Thursday, October 19, 2023

My final FOSS Patents post: thanks again for your interest in my views

As I already indicated in the previous post, after all those years I have decided to move on in various ways. It's the year of new horizons for me.

This post is my final one on FOSS Patents. There is a possibility that others than me will maintain and contribute to this blog in the future. It will remain available as an archive for a transitional period.

I never monetized FOSS Patents. Not a single ad was sold. Not a single subscription. It started as a private, personal thing, and that's how my involvement with it is ending now. The content wasn't monetized either. Whenever I received serious requests for reuse, I authorized them, such as by the Library of Congress (LoC). By authorizing the LoC more than a decade ago to archive all FOSS Patents post, I already dedicated the content to the general public. And let's face it: the kind of content that you find here is rather short-lived in practical terms, though an archive may satisfy researchers' curiosity.

With the exception that I can't make decisions for third parties whose material I incorporated (which is easily identifiable as such, given that I properly quoted external sources and made the sources of images clear), you can use my FOSS Patents writings under the Creative Commons BY-ND license. Beyond that, I will consider even derivative works fair use so long as they don't create any misconceptions as to what my views really are--and what they are not.

I don't want to make this a big thing here. I'm neither celebrating nor mourning. This is a rational and well-considered step. Times change (for instance. I'm not available for consulting work anymore). I hope you enjoyed reading my posts as much as I enjoyed writing them, and I apologize for sometimes having gone off-topic.

I'm now, starting in a few days, going to be writing a book on the Microsoft-ActivisionBlizzard merger saga. I will do so in a beautiful place with excellent weather and in a quiet environment. That book project--my first one in decades--is going to essentially require my full attention until it's done. Given that I played Activision games in the 1980s, worked for Blizzard in the 1990s, opposed and thereby delayed a merger in the late 2000s, and played Candy Crush in the 2010s, I just want to write that book. And it's not going to be put under a Creative Commons license, by the way.

While my focus on that project will be next to 100%, I may sometimes voice my views on certain other topics elsewhere. There are many formats out there.

Once again, thanks for everything!

Tuesday, October 17, 2023

Sisvel subsidiary 3G Licensing wins jury verdict against HTC in Delaware: per-patent per-unit royalties of 37 and 43 cents; pool license would have been cheaper

[PRELIMINARY NOTE] Let me note upfront that this is one of the last articles--possibly the penultimate one--that I'll ever publish on FOSS Patents. That doesn't mean FOSS Patents will disappear immediately: it remains available as an archive for a limited transitional period and may very well be used by others than me in the future. Nor will I personally disappear, but in the nearest term I will focus on writing a book about the Microsoft-ActivisionBlizzard merger saga, which became the most spectacular turnaround in merger regulation history and gave rise to a decision by a U.S. federal judge that communications between Microsoft and me were not a legitimate subject of pretrial discovery (as I mentioned toward the end of this recent post). I am going to remain interested in patent litigation and patent policy, as I have been for almost 20 years by now, but I have various new ideas and have to decide which ones to pursue, how, and when. I'll say something more in my final FOSS Patents post. As I'm also in the midst of relocation, this is a time of change and fresh new starts for me. [/PRELIMINARY NOTE]

Damages verdicts over standard-essential patents (SEPs) are rare because most SEP licenses are granted without litigation and in the few cases where infringement actions are filed, settlements typically occur ahead of any damages trial. But yesterday was one of those exceptional days: 3G Licensing, a subsidiary of patent pool administrator and licensing firm Sisvel, prevailed in the District of Delaware on two--based on the company's name, guess what--3G patents over mobile device maker HTC.

On a per-patent per-unit basis, the damages figure that was awarded shows that SEP infringement can get a lot costlier than licensing. 3G Licensing prevailed on two patents-in-suit, U.S. Patent No. 7,995,091 on a "mixed media telecommunication call manager" and U.S. Patent No. 6,856,818 on a "data store for mobile radio station." The damages verdict is so granular that it makes a distinction for the '818 patent between "Verizon Accused Products" and "Google-Fi [a mobile virtual network operator] Accused Products":

  • For the '091 patent, 3G Licensing was awarded $0.37 per product, amounting to $7,228,042.13 for a total quantity of 19,535,249 infringing products.

  • For the '818 patent, the royalty is again $0.37 per product with respect to 2,551,265 units of the Verizon Accused Products (a total of $943,968.05), and $0.43 for each of 1,84,295 infringing products that are Google-Fi Accused Products (a total of $795,196.85).

  • In total, that's almost exactly $9 million.

  • 3G Licensing obviously participates in Sisvel's 3G/4G mobile communications patent licensing program, and the published "compliant rate" (for willing licensees) that applies to 3G UMTS is just €0.35. That's $0.37 for the entire pool (all relevant patents from multiple patent holders)--but here it's the amount that the jury now found HTC owes on a per-patent per-unit basis, with the number being even higher for the Google-Fi Accused Products. The complaint mentioned that 3G Licensing was open to bilateral as well as pool licensing.

That litigation has been going on since 2017, following (according to the complaint) extensive but fruitless efforts to work out a negotiated agreement. I wasn't following it, but now that this interesting verdict has come out, someone may wish to take a closer look at the history of the case. The dispute is also instructive with a view to the debate over the EU SEP Regulation: I've been saying since earlier this year that any attempt by the EU to encourage and enable hold-out in its own courts will make other jurisdictions more attractive, and I mentioned U.S. damages verdicts as another way for SEP holders to stop infringement. There is nothing an EU regulation could lawfully (and without violating international trade agreements) do to prevent patent holders like 3G Licensing from enforcing their rights in the United States, where damages verdicts can become costly for infringers.

For now, let me just show you the public redacted version of the jury verdict. There's actually a typo in the verdict form concerning the number of the '091 patent that I noticed, but it was easy to find the correct one based on the complaint.

3G Licensing v. HTC (case no. 17-cv-83-GBW, D.Del.): verdict form (public redacted version)

Friday, October 13, 2023

First Ericsson v. Lenovo & Motorola Mobility patent infringement lawsuit found in North Carolina after standard-essential patent (SEP) licensing negotiations failed: multi-jurisdictional enforcement underway

I found out from a Light Reading article that "Ericsson has filed a number of lawsuits against Lenovo and its subsidiary Motorola Mobility for patent infringement in multiple jurisdictions." While I have subscribed to Ericsson's press release on its website, and received an earnings update two days ago, I didn't get that one.

I'll try to find out more about that new cross-jurisdictional patent dispute that appears to involve SEPs as well as non-SEPs. So far I've been able to download from an electronic court docket the following complaint that was filed with the United States District Court for the Western Division of the Eastern District of North Carolina:

Ericsson v. Lenovo & Motorola Mobility (case no. 5:32-cv-570, E.D. N.C.): October 11, 2023 complaint

These are the five patents-in-suit:

As for the choice of venue, Ericsson's complaint points (inter alia) to a 2018 pleading in the Western District of Texas in which the Eastern District of North Caoflirna was described by those same defendants as a proper venue and forum conveniens:

"If, however, this Court chooses, in lieu of dismissal, to transfer this case, Lenovo and Motorola respectfully submit that the Eastern District of North Carolina (EDNC), and specifically the Raleigh Division, is both a proper forum for this dispute and the most convenient forum. . . . Under the patent venue statute, the Eastern District of North Carolina is a proper venue for both Lenovo and Motorola. See 28 U.S.C. § 1400.”

Thursday, October 12, 2023

Appeals court rejects Deutsche Telekom's appeal against IPCom: no SEP royalty refund

This is a quick follow-up to yesterday's report on the Karlsruhe Higher Regional Court's appellate hearing in Deutsche Telekom v. IPCom. Unsurprisingly, the regional appeals court threw out the appeal as a spokesman for the court told me this afternoon. This means the Mannheim Regional Court's dismissal of the complaint stands.

Deutsche Telekom can try to appeal this matter to the Federal Court of Justice. Presiding Judge Andreas Voss ("Voß" in German) mentioned yesterady that the case has the potential to reach the top court. Whether this means that his court will authorize a further appeal is another question. The reasons for the appellate decision are not known yet. I look forward to a public redacted version of the decision in case it becomes available.

Deutsche Telekom is essentially trying to upend the standard-essential patent (SEP) licensing system--of which license-based settlments are a significant part--and even non-SEP licensing could be affected by extension (though antitrust law rarely applies to non-SEPs).

There are two case-specific factors here that weaken Deutsche Telekom's case:

  • They settled for convenience, not for hold-up. No injunction was being enforced. No injunction had been ordered. And no injunction was on the horizon. Now imagine what would happen if companies that took a license after an injunction came down, or on the eve of a likely injunction, sought refunds through antitrust litigation.

  • The license agreement in question contains a clause 8.2 according to which IPCom was under no obligation to get other telecommunications network operators to take licenses on comparable terms. Deutsche Telekom argued that this merely meant they could not enforce an obligation on IPCom's part to enforce, but IPCom could have given Deutsche Telekom a refund regardless. Deutsche Telekom also argued that there was no waiver of potential damages claims. That attempt to vitiate an important clause (which had resulted from extensive negotiations, led by Dr. Roman Sedlmaier as outside counsel for IPCom) did not succeed in Mannheim, and I don't know yet whether it also proved dispositive in the appeals court. Be that as it may, if Deutsche Telekom could obtain a refund on antitrust grounds, numerous other licensees who never signed an agreement that contains such a clause--and/or licensees who took a license under the threat of injunctive relief--would bring such cases.

Judge Voss gave Deutsche Telekom's counsel from Clifford Chance every opportunity to make their case. In my recollection, Deutsche Telekom had at least about twice as much speaking time as IPCom, and easily three times as much time as a U.S. federal appeals court would have allotted to them. Frankly, their arguments were exceedingly repetitive.

Quinn Emanuel's Jérôme Kommer didn't want to waste a minute of the court's time. He largely just pointed to his opposition brief, and focused on providing a few clarifications. Less is more in certain situations, and this was one of them.

It would make a lot of sense for that non-case to go away now, but Deutsche Telekom's litigation budget may have room for yet another appeal...

Wednesday, October 11, 2023

Governments of three medium-sized EU member states agree: proposed SEP Regulation is overly intrusive and unbalanced

If the decision makers in Brussels knew and understood the facts and the law, they'd realize that the proposed EU regulation on standard-essential patents (SEPs) is misguided and should be tossed (in favor of a complete do-over) regardless of whether one is more sympathetic to one camp or the other. But political dynamics are sometimes detached from reality, especially in the EU, whose economic policy track record is abysmal.

That's why influential voices of reason are needed. Granted, the collective voting weight of the Netherlands, Finland, and Sweden falls far short of a blocking minority in the EU Council. But it's a critical mass of member state governments opposing the bill in its current (or any similar) form in order to get the attention of all the experts. Council working groups are composed of experts, who obviously get political directions from above, but the likelihood of them being receptive to technical (in terms of "legally technical") arguments is far greater than when you're dealing with politicans seeking reelection or higher office based on faux achievements.

That also applies to issues concerning fundamental rights. The EP(P) rapporteur on this one, Marion Walsmann MEP (EPP-Germany), even seeks to exacerbate the bill. Mrs. Walsmann's voting record with a view to human rights should be subjected to scrutiny. And just like the totalitarian political system in which she started her career, she seeks to silence and suppress rather than listen to critical voices:

According to what I heard from Brussels sources, Mrs. Walsmann is none too pleased with the draft opinion authored by her party colleague Professor Danuta Hübner (Poland), who is the international trade committee's (INTA) rapporteur. Mrs. Walsmann incredibly argues that INTA oversteps its competency by commenting on a wide range of aspects of the draft regulation, but a WTO treaty named TRIPS (trade-related aspects of intellectual property rights) is reason enough for the INTA committee to look at the proposal holistically, with or without Mrs. Walsmann's blessings or misgivings. And if any additional reason was needed (it is not), the perspective of the EU's largest trading partner should be considered as well. INTA has no shortage of reasons to be profoundly concerned and to make its presence felt, for the sake of protecting the EU's reputation on the world trade stage.

Back to the EU Council, which would be in the best position to prevent an idiocy that could even turn out a tragedy.

1. The Netherlands

The Dutch government was the first one to formally voice criticism of the proposal. Others may have previously done so behind closed doors, though.

I'll now quote a few passages based on the English-language summary provided by IP Europe on its live blog (the two original documents--in Dutch--are also available: 1, 2):

  • "the intrusiveness of the initiatives relative to the perceived magnitude of the problem"

  • "the potentially adverse confluence of the proposal with the launch of the Unified Patent Court and existing (market) mechanisms such as patent pools and existing alternative dispute resolution options"

  • "the risk that by regulating the licensing practice for SEPs, the EU loses attractiveness both as a standardization environment and the place to resolve disputes effectively and efficiently"

2. Sweden

The Swedish government--which is not simply in Ericsson's pocket but also has major implementers of all sizes to take into consideration--discussed the EU proposal at a recent parliamentary committee hearing (minutes in Swedish). From a machine translation:

  • "the proposal put forward introduces a comprehensive and highly binding regulatory framework in an area where there was previously no regulation and places extensive tasks on the EUIPO, which has not previously handled similar tasks"

  • "the background analysis presented by the Commission does not support the view that such restrictive measures are necessary"

  • "it seems doubtful whether the proposed limitations on the ability of patent holders to prosecute infringements can be regarded as proportionate restrictions on their intellectual property rights"

  • "The Government therefore intends to work to ensure that the proposed regulatory framework is not introduced or, in any case, that the regulation is as limited, flexible and predictable as possible. In this respect, the Government intends, among other things, to work to ensure that patent holders' ability to prosecute infringements is limited as little as possible and that the authorisations granted to the Commission in the Regulation are limited as far as possible."

  • Sweden's Social Democrats went even further, saying inter alia that "a proposal as far-reaching and intrusive as the present one should not be used as a basis for legislation."

3. Finland

The Finnish government circulated a "U-letter" that discussed various policy issues including the EU SEP Reg (Finnish document). Based on a translation and a summary that I've obtained, the Finnish government has declared itself "highly critical" of DG GROW's proposal. Here are some key points:

  • "the proposed regulation is disproportionately burdensome on the right-holders and thus “likely to discourage European companies from participating in the development of international standards"

  • the scope of the regulation - the standards that it will apply to - is left to the Commission to define via a delegated act, which may confer disproportionate, inappropriate and unjustified powers on the Commission

  • the FRAND determination process restricts fundamental right to judicial review and thus raises the question of compliance with the WTO-level TRIPS agreement

Here's a translation of a longer passage:

"The Government considers it important that the regulation of businesses is clear, predictable, proportionate, competition-neutral, technology-neutral and innovation-friendly. An environment that encourages and inspires entrepreneurship means that businesses and citizens are not discouraged by excessive regulation. Intangible rights, such as patents, encourage businesses to innovate and promote the use of innovation in society. They are therefore an important part of innovation policy, which aims to build conditions in Finland that encourage companies to innovate boldly, innovate and grow internationally.

"The Government is highly critical of the Commission's proposed regulation on patents essential to the standard. The Council of State considers the objectives of the Regulation to improve the licensing of essential patents and to increase transparency to be important, but considers that the measures proposed by the Commission do not fully comply with the principle of proportionality. The proposed new regulation would create a significant regulatory burden, in particular for holders of essential patents, which is likely to discourage European companies from participating in the development of international standards. As such, the Council of State welcomes the fact that the Commission has taken into account the role of small and medium-sized enterprises (SMEs) in its initiative. However, the negotiations must ensure that a balance is maintained between taking into account the interests of essential patent holders and users of standards, which promotes the dissemination of standardised technologies and the development of new technologies and products, without placing an unduly burdensome new regulatory burden on enterprises.

"The Government is highly critical of the Commission's proposal that the proposed regulation would also apply, under certain conditions, to standards or parts thereof published before its entry into force and that the Commission would define such standards by delegated act. The negotiations must ensure that the powers conferred on the Commission are sufficiently precise, proportionate, appropriate and justified.

"The Government is highly critical of the Commission's proposal for a compulsory settlement procedure to determine the FRAND conditions for licensing essential patents. Negotiations must ensure that the regulation does not unduly restrict the right to judicial review, which is a fundamental right. The negotiations must also ensure that the proposed procedures comply with the terms of the World Trade Organisation (WTO) TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights."

License-based settlements of SEP disputes in jeopardy: Karlsruhe Higher Regional Court heard Deutsche Telekom's 'antitrust' appeal against IPCom, anticipates review by Federal Court of Justice

I just attended a two-hour appellate hearing in the German city of Karlsruhe. The Karlsruhe Higher Regional Court is the appeals court that hears all appeals from the Mannheim Regional Court. In this case, the June 2022 decision to throw out Deutsche Telekom's long-shot antitrust lawsuit against standard-essential patent (SEP) licensing firm IPCom.

Given what's at stake, I was surprised to be the only independent person in the audience. Besides the three-judge panel of the Sixth Civil Senate (Presiding Judge Andreas Voss ("Voß" in German), Judge (and rapporteur) Professor Gloeckner ("Glöckner" in German), and Judge Professor Singer) and yours truly, everyone else was counsel for one of the parties (with a multiplicity of intervenors supporting IPCom). One lawyer who represented IPCom in infringement litigation many years back also attended on an informal basis.

From the beginning, I have considered Deutsche Telekom's complaint facially absurd. They want IPCom to repay all or at least most of a 220 million euro amount plus another 60 million (interest and possibly expenses) because their rivals did not license IPCom's patents, which Deutsche Telekom calls "discrimination." But the license agreement contains a clause (clause 8.2) that specifically says IPCom was under no obligation to get other telecommunications network operators to take licenses to its portfolio.

The fact that Judge Voss had to get Deutsche Telekom to resolve a discrepancy of several million euros between two references to the amount in dispute in an amended appellate filing they made about a month ago is just an embarrassment for a company that tries to bully a small patent holder. Given how much they are spending (and risking, given the German "loser pays" rule), one would think that they can at least get their act together without the court having to ask them at the hearing to reconcile their numbers.

That should not distract us from the real issue. My hunch was right that this appellate hearing was worth attending not because of Deutsche Telekom being likely to win (Judge Voss appeared rather skeptical, though he steered clear of stating a preliminary position on any aspect of the case), but because they try to create massive legal uncertainty for SEP holders of all sorts and sizes with a view to past and future settleements. Deutsche Telekom could lose, but there could be some holding--maybe just a dictum--that could have serious repercussions.

Toward the end, when making a routine check on whether some sort of settlement was achievable, Judge Voss--who personally presided over various of IPCom's infringement actions while he was sitting on the lower court--noted that "this dispute has the potential to be heard by the Federal Court of Justice." Earlier this year, that same court--in practical terms. Germany's top court for patent disputes--shocked the SEP licensing community by expanding the concept of patent exhaustion to covenants to sue last. That's why I believe there should be a lot more interest in that case, and it's astounding that I was the only one to go there. (It was, by the way, the last German court session I got to attend as a resident of Germany at least for the foreseeable future, given that I'll formally leave the country in a little over a week.)

With a view to that contract clause 8.2, Deutsche Telekom reiterated the argument that had failed in Mannheim: they said that private parties cannot enter into a valid and enforceable agreement that goes against antitrust law. What they want is a legal holding according to which (if one thinks it through) any SEP licensee could bring antitrust claims against licensors on the grounds of discrimination just based on their licensing activity that follows the settlement in question. Here, Deutsche Telekom argues that IPCom caused market distortion by not succeeding in getting Deutsche Telekom's German rivals to take a license. In other cases, the argument might as well be about the amount, and Deutsche Telekom's lead counsel specifically said that if IPCom had extended a license to Vodafone for 10 million euros (as compared to the 200-million-euro deal with his client), that would be a clear case of discrimination (Vodafone and Deutsche Telekom have similar market share in Germany).

I struggle with that approach. The practical reality is that patent disputes (not only but also SEP disputes) are always settled on a probabilistic basis: things could go better or worse for a given party if litigation continued. And if some key patents are invalidated, a portfolio may be devalued, possibly become impossible to license to anyone.

In this case, it's even worse: Deutsche Telekom even signed an agreement under which IPCom's subsequent conduct vis-à-vis other telcos wouldn't count. Deutsche Telekom argues that the clause merely does not impose on IPCom a contractual obligation to enforce. They say IPCom could still be liable for failing to enforce if the result is discrimination: unequal treatment without justification. Judge Voss made a good point: Deutsche Telekom's position comes down to requiring a SEP holder to become the "curator" of the downstream market (here, the market for cellular telecommunications networks).

Deutsche Telekom's counsel said that regardless of clause 8.2, IPCom could have avoided or otherwise addressed the alleged discrimination issue: by obtaining injunctive relief against unwilling licensees; by concluding FRAND license agreements with Deutsche Telekom's rivals; or by (proactively!) lowering its royalties when discrimination became apparent.

Those positions are very aggressive. The appeals court will make a decision (which could also just be a scheduling order) later today, and the parties will be able to find out about the outcome tomorrow morning. This is something to watch. If even despite that clause 8.2 Deutsche Telekom succeeded, even if not on the bottom line but in the form of some dictum, that could result in a flood of German antitrust complaints over the terms of SEP license agreements. The impact would far exceed that of the patent exhaustion ruling by the Federal Court of Justice. And maybe one or two aspects of this case will even be referred to the European Court of Justice...

Saturday, October 7, 2023

European Parliament rapporteur proposes further deterioration and radicalization of EU SEP bill, fails to understand issues and to demonstrate professionalism

Unlike those who engage in lobbying, I don't have to mince words when commenting on what's going on in the EU with respect to the proposed regulation on standard-essential patents (SEPs). Among other things, I've saidthat the EU SEP Reg does reinforce my belief that the EU--an economic policy failure, plain and simple--is on the wrong track in many ways. I'm currently moving to a far better-run country that is not an EU member and most likely won't join in my lifetime.

The European Commission's Directorate-General for the Internal Market (DG GROW) has already embarrassed itself with the proposal and with the partly absurd ways in which it has attempted to justify it. While there is a silver lining in the form of a counterproposal by the rapporteur of the EU Parliament's international trade committee (INTA), I've now seen the draft report by the lead committee's (legal affairs, JURI) and therefore the Parliament's rapporteur--and it's an unmitigated disaster.

As I mentioned in the previous post (which I just linked to), the EP/JURI rapporteur on the SEP Reg, Marion Walsmann, started her parliamentary career as an active supporter of East Germany's antidemocratic regime. I'll talk about that some more on another occasion, but based on what I've researched, her party--which was part of the "National Front" bloc led by the Socialist Unity Party of Germany--almost 100% consistently voted in favor of every single proposal by the ruling communist party until the Fall of the Wall (the only significant exception was in 1972, at which point Mrs. Walsmann was a child). If that is true, then she has a consistent voting record of siding each and every time with an oppressive regime that despised democracy and violated human rights--and was rewarded by the regime for contributing to some faux pluralism. One of the most corrupt actions in German history was to merge those bloc parties into West German parties, all of which seized the opportunity to clear their financial debt, except for the Greens, which didn't have a formal sister party in the GDR anyway.

Nowadays there are no more bloc parties, but there's a phenomenon called astroturfing that is not entirely dissimilar. In an annex that lists entities from whom Mrs. Walsmann received input, ACT | The App(le) Association" is also found.

There are some funny typos in that annex ("Philipps" instead of "Philips" and "Xiami" instead of "Xiaomi") and a fundamental error concerning the lobbying entity of her home country's automotive industry: as the long-form name for VDA, the annex states "Verband Deutsche Automobilhersteller", which is not only grammatically incorrect (an "r" at the end of the second word is missing) but simply not the name of the organization. The actual name is "Verband der deutschen Automobilindustrie." The difference is that the former refers to "automakers" while the latter also includes suppliers.

Those are not the only typos and errors. For instance, she espouses amendments to Article 9 of the proposed regulation that refer to determinations "per user case" while the correct term (which is used in many other instances in the same document) is "use case". Also, the German-language "explanatory statement" uses an inconsistent spelling for the German word for "essential": sometimes with a "t", some other times with a "z". And then there's an odd passage that says implementers can hardly find out "whether a standard is actually essential." She must have meant whether a SEP is actually essential to a standard. Then there are grammatical errors in a sentence about applications to which SEPs are relevant: the list of examples starts with the correct grammatical case ("dem Internet der Dinge"), but then switches to the wrong one ("vernetze Fahrzeuge" (which means "connected vehicles" and where a "t" is missing from the first word) and "intelligente Städte".

Why are those typos and other errors worth mentioning? It's just striking that DG GROW and its philosophically-aligned EP rapporteur can't even put out documents of a decent editorial quality when dealing with this subject. Actually, various of Mrs. Walsmann's proposed amendments serve no other purpose than to correct typos found in DG GROW's proposal. That's OK, but then she should get her own act together.

The degree of Mrs. Walsmann's alignment with the EC proposal is close to 100%, just marginally below the level of her alignment with East Germany's Marxist-Leninist dictatorship when she started her parliamentary career in the late 1980s.

It is ridiculous that she claims in her draft report to seek to strike a balance between the interests of SEP holders and implementers, and her reference to the need to address hold-out is meaningless. She simply wants implementers to be able to use the envisaged process to delay with impunity, which is reflected by various aspects of her proposal, such as the justificatio nof her proposed amendment to Recital 34:

"The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result."

That is the very opposite of what UK courts expect of the parties. In the UK, one has to accept to be bound by a determination of whatever terms are in fact FRAND. If Mrs. Walsmann got her way, implementers could just say after the end of the lengthy process that a royalty rate isn't low enough for their taste.

Mrs. Walsmann's report clearly reflects that her understanding of how SEP licensing and enforcement work is lacking and wanting. Instead of fixing the problems with the original proposal, she just wants to add more elements that are indicative of incompetence. Three particularly stupid examples:

  • She proposes a new Recital 10b that would advocate allowing Licensee Negotiation Groups (LNGs). However, the issue with LNGs is that they are irreconcilable with anti-cartel rules if the collective market share is too high and an actual or threatened group boycott obstructs the licensing process. Possibly influenced by her astroturfer soulmates who falsely claim to represent small and medium-sized enterprises, she then writes that "LNGs benefit SMEs in particular." But SMEs typically won't need an exemption from competition law if they coooperate in reasonable ways: they won't even come close to the market share thresholds where there might be antitrust scrutiny. The ones who need an exemption are the likes of Volkswagen and Toyota.

  • Proposed new Recital 10a talks about patent pools. The proposal says pools "should also commit to FRAND terms and conditions." What would be the practical meaning of that commitment? Pools can't enforce directly, so all that matters is that a given pool's licensors are bound by a FRAND licensing obligation.

  • The draft report makes an attempt to define the term "patent assertion entity" (in order to then withhold certain SME benefits of the bill from them). The problem is that this is not going to work in litigation. One of the criteria there is that a company "does not engage in [...] the research and development of such inventions"--but it's going to be pretty easy for licensing firms to show at least a small investment in R&D.

The draft report also goes directly against the case law of the European Court of Justice and the courts of various EU member states by imposing obligations on patent holders based on declared--as opposed to actual--essentiality.

Let's look at the bigger picture. As I said last month, DG GROW's proposal is a hot mess that lawmakers can at best dilute, but not fix. We have a proposal on the table now from the trade committee's rapporteur, and that one comes down to dilution. It's like "we should actually vote against it, but let's make it look more constructive and merely strike one part (aggregate royalties) and defang the others." And now we see what the rapporteur wants to do: she seeks to make things worse.

The Parliament shouldn't follow this rapporteur, and not even her own group, the European People's Party, which has a clearly more reasonable alternative to choose that was authored by another EPP MEP, Professor Danuta Hübner from Poland.

Thursday, October 5, 2023

Proposed EU SEP Regulation gets pushback from influential European People's Party MEP: draft opinion of Committee on International Trade (INTA)

Finally, the proposed EU regulation on standard-essential patents (SEPs) has been formally criticized--in the form of a draft committee report--within the European Parliament (EP). Not just from within the EP, but also from within the EPP: that's one more P and stands for European People's Party. The EPP is the largest group in the EP, though with 25% of the votes it's not as powerful anymore as it used to be at its peak where it needed only one other (and reasonably large) political group to form a majority (reasonably consistent voting along party lines provided).

There are many rapporteurs on a dossier (legislative or other matter) in the EP, which made it hard to get anything done against the EPP.

So I have to start with the proceudral context. The EP determines a lead committee on a given dossier. In this case, that's the Committee on Legal Affairs (JURI). One member of the lead committee becomes the entire EP's rapporteur. Every other political groups selects a shadow rapporteur, who is also a member of the lead committee. Sometimes shadow rapporteurs disagree fundamentally with the Parliament's rapporteur, whose positions may even be controversial within the same political group.

Here, the EP's rapporteur on the EU SEP Reg is Marion Walsmann, a (German) member of the EPP who started her political career as a parliamentary supporter of the East German communist dictatorship, which is my way to state a simple fact that is mentioned on the German but not the English Wikipedia page. The Christian Democratic Party of the German "Democratic" Republic was not an opposition party: it was part of an effort to pretend pluralism, and its politicians such as Mrs. Walsmann at the time enjoyed privileges for applauding the ruling communist party as it oppressed the true democrats in the country. There were opportunistic reasons for which all major West German parties except the Greens (there simply was no faux Green party in the GDR as the Green movement started toward the end of the GDR's infamous history) merged with their nominal East German counterparts right after reunification: it was mostly about money, and to some extent also about inheriting some existing structures. I'll leave that story for another day.

Mrs. Walsmann is deemed to be in favor of the proposal, or even of amendments that would cause further harm to SEP holders, but that is clearly not a consensus position, not even within her own political group. If one or more other committees are designated to provide an opinion, every such committee also has a rapporteur (and then there are shadow rapporteurs at the committee level). For the Committee on International Trade (INTA), the rapporteur is also a member of the EPP: Polish MEP (and former EU commissioner for regional policy) Danuta Hübner.

On Monday, Professor Hübner submitted her draft opinion: an 82-page document that contains a long list of amendments, the bottom line of all of whic his that SEP enforcement should not be restricted, complicated, obstructed, or delayed in any way, and particularly not the enforcement of non-EU SEPs.

Professor Hübner proposes

  • to drop the part about aggregate royalty determinations (for all SEPs related to a given standard) entirely, which is consistent with a proposal by one of the researchers who were commissioned by the EC's Directorate-General for the Internal Market in this context;

  • to limit bilateral everything else (which is not the case for bilateral FRAND determinations under the Commission proposal) to patents valid in the EU, which makes particular sense for a trade committee to propose but is equally common sense;

  • to define reasonably clearly the scope of the regulation and not to delegate excessive powers to the Commission, an aspect on which she is particularly qualified to opine as a former chair of the EP's Constitutional Affairs Committee;

  • to steer clear of disproportionate restrictions of patent holders' rights to enforce their IP, which actually raises international trade (as many patents valid in the EU are held by non-EU companies) and constitutional (fundamental rights) issues at the time; and

  • to put more specific and elaborate measures in place to assist SMEs with a view to their participation in standardization as well as with a view to assisting them in their inbound licensing efforts.

The draft committee report coherently and consistently seeks to codify those objectives and to straighten out some other flaws, such as a weak definition of the term "patent family." Professor Hübner's proposal is certainly of a far higher quality than the Commission proposal, which in this case is, however, not a significant threshold.

There are some details I disagree with. In particular, the rationale provided for some proposed amendments is that removal of a patent from the envisioned EU SEP Register would render it unenforceable, but one could even argue that such a patent becomes even more enforceable: national courts or the Unified Patent Court (UPC) could still deem it essential, but it would not fall under the rules of the proposed regulation, and even if courts did not deem it enforceable, it might be a formidable non-SEP. The only respect in which the removal of a declared SEP from the register is certain to adversely affect its owner is that the company's essentiality ratio for the purposes of EU FRAND determinations will go down. Whether national courts will be swayed at all by those EUIPO-led determinations by anonymous "evaluators" is impossible to tell right now. As a litigation watcher, I could easily see lots of situations in which an infringement court would deem a patent essential notwithstanding an EUIPO-led negative determination. If some national courts--as I've just seen in the dispute between Nokia and OPPO--arrive at different conclusions on comparable questions than courts in another EU Member State, why wouldn't they also just use their own judgment instead of adopting the outcome of an opaque and generally low-credibility process?

But let's not get lost in details. A month ago I already said that the EC proposal "is a hot mess that lawmakers can dilute but not fix due to structural issues, fudnamental rights, and international obligations." Looking at it from that angle, I think the most straightforward proposal for Professor Hübner to make would actually have been to propose only one deleting amendment. Strike the whole thing because it's crap. It's easy to see, though, why she didn't do that: while perfectly warranted, it would be viewed by many as not being constructive.

What would the net effect of those amendments be? Dilution and delay (the latter because she'd extend the initial implementation period from 24 to 36 months).

Would the proposal--regardless of the proposed INTA position being consistent and coherent--serve any purpose? No, with just one exception: the part about helping SMEs might make sense, though that one is so small that it wouldn't warrant an entire legislative measure in its own right. There wouldn't be much else left. The aggregate royalty determinations would be thrown out; the bilateral process would be voluntary, and while there are strong reasons for limiting the scope of the regulation to SEPs valid in the EU, global licensing disputes result in global license agreements, so it is doubtful that the FRAND determination process would play much of a practical role.

I hope that some political group(s) will ultimately propose an amendment that enables MEPs to vote down the proposal as a whole. But at this stage, all that people can do is propose countless amendments. This is still an early stage of the process.

The EP votes on each amendment separately, though the non-binding voting lists provided to MEPs seek to ensure consistency. If just some of Professor Hübner's amendments got support in the further process (be it a parliamentary vote or a so-called trilogue where representatives of the EP, the EU Council, and the EC try to broker a deal that an EP majority typically rubberstamps), the regulation could become toothless. It can't be reduced to absurdity because it already is absurd, but something absurd that may not even benefit implementers as much as some of them hope might be defanged.

The intellectually most honest and generally most rational outcome would be for the EU not to pass anything into law based on the current proposal. They should send the EC back to the drawing board, and maybe there would never be a second proposal. But it could be that some people just want to have some outcome so they will (rightly or not) claim victory as they seek a nomination for reelection or audition for higher office or whatever.

It would be a waste of time, money (particularly taxpayers' money), and energy. Sadly, the EU's economic policy initiatives don't work very often, yet there are always politicians who put their weight behind them and hope for political gain from them. Maybe that's the inevitable fate of this proposal, but I'm not ready to give up yet. Rationality could still prevail, and Professor Hübner's draft opinion is, by and large, a silver lining.

Sunday, October 1, 2023

USPTO invalidates Nokia patent as per OPPO's PTAB IPR petition: Nokia is appealing parallel decision by European Patent Office

Bring the popcorn. The seemingly neverending, multijurisdictional patent dispute between Nokia and OPPO continues to make news. Earlier this week, I reported on a decision by the European Patent Office (EPO) to uphold an OPPO patent in an amended form, and now let'see how the modified claim language will fare at a Mannheim infringement trial in early December and/or in a preliminary injunction proceeding before the Unified Patent Court (UPC). Now there's news from the U.S., a jurisdiction in which the parties don't have any infringement actions pending against each other, but where the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) instituted an inter partes review (IPR) roughly a year ago relating to U.S. Patent No. 10,701,588 on "methods, apparatuses and computer program product for PDU formatting according to SDU segmentation."

On Thursday, the PTAB granted the petition and held all challenged claims unpatentable:

Guangdong OPPO Mobile Telecommunications Corp., Ltd., v. Nokia Solutions and Networks Oy (IPR2022-00632, Patent 10,701,588 B2): Final Written Decision Determining All Challenged Claims Unpatentable

Nokia can appeal the PTAB decision to the United States Court of Appeals for the Federal Circuit, just like it also appealed in September a decision made by the Opposition Division of the European Patent Office (EPO) in May, which declared the European equivalent of that patent, EP3395029, invalid. Now that both the USPTO and the EPO have sided with OPPO in the first instance, any appeal seeking to salvage one of those patents is going to be an uphill battle.

It's been 27 months since the previous cross-license agreement between the two expired and Nokia sued without delay. OPPO's resilience is admirable. They're giving one of the very best in-house patent litigation teams out there a run for the money to say the least. It's become clear in recent years that some German judges have an anti-Chinese bias (which is not a conspiracy theory but was evidenced by problematic public statements as well as rather divergent decisions in neutral jurisdictions), without which the situation would look even more favorable to OPPO.