Saturday, August 6, 2022

SHOCKING: Nokia patents, other lawsuits force OPPO, OnePlus out of German market--first smartphone maker in history to exit major market over patent enforcement

The history of phones has been linked to patents ever since Alexander Graham Bell patented the telephone in 1876. One of humanity's dreams materialized. Fast forward 146 years, and nothing short of a nightmare has come true: a very significant phone maker has actually exited--not merely threatened to exit--one of the largest markets in the world--Germany--as a result of patent assertions.

I became aware of this shortly after yesterday's post on two standard-essential patent (SEP) injunctions Nokia had just obtained against OPPO from the Munich I Regional Court. Previously, the Mannheim Regional Court had granted Nokia a non-SEP injunction in June as well as a a SEP injunction (over two patents from the same family) in July.

Nokia may win one or more additional injunctions on Tuesday. OPPO has its own countersuits pending, but those are taking longer.

While U.S. and UK courts would hear extensive testimony from expert witnesses in such cases, and German courts appoint their own experts in cases of far lesser significance (such as construction law disputes over only a few thousand euros), neither the Mannheim court nor the one in Munich appointed an economic expert to analyze whether the parties' positions were fair, reasonable, and non-discriminatory (FRAND). In all three SEP cases, the decisions were based on the judges' own determination that Nokia had discharged its FRAND licensing obligations and OPPO was an unwilling licensee.

I'm now going to report and comment on the situation in multiple parts:

  1. Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

  2. Hard evidence of OPPO and OnePlus having left the German market

  3. Other patent assertions against OPPO in Germany

  4. Why OPPO's calculus may simply make economic sense

  5. Implications for Apple, Samsung, and Xiaomi

  6. Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

  7. Tactical implications for Nokia-OPPO licensing negotiations

  8. German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

According to Canalys, OPPO's worldwide market share was 10% in the first quarter of 2022--slightly down from 11% year-on-year. And there's another 8% for Vivo, which is not an OPPO affiliate, but like OPPO belongs to BBK Electronics Corporation of Guangzhou, China, and is also being sued by Nokia in Germany. Vivo hasn't exited the German market (here's a German Vivo product page) as there is no injunction in place yet, but given that OPPO has made the determination that it was prudent to leave the German market and to reject Nokia's royalty demands, it seems likely that--faced with the enforcement of an injunction--Vivo, too, would independently reach that conclusion when running the numbers.

So, in the short term we're talking about the exit of smartphone brands accounting for more than 10% of the market (OPPO + OnePlus), and in the mid term we may be talking about more than 10% (OPPO + OnePlus + Vivo). Vivo has much less of a market presence in Germany than OPPO.

When phones accounting for 10% or more of unit sales in a large market--and an even higher percentage of the low- and mid-range segments--become unavailable, it cannot be denied that there is an impact on consumer choice and possibly even a very significant output restriction in these times of chipset shortages. That, of course, does not mean to blame patent holders or the patent system. I'm talking about the practical consequences of this. This is plainly massive.

Hard evidence of OPPO and OnePlus having left the German market

I had mentioned in several previous posts the possibility of OPPO determining that it was too costly to stay in the German market, and then I ran a Twitter search to see whether someone else had also reported on yesterday's Nokia v. OPPO injunctions #3 and #4. I found this tweet by OPPOblog's Dominik Lux and another one that pointed me to this article. Yesterday, Caschys Blog also reported on this development.

I've also verified the situation myself. OPPO's German website contains the following note (click on the image to enlarge):

That note translates as follows:

"Currently, no product information is available on our website.

"Q: Can I continue to use OPPO products without limitation, receive support, and receive future updates?

"A: Yes, you continue to be able to use your OPPO products without limitation, receive support, and of course you will receive all future updates."

The removal of product information is key because German patent injunctions typically enjoin a defendant not only from making and selling the products that have been held to infringe, but also from advertising them.

As for the availability of future over-the-air (OTA) software updates, Nokia can't do anything about that unless and until it enforces a patent on a technique that is essential to Android. Cellular standards are implemented at the hardware level, not in Android itself. The WiFi non-SEP over which Nokia won its first German injunction against OPPO can be worked around, but even that one may be implemented at the chipset level.

The German OnePlus store delivers the following when one clicks on the "Phone" category (click on the image to enlarge or read the text below the image):

"Uh-oh! Nothing is found.

"Try searching with different filters."

Some OnePlus accessories are still available. They are not among the accused products (for now).

German injunctions are binding only on the defendants, not on third parties. Therefore, resellers still have OPPO and OnePlus products in stock--though it's unclear for how much longer that will be the case. The largest one of those resellers is Deutsche Telekom (T-Mobile), which carries five OPPO and six OnePlus products as you can see in the following screenshot (click on the image to enlarge):

In the part on tactical implications for the Nokia-OPPO licensing negotiations I'll discuss what the parties' options with a view to OPPO's resellers are.

Other patent assertions against OPPO in Germany

While Nokia is the only patent holder with a German injunction in force against OPPO and OnePlus at this stage, there are other patent cases pending against OPPO and OnePlus in German courts:

Why OPPO's calculus may simply make economic sense

The totality of the injunctions that have come down, as well as other pending and threatened cases, faces OPPO with the choice of

  • taking global portfolio licenses on the patent holders' offered terms, thereby reducing margins and/or (as a result of price increases) the company's competitiveness in the rest of the world, or

  • forgoing potential profits in Germany, possibly even in the long run, in favor of maintaining the company's margins and competitiveness in the markets where it generates the bulk of its sales.

It's what chess players call a gambit. Economically, it's an "op cost" (opportunity cost) analysis of two alternative scenarios.

According to the BITKOM industry association (of which Nokia is a member, too), the annual sales volume of smartphones in Germany is approximately 20 million devices with an average price of approximately 550 euros (US$560). The median would be more interesting to know, as Apple with its sky-high prices is not representative of the rest of the market. It is a safe assumption that OPPO's average price--even with OnePlus included--is significantly lower. That would mean a quantity of roughly 2 million units, at an average price of maybe 400 euros (US$407). If we assume a margin of maybe 10%, that would mean annual profits of approximately 80 million (euros or U.S. dollars).

On Thursday, InterDigital discussed OPPO's global sales volume in a conference call with investors, and an estimate of 200 million units was mentioned (I knew that the number was well over 100 million units per year). That means OPPO generates maybe about 1% of its global sales in the German market.

If we now compare those 80 million euros/dollars in annual profits from Germany to the impact of paying elevated patent royalties on the other 200 million units, the simplest way to look at it is that even if OPPO expected to save only about 40 cents in patent royalties on a per-unit basis, it would make sense to just leave--and even in the long run, stay out of--the German market. The difference between Nokia's and OPPO's positions may be a lot greater than that--and then there are various other patent holders, including the ones already suing OPPO in Germany. In the total of all the patent holders seeking leverage in Germany now or later, the per-unit cost increase could amount to several euros/dollars.

If OPPO assumed that it can get a substantially better deal in a matter of weeks or months, then it would pay off big-time to forgo some German sales, especially during the slow summer season.

OPPO may never really lose 100% of its German sales. Resellers and even consumers may buy products in other European countries, such as Austria or Poland.

Obviously, the question is then whether Nokia will get leverage over OPPO--or OPPO over Nokia, as it's a two-way dispute--in other jurisdictions, as cases are pending in many countries. I'll talk more about the tactical options both parties have from here on out further below.

Implications for Apple, Samsung, and Xiaomi

For Apple and Samsung, and probably even for Xiaomi, the calculus would be rather different if faced with a similar situation.

Apple--which has yet to renew its Ericsson, Nokia, and InterDigital license agreements, two of which have expired and the last one of which is about to expire--has far higher profit margins than OPPO, and doesn't target similarly price-sensitive customer groups as OPPO does especially (but not only) in Asia.

For instance, Apple generates only 0.2% of its worldwide sales in Colombia, but the cost of not being able to sell its 5G iPhones and iPads there is already substantial compared to the license fees Ericsson is seeking. Exiting the German market wouldn't be an option for Apple.

Samsung (which also has to renew the core part of its Nokia license rather soon) and Xiaomi are somewhere between Apple and OPPO in terms of per-unit prices, profitability, and market shares in affluent vs. developing countries.

Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

OPPO's withdrawal from the German market is of an unprecedented scope and scale. So far there had only been

  • sales bans that temporarily affected limited parts of a given smartphone maker's line-up,

  • temporary removals of features, and

  • cases in which companies publicly or privately said they were contemplating exiting a market as an alternative to caving to a patent holder's demands, but in none of those cases did it actually happen when push came to shove.

The most recent case of a temporary exit from the German market concerning some--not all-- of a smartphone maker's products became known six months ago and involved HMD. That was due to the enforcement of patent injunctions by VoiceAge EVS.

The previous incident resulted from Qualcomm's enforcement of a patent injunction against Apple. That one, too, affected only some products: the iPhone 7 and 8, which were already the low-end iPhones at that time. While Apple was temporarily unable to sell them directly in its Apple Stores or online, those devices remained widely available through resellers. The problem was solved by Apple incorporating Qualcomm--not Intel--chips into the iPhone 7 and 8 for the German market. Had Apple and Qualcomm not worked it out, the appeals court would have lifted the injunction anyway: that's precisely what it did at a time when it no longer mattered.

In early 2012, Motorola (while in the process of being acquired by Google) was enforcing a Mannheim SEP injunction against Apple. As a result, Apple was unable to sell the iPhone 3G, the iPhone 3GS, and the iPhone 4 (but not the iPhone 4S), and all 3G/UMTS-capable iPads in Germany. But what was really going on was that Apple iteratively offered Motorola better terms until the appeals court--the Karlsruhe Higher Regional Court--deemed Apple's offer reasonable enough to stay the enforcement of the injunction.

What lasted more than a year was the impact of Motorola's push notification patent injunction. Apple had to disable that feature until the appeals court lifted it in 2013.

IPCom enforced a patent injunction against HTC in Germany before that, and a motion for contempt-of-court sanctions was brought, but there was no market impact.

Last year, Apple's outside counsel told a UK judge that her client might exit the British market if the court set too high a global royalty rate, but ultimately agreed to accept the UK court's determination, and the related trial took place a couple of months ago. (By the way, FOSS Patents was referenced on multiple occasions during that trial.)

Experienced licensing negotiators have witnessed countless situations in which companies said that if they were going to lose a case in a given jurisdiction, they'd rather leave that market than settle on a worldwide basis. Generally, no one ever took such statements too seriously. But with OPPO in Germany it appears that a point has been reached where a significant player has determined that pulling out is preferable over backing down.

Tactical implications for Nokia-OPPO licensing negotiations

Nokia and OPPO can hardly know what the other side's intentions are:

  • Given that the current situation is unprecedented, Nokia may assume that OPPO is bluffing and not going to stay out of the German market for too long after the slow summer is over and OPPO's products that are currently in its resellers' warehouses have been sold.

    But if Nokia miscalculates in this regard, and OPPO actually does pay the price of staying out of the German market (also with a view to other pending patent cases), then the point will come at which Nokia is the more vulnerable side in Germany. OPPO's own enforcement of true 5G patents is likely to lead to injunctions against Nokia's mobile base stations.

  • It would be reasonable for OPPO to assume that Nokia will want to turn the page on that dispute and focus on bigger fish to fry: Apple and Samsung--companies that, unlike OPPO, could not afford to pull out of Germany only to avoid taking a patent license on Nokia's preferred terms.

    But there's another side to this. Nokia knows that whatever deal it reaches with OPPO will be referenced in potential disputes with Apple and Samsung as a comparable license agreement. Nokia can argue that OPPO's average selling price is far lower than Apple's, and significantly lower than Samsung's. But the headline royalty rate is going to be part of the discussion.

    And this works both ways: OPPO won't be interested in weakning its position vis-à-vis other SEP holders (such as InterDigital).

With a view to Nokia's potential future disputes (Apple, Samsung etc.), there's also an upside and a downside from continued litigation with OPPO:

What's unclear is how big a part of OPPO's problem some other German lawsuits (InterDigital, VoiceAge EVS, and any potentially unknown or yet-to-be-filed ones) are. The aggregate of the bid-ask differences between OPPO and those other patent holders could be comparable to, or greater than, the one in the Nokia case. In that case, settling with Nokia would at best solve half the problem fro OPPO. However, against InterDigital and VoiceAge EVS, OPPO can't countersue as those companies aren't selling products in Germany: their revenue model is patent licensing.

Then there are all those other jurisdictions in which Nokia and OPPO are currently embroiled in litigation. Simultaneously with the German cases, Nokia brought complaints in London, Paris, and Barcelona. OPPO sought a declaratory judgment in the Netherlands, where Nokia responded with non-compulsory counterclaims. In China, OPPO is seeking a FRAND determination, and Nokia brought infringement claims. Nokia is suing in India and Indonesia. In the latter jurisdiction, OPPO has so far defended itself, though Nokia could refile. Nokia also sued in Russia, but withdrew there over the Ukrainian situation--but then brought cases in Sweden and Finland.

Nokia may be able to obtain injunctions in some other jurisdictions, but it remains to be seen what the courts in those countries will say about Nokia's and OPPO's FRAND compliance. Divergent decisions are possible.

There are also tactical decisions to be made by Nokia in Germany. It's possible that resellers like Deutsche Telekom and MediaMarkt will just buy OPPO products in other countries within the EU's single market, such as Austria or Poland. Nokia wouldn't want to sue the carriers as they are its network infrastructure customers. What Nokia could consider is a petition for border seizures by customs authorities (here's a German-language article (PDF) by the Bardehle Pagenberg firm on that topic).

We may not see an immediate settlement during the summer, but the closer we get to the Christmas Selling Season, the more likely it is that a deal will happen. Otherwise, OPPO would have nothing left to lose in Germany, but could at some point enforce injunctions against Nokia in Germany.

Should there be no settlement in the near term, we'd likely also see the parties file cases with the Unified Patent Court (UPC) in order to obtain EU-wide injunctions.

German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

It's been almost exactly a year since a German patent "reform" bill entered into force. While OPPO wasn't visible in the lobbying efforts related to that piece of legislation, companies like Apple, Google, Nvidia, Deutsche Telekom, SAP, and the German automotive industry had completely false hopes that a modified injunction statute (§ 139 of the German Patent Act) would lead to a departure from Germany's near-automatic injunction regime.

I've commented on that monumental lobbying failure on various occasions, such as earlier this year when two Dusseldorf judges made it clear that patent holders would continue to obtain injunctions in virtually every case where they prevail on the technical merits. More recently, there have been court rulings--also from Dusseldorf--that clarified that the situation was still the same as before. German judges have pointed out in their decisions as well as in public speeches that the language that got inserted into § 139 last year merely codifies the prior case law, under which a plaintiff either has to make stupid mistakes or seek a sales ban on, say, the printing of bank notes or a COVID vaccine in order to be denied an injunction. It's not even clear whether a proportionality defense could succeed in a single case in which a defendant wouldn't be entitled to a compulsory license anyway.

A few months ago, even ip2innovate, a lobbying front for the likes of Google, Nvidia, Daimler, and SAP--conceded in light of an injunction against car maker Ford that the legislative amendment hasn't really lived up to those companies' expectations. Well, I already predicted it in early 2000 right here on this blog. They just wouldn't believe me then. They now know that I was right with my predictions, and they were strategically on the wrong track.

OPPO's exit from the German market illustrates it again. Being exposed to German patent litigation is a vulnerability that some may prefer to avoid regardless of the opportunity costs from not serving such a large and otherwise lucrative market.

Share with other professionals via LinkedIn:

Friday, August 5, 2022

Nokia wins two patent injunctions against OPPO in Munich (on top of two previously-granted Mannheim injunctions): Apple may be next in line

There was good news for OPPO this week with respect to one VoiceAge EVS patent, but the Munich I Regional Court adjudicated two Nokia v. OPPO patent infringement actions today--and found for Nokia in both of them.

Nokia has now won four out of four German patent cases against OPPO: two each in Mannheim and, just today, Munich. In all of these cases, injunctions have come down, and the question is now whether the Karlsruhe Higher Regional Court (for the Mannheim decisions) and the Munich Higher Regional Court will allow Nokia to enforce--or stay enforcement pending the appellate proceedings. For the law firm of Hogan Lovells, there is a lot at stake. They must fight hard now for enforcement stays or other Hogan clients--such as Apple--may lose faith in that firm.

Bird & Bird's IP practice group leader Christian Harmsen was Nokia's lead counsel in both cases, with Dr. Stephan Waldheim (also Bird & Bird) having handled the FRAND part.

Even if one or more of Nokia's injunctions got enforced, it is not a given that OPPO will settle: according to estimates, it generates only a fraction of a percent of its worldwide sales in Germany.

Today, the Munich I Regional Court's 21st Civil Chamber under Presiding Judge Dr. Georg Werner granted Nokia injunctions against OPPO over two standard-essential patents (SEPs):

  • EP2080193 on "pitch lag estimation" (case no. 21 O 8891/21) which is related to audio coding, and

  • EP3557917 on a "method and apparatus for providing efficient discontinuous communication" (case no. 21 O 8879/21), which is about a flexible allocation of resources with "keep awake messages" in discontinuous communications.

According to an official Nokia statement, the court "found that Nokia has acted fairly." It also deemed OPPO an unwilling licensee, as did the Mannheim Regional Court last month in a standard-essential patent (SEP) case. I didn't attend any of the FRAND discussions (the courtroom was sealed anyway) and don't know what royalties Nokia is seeking or what OPPO's counterproposal is. All I know is what the courts in Mannheim and Munich have concluded--and to the best of my knowledge, no SEP defendant has been deemed a willing licensee in those venues since the Federal Court of Justice decision in Sisvel v. Haier.

FRAND is not an issue in the WiFi non-SEP case, the first one that Nokia won against OPPO in Mannheim.

OPPO is a major 5G SEP holder and countersuing Nokia over true 5G patents, but it will take some more time before any OPPO v. Nokia cases are adjudicated.

While it is unclear what OPPO will do under these circumstances, pulling out of the German market would not be a profitable option for Apple. Apple, whose license agreement with Nokia is rumored to have expired very recently, has reasons to be worried now:

Share with other professionals via LinkedIn:

Thursday, August 4, 2022

OPPO, HMD win Federal Patent Court ruling against VoiceAge EVS: all challenged claims declared invalid, final decision to be made by Federal Court of Justice

After an impressive and unprecedented series of six favorable decisions against HMD--a company that makes Android smartphones under the (licensed) Nokia brand and whose shareholders include Qualcomm, Google, and Nokia--patent licensing firm VoiceAge EVS now faces a first unfavorable court ruling:

The Bundespatentgericht (Federal Patent Court of Germany) has just informed me that at the end of a hearing in case no. 4 Ni 11/21 (EP) on Tuesday (August 2), the court's Fourth Nullity Senate announced a decision in plaintiffs OPPO and HMD's favor concerning VoiceAge EVS's EP3132443 on "methods, encoder and decoder for linear predictive encoding and decoding of sound signals upon transition between frames having different sampling rates". The written ruling will issue at a later stage. The net effect is that

  • claims 1-4 and 10-17 have been declared invalid, and

  • claims 7-9 have been declared invalid to the extent they reference claims 1-4.

VoiceAge EVS had won--and had since been enforcing--a Munich injunction against HMD about a year ago. A ruling in a case over the same patent against OPPO is scheduled for August 18. Until the nullity decision on Tuesday, it actually looked like VoiceAge EVS was going to win that case, especially since the Federal Patent Court's preliminary opinion had been that the patent is valid, which suggests to me that this is a close call and the nullity appeal can go either way.

Not all claims were challenged by OPPO and HMD. What I don't know is whether VoiceAge EVS could build a meritorious infringement case on any of the claims that weren't challenged, and how swiftly those other claims--if pursued--would be adjudicated.

For now, OPPO doesn't have to fear an injunction over EP'443. A different VoiceAge EVS v. OPPO decision has been scheduled for September 29, an several other cases will go to trial in early 2023. All in all, VoiceAge EVS is asserting a handful of patents against OPPO.

Xiaomi was being sued over the same patent (and others), and apparently took a license.

For OPPO, this outcome is a boost and much-welcome good news after Nokia won two Mannheim injunctions against the smartphone maker. It shows that OPPO can snatch victory from the jaws of defeat. The Karlsruhe Higher Regional Court confirmed to me that OPPO has brought a motion to stay enforcement in at least one of the two cases, which motion hasn't been definitively resolved yet. I'm sure that a motion has been--or will be--brought in the other case (a SEP case) as well. For now it looks like Nokia is not yet enforcing those injunctions, and let's see whether it will be able to do so later this summer. OPPO isn't easily beaten--this much is certain.

I've found out who represented the successful nullity plaintiffs:

Share with other professionals via LinkedIn:

InterDigital announces patent license agreement with Amazon and confirms Apple agreement will expire by end of this quarter, Samsung next

I just listened to large parts of patent licensing and research firm InterDigital's investor conference call for Q2 and looked at its related SEC filings.

InterDigital CEO Liren Chen mentioned a new license agreement with Amazon. I'll try to find out more about its scope. What was said on the call is that it's a multi-year, worldwide license agreement "covering a range of Amazon’s consumer electronic devices."

It was confirmed that InterDigital's license agreement with Apple--which was apparently last renewed in 2016 (see this Reuters article)--will expire by the end of this quarter, and that the agreement with Samsung will expire by the end of the following quarter (i.e., by the end of the year). Apple has been a licensee to InterDigital's patents since the launch of the first iPhone in 2007Samsung has been an InterDigital license for about 25 years.

There are currently two significant patent assertion efforts by InterDigital: they sued OPPO in late December (according to InterDigital, the annual device volume there amounts to approximately 200 million units including OPPO's affiliates), and they are awaiting a UK ruling in a Lenovo FRAND case.

The last major litigation that was settled (almost precisely a year ago) targeted Xiaomi.

Share with other professionals via LinkedIn:

Intricacies of EU antitrust enforcement against Big Tech on full display as Politico reports on DG COMP questionnaires concerning Google Play Store app tax

The EU Commission is on a summer break, with only a few people holding down the fort, which makes it all the more surprising that a major EU antitrust investigation just became known. Politico's Samuel Stolton achieved a major scoop as he was first to report that "[t]he European Commission’s antitrust enforcers are investigating Google’s app store rules, according to two people close to the matter." According to the article, "billing terms and developer fees" for the Google Play Store are being looked at--and while the investigations are only preliminary--not full-blown--investigations at this stage, Politico's unnamed sources even predict that an investigation by Dutch competition watchdog Autoriteit Consument & Market (ACM, Authority for Consumers & Markets), which I mentioned in May, will have to be closed as Brussels will take care of this matter on an EU-wide basis. Otherwise there would be a risk of divergent--even if maybe only marginally inconsistent--decisions relating to the Netherlands, a country that is part of the EU's Single Market. The UK is not, as a result of Brexit, so the CMA (Competition & Markets Authority) can go ahead with its own investigation of the same set of issues.

The Dutch connection and UK non-connection are much simpler and more straightforward than how this DG COMP inquiry into Google Play relates to

  • the future enforcement of the EU's Digital Markets Act (DMA) and

  • the next steps regarding Epic Games' EU antitrust complaint over Apple's App Store terms.

The DMA was adopted by the European Parliament last month, and the EU Council (where the governments of the EU member states cast their votes) had already reached a political agreement (an informal decision affirmed later) prior to the parliamentary vote. As Politico mentions, it's only "in early 2024" that Big Tech will actually have to comply. In the meantime, the Commission will hammer out its guidelines and designate gatekeepers--and there may be legal challenges to particular aspects of the new law, which could delay everything.

Two weeks ago, Google announced some new in-app payment rules--allowing the use of third-party payment processors but not in a way that would be profitable for developers-- for the EU. It was almost irrationally soon for that, almost like if a car indicated a left turn somewhere on PCH in the L.A. area because it would actually make a turn in Seattle two days later. Formally, the DMA hasn't even been enacted (that will happen in October), and it won't be until early 2024 at the earliest that the Google Play Store would be formally affected. While Google does strive to come across as more cooperative with regulators than Apple does--admittedly a sub-sea level bar--even Google does try to delay the impact of competition enforcement or new laws. Case in point: the South Korean situation I reported on four weeks ago.

It is now my assumption that Google's announcement was an attempt to dissuade DG COMP from launching investigations under current, conventional EU antitrust rules, and the DMA was just used to make the whole move appear less defensive than it actually was.

I'm not surprised that the announcement underwhelmed DG COMP. It was really weak stuff, and not even very clever.

Google's agenda, with the benefit of 20-20 hindsight, is now transparent. But what does DG COMP want to accomplish, and when and how?

Here's my theory:

DG COMP knows that with Google (and Apple), these cases take long and go to court. With the DMA, the Commission will be in a much stronger position. But some issues require preparation and foresight.

If DG COMP investigates now, it realistically knows the case won't be concluded before the DMA takes effect. There won't be a satisfactory settlement in all likelihood (anything else would be a huge--but positive--surprise).

The Commission can now commence its proceedings under the traditional set of competition rules, gather evidence, and develop its theory of harm. At some point it can change lanes: the DMA is a faster track and represents lower hurdles for the agency.

It may even help the Commission and the EU's legislative institutions to fine-tune the DMA itself or, more likely, the related implementation guidelines based on the facts established and legal arguments exchanged during the course of the investigation.

In February 2021, Epic Games filed an EU antitrust complaint with DG COMP, but focused on Apple as Tim Sweeney explained to Politico. I remember that someone close to Epic told another Brussels reporter (but don't remember whom) that they believed the EU was focusing on Apple--presumably with a view to the Spotify case.

It's been a long 18 months since then, considering that DG COMP normally decides within about a year whether to investigate or reject a complaint, and now we hear about those Google Play questionnaires but don't know yet what will happen with respect to the App Store. Apple and Google--the two parts of the "Goopple" mobile platform duopoly--often pursue almost the same tactics and promulgate near-identical policies, such as the 30% standard commission rate. But one key difference is that Google's walled garden is slightly more open (though only slightly so if one looks at it in depth) than Apple's. It wouldn't make sense for Google to be investigated over its app tax and Apple getting away with it--if only one of the two companies were to be investigated, that would have to be Apple, which doesn't allow any alternative app stores or "sideloading" (which Google formally allows while making sure that there still isn't any real competitive constraint).

Should my theory be right and the Commission decided to get going sooner rather than later with tackling the app tax regime, then I would strongly recommend to DG COMP to consider a similar course of action with a view to App Tracking Transparency (ATT). I just reported on that one yesterday because a new U.S. class action complaint brought by French publishers is targeting ATT in addition to the app tax.

Share with other professionals via LinkedIn:

2 out of 3 for Ericsson as ITC judge allows amended infringement argument, denies eHealth- and Watch-related Apple motion, but declines to throw out patent misuse defense: non-SEP case

The smallest one of Ericsson's three USITC cases against Apple--investigation no. 337-TA-1301--is also the nimblest, which is attributable not only to its scope, but equally to Administrative Law Judge (ALJ) Cameron Elliot's efficiency and decisiveness.

The case, which for the avoidance of doubt doesn't involve standard-essential patents (SEPs), shrank this week as Ericsson dropped all of the asserted claims of one of the originally three patents-in-suit, and most of the asserted claims of another patent-in-suit. That was unsurprising in light of a claim construction order that identified indefiniteness issues with some claim limitations. And it was equally unsurprising that ALJ Elliot granted that (obviously unopposed) motion.

There have also been other developments that I'd like to summarize briefly. Two of them are good news for Ericsson, while Apple has avoided an early-stage dismissal of its "patent misuse" defense:

  • Ericsson can now amend its infringement contentions (as well as its technical domestic industry contentions, which involve the same questions as infringement, but not with respect to Apple's products--it's actually about what Ericsson's licensee Samsung does in the U.S. market). This represents an opportunity for Ericsson to optimize its arguments with a view to the upcoming evidentiary hearing (i.e., trial) in light of the aforementioned claim construction order., which particularly highlighted that, with respect to one of the patents, the case will hinge on a "Make-Before-Break" question (meaning whether one connection does or does not have to be terminated before the next one is established).

    Apple vehemently opposed Ericsson's motion, saying that the iPhone maker would be OK with the mere addition of "citations to late-produced evidence," but alleging that Ericsson "now seeks to add evidence thatw as timely produced" and would amount to "untimely new theories," or as Apple also calls it, "a do-over."

    For now, the order granting Ericsson's second motion for leave to supplement its infringement and technical domestic industry contentions is sealed. Apple's unsuccessful opposition is the only publicly accessible source of information on this, for the time being.

  • Apple also wanted to amend something: its tentative list of evidentiary hearing witnesses. But ALJ Elliot found that no good cause had been shown.

    Apple sought to bolster its public interest argument against the entry of an import ban (in the event an infringement of a valid patent is shown) with testimony from Dr. Richard Milani, Chief Clinical Transformation Officer and Vice Chairman of the Department of Cardiology at Ochsner Heath System, and Dr. Patrick Reardon, Adjunct Professor of Surgery at Texas A&M College of Medicine, and Chief of Foregut & Minimally Invasive Surgery at Houston Methodist Hospital.

    Those witnesses from the healthcare sector submitted declarations according to which an exclusion order concerning the iPhone and the Apple Watch "would have major negative implications on public health in this country by greatly hindering patient care and medical research in critical areas." The doctor from Houston wrote: "If these Apple products were excluded from the United States, it would have a strong negative impact on patient care and would harm patients."

    ALJ Elliot didn't buy Apple's claim that it turned out at a relatively late stage that those healthcare professionals would submit declarations. Apple "was able to identify at least eleven other third[ ]parties who appear to be listed for public interest purposes. [...] It is also unlikely, as Ericsson suspects [...], that Drs. Milani and Reardon approached Apple out of their own volition without any outreach first from Apple. And if there was prior outreach, that timing would greatly affect the evaluation of Apple’s diligence and timeliness in filing the present motion."

    Furthermore, ALJ Elliot doubts the "probative value of the testimony expected to be offered" by those witnesses, as they highlight the Apple Watch, "but Ericsson suggests this particular product is unaccused of infringement in this Investigation." Those witnesses also wouldn't add a lot of new information by duplicatively "extolling Apple devices’ ability to collect health data for review by professionals."

  • What worked out better for Apple was its opposition to Ericsson's motion to strike the iPhone maker's "patent misuse" defense. Unfortunately, the order keeping the defense alive for the time being is sealed. Four months ago I already commented on that "patent misuse" theory, which comes down to saying that Ericsson abuses non-SEPs in order to secure a SEP license--but that turns the concept of "tying" on its head, as it would only be an issue if Ericsson used SEPs in order to force Apple to take a non-SEP license.

    I'll read with interest why ALJ Elliot declined to toss that defense, but I still doubt that Apple can ultimately prevail on it.

In other Ericsson v. Apple news, Apple's allegation of a human rights violation in Colombia (related to a 5G iPhone/iPad sales ban over a SEP) should be adjudged in a matter of days. Even Breitbart, which is famously skeptical of Big Tech's political leanings and intentions, has meanwhile reported on it (quoting this blog).

Share with other professionals via LinkedIn:

Wednesday, August 3, 2022

Continental, Apple, others want FCC to overstep its mandate by injecting itself into standard-essential patent licensing and litigation

Certain companies and their lobbying fronts are pushing the U.S. Federal Communications Commission (FCC) to support those organizations' efforts to devalue standard-essential patents (SEPs). The most vocal one of them is automotive supplier Continental (see Conti's latest filing, dated July 29), but Apple and its astroturfers (see this July 2021 filing (PDF)) are also involved.

The specific context has docket no. OET 19-138 and relates to the use of the 5.850-5.925 GHz spectrum block for Cellular-V2X (C-V2X) purposes. Put differently, Conti, Apple, and their friends are trying to hijack a spectrum regulation process for their gain, and their pretext--the suggestion that ruthless SEP holders would otherwise threaten the viability of the standard--is simply made up. The SEP holder with the most clout in U.S. politics, Qualcomm, opposes that initiative.

Let's go for a quick, virtual walk around Washington, D.C., and "visit" the various agencies of the Executive Branch that are actually in charge of SEP policy and/or the related enforcement:

  • The Antitrust Division (ATR) of the United States Department of Justice (DOJ), the United States Patent & Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) have recently withdrawn a SEP policy statement. At the same time they declined to agree on a new one or reinstate an Obama-era position that was favored by implementers like Apple.

    The fact that those three agencies determined it was better to let the market and--to the extent necessary--courts sort SEP things out strongly counsels against the FCC taking a position on the most controversial of SEP-related questions, which is the proper licensing level and royalty base.

  • The Federal Trade Commission (FTC) challenged Qualcomm's licensing-centric business model, but lost the appeal and ultimately gave up. The bottom line was that patent holders like Qualcomm enjoy wide latitude in defining and implementing their business models, and it's very hard to obligate them to do business with a third party on the latter's preferred terms. While other circuits, such as the D.C. Circuit, could theoretically reach different conclusions than the Ninth Circuit, the FTC v. Qualcomm outcome, too, should dissuade the FCC from taking steps that would invite legal challenges. A solid Supreme Court majority is absolutely not in favor of federal agencies overstepping their mandate.

  • Then there's also the United States International Trade Commission (USITC, or just ITC), which can order import bans if patent rights are infringed (and provided that it's not against the public interest, which is, however, a narrow exception).

It's not a question of whether the FCC is important. No one would doubt that. It's just that too many cooks in the SEP policy kitchen are not a good idea. On its face, Conti's (and its allies') argument is that the FCC should just exercise its regulatory authority in connection with the reservation of spectrum for one specific standard. But the issues, particularly access to exhaustive component-level SEP licenses, have far wider ramifications.

Now, Conti points the FCC to the fact that it mandated FRAND licensing of SEPs in the context of ATSC Conti at least once misspells ATSC as "ATCS" and there are other typos in its recent submissions to the FCC, of which "AUtomotvie" is the most striking one. But compared to last year's Epic Games v. Apple judgment (271 typos and similar mistakes; an average of more than 1.5 per page) that's not too bad.

With respect to ATSC 1.0, the FCC didn't decree that component makers had to be licensed. The agency merely reminded SEP holders of their FRAND licensing obligation without narrowing the meaning of FRAND, which is what Conti and its allies are seeking here. Spectrum regulation isn't FRAND interpretation.

The FCC should not buy those unsubstantiated allegations of widespread problems in SEP licensing. Well over half of the automotive industry (based on car sales volumes) has already taken the Avanci 4G patent pool license. The two exits from the wireless component market that Conti mentions are not even anecdotal evidence: the car industry is affected by a chipset shortage, not by an insufficient number of actual and potential suppliers.

Conti is telling the FCC what the Fifth Circuit rejected (even twice): the notion that Conti is being harmed by the fact that SEP holders prefer to license Conti's customers over licensing Conti itself. The only harm Conti is really suffering here is entirely self-inflicted and amounts to the legal fees it keeps wasting in its crusade against SEP holders.

Share with other professionals via LinkedIn:

FINALLY: U.S. injunction sought against Apple's App Tracking Transparency (ATT) scheme to harm others' ad business, and against app tax: antitrust complaint by large French publishers

This here is a FOSS Patents exclusive because no one else appears to have noticed the following:

Well-hidden in a new 90-page U.S. antitrust complaint against Apple (even 251 pages with the exhibits (PDF)), filed on Monday in the Northern District of California, is a challenge to one of the most devious and ruthless schemes Cupertino has ever devised: App Tracking Transparency (ATT).

This is precisely what Meta (Facebook) would love to do, but it hasn't gone to court (at least not yet) and is, instead, contenting itself with drawing public attention to the issue.

Under the pretext of "privacy," App Tracking scares iPhone and iPad users away from granting even the most innocuous apps permission to share with advertising networks non-sensitive information that has nothing to do with spying on users, but is simply necessary in order to avoid that the same user will see irrelevant ads--ad even the same irrelevant ads over and over again. As a result, ATT

The issue of Search Ads being an extension of Apple's app tax came up, but didn't take center stage, in last year's Epic Games v. Apple trial. Judge Yvonne Gonzalez Rogers, to whom the new complaint by those French publishers is likely to be assigned, made terrible mistakes. Yesterday I published a 33-page PDF that details 271 (yes, two-hundred seventy-one!) typos, punctuation errors, inconsistencies, and similar mistakes, which is embarrassing for the (otherwise world-class!) United States District Court for the Northern District of California. And I've previously shown that in the single most critical part of the decision (market definition), Judge YGR was wrong on the law, wrong on the economics, and wrong on the technology. But she did get some things right (as I also clarified in my previous post), and this includes the finding that Search Ads aren't necessarily a blessing for app developers:

Footnote 498:

"[...] Developers must pay for these search ads and competitors may use them to artificially drive traffic, which decreases overall app discoverability. [...] Thus, the search ads are, at best, a mixed blessing for poor overall matchmaking."

At first sight, Société du Figaro et al. v. Apple is just an extension of other U.S. class actions that app developers have previously brought against Apple in the Northern District of California over the 30% app tax. One might be led to think that the only difference is that previous cases--which merely led to a sham settlement the only major beneficiaries of which were Apple and both sides' lawyers--pursued claims on behalf of U.S.-based app developers, and the Figaro case is now seeking redress on behalf of French legal entities under U.S. federal and California state law because the App Store is a global operation.

The headline of the press release with which the Hagens Berman firm announced the new complaint mentions only "Apple's App Store Fees." The firm's name partner Steve Berman then says:

"Our firm is happy to see iOS developers from other countries seeking the same justice we were able to achieve for U.S. developers. We believe they too have been wrongfully subjected to the stifling policies of Apple’s App Store, and we intend to hold Apple to the law." (emphasis added)

The first-named plaintiff's famous newspaper Le Figaro published an article yesterday that says the damages and interests sought from Apple could exceed US$1 billion. And this group of plaintiffs is not going to be as easily persuaded to agree to a sham settlement: they aren't little guys, but powerful and deep-pocketed publishers.

The emphasis remains on the infamous app tax where Hagens Berman's press release describes the issues raised in the complaint: "France-based iOS developers [...] were subjected to Apple’s high commissions, fees and other policies." The term I just emphasized--"other policies"--does, however, include ATT. The prayers for relief include a request for "injunctive relief requiring that Apple cease the abusive, unlawful, and anticompetitive practices described [t]herein." And Apple's ATT program is addressed by paragraphs 187 et seq.:

b. Apple’s ATT program

187. Another situation that Apple has devised and then exploited for yet more profits is that involving recent implementation of its App Tracking Transparency (ATT) program. Ostensibly, this program is good for end-user consumers because it gives them more choice as to third-party tracking of personal data.

188. However, large and small iOS developers claim that it is implemented in such a way that they are unfairly robbed of their ability to monetize their work by fair use of consumer data for targeted advertising. These developers, which include plaintiffs Individual Developers, as well as associational plaintiff le GESTE, allege that Apple’s ATT program will mean less free-to-get apps; developers will forgo creating them, or will begin to charge fees for heretofore free-to-get apps, because they will be unable to make a living by means of advertising.

189. Moreover, they claim that Apple is advantaging itself by the way in which it presents consumers with the option to opt-out of certain third-party tracking, versus other means that would more fairly present the choice.179 They also claim that Apple advantages itself by offering a Personalized Ads architecture for its own apps that is not parallel to the way it presents the ATT opt-out choice; instead, as the U.K.’s CMA has written, it “employs a different choice architecture compared to the ATT prompt.”180 Thus, Apple, which already holds stores of first-party data, and whose advertising services can “use the Apple Ads Attribution API while third parties must use SKAdNetwork [which may be more limited and immature],” is and will be further advantaged vis-à-vis other entities that participate in digital marketing or product development. And so will other large gatekeepers such as Google, which itself holds enormous stores of first-party data gathered by way of its many properties.

190. By monopolizing the relevant market, Apple affords iOS developers who do not wish to participate in ATT, especially as implemented, nowhere to go. Again, Apple presents ATT as a take-it-or-leave-it proposition, if iOS developers wish to sell their iOS apps and in-app products. If there were competition, iOS developers such as Individual Plaintiffs could choose other distribution avenues, or they could more effectively press Apple to change some of its policies and practices around ATT. As to the latter—changing policies and practices—Apple might be persuaded to change the ways in which it presents the opt-out screen to consumers. Or it might be persuaded to allow developers to tell end-users in a fair manner, when the ATT opt-out screen is presented, that if they opt-in, they will receive remuneration or free or discounted digital products, for example. But instead, affected iOS developers are offered no real choices. On the other hand, in typical Apple fashion, it benefits from ATT monetarily. Apple’s App Store Search Ads, which iOS developers that can afford them buy in order to help to alleviate the discoverability issue, are reportedly up in volume sold and more expensive following the introduction of ATT. Because they are auction-based, the more developers that bid on them, the higher the prices go. And in fact there are more bidders, as iOS developers shift more of their own app-related advertising dollars to Apple, given ATT’s negative effect on the quality of certain other places where they might have advertised previously. Once again, iOS developers are squeezed, as Apple’s App Store-related profits increase yet again. Apple harms iOS developers—consumers of its iOS app-distribution and IAP services—by way of supracompetitive pricing and retail pricing mandates.

Given that the app developers here are actually publishers, ATT and its impact on advertising revenues as well as user acquisition costs is going to play a major role in this litigation. And so are subscriptions as opposed to an exclusive focus on one-off in-app purchasing (IAP) transactions.

There are three original plaintiff entities:

  • Société du Figaro, SAS (famous for the namesake newspaper),

  • L'Équipe 24/24 SAS, publisher of the namesake sports paper and related streaming app, and

  • le GESTE, an industry association of French publishers whose membership includes 140 online publishers, two of which are the previously named plaiintiffs. Le GESTE brings the class action on behalf of all of its members. But the class is open to opt-in by other French entities.

The issues in the case are obviously not limited to French publishers. There's no reason why, say, British or German publishers couldn't pursue the same types of claims. And with respect to in-app subscriptions and App Tracking, a victory by those French plaintiffs would immediately lead to additional cases being brought by U.S. plaintiffs. This is a scalable business for Hagens Berman and other firms active in that space, but that's OK as long as their next cases--unlike the case involving small U.S. app developers--truly bring about change.

Consumer class actions against Apple are pending in the United States, Australia, the United Kingdom, the Netherlands (where one of the two class actions invites all EU-based consumers to join, not just Dutch ones), and--most recently--Portugal. In my post on the Portuguese action you can find a structured list of those consumer cases.

But there's also a growing diversity of corporate class actions. The same firm that is representing the French publishers brought a case against Apple--over Apple Pay and restrictions on the access to the iPhone's NFC functionality--on behalf of credit card issuers last month.

Hagens Berman (in the U.S.) and Hausfeld (in a variety of jurisdictions) are presently the two most active firms pursuing class actions against Apple (with parallel cases often targeting Google, but Apple's conduct raises far more issues).

It's worth noting that there also is an effort underway in France. The equivalent of a preliminary injunction against ATT was denied last year, but that case is still ongoing. In the French case, various publishers are being represented by Geradin Partners, a really great antitrust boutique with offices in Brussels and London.

Share with other professionals via LinkedIn:

Tuesday, August 2, 2022

Epic v. Apple judgment: 271 typos and similar errors identified, not even Apple's name and Tim Cook's title are correct--SLOPPIEST antitrust decision in U.S. history?

The headline of this post would have begun with "Northern DisGRACE of California" or "Total Disaster of California" if I didn't have the greatest respect for the United States District Court for the Northern District of California as an institution--and for all the judges there who work incredibly hard and smart. It would be utterly unfair to make it sound like an absolute outlier, which may even be unprecedented among high-profile commercial disputes decided by the U.S. Federal Judiciary in more than two centuries, was representative of that top-notch court's work.

But Epic Games v. Apple is far too important a case that I could turn a blind eye to what has gone wrong so far. It's unbelievable that last year's ruling has literally hundreds of typos, punctuation mistakes, inconsistencies, and similar errors. Prior to Epic v. Apple, I had never seen anything like that in a high-profile case. Now I've finally found the time to document 271 mistakes of that kind (33-page PDF):

Some of the errors would be funny if the context wasn't so serious:

What's also remarkable is that Judge Yvonne Gonzalez Rogers is totally inconsistent in various ways:

  • In the majority of cases, she uses the Oxford comma (comma before final part of enumeration), but in a minority of cases she doesn't.

  • Sometimes she forms the genitive of names ending in the letter S with only an apostrophe ("Dr. Evans' SSNIP analysis" or "American Express' prohibiting steering"), sometimes with an extra S ("Dr. Evans's analysis" or "American Express's rewards program"). Those inconsistencies are often even find within the same paragraph, or only a few paragraphs apart.

  • In some cases, she correctly places a comma before "which" subclauses that don't serve to narrow the meaning of the noun they refer to, but in many cases she omits it.

  • In one sentence, "Mac" has no article; in the very next sentence, it's "the Mac."

  • After finishing the document shown above I even identified another inconsistency: sometimes "e.g." is italicized, sometimes it isn't. That would even increase the number of errors, but 271 is already a pretty high number and there is always the possibility of someone disagreeing with me on one detail or another, so I'm fine with understating the extent of the problem.

One mistake occurs with a consistency of 100%: when she refers to Epic as "plaintiff" (though it's always "Plaintiff" in U.S. court rulings when the plaintiff in the present case is meant), she doesn't capitalize that term (except at the beginning of sentences).

How could this happen? Why didn't anyone care to proofread the document before it was published last September? Judge Gonzalez Rogers knew that a significant part of the digital economy was watching the case with great interest--not only, but also including many app developers (like me). She had no firm deadline. She could have taken another couple of days. In fact, it took me only about 20 hours of work to document all those errors with screenshots. It would have taken only about a day to simply fix them.

If one actually wanted to take that document to the level of editorial quality one usually sees in the Northern District of California, hundreds of additional edits would be needed (far more commas, but also other edits such as more suitable prepositions). In that PDF I tried to focus on only the clearest deficiencies.

As the preliminary note of that document explains, it would be possible, at least in theory, that a judge publishes a decision with hundreds of typos and similar errors, but nevertheless gets the facts and the law right. Regrettably, the absurdity of saying that Apple's market share in smartphone operating systems is substantially greater than in smartphones--even though there is clearly a one-to-one relationship as each iPhone or iPad comes with iOS, and iOS cannot be purchased separately from an iPhone or iPad--is a lot worse than those 271 typos and similar editorial shortcomings combined. With respect to the foremarket part of Epic's single-brand market argument, the judge was wrong on the law (Kodak), wrong on the economics, and wrong on the technology.

Market definition is almost always the most critical part of an antitrust case, comparable to claim construction in patent infringement litigation. The formal market definition the judge adopted--"digital mobile gaming transactions"--is also flawed because all mobile gaming transactions are digital, period.

Hopefully, the United States Court of Appeals for the Ninth Circuit will get that litigation back on track. I wish to stress that my positions are not coextensive with those of a party or any of the amici curiae. I may be the only public commentator to take the following combination of positions:

  • A single-brand market definition is warranted.

  • On that basis, Apple should be found to violate the Sherman Act.

  • Epic is right on tying.

  • Epic and some of its amici may be right that the case law makes Section 1 applicable even to contracts of adhesion, but for policy reasons I understand the judge, Apple, and some of Apple's amici who disagree.

  • It might be possible to decide the case in Epic's favor even with the district court's market definition, but I'm unconvinced that Epic can realistically win on that basis. (Between now and the appellate hearing, I'll give this more thought.)

  • I agree with Apple's narrow interpretation of the injunction under California Unfair Competition Law, and also with Apple and its amici that the state UCL injunction--sort of a consolation prize for Epic--should be reversed. In other words, I agree with both appeals: with Epic on federal antitrust law, and with Apple on state UCL.

No one even knew that I was working on the document I published today. It was my own initiative because I believe the facts must be put on the table. There is so much at stake for the digital economy.

In a way, Judge YGR sensed during last year's trial that app developers are at Apple's mercy. Her deposition of Tim Cook was world-class, and it even seemed she had understood the Kodak problem: Apple can behave in all sorts of ways in the app distribution aftermarket without being adversely impacted in the smartphone operating system foremarket.

She also made a remark in mid-trial that was totally spot-on: competition can spur innovation and, in turn, enhance security.

But ultimately she sided with Apple on the key questions, like she previously did in the Pepper consumer class action over the App Store tax. That's presumably why some new plaintiffs would rather have their Apple antitrust cases decided by any other judge in that district.

I'm cautiously optimistic about Epic's appeal. The amicus briefs in support of Epic's appeal are extremely strong (formally, the Biden Administration made its submission in support of neither party, but all the points it raised favor Epic). When the circuit judges and their clerks prepare for the hearing, they'll see the glaring shortcomings of Judge YGR's decision. Those hundreds of typos and similar mistakes won't go unnoticed, and while it's not the appeals court's task to fix typos, the editorial shortcomings of that document won't enhance its credibility. And some of the errors are easily identifiable. That decision doesn't deserve much deference.

Share with other professionals via LinkedIn:

Ericsson drops one of its 15 U.S. patents-in-suit from its smallest ITC case against Apple (also withdraws large parts of another patent)

The first and only significant good news for Apple in its 5G patent dispute with Ericsson came about a month ago when a U.S. trade judge identified indefiniteness issues concerning two of the three patents-in-suit in the smallest Ericsson v. Apple case. The patents in that action are not standard-essential.

Ericsson has now done what I deemed most likely in my commentary on the indefiniteness opinion: it has voluntarily dropped all of the asserted claims of U.S. Patent No. 10,880,794 on "inter-band handover of the same physical frequency" and six of the eight asserted claims of U.S. Patent No. 8,472,999 on a "method and system for enabling dual standby state in a wireless communication system."

Such withdrawals--called "motion for partial termination of the investigation"--are simply expected by the ITC, which depends on such streamlining to keep its timelines. This is in line with what I thought would happen when I commented on the claim construction order that gave rise to these withdrawals. Ericsson's motion--which is unsurprisingly unopposed by Apple--doesn't mean that the Swedish wireless company necessarily agrees with Administrative Law Judge (ALJ) Cameron R. Elliot. The motion just contains the usual boilerplate language about "narrow[ing] the scope of the [i]nvestigation and to simplify the issues for the ALJ, [the ITC] Staff and the parties" (and how this "serve[es] the public interest by saving [...] time and resources."

After this withdrawal, there are still two patents in Unfair Import Investigation No. 337-TA-1301 (all four asserted claims of U.S. Patent No. 8,792,454 on "secure and seamless WAN-LAN [wide area network, local area network] roaming" and the two remaining claims of the '999 patent). That case may even get the first in-person hearing after the envisioned reopening of the ITC building, as ALJ Elliot discussed with the parties in a telephonic conference, where he mentioned that some uncertainty remains concerning the further evolution of "the virus." In the other two ITC investigations, Ericsson is asserting a total of another ten patents--and in the Eastern District of Texas, there are three more patents (5G SEPs) that Apple initially wanted to challenge, then preferred not to deal with, but Ericsson is pursuing its compulsory counterclaims.

The ALJ's indefiniteness opinion is not precedential with a view to any assertions in federal court. The withdrawal does not formally affect a companion case in the Western District of Texas, which was filed simultaneously with the ITC complaint. The W.D. Tex. case is currently on hold, and normally those mirror cases in federal court (where monetary relief--which the ITC can't order--is available) never come out of hibernation as the parties tend to settle before. Should the case go forward, Judge Alan Albright could still preside over the proceedings, though the Chief Judge of that district court now makes it unlikely that any new patent infringement complaints filed with the Waco division of the Western District would be assigned to Judge Albright.

Over in the Eastern District of Texas, Apple has been warned of sanctions for misuse of court rules after bringing an unsuccessful (except for some minor access-to-documents issue) "emergency motion." Incredibly, Apple is portraying a Colombian 5G iPhone/iPad sales ban as a human rights issue. I'd rather talk about workers' rights and developers' rights...

In Brazil, where Ericsson is seeking preliminary injunctions against a local Apple distributor, the specialized press also takes note of Apple's Colombian motion as well as the reprimand in Texas. Another South American website,, calls this litigation tactic "not just an embarrassment... a disgrace." IAM's Joff Wild expressed doubts on LinkedIn over whether human rights legislation exists to enable Apple to get around an iPhone sales ban...

The human rights motion must be adjudicated swiftly, so I guess we'll hear from Colombia again soon.

Ericsson v. Apple--and also Apple v. Ericsson--cases are pending in multiple jurisdictions. These days I found out from the Munich I Regional Court that Apple's first-ever SEP assertion--a former Intel patent declared essential to 4G--is actually a complaint for (inter alia) injunctive relief. Also, two weeks ago Law360 reported (mostly behind a paywall) on another Ericsson v. Apple case in the UK over four 4G/5G SEPs. I haven't been able to find out about the details of that additional UK action. I was previously only aware of a couple of UK filings that Ericsson had made in early June.

Share with other professionals via LinkedIn: