Friday, July 28, 2023

UK FRAND judgment contains revelation casting EVEN MORE doubt on Mannheim court's treatment of OPPO: anti-Chinese judicial bias?

The longer the Nokia v. OPPO/OPPO v. Nokia FRAND dispute takes, the harder it becomes to believe that the Mannheim Regional Court's Second Civil Chamber under Presiding Judge Dr. Holger Kircher and the Karlsruhe Higher Regional Court's Sixth Civil Senate under Presiding Judge Andreas Voss ("Voß" in German) have treated OPPO in fair, reasonable, and non-discriminatory ways. In fact, I can't help but suspect that some decisions were fundamentally unfair, unreasonable, and potentially even discriminatory. The latter would be consistent with anti-Asian statements by two high-profile German patent judges.

In the post I just linked to, I discussed that the first patent (of several) to be enforced by Nokia against OPPO in Germany has been held clearly invalid (non-novel, which is the worst outcome for a patentee) by the Tribunal judiciaire de Paris. And now I've found something in Mr Justice Richard Meade's Nokia v. OPPO remedies roadmap decision that also calls the Mannheim and Karlsruhe courts' fairness and reasonableness in the FRAND context into serious doubt.

A little over a year ago, I quoted certain passages from the Mannheim court's FRAND-related findings when it ordered an injunction over two cellular standard-essential patents from the same family.

The final point I quoted in that post was this one:

"In view of OPPO's substantially increased sales figures, any blanket license for the cellular portfolio on which the counteroffer is based is clearly not FRAND."

So, OPPO's counteroffer to Nokia was a lump-sum royalty. Nokia must have opposed that deal structure. That's the only plausible explanation for that sentence in the Mannheim decision. The Mannheim court then agreed with Nokia that it was within its rights categorically to reject a lump-sump license offer.

There are two things that we can learn in this regard from Mr Justice Meade's UK remedies roadmap decision (as a result of which OPPO either has to commit to take a license on FRAND terms to be set by the UK court or be enjoined). First, the previous (2018-2021) license agreement between Nokia and OPPO was also based on a lump-sum payment. The second point, however, is far more important here: when disputing OPPO's position that it was a willing licensee by virtue of a commitment to be bound by a FRAND determination by a Chinese court (Chongqing), Nokia argued that a per-unit royalty was unacceptable and only a lump-sum would be FRAND--and said that the Chinese court might (though it wouldn't necessarily) set a per-unit royalty.

Here's a screenshot of the relevant passage (click on the image to enlarge or read the text below the image):

Running royalty versus lump sum:

286. In these proceedings the FRAND valuation is in terms of a lump sum, whereas in the Chongqing proceedings the contentions are in terms of a per-unit or running royalty.

287. In the abstract, and for reasons I have given above, I think that the difference between lump sum and running royalty could be a major one with real impacts for a patentee, and if it were determined that each was FRAND then one can see why the patentee ought to be entitled to choose.

288. However, in the present context the difference is much less and may be nil. The reason is that the duration of the proceedings here and in Chongqing and the term for the new FRAND licence, expiring in 2024, mean that Oppo will not in reality work under the licence on an ongoing basis after it is put in place. The proposed licences in Chongqing do not include reporting provisions or the like and the result in Chongqing while analysed as a running royalty will in all likelihood result in a lump sum payment based on the per unit rate and Oppo’s sales.

289. Nokia argued that it could not be completely excluded that the Chongqing court will just set a per unit rate and that the parties might thereafter have to debate the relevant sales numbers. I agree that this cannot be ruled out, so the result in these proceedings could give Nokia a modest degree of extra certainty. It is a minor additional reason why Nokia’s ability to choose between the results would be one with some reality.

Nokia, like so many other litigants, will obviously make self-serving arguments. It's not illegal to make one legal argument in Germany and take the opposite position in the UK when discussing a Chinese proceeding. Mr Justice Meade notes that "Nokia has been unnecessarily obstructive in the Chongqing proceedings" (in connection with the technicalities of how OPPO affiliates OnePlus and realme would be licensed). He "stigmatised some of Nokia's steps as pretty" but stopped short of "conclud[ing] that it was playing games."

But this does call into question whether OPPO ever had a fair chance in the Mannheim court. I regret to say that it probably never had a chance there. It was going to be deemed an unwilling licensee for being Chinese, not for what it did or did not do. It was going to be enjoined even over a facially invalid WiFi patent. By contrast, Apple has gotten away with pretty much anything in Mannheim for more than a decade. Whether or not there are fanbois at work or it's just the fear of enjoining the world's richest company and public backlash, I don't believe that WiFi patent would have been considered valid if Apple had been the defendant, and I strongly doubt that Apple would have been deemed an unwilling licensee for offering a lump-sum royalty when a previous contract was based on one. In fact, there was a recent case in Mannheim where the very same division of the court took an extremely defendant-friendly position on FRAND that would likely have enabled Apple to come away unscathed. Double standards as far as I can tell.

Let that sink in: Nokia argued, and to a limited extent Mr Justice Meade agreed (in the last two sentences of the passage quoted above), that a lump-sum offer was preferable over a per-unit royalty, while the Mannheim court said that a lump-sum counteroffer (as opposed to a per-unit royalty counteroffer) was "clearly not FRAND."

Future defendants in OPPO's situation may now want to point courts in Germany (or elsewhere) to a UK SEP enforcement action by a patentee whenever that same patentee argues that a lump-sum royalty offer is unacceptable. And I believe the enforcement of those Mannheim SEP injunctions should now finally be stayed by the appeals court in light of hard evidence--in the form of the UK ruling--of Nokia itself not only considering a lump-sum royalty acceptable and FRAND, but even preferable. The WiFi patent injunction should also be stayed immediately in light of the French decision, after a full trial, that the patent is not valid (and not just for lack of an inventive step but even for non-novelty). The Mannheim-Karlsruhe axis has done major harm to OPPO on unfair and unreasonable grounds.

I'll soon do another post about the UK decision as I believe it also teaches a lesson with a view to the EU's misguided proposal for a SEP regulation.