Tuesday, May 16, 2023

Telit drops antitrust lawsuit against Avanci and Nokia over component-level licensing of standard-essential patents started by Thales in Munich, also withdraws U.S. discovery requests

A few months ago, IoT module maker Telit consummated the acquisition of the cellular IoT products unit of French industrial conglomerate Thales. As a result of the transaction, Telit inherited the antitrust dispute Thales had started in 2021, accusing the Avanci patent pool firm and one of its licensors--Nokia--of violating EU antitrust law by declining to grant exhaustive component-level licenses covering cellular standard-essential patents (SEPs).

From the beginning I had--and expressed--my doubts about the prospects of that complaint, just like I never believed in Continental's U.S. litigation against Avanci, Nokia, and others, a case that indeed went nowhere. At some point a Thales v. Avanci & Nokia trial was scheduled for September 2022, but it didn't take place. There were delays, and with what is known now it's fairly possible that Thales knew Telit--which was in the process of acquiring that business unit--wasn't really interested in pursuing that litigation.

I noticed the withdrawal of the three related U.S. discovery motions earlier this month. Thales was seeking discovery (for use in the Munich proceedings) of Avanci (Northern District of Texas), Ericsson (Eastern District of Texas), and InterDigital (District of Delaware). For instance, on May 4 Thales gave notice that the Delaware action was "dismissed without prejudice, with each party to bear own costs, attorney’s fees, and expenses." The other dismissals were also without prejudice, and there is generally no indication of an agreement having been worked out between the parties along the lines of a license agreement. If anything, there was probably just a procedural agreement to terminate the litigation.

Yesterday afternoon the Munich I Regional Court was able to confirm to me that Thales (Telit) withdrew its antitrust complaint on May 4, 2023. The case was pending before the court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner).

While Continental was primarily seeking injunctive relief (and is still suing Nokia in Delaware state court, though nothing important has happened there so far), Thales brought a complaint for damages, which was unusual. Whatever the strategy may have been, the net effect is that those automotive supplier lawsuits over component-level SEP licensing are just a waste of resources.

The automotive sector has stepped up its lobbying efforts, which is reflected by the European Commission's proposed SEP Regulation. That bill does not require SEPs to be licensed at a specific level of the supply chain, but the EUIPO may in the end encourage component-level licensing through its recommendations further to the regulation. It is too early to tell whether that will happen, as the legislative proposal is likely to undergo lots of changes in the further process. Given that car-level licensing demonstrably works (by now most car makers have an Avanci license), the case for governmental intervention, even if merely in the form of an official recommendation, is increasingly hard to make. The failure of those lawsuits brought by Conti and Thales also doesn't suggest that there's an actual problem to be solved.