Wednesday, November 30, 2022

Apple loses first patent case against Ericsson: Mannheim Regional Court rejects Apple's first offensive patent complaint that has come to judgment since 2014

The first final judgment (as opposed to a preliminary injunction ruling such as the one in Colombia) in the current multijurisdictional Ericsson-Apple patent dispute came down yesterday--and Apple lost an offensive case in Germany. Apart from design patent cases, it's the first judgment in an offensive technical (utility) patent case brought by Apple since the second case against Samsung that went to trial in San Jose in 2014.

As a spokeswoman for the court just informed me, the Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) of the Landgericht Mannheim (Mannheim Regional Court) yesterday handed down a judgment in Ericsson's favor, rejecting Apple's patent infringement complaint and imposing all costs on the iPhone maker. Apple can appeal this decision to the Sixth Civil Senate (Presiding Judge: Andreas Voss ("Voß" in German)) of the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court).

The case no. is 2 O 9/22; the trial was held on October 18; and the patent-in-suit is EP2945332 on an "apparatus and methods for network resource allocation."

Ericsson was successfully defended by the Dusseldorf-based law firm of Kather Augenstein. I've found out now that Ericsson's lead counsel defending against this particular Apple lawsuit was Christopher Weber, who was supported by Dr. Christof Augenstein and Sophie Prudent.

The patent specification describes EP'332, which has not been declared essential to any cellular standard, as being "directed to a computer networking device (e.g., a router) which is adapted to allocate portions of a communications network or its available bandwidth between different uses." While the specification also says the claimed invention "relates generally to the field of data networks," it appears that Apple couldn't show that Ericsson's cellular (4G/5G) base stations infringe this patent that clearly has its roots in the WiFi space. That is obvious from the use of typical WiFi terminology such as "access point" in the claim language (emphases added):

A method for allocating a collective bandwidth of a plurality of wireless access points, the method comprising:

at a first wireless access point of the plurality of wireless access points

  • receiving a request for a first use from a wireless client device;

  • in response to the request for the first use, allocating a first portion of the collective bandwidth to the first use based at least in part on a bandwidth allocation rule that is dynamically set and that implements in part a bandwidth allocation of the collective bandwidth, wherein the bandwidth allocation rule is based on a level of network security associated with security requirements for different types of traffic;

  • allocating a second portion of the collective bandwidth to a second use different from the first use based at least in part on the bandwidth allocation rule; and

  • servicing the request for the first use using the first portion of the collective bandwidth,

  • wherein each of the plurality of wireless access points dynamically allocates one or more portions of the collective bandwidth to at least the first use or the second use based at least in part on one or more bandwidth allocation rules to maintain the bandwidth allocation of the collective bandwidth.

In theory, a patent stemming from WiFi research could cover such a foundational technique and be so broad that even cellular (4G/5G) base stations infringe it. But a patent holder would be lucky in that case, and Apple wasn't.

None of Ericsson's cases against Apple has come to judgment yet, but it's going to happen in the not too distant future. The Munich I Regional Court held two hearings (not yet full trials) in September and is inclined to find that the iOS version of WhatsApp (which Apple exclusively distributes due to its app distribution monopoly abuse) infringes an Ericsson non-standard-essential patent (non-SEP) as well as a standard-essential patent, with respect to which the Munich court denied Apple's motion to dismiss the complaint at this stage. Three weeks ago the Mannheim Regional Court heard an Ericsson v. Apple SEP case and appeared inclined to deem the patent infringed and likely valid. The FRAND part was discussed behind closed doors, but Apple would be the first defendant in a Mannheim or Munich SEP case in the post-Sisvel v. Haier era to be deemed a willing licensee.

A FRAND trial in the Eastern District of Texas will start on Monday, and it won't be easy for Apple to persuade the jury that the royalties it pays to Qualcomm should be ignored.

The United States International Trade Commission (USITC, or just ITC) will also hold an Apple v. Ericsson trial starting next week. Apple is seeking a U.S. import ban on Ericsson's base stations. Whether that would actually happen and (should it happen) make an impact is questionable. The ITC staff opposes an untailored import ban (while Apple even opposes telecommunications carriers's right to repair). Yesterday a public redacted version of an Ericsson filing with the ITC became available, and it states that "[t]he vast majority of the Accused [Ericsson] Products are manufactured and assembled in the United States from [REDACTED] of individually imported components." Apple's strategy is to "[rely] on indirect infringement allegations to demonstrate a violation through Ericsson’s imported components."

While the first Ericsson v. Apple injunction is just a matter of time, it looks like Apple can't easily find patents in its portfolio that can do damage to Ericsson's business. And Ericsson is a lot smaller than Apple anyway, especially in unit volumes, which means its exposure to patent assertions is dwarfed by Apple's.

The dispute is now entering a very interesting stage, and Apple has just suffered a setback in the form of the rejection of its Mannheim countersuit.

Musk-Apple clash puts conflation of Section 230 and antitrust issues on full display: left and right agree on need for Open App Markets Act, but not for identical sets of reasons

The most fascinating aspect of political alliance and majority building is that people--or political parties--may agree on the adoption or rejection of a proposal for reasons that can be disparate or, in some cases, seemingly irreconcilable.

That is what could get the Open App Markets Act (OAMA) over the finish line now during the "lame duck" session of Congress. In the end, Apple and Google's national security and privacy pretexts and the pandering of a very few politicians may fail to prevent the OAMA from being passed into law. It could be--and I keep my fingers crossed--that Democrats who have long wanted to reverse the constant gutting of the antitrust laws will form a solid majority with Republicans who are normally not in favor of governmental intervention, but are weary of Silicon Valley "wokism."

In the end, a majority is a majority regardless of individual reasons. That even applies to judicial decisions, but those are not just a vote: it can be a huge challenge for a majority of a panel or full court to author a decision. The Federal Circuit's en banc decision in the Alice case (patent-eligible subject matter) came down to each judge taking a different position from the rest, and they then had to figure out a way to identify just enough of an overlap to identify a majority. In politics, that's not needed: they cast their votes, and tell their voters why they did what they did, but the vote itself is a straightforward yay/nay count.

Elon Musk is antagonizing Apple for a mix of reasons. Let's separate the App Store issues from the ad spend part (the "odd man out" in that mix). So, there is a problem with the app tax but also one with app review. Epic Games focused on the app tax in its litigation with Apple, but app review was also discussed in last year's trial. The OAMA would address both issues at the same time: the app tax will go down, and review guidelines and their application will become much more reasonable, if there is competition between app distribution channels.

According to Mr. Musk, Apple didn't even clarify why Twitter might be ejected from the App Store. We don't even need to know: it's bad enough that Apple has the power to do this over one or both of the possible reasons (Mr. Musk's resistance to the app tax and/or his vision of free speech). Whether an app is kept out of the App Store or economically unsustainable due to the app tax has the same effect. It now looks like Twitter already wanted to launch its new Blue subscription on Tuesday, but the unresolved app tax issue is the reason for further delay.

At a very important time--shortly before the end of the current Congressional term--immense political momentum is building. If it came to worst, the bill could always be re-introduced in one form or another. But with what's going on now, I'm increasingly hopeful that the OAMA may indeed be enacted in the coming weeks. Some Republicans such as Senator Marsha Blackburn (Tennessee) and United States Representative Ken Buck (Colorado) have been in favor of the OAMA for some time. But now more and more powerbrokers throw their weight behind the OAMA. At a press conference, Florida Governor Ron DeSantis--probably the next Republican presidential candidate--called on Congress to take action against Apple's monopoly power:

Governor DeSantis emphasized free speech. There is an interesting phenomenon in U.S. politics with Section 230 (the rule that allows Big Tech to claim free speech rights for itself, but to silence others exercising them) and antitrust issues getting conflated by conservative politicians. My theory is that they know exactly what they are doing, but the Section 230 controversy gives them an excuse for supporting stronger antitrust enforcement in areas where they know it's needed. It bridges an ideological gap. Antitrust enforcement as a means of combating cancel culture.

Defendants of Sec. 230 argue that everyone remains free to express any opinion--but not free to actually reach a given social network's or other type of platform's audience. But that argument has one fundamental flaw: short of fictional mind control in George Orwell's 1984, where thoughts were potential crimes and the Thought Police used surveillance devices, no dictatorship has ever been able to completely supress opinions: one could always say something in the privacy of one's home. What matters, however, is the ability to actually share those thoughts with others. The Constitution is about limiting government's ability to censor, but if a reasonable application and/or limited amendment of the antitrust laws ensures that private companies can't engage in censorship the way they currently can, that is also in line with the spirit of the First Amendment.

Senator Mike Lee (R-Utah) has a very principled approach to antitrust. And he states very clearly on his website that he doesn't want politicians to give in to the "temptation in Washington to expand the federal government’s regulatory role over the private sector and attempt to centrally control our innovation." But he does "believe[] a responsible approach to technology policy is one where the federal government restrains itself to its limited constitutional authorities and even then only acts in a manner that is narrowly tailored to address the specific challenge." Well, the OAMA is such a narrowly tailored measure to deal with a particular problem.

Some media reported yesterday that Senator Lee tweeted in support of Elon Musk's criticism of Apple, but the related tweet is not from Senator Lee's verified and official account, so it may just have been a misattribution:

It would, of course, be great if Senator Lee indeed supported the OAMA. No matter the reason. We need the votes now.

The OAMA situation reminds me of my own political work. I only did a limited amount of lobbying (during limited periods from 2004 to 2007), and in my last project, which was about soccer broadcasting rights and the related revenue distribution, I built a majority for an amendment (sponsored by Chris Heaton-Harris, who is now the UK's Secretary of State for Northern Ireland) to a European Parliament resolution by presenting two different sets of arguments. In fact, I even authored two distinct position papers. Some voted for the amendment because they shared my economic policy position--but we wouldn't have had a majority if not for others who simply supported it for subsidiarity's sake (limiting the EU's influence over matters that are better addressed at the national level). I was perfectly transparent about that, and everyone was glad to see that others would support the same cause.

Apple's biggest problem at next week's Ericsson FRAND trial in Texas: Qualcomm deal will be evaluated as comparable license agreement

I am still trying to find out what happened in Mannheim, where the court had originally scheduled the announcement of an Apple v. Ericsson ruling for yesterday (Tuesday, November 29). The response I received from a spokesman for the court (himself a judge, but not on this case) was that the court is not presently in a position to provide information on that case. The court's Second Civil Chamber was in session all day yesterday, so maybe I will hear something today.

There are no clear signs of the parties having settled. Therefore, it is still a possibility that next week's FRAND trial in the Eastern District of Texas (before Chief Judge Rodney Gilstrap) will go forward. Given the complexity of the case, it's difficult to describe it as an uphill battle for the iPhone maker, but it is fair to say that Judge Gilstrap's pretrial rulings have been significantly more positive for Ericsson. I already made that inference from the minutes of the pretrial hearing: there was no breach of the 2015 contract by Ericsson, and Ericsson is under zero legal obligation to license non-standard-essential patents (non-SEPs) to Apple. Apple can point to the fact that the 2015 agreement included non-SEPs, but that was simply a voluntary inclusion of additional IP and has nothing to do with what Ericsson "owes" Apple under its commitments to ETSI.

That Apple can mention non-SEPs (while not being able to claim an entitlement to a non-SEP license when a new agreement is negotiated) is one of the things I learned from Judge Gilstrap's order on numerous pretrial motions:

Ericsson v. Apple, case no,. 2:21-CV-00376-JRG, Eastern District of Texas: Order on Pretrial Motions and Motions In Limine

Another thing that is clearer now is how Apple's Count IV will be adjudicated. Apple wants the court to set a FRAND rate. But as Judge Gilstrap explains, "[t]he jury need only concern themselves as to the prior conduct between the parties and whether that conduct comports with FRAND and good faith" and "the Court will tell the jury that it will set a rate that is fair, reasonable, and non-discriminatory between the parties as to these patents at a later date and that the jury need not be concerned about what an appropriate rate is."

So there won't be a jury verdict that states a specific FRAND rate. But, of course, what the jury says about Ericsson's FRAND compliance will matter in various ways.

Having read Judge Gilstrap's order, the one part that strikes me as the biggest problem for Apple is that its motion in limine number two was denied--unsurprisingly so, but that doesn't make the problem any smaller:

[Apple]'s MIL 2

Exclude Reference to Apple-Qualcomm Negotiations, Litigations, And Agreements Because the Apple-Qualcomm Agreements Are Not Comparable.

The MIL was DENIED. (Dkt. No. 290 at 29:11–34:4.) The Court found that the comparability of licenses is a question for the jury.

Apple pays Qualcomm more than all other patent holders combined. At least that was the case a few years ago during the FTC v. Qualcomm litigation, where the U.S. government was challenging Qualcomm's licensing practices (but the appeals court determined that Qualcomm was free to charge patent royalties separately from, and as a precondition for, its chip sales). At the time, Apple was paying Qualcomm $7.50 per iPhone. I don't know what the rate under the 2019 settlement is, but Apple needed Qualcomm's 5G chips as we all learned later (because we can see that what was then Intel's chipset division and acquired by Apple shortly thereafter, still doesn't have a 5G chip ready that Apple could use. So, chances are that Apple is paying Qualcomm the same or a similar license fee as it did at the time--and Ericsson will presumably argue to the jury that its 5G patents are stronger than Qualcomm's. Even if the jury felt that Qualcomm's patents were gradually more valuable than Ericsson's, it's still hard to see why Ericsson couldn't just ask for $5 per iPhone.

Apple will argue that the Qualcomm agreement isn't comparable. But jurors will learn about the terms, and Ericsson will get to explain why the jury shouldn't buy Apple's attempts to distinguish one license agreement from the other, but focus on the rate.

Ericsson v. Apple is in no small part about the discrepancy between what Apple pays to Qualcomm versus what Apple pays everyone else.

Tuesday, November 29, 2022

The three-letter acronym soup of UK tech antitrust enforcement: CMA, MIR, DMU, and temporarily ABK

This post is mostly a glossary of an alphabet soup. But first I'd like to draw your attention to a very interesting and well-crafted speech that Sarah Cardell, the Interim Chief Executive of the UK Competition & Markets Authority (CMA), delivered yesterday at the British Insttitue of International & Comparative Law (BICCL) and Linklaters Tech Antitrust Roundtable. Mrs. Cardell discussed the CMA's enforcement activities under the current legal framework as well as "the Digital Markets, Competition and Consumer Bill [that] will be introduced in the third session of [the British] Parliament" (emphasis added). That speech is a roadmap, and explains in very understandable terms why certain actions must be taken in order to remedy and ideally even prevent market failures.

The Digital Markets, Competition and Consumer Bill is somewhat comparable to the European Union's Digital Markets Act (DMA), but that analogy isn't meant to downplay its distinct nature. It is easy to confuse the two, however, as this UK legislative initative is often referred to as the Digital Markets Unit (DMU). But a unit is not a bill. The Digital Markets Unit of the CMA already exists, but it will make an impact on the market only after the Digital Markets, Competition and Consumer Bill is passed into law. The legislative process could have been massively delayed or even derailed as the country has very recently had three different prime ministers, but is now--fortunately--going forward.

The bedrock of the DMU as well as the EU's DMA is the realization that traditional antitrust rules are not suitable to task in a field in which unprecedented network effects giving gatekeepers an unhealthy degree of power. Many U.S. lawmakers agree, yet we are still waiting for Congress to enact at least the Open App Markets Act (OAMA).

There is something in between traditional antitrust enforcement (investigations that lead to fines for and/or injunctions against abusive conduct) and a so-called ex ante regime like the one envisaged for the DMU. Without having to establish a violation of antitrust law, the CMA has the power to conduct market investigations, which may then lead to structural measures. In other words, the standard is a market failure, not a finding of abuse (though in practice, there will be findings of abuse, just that the legal standard for such findings doesn't have to be met). I have stated on various occasions--most recently on Friday when commenting on a tweet by Internet luminary Jack Dorsey (of Twitter and Block/Square fame)--that the CMA correctly identified a need to look into (and, as I believe it will at the next stage, to take measures) relating to mobile browsers and cloud gaming. Apple's WebKit dictate--forcing all other browsers on iOS to use the same engine as Safari--is terrible for innovation and competition.

One week ago, the CMA announced that after a public consultation, the agency is now carrying out a market investigation. The next three-letter acronym is MIR: Market Investigation Reference. The MIR is a formal decision to open a market investigation (PDF) that may indeed lead to structural remedies. The CMA published the Terms of Reference (PDF) "in relation to the supply of mobile browsers and mobile browser engines, and the distribution of cloud gaming services through app stores on mobile devices (and the supply of related ancillary goods and services) in the United Kingdom."

On another occasion I'll comment on some of the submissions by stakeholders. Apple's claim of acting procompetitively is so very absurd that I don't know how they can even make that claim with a straight face, but now is not the time to go into detail on that. The market investigation will take up to 18 months and has enormous potential to bring about change. The Platform Law Blog explains the scope of the MIR very well.

The fourth and final three-letter acronym in this UK tech antitrust context is different from the others because it's non-governmental: it's the abbreviation of a company name, Activision Blizzard King (ABK).

The official company name is only Activision Blizzard, but King (the maker of Candy Crush) is key and it's in third place only for chronological reasons (Activision first acquired Blizzard, later the combined entity acquired King), not as an indicator of strategic importance. The CMA is reviewing Microsoft's purchase of ABK. While merger cases have their own legal framework, there are factual overlaps here that matter to me as an app developer.

Microsoft's response to the CMA's Phase 2 Issues Statement discusses the problems facing Fortnite on Xbox Cloud Gaming. In that section of the blog post I also show a conversation on Twitter in which I defended the CMA's decision to consider the iOS browser monopoly issue closely related to cloud gaming.

It was also in that UK merger review process that Microsoft publicly revealed its plans to compete with the incumbent mobile app stores. Section 2.15 of Microsoft's October 23 submission to the CMA explains that it takes two factors to make this work. The walled gardens must be opened up, but then there will still be the challenge of convincing consumers to use app stores other than the default ones:

"In particular, the concept of a next-generation game store that operates across a range of devices ('Universal Store') is risky. Moving consumers away from the Google Play Store and Apple App Store on mobile devices will require a major shift in consumer behaviour. Microsoft hopes that by offering well-known and popular content, gamers will be more inclined to try something new. But this is far from guaranteed and also depends on proposed regulations and legislation in the U.S., and around the world, that would require Apple and Google to make their platforms and app stores more open to third-party stores and commerce platforms. As such, in seeking approval from its Board of Directors as a public company, Microsoft leadership could [REDACTED]. Nevertheless, as Mr. Spencer confirmed, Microsoft will measure the strategic success of the Merger on [REDACTED]."

It looks like Microsoft is prepared to make a ten-year commitment to the PlayStation. If that helps in the EU, it may also be deemed satisfactory in other jurisdictions--including, but not limited to, the United Kingdom. At any rate, I hope the CMA will take the same holistic perspective on digital markets when making a decision on Microsoft-ActivisionBlizzard (and will take the potential benefits to app developers into account) as Mrs. Cardell did in her speech yesterday, which covered a lot of ground (and in which she mentioned that so far the CMA has actually blocked only one tech merger, Facebook-Giphy, which is easily distinguishable from Microsoft-ABK).

Elon Musk threatened war on Apple's app tax, then deleted his tweet, but the gauntlet is out of the bag: he can win this, just needs to separate antitrust issues from advertising budget allocation

After repeatedly criticizing Apple's app tax and even raising the prospect of a Tesla Phone, Elon Musk crossed an important line yesterday by giving Apple the choice between exempting Twitter from the App Store's usurious app tax or an outright antitrust war. In a series of tweets taking Apple to task over different issues, Mr. Musk shared the following image (but later deleted the tweet):

A near-simultaneous tweet about the app tax can still be found:

Actually, Mr. Musk was "generous" in the sense that Apple's app tax even exceeds 30% (except for those who fall under the Small Business Program, but that's a negligible share of total App Store revenues). Apple passes on parts of its taxes (which app developers would not owe in most cases if they could transact directly), makes app discovery ever more expensive, and Apple makes billions just with its base developer program fees (charging about four times per year as Google charges Android developers as a one-time fee). And some believe--credibly so--that Apple will soon run its own in-app ad platform on iOS, meaning Apple would take a cut of in-app ad revenues as well (after kneecapping the existing networks).

Mr. Musk can win this war if he has to wage it. There is only one concern--not a huge one, but worth mentioning: conflation of issues can backfire.

Yesterday's tweets addressed a trio of issues: the app tax; Apple's app review (from a freedom-of-speech angle); and Apple's decision to slash its Twitter advertising budget. The first two are reasonably closely related, and would be remedied the same way: by means of alternative app stores and direct installs ("sideloading"). Apple allegedly threatened to Twitter with ejecting its app from the App Store, but didn't clarify over which issue or set of issues:

So I would agree that app review and app tax are manifestations of the same problem of monopoly abuse. But the third issue--ad spend--is the odd man out. It is easy to predict that in a hypothetical scenario where Mr. Musk takes that highway exit to the war zone and seeks a temporary restraining order and preliminary injunction to have the Twitter iOS app reinstated on the App Store, Apple is going to hold it against him that he started his Apple criticism yesterday with a reference to advertising budget allocation:

Apple will then foreseeably tell the court that a few weeks before, Mr. Musk had threatened renegade advertisers with a "thermonuclear name & shame":

Arguably, Apple is now the first company to have been exposed as a company reducing its ad spend on Twitter. Apple may have been Twitter's single largest advertiser until then. But other companies even withdrew entirely.

I'm not saying that Apple could reasonably spin all of this as "he's suing us over the App Store because we exercised our right to advertise where we want." Mr. Musk could point to his long-standing criticism of the app tax. The hypothetical removal of Twitter from the App Store would raise far more important issues, and any judge or juror could easily see what the case is really about: Apple's monopoly abuse. But there would be an unnecessary smokescreen for Mr. Musk's lawyers to deal with.

As an app developer who brought his own complaints over Apple's and Google's tyrannical censorship, I obviously hope there will be further escalation and that Apple (and preferably also Google) will be sued, just like I can't wait to see a cross-platform Microsoft app store compete with the incumbents as well as other future entrants like an Epic Games Store.

The attention that the App Store monopoly would get if Mr. Musk went to war would far exceed what Epic Games' "Project Liberty" achieved in the summer of 2020. Mr. Musk and Epic's founder and CEO Tim Sweeney would be perfect comrades in arms. An anti-monopoly-abuse alliance made in heaven. In fact, after last year's district court judgment, Mr. Musk expressed sympathy for Mr. Sweeney's fight. Where? On Twitter, of course.

Monday, November 28, 2022

Patent holder DivX enforces injunction seeking Netflix shutdown in Germany, already asked Mannheim court to impose contempt fine--and ITC instituted investigation against Amazon, Vizio last week

Netflix is watching the IP equivalent of a hardcore horror movie that would make Stephen King proud, and the scenery is Germany's Draconian patent regime.

When the Consumer Federation of America opposed the Comcast-Time Warner merger, it blamed Comcast for a past "degradation of [Netflix'] service quality." In the present context, where licensing firm DivX, LLC is enforcing a Germany-wide patent injunction, a degradation of service quality could indeed happen and would be bad enough in its own right, but according to what Netflix itself told a German appeals court--which nevertheless allowed enforcement to go forward--there is a clear and present danger of the service going offline in the largest European market. That dramatic event would cost Netflix hundreds of millions of dollars in profits per year and possibly billions in lifetime revenues from customers that might never come back. The streaming company now has to decide whether to settle by way of a patent license agreement with DivX.

Meanwhile, Amazon and Vizio are facing a fresh ITC complaint by DivX that the ITC decided last week to investigate and which could result in a U.S. import ban of certain devices. I'll show that complaint further below, and last week's institution notice is what got me interested in the DivX cases in the first place, but given the immediate threat that the German enforcement proceeding poses, let's focus on that one first.

On April 22, 2022, the Landgericht Mannheim (Mannheim Regional Court) granted DivX a German patent injunction in case no. 7 O 88/21 against Netflix over EP3467666 on a "video distribution system including progressive playback." Since then, Netflix--represented by Quinn Emanuel's Dr. Marcus Grosch--has suffered three more defeats that paved the way for the enforcement that is now tightening the noose around Netflix' neck. The Sixth Civil Senate (Presiding Judge: Andreas Voss ("Voß" in German); side judges: Judges Lehmeyer and Professor Singer) of the Oberlandesgericht Karlsruhe (Karlsruhe Higher Regional Court), which hears all appeals from Mannheim patent judgments, denied

  • Netflix' emergency motion to stay enforcement of the injunction (on July 5),

  • Netflix' motion for reconsideration of the denial of an enforcement stay (on August 2), and finally also

  • Netflix' motion to increase the amount of the collateral (bond or deposit) required for enforcement during the appellate proceedings (on October 26).

The Karlsruhe appeals court published a redacted version of the last one (in German)--which contains a wealth of information about the case--and thankfully responded to my request for information.

In its motion to increase the security amount, Netflix based its calculation of enforcement damages on the assumption of having to switch off its entire service in Germany if the injunction is enforced. It had already made that argument in the court below. Neither court was persuaded, given that Netflix faces competitive constraints in Germany and the patent covers a feature called TrickPlay, which makes it hugely more convenient for users to jump backward or forward when watching a stream. There is always some delay as different data than originally foreseen must be downloaded. But DivX' patented technique makes it a lot more bearable than otherwise.

I don't know whether Netflix can now abide by the injunction by merely disabling the TrickPlay feature (as DivX argued)--thereby inconveniencing its German customers in ways they would notice--or whether the technical and logistical complications would effectively require Netflix to shut down its German service altogether. What I can infer from the appeals court's order, however, is that Netflix itself presented the situation as an all-or-nothing choice. Should Netflix be right about that doomsday "go dark" scenario, then it's playing a dangerous game now by refusing to settle. In the other event, Netflix and Quinn Emanuel would risk a massive loss of credibility with both the Karlsruhe Higher Regional Court and the Mannheim Regional Court by having way overstated the practical effects of enforcement--only for the purpose of making provisional enforcement (i.e., enforcement before the appeals court's final decision) potentially unaffordable to the small patent holder. In some jurisdictions, misrepresentations of that kind can even give rise to sanctions on a party and/or its counsel...

The Mannheim court noted in its ruling that Netflix had not pled any fact that would make the enforcement of the injunction in question a disproportionate hardship. As I discussed on many occasions and most recently last month, last year's German patent "reform" has been of zero help to defendants.

The appeals court refers to Netflix' shareholder information, from which one can deduce that its annual revenues from millions of German customers are in the hundreds of millions of dollars. But the security that DivX must provide appears to be only in the millions or maybe tens of millions (almost certainly not in the hundreds of millions).

After the appeals court cleared the way for enforcement, DivX made the deposit and demanded compliance. Netflix is still operating its service in Germany, and DivX has meanwhile filed a motion for contempt-of-court sanctions with the Mannheim court. It seems that Netflix has until after the Holiday Season to file its opposition brief, which is unusually long and hard to reconcile with the policy goal of strong IP enforcement that has been pronounced by the European Union and the German legislature. As a longstanding fan of the Mannheim court (from back when Judge Voss was presiding over its Seventh Civil Chamber), I'm a bit worried that other patent holders may be discouraged from filing their cases with a court that comes across as lenient with deep-pocketed hold-outs. Plaintiffs generally have a lot of confidence in the Munich court, and for certain types of cases Dusseldorf is becoming more popular after it substantially shortened its median time to trial.

The circumstances of the present case warrant swift and decisive action, with the Karlsruhe appeals court having affirmed the Mannheim court all the way and an opposition panel of the European Patent Office having rendered a preliminary assessment according to which the patented invention is not anticipated by the prior art (it appears that the prior art references Netflix primarily relies upon are actually more than one step away from the challenged claim--and out of an abundance of caution DivX has filed various amended claims as potential fallbacks).

At this stage of proceeding, DivX' German lead counsel is Dr. Thomas Gniadek of Simmons & Simmons. He represents plaintiffs as well as defendants (last time I mentioned him was in the spring, when Xiaomi settled with Philips, and he was on a Bardehle Pagenberg team about ten years ago that won some cases against Motorola, represented by Quinn Emanuel). The EPO will hold the opposition hearing in January, where patent attorneys from Eisenfuehr Speiser will represent DivX.

Quinn Emanuel Germany notoriously refuses to bring patent attorneys to infringement and nullity trials and hearings, which also applies to this case. While QE's vigorous litigation style is a good thing per se, it is really up to their clients to decide when the time has come to settle in order to avoid risks that one cannot responsibly take. Let me put it this way: I know patent litigators who are much more inclined to advise clients to err on the side of caution.

There has been one high-profile case in which a client scored a settlement with the help of another firm (Paul, Weiss) after terminating QE's contract: world soccer body FIFA, whose World Cup is taking place as we speak, had spent a fortune on QE's fees (so much that QE even set up a Zurich office just to be closer to that client), but after Gianni Infantino--a lawyer by training--took over, he changed horses in midstream and shortly thereafter even got $200 million back from the United States Department of Justice. In the German Daimler cases, I don't think QE Germany can be blamed because the Mercedes company didn't even take its chances the way Netflix is doing now. It's just that Daimler could have gotten those four patent injunctions in 11 weeks at a much lower cost--or could have taken an Avanci patent pool license (as it ultimately did) in the first place.

Protracted litigation only benefits the lawyers. That's a fact. But for those of us watching the cases, it means more "bring the popcorn" situations.

ITC complaint against Amazon and Vizio

On October 24, DivX--represented by Tensegrity's Matt Powers, whom this blog first mentioned in 2013 when he was also doing some work for Apple--filed a complaint with the United States International Trade Commission (USITC, or just ITC), seeking a U.S. import ban on Amazon and Vizio devices:

DivX, LLC ITC complaint In the Matter of Certain Video Processing Devices and Components Thereof, Investigation No. 337-TA-1343

On Wednesday (November 23), the ITC instituted an investigation. Unified Patents, which challenges patents in the USPTO's PTAB all the time on behalf of large companies hiding behind it, filed a public interest statement that was obviously not going to dissuade the ITC from instituting the investigation. In fact, the filing itself acknowledged that the ITC routinely investigates complaints by licensing firms and considers patent licensing activities--if certain criteria are met--as capable of satisfying the ITC's domestic industry requirement. And the fact that DivX has previously concluded license agreements actually suggests that even Netflix (under pressure now in Germany as I explained above) and Amazon will ultimately take licenses. The question is just the cost, and if the German Netflix service went offline, the deal terms will hardly be sweet.

These are the five U.S. patents-in-suit against Amazon and Vizio:

Rumors about Microsoft-ActivisionBlizzard approval processes in U.S. (FTC lawsuit?) and EU (clearance conditioned upon ten-year commitment to PlayStation?)

Since my detailed analysis on Wednesday of documents released by the UK Competition & Markets Authority (CMA) related to the merger approval Microsoft and Activision Blizzard King, there have been some interesting rumors about what may happen next in the United States and the European Union:

  • Politico wrote that the staff of the United States Federal Trade Commission (FTC) is taking a position that makes a lawsuit by the agency against the transaction somewhat likely, though far from a given as it will be up to the commissioners to decide.

    In the U.S., antitrust enforcers have to go to court, unlike in jurisdictions like the EU where they can hand down a decision that the other party may then appeal in a court of law. Merger cases are adjudicated relatively swiftly, and the FTC as well as the Antitrust Division of the DOJ have lost some of them, especially in recent history. The question is--in the simplest terms--whether the FTC will at some point get tired of losing, and whether it really wants to bring a case when only Apple (which is not known to be against this acquisition) could be a worse complainant in a gaming platform context than Sony (an enemy of cross-platform play) and Google--two companies that want ABK to remain independent only so they can enter into exclusive (and anticompetitive) deals with it.

    Politico speculates that the FTC might decide to bring a case in its in-house court instead of federal court. That practice is controversial as the recent Supreme Court hearing in the Axon case showed. And it's absurd that the FTC has won every single case in front of its in-house judges over the last 25 years, but maybe this case would be an opportunity for the FTC's in-house judiciary to show some independence. I, personally, believe that if they wanted to sue, they should go straight to federal court, and I'm unconvinced (for more than one reason) of the argument that they shouldn't file in an Article III court because they (allegedly) couldn't seek a preliminary injunction while other jurisdictions haven't cleared the deal. It would look like an excuse to me, but that's my personal opinion and subject to the exact circumstances at the relevant time.

  • The Politico article says that Google is worried about Microsoft using ABK's games to make Chrome OS less competitive with Windows. I doubt very strongly that hardcore gamers are the primary target audience for Chrome OS. Google just wants to do another "Project Hug" type of deal with Activision Blizzard King--for Android, not Chrome OS.

  • The latest news just comes from Brussels, and was reported by Foo Yun Chee of Reuters. She has learned from "people familiar with the matter" that Microsoft "is likely to offer remedies to EU antitrust regulators in the coming weeks to stave off formal objections." A ten-year commitment to make ABK's titles available on Sony's PlayStation could apparently go a long way toward resolving any concerns and obviating a Statement of Objections (SO) that might otherwise come down in January.

    Due to the specific circumstances of the proceedings on both sides of Atlantic I'd be more inclined to bet on the EU story than the U.S. one (to be fair, Politico's article makes it clear that the FTC may not sue in the end). When I saw the Commission announce an extension of the merger review deadline by ten working days, I already suspected that it had to do with a potential agreement. While I personally believe that this deal is a case for unconditional approval, a behavioral remedy--especially if merely consistent with what Microsoft has publicly said all along--may be the outcome. If the EU--whose competition chief Margrethe Vestager is world-famous for vigorously enforcing competition rules--cleared the transaction, an FTC lawsuit would be less likely to be brought in the first place or, in any event, be even more of an uphill battle.

As an app developer (previously two games, and now a productivity app) who brought his own complaints against Apple and Google, I'd like competition authorities to see the benefits to the digital economy at large from enabling Microsoft to compete with the mobile app store incumbents. I'm not worried about the PlayStation because the numbers make it clear it will remain the market-leading gaming console at any rate...

Nokia wins third Munich case against OPPO--more specifically, against OnePlus--after amending patent deemed likely invalid by Dusseldorf Regional Court in August

A few hours after I found out about a Nokia v. OPPO patent ruling from Dusseldorf (complaint rejected), I learned about a Munich judgment that also came down on Black Friday:

The Munich I Regional Court ruled in Nokia's favor and held OPPO affiliate OnePlus liable for infringement of EP1728352 on "secure data transfer" (such as contacts that are already stored in the cloud being downloaded when setting up a new device). That patent has not been declared essential to any industry standard.

There's an interesting twist in this. As I already showed more than a year ago, Nokia's litigation strategy against OPPO in Germany involved parallel assertions of certain patents, targeting OPPO in one venue and OnePlus in another. EP'352 was asserted against OPPO in Dusseldorf and against OnePlus in Munich. In August, the Dusseldorf Regional Court stayed Nokia's EP'352 case against OPPO pending a parallel nullity action as the court doubted strongly that the patent would survive the challenge. What Nokia apparently did is that they amended the claim language with a view to the Munich decision, and that strategy worked.

The Munich court was not bound in any way by the Dusseldorf decision, and I understand that the Dusseldorf court didn't elaborate in writing on its reasons to order a stay pending the parallel nullity action. However, it appears that Nokia decided not to take any chances. What is impossible for me to tell--and none of us may ever find out--is whether the narrowed patent still gives Nokia meaningful leverage in case it enforces an injunction. The patent will expire in a little over a year according to Google Patents. OPPO and OnePlus devices are not being sold in Germany at this point due to other injunctions that are already being enforced (two other Munich injunctions, and two from Mannheim). That's why there likely won't be a real-life experiment that would tell us whether the amended patent can be worked around. Sometimes plaintiffs can salvage a patent through an amendment that makes it just as powerful in practice, but very often they feel forced to introduce a claim limitation that enables workarounds.

Given that the patent had been amended after the Dusseldorf stay, I wouldn't necessarily conclude from the divergent Dusseldorf and Munich outcomes over the same patent that Nokia prevailed in Munich because it's a plaintiff-friendlier venue. It could be that the original patent would have failed in Munich as it did in Dusseldorf, and that the amended one would have succeeded in Dusseldorf as it ultimately did in Munich. That said, the fact of the matter is that Nokia has won three cases (over four patents, but only from three different patent families) out of five in Munich (two Munich cases got stayed), and has not won a single one of the three that have been decided in Dusseldorf so far.

The dispute between Nokia and OPPO continues to be an interesting one to follow--more interesting than I would have thought when it all started in July 2021.

Ericsson seeks U.S. discovery from Broadcom for use in Apple UK patent litigation involving WiFi chips: Northern District of California

Black Friday was not a very eventful day in U.S. patent and antitrust litigation, but the courts were open for business and Ericsson filed a § 1782 discovery motion with the United States District Court for the Northern District of California:

Ex Parte Application of Telefonaktiebolaget L.M. Ericsson for an Order Pursuant to 28 U.S.C. § 1782 Granting Leave to Obtain Discovery From Broadcom Corporation for Use in a Foreign Proceeding

This motion for a subpoena is related to an Ericsson v. Apple patent infringement case pending in the High Court of Justice in London. The infringement action was discovered in June (claim no. HP-2022-000013). From the U.S. court filing I've learned that the two patents-in-suit asserted in that UK complaint are EP1721324 on a "method and inductor layout for reduced vco coupling" and EP2220848 on "mobile access to internet-based application with reduced polling. The discovery motion in California is only about EP'324, which is a member of the same patent family as U.S. Patent No. 7,151,430, which I identified as "[t]he most interesting patent-in-suit [remaining] in [ITC] investigation [no. 337-TA-1300]."

The amended particulars of the UK infringement claim state the following:

"The claim for infringement of EP 324 is made in respect of all Apple branded handsets / user equipment / mobile devices that incorporate the Broadcom 'BCM 4387' chip, the Broadcom 'BCM 4378' chip or the Apple 'TMIR36' chip (the '324 Devices')."

Originally, Ericsson listed the iPhone SE, iPhone 13, and Apple Watch Series 7 as exemplary accused devices. Ericsson's UK filing alleges that the iPhone 14 and the Apple Watch Series 8 also infringe EP'324 ("in addition to other later Apple branded devices such as iPhone 14 and Apple Watch Series 8 which it is inferred are also 324 Devices").

Given that Broadcom was already subjected to discovery due to the ITC investigation over a U.S. member of that patent family, the burden on Broadcom is minimal. It's all just about enabling the UK court to see the evidence.

One can deduce from Ericsson's discovery motion that a credible infringement case can be made against Apple gadgets that incorporate a Broadcom WiFi chip, which means the ITC trial (that evidentiary hearing will take place early next year) should get interesting. It seems that the same chip also supports Bluetooth, but that fact does not appear to give rise to infringement allegations here.

Tomorrow the Mannheim Regional Court will render judgment on an Apple countersuit against Ericsson, and the next day the Munich I Regional Court's 21st Civil Chamber will hold two Ericsson v. Apple hearings. Last week's Munich hearings were canceled as someone called in sick, a fact that I mentioned at the end of a recent post that was mostly about an interesting position taken by the ITC staff on public interest concerns surrounding a countercomplaint by Apple over mmWave patents. Next week, both a FRAND trial in the Eastern District of Texas and an ITC trial in the mmWave case I just mentioned will kick off. Later that month (December 21 to be precise), the Munich I Regional Court will hold an Ericsson v Apple FRAND hearing.

OPPO fends off another Nokia patent lawsuit in Dusseldorf: no infringement

This month has been a pretty good month for OPPO's defenses against Nokia's multijurisdictional onslaught that started almost 17 months ago. An Indian court threw out a Nokia motion to require OPPO to make a deposit, and added insult to injury by calling the motion "fundamentally misconceived." In that blog post I also described the overall situation between the two parties, which is that Nokia's four German patent injunctions (which it can currently enforce) haven't ended the dispute and meanwhile OPPO is making progress elsewhere. The previous month--October--also had some good news for OPPO, with Nokia withdrawing a Mannheim case and a Nokia patent likely to be held invalid by the USPTO and the EPO.

Now I have just found out from the Dusseldorf Regional Court's press office that its 4c Civil Chamber (Presiding Judge: Sabine Klepsch) handed down a final judgment on Friday in case no. 4c O 37/21 over a non-standard-essential Nokia patent, EP2728964 on a "distributed multiradio controller." The complaint was rejected because the judges did not see that OPPO actually infringed that patent. The 4c Civil Chamber had already stayed two Nokia v. OPPO cases in August.

It's not that Nokia hasn't won anything: besides the four German injunctions I mentioned (over five patents, but two of them from the same family), it has also obtained some favorable decisions in the UK and the Netherlands. But OPPO hasn't folded, and probably won't anytime soon.

One change I've recently noticed in the marketplace is that Deutsche Telekom (T-Mobile) no longer offers OPPO and OnePlus phones. The injunction binds only OPPO, not resellers, but Deutsche Telekom may have decided not to upset Nokia by importing OPPO and OnePlus phones from neighbor countries in which no injunction is in force. Some other German resellers still carry OPPO and OnePlus phones. It is unclear how big the economic impact of Nokia's injunctions is on OPPO's business, but after all these months it's clear that it's not sufficient to bring about a settlement. Against other defendants, Nokia would already be laughing all the way to the bank. Not so here. This dispute is different.

Sunday, November 27, 2022

ASTROTURFING: Where was Charles River Associates' economic expertise when Apple funded their paper criticizing 5G patent ownership studies? Where was CRA's common sense?

Charles River Associates (CRA) is a high-profile all-things-to-all-people economic research firm. According to CRA's website, the organization's clients include 78% of the Fortune 100. In order to maximize their profits and keep 800+ consultants from 50+ countries busy, they have to work for a diversity of clients and on a multitude of issues. They can't always be right, nor can they always be wrong. It depends. I've agreed and disagreed with what I've seen from them on issues I'm interested in, and I've found them to be on the right (procompetitive) and at times on the wrong (anticompetitive) side of history--but never would I have doubted that they are good at what they do.

Policy makers, regulatory authorities, and judges are smart enough to know that the C in CRA doesn't mean "charitable." Journalists will understand that, too. But an organization like that needs to maintain a certain minimum standard to preserve its credibility. Credibility has (at least) two aspects in this context:

  • economic competence


  • compliance.

CRA must now correct the disclosure on its November 8, 2022 paper on 5G standard-essential patent (SEP) ownership--A critical review of 5G SEP studies--to make it perfectly clear that it was overwhelmingly (if not entirely) funded by Apple or remove the document from its website. Anything less would be disappointing to say the least.

Apple obviously has an interest in devaluing SEPs and doubting the value of the 5G SEP portfolios of companies with which it has not yet agreed on license terms, just like CRA has an obvious interest in serving the world's richest corporation, even if it means going against consumer interests such as in a recent French antitrust case, where CRA not only disclosed but even boasted with its work for Apple.

Also, it's not generally a bad idea to call into question the reliability (as evidence) of certain patent ownership studies. CRA's paper looks at studies by various organizations, including some that were created by IPlytics--the same IPlytics that I criticized for not listing Huawei among the top 10 narrowband IoT SEP owners in 2020 though in 2022 the company (credibly and finally) was ranked first. But CRA's paper appears somewhat selective to serve Apple's interests.

When Apple--in the midst of litigation as well as policy debates around the globe--pays CRA for a paper on 5G SEP ownership, they should say so. But they didn't. This screenshot--a part of the title page--shows the problem (click on the image to enlarge):

ACT. That's the Apple astroturfing operation that Bloomberg exposed in September--two months before CRA published that 5G paper (and given how thin that paper is, it's actually possible that the Bloomberg article even appeared before CRA started working on that 5G paper).

How can Charles River VP John Hayes and his associates Assaf Zimring and Ben Ladabaum ever have had the slightest reason to believe that 5,000 small app developers and IoT startups were funding their work?

Didn't they do any background check, such as with Google, to get an idea of what ACT is all about?

Two members of European Commission EVP Margrethe Vestager's cabinet met with ACT shortly before the Bloomberg story. CRA, however, had every opportunity to know that this was an Apple-funded paper. Maybe Apple even discussed the topic with them. Apple is a client of theirs, and may be paying CRA more than any other client these days. But let's give them the benefit of the doubt and view this in the light most favorably to CRA. Let's assume that ACT introduced themselves as an organization representing 5,000 small app developers and IoT startups. Wouldn't an expensive economic advocacy firm like CRA--whose clients include 78% of the Fortune 100--reasonably ask itself whether those little guys really have the wherewithal to afford their services? It would take very simple math--even simpler than what's in that paper: they could just have divided their fees by the official (and unproven, but that's another story) number of ACT members, and they could have figured that small companies wouldn't pay membership dues to an organization like ACT that would pay even just for that CRA study, let alone ACT's overall operating costs of approximately $10 million a year.

If John Hayes, Assaf Zimring, and Ben Ladabaum believe they understand 5G patent economics so well that they must publish a paper to educate the world about the subject, shouldn't they also know that small app developers simply don't have problems with SEP licensing or assertions?

Where was CRA's common sense here? Where was their economic expertise? What plausibility tests did they perform? Again, all of this is based on the assumption that Apple wasn't actually talking directly to them about this study, but that ACT introduced themselves as an organization claiming to represent 5,000 small app developers and IoT startups.

CRA and those three economists can do better than that. That's why they should correct the paper and disclose Apple as their actual client--or pull the paper altogether.

'Autocalypse Now' or Tesla Phone: what can save the digital dilettantes at Volkswagen, Toyota, and other car makers from Apple's and Google's world domination?

The latest edition of Wirtschaftswoche (German for "business week") came out on Black Friday, and there's a great article on pages 32 and 33 (available only to subscribers, at least for the time being) that I'd like to recommend: Autokalypse now (the "k" instead of the "c" is due to the German spelling of "apocalypse"). It's about an issue that this blog has dubbed as "carjacking"--meaning that Apple and Google use their mobile operating system monopolies to take control over connected vehicles:

Another term than "carjacking" is "carmageddon" (see The Android-ification of Cars).

The Wirtschaftswoche article starts with a high-profile Mercedes customer: former EU commissioner Guenther Oettinger says he uses Google Maps for navigation because it suggests better routes and more accurately predicts the time of arrival. That's what many of us have experienced with cars of different brands. During his tenure as the EU commissioner in charge of digital industry policy, Mr. Oettinger was already--and rightly--concerned about traditional car makers' share of the future automotive value chain. That concern is shared on Capitol Hill: on November 1, Sen. Elizabeth Warren (D-Mass.) wrote a six-page letter (PDF) to U.S. antitrust enforcers about this threat.

The problem is that the C-level execs, chief lawyers, and lobbyists of automotive companies don't get it. They're sort of aware of the problem, but far from taking the measures that would be required to respond to the threat. Those execs and the "experts" they rely upon would rather downplay the issue than take decisive action outside their comfort zone. Meanwhile,

There is only one outlier: Elon Musk. While he may not have had the chance yet to develop a regulatory strategy and to figure out the full potential of the EU's Digital Markets Act, he is clearly prepared to go to bat. That's a lot more than those traditional automakers can say: it seems to me that most of the decision makers there have no strategy other than hoping that they won't have to deal with the problem before they reach the age of retirement. But that could prove a mistake not only for their companies but even for those decision makers: Wirtschaftswoche quotes a McKinsey partner who says it will be decided in a matter of three to five years who will be in control of the automotive industry (car makers or gatekeepers).

Earlier this week I outlined the three reasons Mr. Musk has to fight Apple's and Google's gatekeeper power: the third one involves Tesla and is no less important than the other two, which are about Twitter in the short term. On Black Friday, Mr. Musk said he didn't rule out making "an alternative phone" if that was the last resort to deal with the mobile gatekeeper problem:

Patently Apple reported on it. That's where I first saw the tweet.

I agree with Jim Hanson, who says Mr. Musk should "[f]irst give Apple a good taste of lawfare."

But what would an Elon Phone, Twitter Phone, or Tesla Phone (about which there have previously been rumors) mean for the automotive industry at large?

That depends on interoperability. That new phone (likely based on the open-source code base of Android, but without a Google license and, a as result, without Google Maps, the Google Play Store etc.) could give Tesla another competitive advantage. But it might also be the lesser evil than the "Goopple" duopoly for the digital dilettantes at companies like General Motors, Ford, Volkswagen, Toyota, BMW, and Mercedes. If Mr. Musk made the strategic decision to enable all car makers to provide the same level of integration, it would be an opportunity for the entire industry.

Again, I think the first step is to put pressure on Apple and Google at other levels: policy, regulation, and litigation. Whether Apple and Google will make concessions because of Mr. Musk threatening to enter the smartphone market is doubtful. So far it seems that both mobile gatekeepers only make changes to their terms and policies when they absolutely have to. But anything can happen, and a Tesla Phone is yet more of a possibility than seeing the Facebook Phone rise from the ashes...

Saturday, November 26, 2022

Solomonic ITC staff says Apple should not win untailored U.S. import ban in case it proves Ericsson's infringement of mmWave patents: carriers and consumers would be impacted

On Wednesday, two Ericsson v. Apple patent infringement hearings in Munich couldn't go forward (someone called in sick). There will be a couple of other such hearings next Wednesday as the court told me, and the court may then discuss with counsel when to hold the two postponed hearings. The most interesting Ericsson v. Apple hearing in Munich is still scheduled for December 21 and will be focused on FRAND.

Meanwhile the United States International Trade Commission (USITC, or just ITC) has uploaded to the agency's electronic docket the public redacted versions (filed with the agency on Wednesday) of Apple's, Ericsson's, and the Office of Unfair Import Investigations' (OUII, commonly referred to as the "ITC staff") prehearing briefs ahead of next month's evidentiary hearing (i.e., trial) in a case in which Apple is seeking a U.S. import ban on Ericsson's base stations over three mmWave-related patents.

On Wednesday it became known that Apple even opposes mobile telecommunications carriers' right to repair. Apple asked Administrative Law Judge (ALJ) Monica Bhattacharyya of the United States International Trade Commission (USITC, or just ITC) to strike Ericsson's argument (which Apple argues was made untimely) that any exclusion order Apple might win should, at minimum, feature a "service and repair" carve-out.

The three pre-hearing briefs shed more light on the parties' argument. Obviously, the private parties take positions at the opposite end of the spectrum:

Apple wants to make maximum impact on Ericsson's business and wants an immediate and untailored import ban:

ITC Investigation No. 337-TA-1302: Apple's prehearing brief

Ericsson argues that mmWave is really critical: "Because mmWave has a shorter geographic range than other technologies, it is targeted to more densely populated areas, such as urban and suburban areas, and to applications that require high density connectivity, where the benefits of high speed and low latency can be maximized for the most users in a smaller geographic area." Should any exclusion order issue nonetheless, it should come with "at least a two-year delay to enforcement of any remedial orders to allow U.S. network operators time to attempt to put viable alternatives into place" and with the carve-out for service and repair that I mentioned further above, as well as a certification provision "to certify to Customs that the components in question were either (a) accused but found to be non-infringing and/or (b) to be used in non-Accused Products":

ITC Investigation No. 337-TA-1302: Ericsson's prehearing brief

It comes as no surprise that the private parties disagree. So what does the ITC staff say? Here's its really interesting brief on public interest and remedy:

ITC Investigation No. 337-TA- 1302: Commission Investigative Staff's Prehearing Brief

The ITC staff recognizes the importance of protecting intellectual property, but "the evidence will demonstrate that an untailored remedy would have troubling adverse effects on competitive conditions among network providers and between different geographic regions of the United States, as well as on U.S. consumers in regions currently served by Ericsson mmWave equipment." The ITC staff does not see that Nokia and Samsung can easily replace those components, and Ericsson explains in its brief that depending on the level of customization, it can take years to mix infrastructure products from different vendors in a given location. Also, the ITC staff notes that a redacted (but apparently significant percentage) of the accused Ericssion based stations "produced in the United States in Lewisville, Texas, using components imported from Estonia"--and, by contrast, "there will be no evidence that any Nokia or Samsung mmWave cellular base station communication equipment (or components thereof) is manufactured in the United States."

The Staff appears to lend significant credence to expert testimony that "three types of consumers [...] will be most affected by a delay in the rollout of mmWave capabilities: 1) those utilizing mmWave 5G in congested areas, such as dense urban cores, stadiums, and airports and transit hubs; 2) those reliant on ultra reliable, low-latency applications, such as Chicago’s Rush University Medical Center; and 3) those relying on fixed wireless access ('FWA')." A footnote explains that "FWA enables network operators to provide a broadband internet experience throughout a customer’s location via a cellular network instead of via fiber, cable satellite, or telephone lines."

Then the ITC staff makes a distinction based on whether a given area is already serviced by Nokia and Samsung base stations or not:

"[T]he potential harm to U.S. consumers runs parallel to the harm to competitive conditions, in that the 45 million consumers in areas currently serviced by Ericsson mmWave equipment would bear the brunt of any loss of, or delay in the development of, mmWave capabilities, while consumers in areas serviced by Nokia and Samsung would be largely unaffected."

The ITC staff then "proposes a carve out that would allow network providers to continue to purchase Ericsson Accused Products for installation in geographic areas where existing Ericsson equipment is already physically installed as of the effective date of the Commission’s remedial orders:"

"Under the Staff’s proposed exemption, Ericsson would not be permitted to sell or service Accused Products for installation in any area currently served by another supplier of mmWave cellular base station communication equipment or in any area that does not already have mmWave 5G service. Within areas already served by Ericsson mmWave equipment, however, the carve out would enable Ericsson to repair or replace existing equipment, to upgrade installed mmWave equipment, to add mmWave equipment to an existing 4G installation using Ericsson equipment, and to in-fill its existing territories with a greater density of mmWave installations. In other words, Ericsson would be able to keep mmWave service within existing 'Ericsson' territories on par with mmWave service offered in other regions of the United States, but would not be allowed to import Accused Products for the purpose of expanding the geographical borders of those territories beyond the status quo."

Therefore, the ITC staff says "any remedy should be tailored to permit Ericsson to continue to sell and service Accused Products for installation in geographic areas where existing Ericsson mmWave equipment is physically installed as of the effective date of the Commission’s remedial orders."

I'm not taking a position on who's right, just on whether certain positions can be taken on a reasonable basis. The ITC staff's recommendation strongly suggests that what Apple wants goes too far. The question is then whether the staff's Solomonic proposal is the answer, or whether some further modifications such as a grace period are needed--and whether the fact that Ericsson actually does make equipment in the U.S. should be given more weight as it is really the ITC's task to protect any domestic industry. I'd rather wait until the carriers (with Verizon having invested particularly heavily in Ericsson equipment according to the ITC staff) file their public interest statements at a subsequent procedural stage. For the time being, however, the ITC staff's approach is a noteworthy development in its own right.

Friday, November 25, 2022

Twitter and Block (Square) founder Jack Dorsey attacks #AppleBrowserBan, thereby validating UK CMA's regulatory initiative, and throws his weight behind Open Web Advocacy

More and more tech luminaries call out Apple on its shameless abuse of market power and the damage it does to innovation and the economy at large. As Epic Games' CEO Tim Sweeney has repeatedly said on Twitter, "Apple must be stopped." Nothing is even half as urgent in the tech regulation context (Google is a clear but distant second). Instead of addressing the issues, Apple brazenly keeps causing additional problems. Apple is the tech industry equivalent of the Lernaean Hydra.

Not everyone dares to speak out against the tyrant. That's always been a problem in any dictatorship in history. But Apple has gone so far, and suffering is so widespread, that slowly but surely its critics grow in numbers and in profile.

Take Twitter's current owner--Elon Musk has more than one reason to fight Apple's (and Google's) app store monopolies--and its former chairman, serial entrepreneur Jack Dorsey. On Thanksgiving, Mr. Dorsey tweeted the following:

He then laid out the three priorities, the first one of which he described by means of a hashtag: #AppleBrowserBan.

I'm particularly happy to see that Mr. Dorsey pointed to In June, I republished various charts that Open Web Advocacy had previously posted to Twitter. They really do great work on the Apple browser engine monopoly issue.

That same month I also drew addition to long-time web browser developer Alex Russell's write-up that explains Apple is not defending browser engine choice. Apple forces all iOS browsers to use its WebKit engine (like Safari).

Apple's browser engine dictate is bad for competition, for innovation, for choice. It's a shame that Apple got away with it for so long, but it won't stay that way.

Some of Apple's sycophants, astroturfers and others vassals, and brainwashed followers incredibly argue that if Apple opened up browser engines on iOS, Google's Chrome would win and the last bastion to a total Chrome monoculture would fall. We should not take people seriously who say that. It's just crazy. If Google abused a browser monopoly, regulators would have to deal with it. But the fundamental difference between Chrome and Safari is that Chrome is a meritocratic monopoly. Chrome got there because of quality. Again, that doesn't justify abuse, but the first question is how a market gets monopolized, and Google undoubtedly did something right while Safari's market share on iOS is the result of anticompetitive wrongdoing that will hopefully be found unlawful. Safari never got serious traction on a third-party operating system, while Chrome managed to displace anyone, anywhere, provided that Chrome could come with its own engine.

Without mentioning the UK's Competition & Markets Authority (CMA), Mr. Dorsey effectively endorsed its very recent decision--a so-called market investigation reference (MIR)--concerning mobile browsers and cloud gaming.

In my commentary on two documents that became public on Wednesday owing to the CMA's Microsoft-ActivisionBlizzard merger review, I noted that Fortnite hasn't really succeeded on mobile devices as an Xbox Cloud Gaming offering and that Apple (and, to a lesser degree, Google) are responsible for large parts of the problem, and mentioned the CMA's market investigation reference.

The timing of Mr. Dorsey's public criticism of Apple's browser ban could hardly have been better.

I will soon write about the CMA's market investigation as well as a UK legislative initiative called Digital Markets Unit (DMU), but wanted to immediately share the news of one of the most famous tech entrepreneurs having spoken out in no uncertain terms. I also made my little contribution on Twitter: