowledge the only firm not to bring patent attorneys along to German patent infringement trials--and not even to nullity and opposition hearings. Their clients accept this and have to live with the results. They should ask themselves one question:

If that is the right approach, why has no other German patent litigation firm adopted it in all those years? It must give anyone in his right mind pause that after more than a decade of QE Germany doing this, no one else has even concluded that this is worth trying.

Samsung insisted on the involvement of Zimmermann & Partner, and QE accepted it--maybe begrudgingly, but still. Daimler didn't insist, but then they also wasted tens of millions on litigation instead of taking an Avanci license right away. Qualcomm didn't insist either, but I attribute it to the fact that they rarely ever have to litigate as most licensees also buy their chips. A long time ago, Qualcomm was represented by Bardehle against Nokia, and Bardehle is the leading German firm with both attorneys at law and patent attorneys on board. But Bardehle would have been conflicted against Apple. Qualcomm doesn't need my help to compare how things went in those disputes.

What about Google? They have an in-house litigator who was a QE associate. He also contributed his ideas to proposed legislation that didn't really move the needle for German patent injunctions. I would also encourage Google to think very hard about why no other German patent litigation firm than QE deems the involvement of patent attorneys unnecessary.

If clients decided to pay QE's premium rates and have patent attorneys involved in addition, it would have obvious implications for litigation economics, and some in-house counsel might find it harder to internally justify the total cost of being represented by QE Germany. But as Dr. Grosch rightly told Wirtschaftswoche, clients are well advised to focus on quality rather than price.

He should, however, have given himself that same advice when it comes to public relations. The former PR chief of his (current or former) client Daimler founded one of the leading firms specializing in crisis communications, litigation PR, and also advised executives such as a former Daimler CEO with respect to their personal PR needs. Presumably, a firm of that kind would have told Dr. Grosch a couple of things:

  • Don't show up for an interview with two watches--an Audemars Piguet (which may have cost as much as, if not more than, a German patent judge earns in a year) plus a smartwatch.

  • Given QE's hourly rates and per-partner profits, it must have made sense for him to hire a chauffeur to drive him to the courts. This way he doesn't waste a minute. But PR professionals would have cautioned him against the risk of how that would be perceived should it ever be reported in the media.

The only client heaping praise on Dr. Grosch in the Wirtschaftswoche article is IPCom founder Bernhard "Bernie" Frohwitter, whose own law firm earned an estimated ten million euros in fees per year while IPCom never got leverage over Nokia during all those years. Mr. Frohwitter describes Dr. Grosch as a bird of paradise, meaning a dazzling personality, who delivers--and says he loves that combination. Wirtschaftswoche also quotes the heiress to the cigarette paper company I mentioned further above. QE even sued her and her husband personally, trying to hold them responsible for patent infringement and hoping to scare them into a settlement. She now says she would recommend Dr. Grosch, which may be attributable to the Stockholm syndrome as well as to her desire to criticize the German patent enforcement framework.

I'm not surprised that a QE client like Daimler wouldn't speak out, as they tend to be very low-key (and it remains to be seen whether they will use QE Germany next time). However, the key point here is that QE Germany should have obtained professional PR advice, and PR pros would have tried very hard to find at least one client (other than Mr. Frohwitter) who would have volunteered to speak with Wirtschaftswoche and say complimentary things.

Then, PR consultants may be just as superfluous as patent attorneys in the world according to Dr. Grosch.

Toward the end, the Wirtschaftswoche article raises the question of where things will go from here. Ten years on I'm still impressed by his great work on Motorola's behalf, and how he snatched victory from the jaws of defeat when a German injunction against Google Maps was imminent. He's extremely smart, and he fights hard. At the same time, QE Germany has grown, and he may have to act as lead counsel in far more cases than back in the Motorola days.

While this is about boxing and not karate, I believe he's facing a Rocky III type of situation. Without a doubt, he has the potential to become the undisputed champion again, but such outcomes as the four injunctions against Daimler during the course of 11 weeks must give him pause. If he finally decided to involve patent attorneys, that would be a good sign.

I don't want to mention specific patent attorney firms now, but the firms that companies like Apple, Samsung, Huawei, Nokia, and Ericsson rely on in their German patent cases are an excellent pool to begin with.

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