Thursday, February 25, 2021

Automotive industry falls into political trap, allows patent reform opponents to portray concerns over injunctions as single-industry issue: German parliament hearing

The short version of what happened at yesterday's patent reform hearing in the German Bundestag (Federal Parliament) is that the positions taken by the seven panelists were materially consistent with how I had summed them up in advance, but the overall perception was even worse for the cause of patent injunction reform.

The video recording of the two-hour meeting of the Legal Affairs Committee became available today. If those seeking to preserve the status quo had scripted the hearing, it wouldn't have been less balanced.

The lone voice--among seven "experts" (who in a U.S. Congressional hearing would be sworn in and called "witnesses")--in favor of a proportionality defense to injunction claims was, as expected, the VDA (German automotive industry association). That fact alone supported the anti-reform camp's narrative, but politicians and co-panelists alike capitalized on the situation and reinforced their portrayal of proportionality as the cause of the German automotive industry plus a bunch of foreign infringers.

There actually is a reasonably broadbased coalition of companies who consider the near-automatic injunction regime unsustainable. That movement comprises not only car makers but also telecommunications service providers, Internet service providers, and even adidas. While the ip2innovate group succeeded in bringing a diversity of companies together, it has failed miserably to advocate the cause. It's been amateurish beyond belief, and the state of affairs in the legislative process speaks volumes--as does the fact that ip2innovate wasn't represented on the panel.

The pro-reform camp should have declined to participate in this farce. They should have demanded a more balanced composition of the panel. Failing that, they should have focused on delegitimizing the event. But they've been strategically misguided all along.

The performance of the automotive industry group's representative was uninspiring. He had prepared some talking points, and given that he's not an IP expert, this could have gone worse. Still, the fact that his understanding of the issue lacks breadth and depth became clear on some occasions. For example, when asked by a member of parliament to compare the German patent injunction regime to the situation in other jurisdictions, he just claimed that courts in other countries could order monetary compensation instead of injunctions, but wasn't able to substantiate this in any way. He didn't even explain the difference between common law and civil law jurisdictions.

When I listened to the anti-reform panelists' statements and, even more so, the parliamentarians' questions, it felt like watching something that must have happened in a parallel universe. It was all completely detached from the reality of patent litigation in Germany. Politicians probably didn't know because the pro-reform movement is too incompetent and uncapable to properly and convincingly explain the situation to them, and to debunk certain smokescreens. The anti-reform panelists described the world out there as one in which patent infringement is avoidable, and the scope of a patent is clear by reading its claim 1--when in reality even reasonable people can easily disagree on claim construction, and most patents aren't valid as granted, so they're either invalid or the valid scope is narrower. But in a field of technology where keyword searches aren't nearly as targeted as in chemistry, the problem is already where to start with patent clearance.

Two female patent attorneys stole everyone else the show: Dr. Alissa Zeller of BASF, speaking on behalf of the vci (German chemical industry association), and Dr. Renate Weisse, a Berlin-based patent attorney in private practice. I disagreed with virtually everything Dr. Weisse said, and when referencing her client base she conveniently omitted that it also includes large corporations and "institutions" (presumably patent troll Fraunhofer). Dr. Zeller's views just didn't reflect the reality of the information and communications technology industry; some of what she said may very well apply to her own industry. But the way they advanced their agenda was first-rate.

Dr. Weisse was far more aggressive and outspoken, but Dr. Zeller, too, came across as very assertive, effectively argued in favor of the status quo, and described the potential implications of the current proposal (notwithstanding the Federal Court of Justice already having stated clearly that near-automatic injunctions are here to stay) as if the world was about to descend into chaos.

The two of them could have faced any ten representatives of the pro-reform camp (as opposed to just one) and would have eaten them alive. Their statements at the hearing could be used for any video tutorial on effective IP advocacy.

By contrast, those advocating proportionality just don't have what it takes to win. Their objective--less leverage for patent holders in negotiations--could only be achieved through a systemic departure. But how can they be revolutionaries in the political arena if their own organizations don't even let them act outside 20th-century structures, such as industry associations?

More than a year ago I explained to them what it would take to win. I also created a chart to put the anti-reform camp's talking points into perspective (click on the image to enlarge):

What you see in that chart is the story that was told during yesterday's hearing.

I'm already looking past that reform bill (while still keeping an eye on the process) and profoundly concerned that Nokia and Ericsson may win the pan-European lobbying battle over component-level SEP licensing. In the worst case, the CJEU will even lower the bar for preliminary injunctions (over any category of patents, ultimately also SEPs). But for now I still hope that those who botched the patent reform effort will learn from their mistakes and do better next time. "Next time" is now.

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Tuesday, February 23, 2021

The Search for Scott (Forstall): Epic Games trying to locate former Apple software chief so he can testify in App Store antitrust case

According to Wikipedia, Scott Forstall "involuntarily" resigned as senior vice president (SVP) of iOS software in the fall of 2012. Since then, he's kept a very low profile. Based on his past responsibilities for iOS, Epic Games would very much like to ask him some questions. Interestingly, Mr. Forstall joined Steve Jobs in the announcement of the launch of the App Store "to explain the mechanics of app development for the iPhone" as Epic writes in a joint case management statement with Apple (this post continues below the document):

21-02-22 Epic Games v. Appl... by Florian Mueller

Mr. Forstall's testimony would be used in a couple of months when the big Epic Games v. Apple App Store antitrust case goes to trial in Oakland (Northern District of California).

According to Epic, Apple initially sounded like they were fine with Mr. Forstall testifying, and that they would take care of the logistics. But, according to Epic, "Apple now states that it never suggested it could compel Mr. Forstall to appear for a deposition," after "promising [for well over a month] it would provide a date for Mr. Forstall’s deposition." At some point, a deposition had been tentatively scheduled (for Febvruary 11), but the week before, "Apple revealed that Mr. Forstall had not responded to Apple's inquiries or confirmed that he will appear for a deposition." And the story goes on like this:

"When Epic requested that Apple provide Mr. Forstall’s last known address and contact information, Apple initially provided a PO box and a Twitter handle. Apple also represented that it was not authorized to share Mr. Forstall’s phone number, but later stated that it did not believe that it was in possession of Mr. Forstall’s current phone number. Epic therefore requested that Apple agree that (i) Mr. Forstall’s deposition may occur after February 15, 2021, and (ii) Epic may supplement its expert reports with information arising from his deposition. Apple agreed that Mr. Forstall’s deposition may occur after February 15, 2021, but imposed an arbitrary deadline of March 10, 2021, and refused to agree that Epic may supplement its expert reports. The Parties have not resolved these issues. Epic is currently attempting to locate Mr. Forstall, and hopes that the Parties may avoid the need for Court intervention on these issues."

In the same court filing, Apple admits that it had originally "indicated that it expected its counsel to represent Mr. Forstall at his deposition." Apple says it's OK with the deposition if it takes place before March 10, but doesn't want Epic to "hold discovery open indefinitely while it seeks to locate, serve, and depose another witness." The discovery cutoff date was last week.

If the parties can't work it out until then, this issue may come up during tomorrow's discovery hearing before Magistrate Judge Thomas Hixson (who is not presiding over the actual case but effectively handling certain matters, particuarly discovery-related ones, for Judge Yvonne Gonzalez Rogers. Judge Hixson has a strong antitrust background, which probably comes in handy with respect to Epic Games v. Apple.

March 10 is approaching fast, so the question is whether Epic can locate Mr. Forstall in time, and compel him to testify, ahead of that deadline given by Apple. Ultimately, it's for the court--not Apple--to decide. The trial is still on track to go forward in May, and Epic appears convinced that the trial date wouldn't be affected by this additional deposition.

Former executives are sometimes very reluctant to testify in cases involving their ex-employer. Two years ago, a former Qualcomm president duct-taped the gate to his home (and ultimately had to testify anyway).

Apple's behavior in this context may actually have served to strengthen Epic's resolve to hear what Mr. Forstall has to say. If it is true that he was forced out in 2012, he might not be 100% loyal to his former employer, more than eight years after having been (if true) fired. I don't think Apple is certain that Mr. Forstall's testimony would hurt its case. But if Apple could rely on him, and didn't have to fear that he might seize this opportunity to cleverly and truthfully (under oath) settle some accounts, why would Apple have played these kinds of games with Epic? This could get very interesting, though it's also possible that--once located and compelled--he'll just be evasive and obstructive.

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Ericsson-Samsung escalation led Judge Gilstrap and me to the same miscategorization of certain patents-in-suit: no SEP injunctions being sought YET

Every once in a while, Ericsson and Samsung have to renew their patent cross-license agreement, but those negotiations have become more complicated over time. The following timeline, included in a Samsung filing with the Federal Circuit, shows how the partes have periodically had to go to court (always on a cross-jurisdictional basis) before they struck the next deal (click on the image to enlarge):

The chart also shows a trend toward ever more protracted litigation. A trend reversal is possible: maybe they'll be able to settle sooner this time around, but I wouldn't hold my breath, given that Ericsson is ever more dependent on patent licensing revenues and now more concerned than ever about competition from Samsung in its core business (mobile base stations).

Samsung's approach to those disputes--including the one with Huawei a few years ago--is "tit for tat": if you sue them somewhere over X patents, they'll countersue (unless you have zero exposure for lack of products) over the same number in the same jurisdiction. Only against Apple, almost exactly ten years ago, Samsung was first to file infringement cases in some countries, responding to Apple's initial action in the Northern District of California with a bunch of intercontinental standard-essential patent (SEP) assertions. And even then, there was nothing that Samsung wanted more than to be left alone and compete on the merits of their products--something that Ericsson failed to do in the handset market and is increasingly struggling with in the network infrastructure business.

Yesterday evening by Eastern Time, Samsung filed its opening brief in the Federal Circuit appeal of Ericsson's anti-anti-antisuit injunction from the Eastern District of Texas (this post continues below the document):

21-02-22 Samsung Opening Br... by Florian Mueller

The 76-page filing contains the timeline shown further above and raises a number of issues concerning Ericsson's preliminary injunction. After Ericsson's opposition filing in early April, I'll discuss some of them in more detail. Samsung is hedging its bets, asking for reversal of the PI as a whole while also taking fallback positions that would allow parts of the PI to stand while potentially making it much less harmful.

Ericsson has empohasized strongly--and will presumably continue to emphasize--its criticism of the fairness of Chinese courts. In the court below, Samsung already presented a declaration by former Federal Circuit Chief Judge Randall R. Rader (whose predecessor, Paul Michel, filed an amicus brief in support of Ericsson's position). What may ultimately bear more weight with the Federal Circuit than the former chief judges' views, however, is the fact that Samsung can point to Supreme Court, Fifth Circuit (whose law is controlling here, even though the Federal Circuit has appellate jurisdiction as there are patent infringement claims in the same case), and other federal appeals courts "regularly defer[ring] to Chinese courts in forum non conveniens cases":

  • Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 435-36 (2007);

  • Innovation First Int'l v. Zuru, Inc., 513 F. App'x 386, 390 (5th Cir. 2013); and

  • Compania Naviera Joanna SA v. Koninklijke Boskalis Westminster NV, 569 F.3d 189, 199 (4th Cir. 2009).

What might impair Ericsson's chances on appeal more than anything else, however, is the fact that the appellate judges can easily see Judge Rodney Gilstrap didn't handle this matter as the neutral arbiter he should have been. There are details such as the fact he gave Samsung a deadline on New Year's Day for its opposition brief to Ericsson's PI motion or that he essentially copy-pasted Ericsson's motion for a temporary restraining order (the TRO was unbelievably overreaching). What may very well undermine the credibility of the court below more than anything else, however, is the fact that Judge Gilstrap incorrectly accused Samsung of "the height of inequity (and hypocrisy)." That's a huge #FAIL. And it's not just an oversight--as I'll explain in a moment, a mistake that I made as well a few days ago--but in Judge Gilstrap's case it's connected to his extreme bias in this context.

Samsung's opening brief clarifies that "[a]s of this writing, all such actions [pending between Ericsson and Samsung] either assert non-SEPs, or assert SEPs but without seeking injunctive relief." But Judge Gilstrap falsely based his accusation of hypocrisy on the misperception that Samsung was seeking a U.S. import ban--called a "limited exclusion order"--against Ericsson in the International Trade Commission, a U.S. trade agency with quasi-judicial powers, over a bunch of SEPs. It turns out the asserted patents are actually non-SEPs.

I readily admit that I made the same kind of mistake just two days ago as I commented on the four ITC complaints brought by these parties against each other (two by each party). Without digging deep enough to learn that those are all non-SEPs, the references to 4G and 5G appeared to indicate there were SEPs involved. Not so.

When Judge Gilstrap got this wrong on January 11 (in his PI order), Samsung immediately filed a notice to alert him to the mistake he had made. Just like him, I, too, should have actually read the complaint in detail before jumping to a conclusion. From now on I'm not going to categorize a patent assertion as a SEP assertion unless a pleading says so or a patent-in-suit can be found in a SEP database. But if I miscategorize some patents-in-suit in a blog post, especially at a point where pretty much nothing has happened in the related cases yet and the possibility of a presidential veto is still there (simply because mobile network infrastructure is critical), it doesn't matter nearly as much as when a judge goes on his own search for further facts (instead of just relying on the record of the case before him), gets it wrong, and then scolds a defendant.

Neither Samsung nor Ericsson had mentioned that ITC complaint in their filings by the time Judge Gilstrap entered his PI order. He might look up the ITC docket routinely from time to time, or he saw Ericsson and Samsung mentioned in the news, or he googled for further information on the dispute.

If you--as a judge (here, Judge Gilstrap) or party (here, Ericsson)--hope for an order by a district court to be affirmed, you want it to come across as a well-reasoned and correct decision by a neutral (and not agenda-driven) judge. Once an appeals court gets the impression that something went wrong below, reversal becomes much more likely. In this case, even a partial reversal would already make a huge positive difference to Samsung.

It's funny, by the way, that even Samsung's lawyers made a small mistake: that opening brief repeatedly and consistently refers to "the United Kingdom Patent Court." That's not the official name of any court. What they mean is the England & Wales High Court (EWHC). Those megadisputes involve so many issues, so many patents, and so many jurisdictions that sooner or later all of us get confused about something.

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Top-notch antitrust experts award five stars to preliminary injunction against Google by Munich I Regional Court

The Munich I Regional Court (Landgericht München I) is my subjective "Technology Court of the Month" (no matter how often I disagreed with it on other issues, which may happen again anytime) as it handed down two key decisions in February that have the potential to make tech law history with repercussions throughout and potentially beyond the European Union:

This post focuses on the Google antitrust case.

I asked the press office of the Oberlandesgericht München (Munich Higher Regional Court) yesterday whether Google's appeal already had a case number and, maybe, a hearing date. They said an appeal had not been filed yet. But I'm sure that's going to happen shortly. If Google's PI appeal failed, it would theoretically still be possible for the full-blown main proceeding to have a different outcome, but it would be unlikely in this case, where the facts are pretty straightforward and the legal questions are crystal clear. However, in the main proceeding Google would be able to seek the equivalent of cert, while the regional appeals court is the final destination on the PI track.

I'm admittedly biased here because my own app development company is going to sue Google and maybe also Apple in Munich with direct references to certain holdings in NetDoktor v. Google (which I guarantee will not change a thing about how I view Apple's and Google's patent cases--in fact, I continue to keep my fingers crossed for Apple and Intel's joint antitrust action against Softbank-owned Fortress Investment). Given my own interest in antitrust action over gatekeepers using the critical nature of public health as a pretext for treating web publishers (in the NetDoktor case) and app developers (both Google and Apple) unfairly, it's all the more reassuring to see that totally impartial experts, too, heap praise on the NetDoktor PI decision:

Professors Justus Haucap (an economist the former chairman of Germany's Monopoly Commission, which advises the federal government on antitrust matters) and Rupprecht Podzsun (a legal scholar who is by now the undisputed number one among German competition law professors with respect to technology markets) awarded five stars to the Munich decision in the latest edition of their competition law podcast.

Both professors teach at the University of Dusseldorf. I met Professor Podszun at his previous university (Bayreuth) in 2014. That day I also had the honor to speak at his then-university alongside Judge Dr. Klaus Grabinski of the Federal Court of Justice about certain patent litigation topics.

In that podcast on the Munich NetDoktor v. Google decision, the professors agreed that the German federal government effectively became an economic operator by running a health information portal at taxpayers' expense, competing with private-sector offerings on the very opposite of a level playing field.

They note toward the end that even the half-hour duration of that podcast wasn't sufficient to highlight all that's remarkable about the well-reasoned ruling. But they managed to touch on various aspects, including the one I care about most: that the critical nature of health information doesn't serve to justify forcing or keeping high-quality offerings out of a market. The vertical cooperation challenged in NetDoktor was formed and launched last year, but even the COVID-19 pandemic must not be used for a pretext. The rule of law does not get infected by any virus.

Legal industry news service Juve (whose English-language spinoff Juve Patent I sometimes link to) reported on who represented the parties. The winning firm is Hausfeld, a firm with offices in the United States and Europe. In the U.S., Hausfeld focuses primarily on damages claims, and is suing Google on an indie app developer's behalf in a parallel case to Epic Games v. Google (Northern District of California). According to Juve, NetDoktor's lead counsel is Dr. Ann-Christin Richter. It was apparently the first time (but I guess not the last) for Hubert Burda Media, the media conglomerate that owns NetDoktor, to retain Hausfeld, and Hausfeld partner Professor Thomas Hoeppner ("Höppner" in German) has for years been counsel of record to a couple of publishers' associations of which the Burda group is a key member. Notably, Professor Hoeppner represented complainants against Google in the DG COMP investigation that resulted in the Google Shopping decision.

When the Supreme Court of the United States allowed the Pepper v. Apple class action over elevated App Store payment commissions to go forward, Hausfeld took a pro-developer position: Taking a Bite at the Apple: Ensuring a Level Playing Field for Competition on App Stores (which is not only about Apple's Apple Store, but also addresses the Google Play Store).

Now that I've digressed into App Store Antitrust again, I'd just like to highlight--in closing--that this has been my most popular tweet in quite a while:

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Monday, February 22, 2021

Sisvel v. Haier II: no patent ambush defense against acquirer of standard-essential patent, Germany's Federal Court of Justice holds

The bad news is already in the headline: if you get sued in Germany over a standard-essential patent (SEP) and the original patent holder engaged in patent ambush (thereby defrauding the standard-setting process), but the party asserting the patent against you now acquired the patent subsequently to standardization, you don't have a patent ambush-based defense in Germany.

The good news--for me personally--is that the Federal Court of Justice of Germany has published a decision that validates something I wrote about two years ago.

In March 2019, Judge Dr. Thomas Kuehnen ("Kühnen" in German) of the Dusseldorf Higher Regional Court ruled on appeal brought by Huawei in the German part of its dispute with Unwired Planet, further to a hearing in which he had already lashed out the practice of privateering (operating companies assigning patents to trolls). In that March 2019 ruling, the Dusseldorf appeals court held that the ND (non-discrimination) part of FRAND precluded the acquirer of a patent from seeking royalties at a rate inconsistent with the licensing practices of a previous owner of that patent. In my commentary, I welcomed the result, but crticized the derivation very harshly as "legislat[ing] from the bench as if patent law were a parallel universe." I said so because Judge Kuehnen's theory involved the notion that the FRAND promise and all that goes with it attached itself to a patent just like "in rem" rights in connection real estate, where a right of way may allow neighbors to lay telephone lines on your property--as opposed to an inter partes agreement, which wouldn't give a future acquirer any rights.

Fast forward by almost two years, and the Federal Court of Justice--which is the highest court in Germany to hear patent infringement and related antitrust cases (unless someone raises a constitutional issue that the Federal Constitutional Court would hear)--has just published a decision it already made on November 24, 2020 in a Sisvel v. Haier case. The first Sisvel v. Haier ruling came down in May 2020, so this is now Sisvel v. Haier II.

Some of the new Sisvel v. Haier II holdings restate, reinforce, and clarify Sisvel v. Haier I. For example the court explains that both parties--SEP holder and implementer--have an obligation to contribute in good faith to the conclusion of a license agreement on FRAND terms, and that they have to do so "in a manner commensurate with the situation."

But there's also a new aspect that gets addressed in Sisvel v. Haier II:

"(c) Outside of the scope of the protection of successors in interest in accordance with Art. 15(3) Patent Act, affirmative defenses that the implementer of an invention was entitled to bring against a prior owner of the patent-in-suit cannot be raised against the patentee's successor. This particularly applies to the affirmative defense of a 'patent ambush.'"

Art. 15(3) Patent Act simply ensures that a licensee remains licensed even if the patent holder transfers the patent.

Statutory law doesn't say that a former patent holder's unclean hands--here, due to ambush tactics during development of the standard--can give rise to an equitable defense against a subsequent owner.

Judge Kuehnen's April 2019 decision wasn't about patent ambush. But it was based on the general notion--which I sharply disagreed with though I liked the case-specific outcome--that certain rights and obligations (beyond just an already-granted license) attach themselves to a patent and survive any number of patent transfers.

The Federal Court of Justice has now clarified that, other than Art. 15(3) Patent Act on licenses surviving patent transfers, the acquirer of a patent is not responsible in any way for what a prior owner of that patent did.

If a given SEP was previously licensed at a lower rate than the one an acquirer is demanding now, that may very well be taken into consideration by a court. The terms of comparable license agreements matter, and if a license deal involves the same patent and a similarly-situated licensee, it may be particularly comparable and, therefore, a court may afford it a lot of weight in the FRAND analysis. Nevertheless, an acquirer of a patent doesn't engage in discriminatory treatment of licensees only because an inconsistency between the terms it is seeking now and the ones on which a prior owner of the same patent granted someone a license.

If an implementer of a standard has a patent ambush defense, it may just have to bring that one as an antitrust damages claim against the original patent owner who participated in the standard-setting process. And if a prior holder of the patent contented itself with substantially lower royalties than its acquirer, that may inform the FRAND analysis, but does not all by itself constitute discrimination.

It's disappointing that the situation described in this post incentivizes privateering. A patent holder may formally "sell" the patent to an acquirer, though actually retaining most of the revenues, and implementers will find it harder to defend themselves against the acquirer than they could have defended themselves against the original owner. That's suboptimal to say the least. Maybe an EU SEP directive or some other piece of legislation could do something about it and could make privateering less profitable. But under the statutory framework as it stands, I can't disagree with the Federal Court of Justice on the availability of a patent ambush defense.

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UK competition court doesn't doubt the merits of Epic Games' antitrust injunction claims against Apple, Google--just forum non conveniens for Apple's U.S. corporate parent

As MLex's Lewis Crofts mentioned on Twitter, Fortnite and Unreal Engine maker Epic Games

At this stage, the UK court had to make a purely procedural decision: whether or not Epic's complaints should be served on non-UK-based entities Epic wanted to sue in the UK. The court has no problem with service on UK-based Apple and Google entities, and even some Ireland-based (not UK, but EU) Google entities as far as Epic is seeking injunctions against them. With respect to those Irish entities, what helped Epic is timing: it filed before Brexit took effect.

The ideal outcome for Apple and Google would have been if the court had held that there was no "serious issue to be tried." That would have been comparable to an outright dismissal of a case not well pled. No such deficiency was identified here with respect to the injunctions Epic is seeking--just with respect to mere declarations of breach. The court furthermore evaluated whether Epic had "gateways" (reasons for which to bring cases against non-UK entities in the UK). But what ultimately did result in the dismissal of U.S.-based Apple Inc. from the case is simply that the British court determined the Northern District of California was the forum conveniens, and that, at a minimum, London wasn't a better choice.

The court also held that some of its claims didn't entitle Epic to sue certain non-UK Google entities in the UK, but the remaining claims ("claims for breach of the Chapter I and Chapter II prohibitions under the CA 1998 as regards the alleged 'Restrictive Terms' in the DDA and the removal of Fortnite from the Google Play Store") still give Epic a potential path to victory there. The court determined that "there is no issue to be tried as regards the claims for the two declarations in the Apple and Google actions" (also noting that "it may be unfortunate that declaratory relief is not included as a remedy available in the [Competition Appeal] Tribunal").

In the Unwired Planet patent case, the UK Supreme Court actually took a very permissive approach to forum conveniens, holding that even if a smartphone maker generated only 1% of its worldwide sales in the UK, a UK court might nevertheless set a worldwide royalty rate for a standard-essential patent portfolio, and if the defendant didn't agree to a license deal on those terms, it would face a UK-wide sales ban. Here, however, a UK court exercised restraint in jurisdictional terms.

Even if Epic had received the go-ahead today to sue Apple Inc. in London, a decision in the UK would still have taken longer than the California case, in which the trial is only a few months away. The discovery cutoff date in the U.S. case was one week ago.

Today's UK decision doesn't help Google in any way, nor does it solve Apple's real problem, which is that its App Store monopoly is under pressure in multiple jurisdictions.

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Sunday, February 21, 2021

Ericsson's escalation strategy against Samsung may provoke another presidential veto against U.S. import ban--5G at stake

Ericsson v. Samsung is the first massive 5G patent spat in the industry. Unless the two "lovebirds" settle reasonably soon, the dispute threatens--or in some people's eyes perhaps promises--to raise a number of important issues. One of them involves antisuit injunctions, especially multiple-anti ones. Samsung's reply brief in support of an expedited Federal Circuit appeal of Ericsson's anti-antisuit injunction from the Eastern District of Texas reinforced the need for speed, but also revealed the kind of playing field on which Ericsson wanted to arbitrate the terms of a cross-license. Samsung's motion succeeded in part, and its opening brief is due tomorrow (Monday, February 22), but Ericsson will have until April 2 to respond--ample time, as it wanted.

Ericsson has been pursuing an escalation-centric strategy in the early stage of the parties' renewed (the last one get settled seven years ago) dispute. Ericsson has escalated in territorial terms by bringing patent infringement cases in Germany, Belgium, and the Netherlands (according to Juve Patent) after its initial infringement claims in Texas. In the U.S., Ericsson also went to the ITC at the earliest opportunity this year:

  • On January 4, 2021, Ericsson filed a request for a U.S. import ban against Samsung mobile devices and TV sets. On February 2, the ITC opened the related investigation (PDF).

  • Samsung--like in its dispute with Huawei a few years back--just keeps things symmetrical and matches any of Ericsson's patent assertions with offensive claims of its own. On January 7, three days after Ericsson's first complaint, Samsung filed an ITC complaint targeting Ericsson's mobile base stations. The U.S. trade agency with quasi-judicial powers opened the related investigation on February 8 (PDF).

  • It's not unheard of for a party to bring a second ITC complaint against a party while another one is pending. However, the ITC can provide its swift service to complainants only if they limit the number of claims, and a more conservative approach would be to file a second complaint about 6 to 12 months after the first one against the same party. Patience is not that much of a virtue in Ericsson's view, and maybe Ericsson thought that complaints targeting different device types wouldn't have to be spaced out anyway. On January 15, within less than a fortnight of its first complaint, Ericsson filed one targeting Samsung's mobile base stations.

  • On February 4, Samsung brought a second complaint as well. The accused products are, again, base stations; Ericsson's doesn't make consumer electronics products anymore, which is part of the problem because Ericsson has become a hyperaggressive patent monetizer since its exit from the mobile handset business.

The asserted patents are related to 4G and 5G, but so far they don't appear to be declared-essential patents.

The public interest factor at the ITC is more of a formality at the early stage: typically the ITC will institute an investigation regardless of whether the accused products are critically important. Still, some arguments are made, and here Ericsson claims that its own mobile base station as well as Nokia's could easily replace Samsung's, while Samsung says that its products and Nokia's are sufficient to serve the U.S. market even if Ericsson's products were banned.

In reality, Samsung doesn't favor SEP injunctions anymore. About ten years ago, they were countersuing Apple over SEPs, and at that point they were interested in maximum leverage from that category of patents. But even in the Apple-Samsung dispute, SEPs quickly lost relevance. Samsung is far more interested in a strong product business than Ericsson, which wants to have it both ways but increasingly relies on patent licensing revenues.

In that Apple-Samsung dispute, the ITC actually decided in Samsung's favor, but the import ban (which wouldn't even have impacted Apple's flagship products at the time) never took effect because the United States Trade Representative (USTR), to whom President Obama had delegated his veto powers against ITC import bans, vetoed the exclusion order as he was concerned over SEP enforcement harming the economy.

A presidential veto might happen again. With Ericsson and Samsung battling each other in the ITC, the theoretical outcome would be that--of the big three vendors in a market from which Huawei is excluded for trade-war reasons--only Nokia could import 5G-capable mobile base stations into the U.S. market. And occasionally even Nokia is under attack.

History might repeat itself in a way next year. And this time around, Samsung would welcome a presidential veto, provided that it's symmetrical, which I'm sure it would be.

Samsung's foray into the 5G mobile network infrastructure market makes it the primary beneficiary of Huawei's purely political problems--and a challenger Ericsson and Nokia must be very afraid of. Besides generally seeking to maximize the income stream from its patent portfolio, Ericsson presumably hopes to make an impact on Samsung's competitiveness. Escalation can be a showing of strength, and one of desperation. It's too early to tell for sure which one of the two is driving Ericsson's decisions, but there are signs of Ericsson being a bit nervous, such as its recent dissent from a totally non-binding European Commission SEP expert group report that was more of a collection of ideas and views than anything else.

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