Wednesday, July 8, 2020

Apple, Intel must amend antitrust complaint against Softbank-owned industrial-scale patent troll conglomerate Fortress Investment

In November, Apple and Intel jointly filed a complaint that practically constituted an amended version of one previously brought by Intel against Softbank-owned Fortress Investment, a group that operates a number of patent troll firms such as what may be the most infamous patent troll in history, Uniloc. This morning a docket entry made an order by United States District Judge Edward M. Chen (Northern District of California) publicly known, but the actual document is sealed for the time being:

(UNDER SEAL) ORDER granting [111], [114] Motion to Dismiss. Plaintiff granted leave to amend. Signed by Judge Edward M. Chen on 7/7/2020. (afmS, COURT STAFF) (Filed on 7/7/2020)

This outcome--a dismissal, but with a chance for Apple and Intel to amend the pleadings--is consistent with what Law360 expected to happen based on a mid-June hearing.

Short of knowing what exactly the order says, I can't elaborate, but the decision per se warranted a post. It's a safe assumption that Apple and Intel will give it a new try, and Fortress will likely argue that even the amended pleadings are lacking and wanting. They may get support once again from Antitrust Assistant Attorney General Makan "Macomm" Delrahim, whose primary objective it is to strengthen the owners of weak patents--never mind if it involves siding with foreign and foreign-owned entities against some of America's most innovative and iconic companies (Make America Great Again, anyone?). However, "Macomm" won't have too many more months in office, judging by the polls (which I find very disappointing, though I can relate to many voters' disenfranchisement with the Trump Administration given what went wrong this year in a couple of extremely important contexts).

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Tuesday, July 7, 2020

Supreme Court affirmance of API copyrightability ever more likely--deference to jury (with respect to "fair use") is Google's last line of defense

For a few years I've limited my commentary on the Oracle v. Google Android-Java copyright case to procedural matters, without reiterating the reasons for which I believe the thousands of lines of Java API code asserted in that case are protected by copyright, and their use by Google was unfair. While I agree with Oracle on substance, I did publicly support Google's successful cert petition because I care about the key issues far more than about specific cases.

I'm going to continue to steer clear of arguing the issues. But I am still following the proceedings, and I have bad news for those who hated the Federal Circuit's copyrightability holding: with respect to copyrightability, it looks like Google is more likely than not to lose.

Due to the coronavirus crisis, oral argument was postponed on very short notice in mid-March, and later rescheduled for the next term (October 2020 at the earliest). Then, in early May, the following order was entered:

The parties are directed to file supplemental letter briefs addressing the appropriate standard of review for the second question presented, including but not limited to the implications of the Seventh Amendment, if any, on that standard. The briefs, not to exceed 10 pages, are to be filed simultaneously with the Clerk and served upon opposing counsel on or before 2 p.m., Friday, August 7, 2020.

This is about deference to the jury with respect to "fair use." The jury had found in Google's favor, so this is, per se, a potential Get Out of Jail Free card for Google, and apparently one that a group of law professors had raised in an amicus curiae brief. But it also means Google's non-copyrightability argument is struggling--or may already have failed definitively--to get traction with the top U.S. court for the second time in about six years.

That's simply because the second question ("fair use") won't be reached unless the first (copyrightability) is answered in the negative for Oracle. "Fair use" is a defense to infringement, and you can't infringe what isn't protected in the first place.

It's unclear how many justices proposed the request for supplemental briefing. It might have been only one, but it will have taken support from several others for this order to be entered. There is quite a possibility of multiple justices--potentially a majority--already having concluded that Google can't prevail on its non-copyrightability argument. The hearing was postponed on such short notice that many if not all of the justices are quite informed; at a minimum, their clerks had concluded their analysis at that stage.

If the Supreme Court answered the "fair use" question in Google's favor on the basis of jury deference, it might or might not discuss the standard for software copyrightability in detail. Whether the Federal Circuit's copyrightability holding would be affirmed explicitly or (by reaching "fair use") mostly implicitly, the copyrightability of API code would continue to be a reality in the United States.

In the same scenario (and I'm not suggesting that it's likely--the fact that the SCOTUS requests additional briefing doesn't mean it will necessarily agree with Google on jury deference), those opposing the protection of API code under copyright law wouldn't really make headway beyond this particular case (and even in that one, there'd simply be a remand to the Federal Circuit). It would be a procedural decision, centered around the standard of review, far short of agreeing with Google's "fair use" defense in its own right--and next time a different jury, ideally instructed by a different (more balanced) judge, might simply find otherwise. It wouldn't be precedential with respect to the substantive issue.

After Oracle won the first of two rounds in the Federal Circuit (with Orrick Herrington Sutcliffe's Joshua Rosenkranz as lead counsel), Google already requested certiorari, but the Supreme Court declined. That fact, combined with the May 4, 2020 order that implies copyrightability, suggests quite strongly that Google is facing an uphill battle in that regard.

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Thursday, July 2, 2020

European Commission circling above--and still failing to help resolve--patent licensing dispute over automotive components

Last week, MLex published a report by Khushita Vasant (not paywalled, though most MLex reports are available only to subscribers, which is why I rarely have the chance to link to them) on a "third round of questions" the European Commission's Directorate-General for Competition (DG COMP) expects automotive suppliers to answer sometime this week.

MLex says the questionnaire "also asks carmakers about 'have-made' rights in Nokia's license offers." An academic paper recently discussed the shortcomings of such "have-made rights", and I commented on it. The Bundeskartellamt (Federal Cartel Office of Germany) summarized the parties' positions, including Nokia's offer to grant "have-made rights," in its submission to the courts hearing Nokia's German patent infringement complaints against Daimler, but clearly wasn't persuaded that the availability of "have-made rights" would obviate the need for judicial clarification on the availability of a full component-level license affording suppliers freedom to operate.

On the one hand, it's a positive sign that Daimler's and its suppliers' antitrust complaints against Nokia are still being preliminarily investigated by DG COMP. On the other hand, the Commission's hesitance to launch formal investigations is in stark contrast to a variety of cases involving American companies (you name them).

In recent months I heard from various sources that Nokia's "have-made rights" and similar proposals were flatly rejected by automotive suppliers from Europe, America, and Asia in response to the previous round of questions. If the Commission had wanted to, it could have considered that feedback a clear indication just like in scenarios in which it performs a market test of potential remedies. Here, the market responded with an unequivocal thumbs-down, and there's no reason why that should be different this time around.

In the weeks and months ahead, three German courts will decide on the well-thought-out suggestion by the Federal Cartel Office to refer certain questions of EU antitrust law to the CJEU. Meanwhile, DG COMP will have to decide on whether or not to launch formal investigations of Nokia's conduct. Should the EU's top court ultimately find that Daimler's suppliers had been entitled to a full SEP license all along, DG COMP would look bad--in terms of a dereliction of duty--for not having taken action. I believe the proper course of action would be for the Commission to launch formal investigations, which the Commission could stay pending the CJEU ruling on the underlying competition issues.

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Monday, June 22, 2020

BREAKING NEWS: Federal Cartel Office of Germany asks regional courts to refer component-level standard-essential patent licensing questions to CJEU, disagrees with Nokia

BREAKING NEWS

One of the most well-respected competition enforcement agencies in the world, the German Bundeskartellamt (Federal Cartel Office), has dealt a major blow to Nokia's abusive standard-essential patent assertion campaign against Daimler and, by extension, Daimler's global suppliers. As a result, the Mannheim Regional Court has already postponed the ruling it was slated to announce tomorrow (June 23) to August 4, 2020.

On June 18, Joerg Nothdurft, one of the highest-ranking officials of the Federal Cartel Office, sent a 24-page fax to the Mannheim and Munich courts, outlining the antitrust agency's perspective on the question of component-level licensing. In what is comparable to a Statement of Interest by the DOJ in U.S. cases or an amicus curiae brief, the Federal Cartel Office moves to stay Nokia's SEP infringement cases against Daimler and to refer multiple outcome-determinative legal questions to the Court of Justice of the EU (CJEU) in Luxembourg.

The letter notes that two of Daimler's suppliers--Continental and Valeo--drew the office's attention to certain issues.

The Federal Cartel Office proposes to request the CJEU to opine on a set of specific legal questions:

  1. The first question is whether it constitutes an abuse of a dominant position under EU competition law to pursue injunctive relief against an end-product maker while refusing to fully license its suppliers.

  2. The second question relates to whether a SEP holder is "entirely free" to choose the target of an infringement action regardless of its position in the supply chain.

  3. The third question outlines specific cases in which the Federal Cartel Office is inclined to believe that suppliers are entitled to a license.

  4. The fourth and final question raises the issue of whether SEP holders are free to offer a license only to a particular level of the supply chain.

The Federal Cartel Office notes that the European Commission's Directory-General for Competition (DG COMP) has not yet decided whether to open formal investigations, but that its failure to do so does not suggest that Nokia's course of action is in compliance with EU antitrust law.

I interpret the Mannheim Regional Court's postponement of tomorrow's decision on very short notice as a sign that the court originally intended to order a Germany-wide sales ban, but is now forced to give this further thought. I cannot imagine that Judge Dr. Kircher is still going to enjoin Daimler. And if he did so, his injunction would be stayed by the appeals court in no time.

This development is the worst news ever for Nokia and its partners-in-crime (mostly the Avanci gang) in the automotive patent wars. Nokia's and its trolls' (as well as Sharp's) infringement campaign is going to grind to a halt now. The Court of Justice of the EU will decide. DG COMP may or may not launch formal investigations now, but in the event of a referral of those legal questions to Luxembourg, the Commission would most likely await the outcome before taking specific action against Nokia. I suspect that the Federal Cartel Office filed its amicus curiae brief with DG COMP's unofficial blessings.

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Wednesday, June 17, 2020

Dusseldorf Regional Court reinforces position on access to standard-essential patent injunctions: analysis starts with SEP holder's licensing offer

On Monday, the press office of the Landgericht Düsseldorf (Dusseldorf Regional Court) issued a press release on six Conversant v. Huawei and ZTE cases scheduled to go to trial tomorrow (Thursday, June 18, 2020). Of note, the court that adjudicates more patent infringement cases than any other European court (though most smartphone cases, including cases over cellular connectivity in cars, go to the rocket dockets in Mannheim and Munich) reiterates its position on the availability ofcinjunctions over standard-essential patents:

"Nach der Rechtsprechung des EuGH darf ein Unterlassungsanspruch aus einem standardessentiellen Patent, für das eine FRAND-Erklärung abgegeben wurde, nur geltend gemacht[] werden, wenn der Patentinhaber dem lizenzwilligen Benutzer zuvor eine Lizenz zu fairen, angemessenen und nicht diskriminierenden Bedingungen (FRAND) angeboten hatte."

My unofficial translation:

"According to CJEU case law [i.e., Huawei v. ZTE], injunctive relief over a FRAND-pledged standard-essential patent may only be sought if the patentee previously offered to the willing licensee a license on fair, reasonable, and non-discriminatory (FRAND) terms."

The above sentence reaffirms that the starting point of the FRAND analysis will be what the SEP holder demanded. Should the SEP holder have failed to discharge its FRAND duties, no injunction will issue.

The three leading German patent litigation venues continue to approach and adjudge this legal question inconsistently:

The legal test is extremely important, but let's not forget that a lot depends on how a test is applied. If the analysis begins with the SEP holder's offer, but even the most egregious of royalty demands are deemed to be FRAND-compliant, it won't really help. Conversely, if a court approaches a case like the Mannheim Regional Court's Second Civil Chamber in Nokia v. Daimler, but doesn't set the bar unreasonably high for the implementer of the standard, then the outcome may still be pro-competitive. That's why next week's Mannheim ruling will be a particularly interesting one to analyze.

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Monday, June 15, 2020

Without transparency in patent ownership, the Avanci pool borders on a scam operation that harms the IoT industry

Avanci isn't the first patent pool to employ a great deal of spin-doctoring, but its homepage is particularly "rich." Take the "Enabling the IoT" headline (that's one of the pages in its "Marketplace" section): baseband chipset makers undoubtedly enable the IoT, as do makers of connectivity modules that contain such chips and additional components, but Avanci refuses to grant them exhaustive patent licenses--which is an impediment (rather than conducive) to the further development and widespread adoption of IoT technologies

No less absurd is the claim that Avanci's pricing (leaving the question of component-level licensing aside for a moment) is fair, reasonable, and non-discriminatory (FRAND). Those of us following the Nokia v. Daimler litigation series know that Nokia makes a clearly supra-FRAND royalty demand (several times what Nokia gets per smartphone) and argues that it gets a similar amount as its share of Avanci's royalty income.

By far the most insane claim on Avanci's website is, however, the part where they talk about the "goal of bringing [...] transparency and predictability to the [licensing] process." Give me a break. On that whole damn website there's no such thing as a list of the patents you can license through Avanci. Nor do they publish their licensing terms. By contrast, there are patent pools such as this one (MPEG LA's AVC/H.264 pool) that do both: they publish their license agreements (including the fees), and they provide a patent list. The length of such a list is no excuse: they could upload a PDF that contains them all and/or provide access via a database query interface. Avanci's claim to be transparent is, sadly, an insult to human intelligence. That website is the epitome of intransparency. It couldn't realistically be any less informative.

Abusers like Avanci (and its worst members in that regard) give patent pools a bad name. I'd like to highlight two new academic papers in this context. First, Orrick Herrington &, Sutcliffe's John J. "Jay" Jurata and Emily Luken discuss the desirable and (in an increasing number of cases) undesirable effects of standard-essential patent pools in Glory Days: Do the Anticompetitive Risks of Standards-Essential Patent Pools Outweigh Their Procompetitive Benefits? That paper flags some very relevant concerns.

Second, with respect to the specific issue of transparency, three University of Bordeaux researchers just published a paper on Non-practicing entities and transparency in patent ownership in Europe that was funded by a lobbying group whose largest member, Google, neither practiced nor promoted transparency in patent ownership in the early to mid 2010s. They even made threats based on patents they claimed to hold but declined to disclose. Then, Google is nowadays also a member of the Fair Standards Alliance, though its then-subsidiary Motorola Mobility was one of a very few companies ever to be held liable for FRAND abuse (by the United States District Court for the Western District of Washington, affirmed by the Ninth Circuit). In a world in which we usually see the opposite trend (with ever more companies resorting to aggressive patent monetization after losing out in the marketplace), such defectors from the dark side are a welcome exception.

The paper on (the lack of) transparency raises the issue of patents being transferred in the middle of licensing negotiations without notice to a licensee. That's a serious issue, and one that Avanci badly needs to address.

If you negotiate an Avanci license today and sign a contract tomorrow, you may find yourself on the receiving end of litigation involving patents that you thought were part of your Avanci package until you found out that those patents were transferred without you having any way of knowing.

Some of Avanci's most important contributors engage in the ignominious practice of "privateering" (letting trolls assert parts of their portfolios on their behalf, with so-called patent "transfer" agreements often just reducing the patent assertion entity to a service provider and agency while the original patent holder is the main beneficiary in commercial terms).

So far, the victims of privateering were mostly smartphone makers like Apple. But while we're on the subject of the Internet of Things that Avanci falsely pretends to promote, it's worth noting that the IoT sector is increasingly impacted by privateering-style patent infringement suits.

Panasonic--an Avanci contributor--gave a bunch of LTE-related SEPs to a troll named Swirlate IP, which has brought five U.S. patent infringement complaints against the IoT industry over former Panasonic patents that the industry at large might have been led to believe were part of the Avanci pool:

A second Panasonic privateer, Nitetek, is suing ChargePoint in the Northern District of California.

Avanci offers a license to a portfolio of portfolios, but how many of those patents are "phantom patents" that have in reality already been assigned to trolls, which effectively results in double-dipping?

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Thursday, June 11, 2020

Sharp's blunt swords: two patents-in-suit against Daimler likely invalid, infringement cases got stayed

Last summer, five Sharp v. Daimler patent infringement cases (two of which were filed in Mannheim, the other three in Munich) became known through a filing in a U.S. Continental v. Avanci case. When the Munich I Regional Corut scheduled a couple of first hearings, I provided an update in September. Now it's time for a catch-up, as a couple of cases have been stayed and the other three are going to trial soon:

  • In its first-filed case against Daimler, Sharp is asserting EP2154903 on a "mobile communication system, base station device, and mobile station device" in Mannheim (case no. 2 O 46/19; complaint filed on 12 April 2019). As per a May 26, 2020 decision, that case has been stayed pending the resolution of a nullity action the infringement court deemed meritorious.

  • In the second Mannheim case (over EP2129181 on a "mobile communication system, base station apparatus and mobile station apparatus"; case no. 2 O 87/19), Sharp had no reasonable alternative to a stipulation to stay. Otherwise the case would have gone to trial later this month.

    So the current score is "two down, three to go."

  • The first Sharp v. Daimler Munich trial has been scheduled for July 23, 2020 (Seventh Civil Chamber; Presiding Judge: Dr. Matthias Zigann). The patent-in-suit is EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method," and the case no. is 7 O 8818/19. The complaint was brought on June 28, 2019.

    On the same day, the same court will also hold an additional trial in a Nokia v. Daimler case.

  • A couple more Sharp v. Daimler cases will be tried in Munich on November 3, 2020 and the following day (case no. 21 O 8609/19 over EP2854324 on a "communication system and mobile station apparatus" and case no. 21 O 9918/19 over EP2312896 on a "base station device, mobile station device and corresponding communication methods using carrier aggregation").

Sharp is a contributor to the abusive Avanci patent pool that makes supra-FRAND royalty demands and declines to license component makers. It's more of a gang than a pool, and its level of coverage (of the cellular SEP landscape) is far lower than Avanci likes to pretend, as I'll discuss in another post very soon.

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