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...