Wednesday, February 8, 2023

Observations on the CMA's full 277-page provisional findings report concerning Microsoft's acquisition of Activision Blizzard

After regular UK office hours, the Competition & Markets Authority (CMA) published additional documents, including the full 277-page version of its provisional findings (PDF). Having studied that one, I'd now like to share just a few general observations as a follow-up to my previous post (UK antitrust authority is fine with Microsoft acquiring Candy Crush, and even for Call of Duty does not rule out 'access remedies': major progress since previous statements).

  • The CMA's approach to market definition can be described as saying "OK, we realize we can't define markets as narrowly as we might want to, but we have a wonderful backdoor: we can achieve the same effect through what we call a competitive assessment." I have my doubts about whether that trick, especially to the extent the CMA relies on it, is appeal-proof.

  • Not only does the CMA decline to adopt some of Microsoft's positions but it doesn't buy some of Sony's claims either. Example: "However, we consider that [Sony Interactive Entertainment]'s estimate overstates [Call of Duty]'s importance."

  • The legal standard at this stage is a balance of probabilities, but in a number of places that are key to the CMA's theories I still found words like "may", "might", and "could", even including the final culminating sentence of the entire report:

    "We have also provisionally concluded that the creation of that situation may be expected to result in an SLC in the supply of console gaming in the UK and in the supply of cloud gaming services in the UK, in each case due to vertical effects resulting from input foreclosure." (emphasis added)

  • While that wouldn't be a ground of appeal, I still consider the following a very relevant question:

    If the CMA is all that concerned about content- and feature-based foreclosure strategies that a challenger might engage in (and the provisional findings don't claim that the market would "tip"--in fact, they say that a tipping point isn't required), why isn't the CMA then investigating the undisputed market leader's various agreements with game makers--including the one Sony has in place with Activision Blizzard for Call of Duty--from an exclusive-dealing angle?

    The "as efficient competitor" test wouldn't be a problem here.

  • With a view to what the CMA thinks of Microsoft's 10-year licensing offer to Sony, one has to look at all of the references to that potential remedy. It's fair to say that the CMA is not saying anything that would generally encourage vertical acquirers to offer behavioral remedies, but it's also a fact that the CMA primarily just declined to consider a contract that Sony hasn't signed and that is still subject to change. What's certainly good is that the CMA recognizes Microsoft has always honored comparable agreements after other acquisitions, particularly also vis-à-vis Sony.

    It's not going to be easy for Microsoft to overcome the CMA's reservations concerning contract-based remedies, but looking at the full-length report and the notice of remedies together, I stand by my view that there can be a solution. Sony is always going to reject everything, but what if Sony is at some point unable to present a single convincing (and good-faith) reason to say no? The decisive phase is only beginning now.

  • In those provisional findings, the CMA is being the devil's advocate and assuming the worst that could happen. But the closer it gets to the point of a final decision, the more it will come down to whether there is numerical evidence as opposed to someone believing (or claiming to believe) something.

Share with other professionals via LinkedIn:

UK antitrust authority is fine with Microsoft acquiring Candy Crush, and even for Call of Duty does not rule out 'access remedies': major progress since previous statements

The Competition & Markets Authority (CMA) of the United Kingdom has just announced its provisional findings according to which (summary (PDF)) the antitrust agency has two competition concerns relating to Microsoft's $68.7B acquisition of Activision Blizzard King (NASDAQ:ATVI):

  1. vertical foreclosure in the console market (Activision Blizzard games being potentially withheld from Sony's PlayStation)

  2. vertical foreclosure in the market for cloud gaming services (Activision Blizzard games being potentially withheld from competitors to Microsoft's Xbox Game Pass offering)

The notice of possible remedies (PDF)

  • states the CMA's well-known standard approach that structural remedies (which in the end come down to either prohibiting a deal altogether or requiring the divestiture of one or more business units) are considered the way to address vertical concerns reliably and without requiring complicated monitoring and enforcement, but also

  • expresses a certain degree of willingness to consider access remedies, which the CMA considers to be a category of behavioral remedies.

  • The CMA would also listen to any other ideas, but for now I believe the discussion will center on whether a divestiture or prohibition is legally defensible--even taking into account the fairly high level of deference that CMA decisions are afforded--and whether access remedies would be appropriate and workable in this case.

Note that the CMA's thoughts concerning potential divestitures are primarily about Call of Duty, possibly the entire Activision label, and maybe Blizzard Entertainment on top, but King (Candy Crush) is not mentioned. This means the CMA has no competition concerns whatsoever concerning that game (a game of which I've mastered well over 1,400 levels).

Here's my initial reaction, without having been able to digest everything in detail yet:

I still can't say that I agree with the CMA, and as an app developer I'm disappointed that the potential benefits of the deal to mobile app makers like me don't seem to be taken into consideration. But I wholeheartedly applaud the agency for the tremendous progress it has made in the course of this investigation. I have no idea what conversations they had, and what written communications they received beyond the ones they made public. But what the CMA has published today--while still being too aggressive for my taste and failing to see the procompetitive benefits such as on app distribution as I just mentioned--is reflective of a far better understanding of the issues:

  • The CMA has dropped that independent theory of harm about Microsoft already owning Windows Azure (cloud service) that I called "off base" last fall. This validates my reaction. I wouldn't have stated my views so harshly if I hadn't been totally convinced that I was right and they were wrong. (I still think they're wrong by referring to Windows, which is an open ecosystem, and Azure, which is a commodity, in the cloud gaming context.)

  • While I struggle with the notion that a competition authority seeks to protect the market-leading console market leader (Sony), today's CMA documents make it clear that the focus is much more on the second theory of harm, which is about cloud gaming. (Even there, Sony doesn't seem to be genuinely worried about Microsoft, but at least it's a nascent market and not one in which Sony has been the undisputed leader for two decades.)

  • The notice of remedies reiterates the CMA's preference for divestitures, and I believe there comes a point where a long-term license is closer to a structural than a behavioral remedy. At any rate, and at risk of appearing naïve, I do believe the CMA that they are sincere about their preparedness to explore access (i.e., license-based) remedies. My reading of the notice of remedies is that such remedies may very well be deemed acceptable in the end, provided that

    • the terms are crystal clear,

    • their effectiveness is obvious,

    • they don't require any monitoring (which should be a non-issue because any console makers or cloud gaming service providers are sufficiently large and sophisticated organizations that they will take care of this themselves, and inform the CMA if need be), and

    • the CMA itself won't have to worry about enforcement (which I believe is a non-issue for the same reason as stated in the previous bullet point: the beneficiaries of any such commitments have all it takes to defend their interests).

My personal opinion is still that no remedies are needed here because there is nothing to be cured in the first place. I furthermore believe that even if any residual concerns over "cloud gaming" remained, they are eclipsed by the positive effects that the deal can have on mobile ecosystems (by creating new distribution avenuues that can serve as a competitive constraint on Apple and Google). But I can separate those views from my analysis of what the CMA has put out today versus what I saw from them last year. I think the trend is very positive. The jury is still out on what remedies will ultimately be deemed sufficient, but to me the CMA appears far more constructive than the FTC at this stage.

Let me put it this way: the CMA has certain preferences and principles, but what I've read so far (and after this post I'm going to read everything else in full detail) does not come across as the position of a dogmatically entrenched competition enforcer. I think they are being constructive in their way, and I hope I won't be proven wrong. The evolution of the CMA's thinking on where the issues are (which includes that the console part is clearly just priority #2) suggests to me that there can be a further evolution of the agency's perspective on reasonable and effective remedies.

Here's my current timetable--which I first published last week--for the merger reviews and litigations in four key jurisdictions (click on the image to enlarge):

Here's a table of the key acronyms:

N.D. Cal.United States District Court for the Northern District of California
MTD(Microsoft's) motion to dismiss (the so-called gamers' lawsuit)
prot orderprotective order (i.e., protection of confidential business information)
PIpreliminary injunction
FTC(United States) Federal Trade Commission
CMA(UK) Competition & Markets Authority
DG COMP(European Commission's) Directorate General for Competition
NZ ComComCommerce Commission of New Zealand

I will update this chart in due course.

Share with other professionals via LinkedIn:

China-based 5G chipset designer UNISOC contributes its patents to Sisvel's 5G standard-essential patent pool for smartphones, other consumer electronics products

When new licensors join a pool, it always means that additional patent holders believe in the pool's success, and that the value proposition to licensees becomes more attractive. Depending on who joins, additional aspects may be relevant. That is the case with what Sisvel announced this morning: Shanghai-based 5G chip design company UNISOC (formerly known as Spreadtrum) has joined Sisvel's 5G Multimode patent pool for consumer electronics products (smartphones, tablets, etc.).

UNISOC--a fabless chip maker--is not to be confused with Uniloc, a patent licensing firm that drew the ire of Apple (with whom it has meanwhile settled) and others a few years ago.

In December I reported on the creation of that pool. The initial group of licensors included players like Mitsubishi, Siemens, and various telcos, which suggested substance (in terms of their portfolios) as well as a reasonable diversity as telcos are major implementers. It's a good sign for a pool when its terms are appealing to patent licensing firms as well as net licensees. UNISOC falls into a key category: it's a supplier to major implementers.

According to Counterpoint Research, UNISOC's global smartphone chipset market share in the period from Q2 2021 to Q3 2022 was 9%, making it the fourth largest player. The top three are Mediatek, Qualcomm, and Apple, but UNISOC has a greater market share than Samsung (which actually incorporates UNISOC chips into the Galaxy A series) and Huawei's HiSilicon combined (the latter is obviously affected by geopolitics). A particularly interesting UNISOC customer is realme, the low-price brand of the OPPO group. In certain markets, Nokia is asserting patents against realme as my Nokia-OPPO battlemap indicates.

The head of UNISOC's legal department, Yang Jiejing, contributed the following quote to Sisvel's press release:

"UNISOC is a world leading 5G chip design company. We look forward to cooperating with Sisvel through its 5G MM Licensing Program to offer implementers 5G patent license at a fair and reasonable rate, which will further promote the widespread adoption and development of 5G technologies."

Obviously, no patent holder would ever say "we joined pool X because it's a tremendous vehicle to extract supra-FRAND royalties from implementers." That's why my plausibility check always involves a company's business interests. In this case, we are talking about a supplier of 5G chips, and particularly one from China and with major Chinese customers, including some rather price-sensitive ones. That, to me, serves to validate my initial reaction, which was that the pool rate would easily be deemed FRAND (should a court reach that question).

At a Licensing Executives Society International webinar last month, Sisvel president Mattia Fogliacco explained his firm's efforts to offer palatable licensing terms. Those efforts include the Licensing Incentive Framework for Technologies (LIFT), a mechanism that encourages early adoption and discourages hold-out. But like any other intermediary, a pool administrator primarily has to identify the right price points that bring both sides of the market together (and then has to execute effectively and efficiently).

After Via Licensing's exit from cellular SEP licensing, there has been some consolidation by virtue of former Via licensors joining Sisvel's pool. Things should go smoothly for this pool. Other licensors may very well follow UNISOC's example, but the ball is now primarily in the implementers' corner.

Share with other professionals via LinkedIn:

President Biden effectively reinforces push for Open App Markets Act in State of the Union speech: first SOTU reference to antitrust since 1979

"We must also fight inflation by improvements and better enforcement of our antitrust laws and by reducing government obstacles to competition in the private sector."

No, that was not (yet) a quote from the State of the Union (SOTU) address President Joe Biden delivered late on Tuesday. It's from then-President Carter's 1979 SOTU speech. But the ability of competition to combat inflation is a timeless truth. It took more than 40 years before a POTUS would bring it up again in a SOTU address. Here are the two most important competition-related takeaways from the 2023 State of the Union speech:

"Look, capitalism without competition is not capitalism. It's extortion. It's exploitation."

"Let's finish the job. Pass the bipartisan legislation to strengthen antitrust enforcement and prevent big online platforms from giving their own products an unfair advantage."

There were parts of the speech that drew a more enthusiastic reaction from Republicans, but also some that were highly controversial. There definitely is bipartisan support for the Open App Markets Act (OAMA), which wasn't mentioned specifically but matches the definition of "bipartisan legislation to strengthen antitrust enforcement" more than any other because of a 20-2 Senate committee vote in its favor.

It's a pity that the OAMA wasn't passed into law during the last term, despite near-unanimity at the committee level. As an app developer who complained about Apple and Google, I'm grateful to the Biden Administration for putting it back on the agenda, such as through a recent Department of Commerce report and now, especially, the mentioning of antitrust in the SOTU speech.

In order to build bipartisan consensus, however, it is suboptimal to call for "legislation to strengthen antitrust enforcement" as House Republicans have made it very clear they do not want to give more powers to FTC chair Lina Khan (and I, frankly, believe that what she is doing in the Microsoft-ActivisionBlizzard context does raise concerns). The way I view the OAMA is that it actually has the power to resolve certain issues through legislation. It's not about a full employment program for competition watchdogs. It's about producing positive effects, which ideally should even obviate the need for certain investigations and government lawsuits. That's what everyone should focus on in Washington.

The App Store problem is not a matter of opposing capitalism; it's about fighting neofeudalism, a tyranny, or to quote that SOTU speech, the problem is one of extortion and exploitation.

If Apple makes the rumored "iPhone Ultra" because some of its customers will pay sky-high prices to just own the most expensive iPhone, that's capitalism. I personally prefer Android (I used an iPhone as my primary phone for a few years and then remigrated to Google's operating system). But I have no problem with other people paying whatever they want to pay for the iPhone Ultra. Any money that Apple and other companies make that way is rightfully theirs. It's just that Apple must be prevented from exploiting and tyrannizing app developers. By the way, the previous post provided an update on App Store antitrust matters in Brazil and the UK.

On the subject of preventing the mobile gatekeepers from abusing their market power, let my refer you to two other websites:

Share with other professionals via LinkedIn:

Apple reiterates demand that Brazilian regulator's App Store antitrust investigation be shelved immediately and gets UK appellate hearing on March 10 (CMA market investigation)

Here's a couple of App Store antitrust updates related to investigations pending in Brazil and the United Kingdom (click here to go straight to the UK part).

In mid-January, Brazil's competition authority--Conselho Administrativo de Defesa Econômica (CADE), which translates as Administrative Council for Economic Defense--opened a full-blown investigation into Apple's App Store terms and practices further to complaints by Latin America's largest e-commerce company, Mercado Libre (in Brazil: Mercado Livre), and another regional player, Clique. A complaint by Mercado Libre is also pending in Mexico.

A week ago, Apple filed an answer to CADE's question concerning investigations in other jurisdictions that was, quite naturally, designed to understate the extent to which the App Store is the subject of antitrust inquiries around the globe.

Yesterday, Apple responded to another CADE request and provided a copy of its App Store Review Guidelines as well as a Portuguese translation of that document.

The two Apple entities who made the filing are both U.S. corporations: Apple Inc. (the parent company in Cupertino) and Apple Services LatAm LLC, a Delaware corporation. Apple insisted early on that Apple Computer Brasil be dismissed as a respondent because it sells only hardware and is not involved with the operation of the App Store according to Apple. I'm not sure that Apple's Brazilian subsidiary has no hand in this (the abuse in question occurs in the aftermarket, but hardware is a foremarket). Be that as it may, the App Store Review Guidelines were provided to CADE by those two U.S. entities.

The letter to which Apple's Brazilian counsel from the firm of Barbosa Müssnich Aragão attached the two versions of the App Store Review Guidelines comes with a ceterum censeo. Here's my translation of that second paragraph:

"Furthermore, Apple reiterates its legal and factual arguments raised on January 6, 2023, and its request for the immediate shelving of the present administrative inquiry, reserving the right to present other objections and evidence to underpin its arguments and to exercise its rights of defense."

Those legal and factual arguments were, however, considered by CADE. I discussed some of them in my commentary on the notice of the formal investigation: the usual arguments about privacy and so forth.

In light of Apple's latest filing, and just for the sake of reasonably comprehensive coverage, I should add that Apple also raised procedural objections, such as claiming that key passages of Mercado Libre's filings with CADE had not been disclosed to Apple. As a result of the launch of a formal investigation, Apple's lawyers now appear to have access to the case file, so there may be no more lack of visibility of what they need to know to properly represent their client.

For now I believe Apple's lawyers are just preserving their rights, especially with a view to an appeal of a final CADE decision, and doubt that there has been--much less continues to be--any violation of Apple's rights as a respondent to a CADE investigation.

UK Competition Appeal Tribunal schedules full-day Apple v. CMA hearing for March 10, 2023

This is a follow-up to my January 22, 2023 post, Apple apparently argues 'shall' means 'must' in appeal of UK antitrust authority CMA's decision to investigate mobile browsers and cloud gaming based on allegedly elapsed deadlines. The CMA's long-form name is Competition & Markets Authority. It's an increasingly important competition agency that some analysts believe will effectively decide whether Microsoft gets to consummate its purchase of Activision Blizzard. The CMA's provisional findings in that merger case are widely expected to be rendered this week. First there were reports that Microsoft expected the CMA to take a negative view of the transaction, but yesterday I saw a tweet that contradicted that view. Let's see. As an app developer who complained about Apple and Google, I just hope the CMA will recognize the ways in which Microsoft's acquisition of key mobile games such as Candy Crush can enable it to compete with the duopolists (in jurisdictions where the App Store is demonopolized, but the EU has enacted such rules and the UK legislature is working on them). After that little disgression into the CMA's presently biggest case, back to the Apple-CMA appeal before the CAT:

Unless I missed something because it was hidden somewhere behind a paywall, only this blog and the reporters who referenced it (thanks to Apple Insider and 9to5Mac!) informed their readers of what Apple's appeal turns on (the mandatoriness of the word "shall").

When I reported on this before, a case management conference was scheduled for January 24. That one was subsequently vacated. Instead, the latest from the CAT is that "[t]he hearing of the application has been listed on 10 March 2023 (with a time estimate of one day)." They will start at 10:30 AM UK time (click on the image to enlarge):

I hope the CMA will prevail over Apple on this one because its market investigation into mobile browser and cloud gaming would have major potential, but Apple has raised a reasonable question of legal interpretation in that appeal.

Two days before that appellate hearing, Geradin Partners will host a London conference to discuss the competition aspects of cloud gaming, with a CMA official (Alison Gold) being one of the panelists.

Share with other professionals via LinkedIn:

Tuesday, February 7, 2023

Sony is officially fighting Microsoft's subpoena in FTC's Activision Blizzard merger case: public filing confirms PlayStation maker brought motion to quash on Friday

This is a follow-up to my Saturday (February 4) post, First procedural dispute between Sony and Microsoft in Activision Blizzard FTC proceeding: Sony suggests it will cost many millions of dollars to answer Microsoft's questions. In that one, I reported on a motion that Sony had filed on Thursday and which became publicly accessible late on Friday. Sony asked the Federal Trade Commission's Chief (and only) Administrative Law Judge (ALJ) D. Michael Chappell for a fourth extension of time for its motion to quash or limit Microsoft's subpoena. See also Sony doesn't want to provide documents and/or witnesses Microsoft requested in Federal Trade Commission adjudicative proceeding regarding its Activision Blizzard deal.

Microsoft had previously waived its right to oppose three Sony motions for an extension. But when Sony wanted a fourth extension, Microsoft's position apparently came down to "enough is enough." Therefore, ALJ Chappell would have had to resolve the scheduling dispute. But he never had to:

A notice that was filed yesterday and just became public today (PDF) says that on Friday, Sony Interactive Entertainment "confidentially filed with [the FTC's in-house court] a motion to limit or quash Microsoft’s subpoena" and, therefore, "withdraws as moot its motion for extension of time."

The filing reveals that also on Friday, but prior to the motion to quash, Sony "filed a motion for leave to file a proposed reply in support of its motion for extension of time to move to limit or quash Microsoft’s subpoena." That means Sony asked ALJ Chappell for permission to reply to an opposition brief by Microsoft. Neither that motion for leave nor Microsoft's opposition brief are publicly discoverable by the time of publication of this post. But there must have been an opposition brief by Microsoft as Sony would otherwise not have had anything to (ask for permission to) reply to.

There are only two possible reasons for which Sony abandoned its motion for leave to file a reply and brought a motion to quash right away:

  • ALJ Chappell may have told Sony's counsel informally that the motion was going to be denied because a fourth extension is one too many.

  • Sony may have tried to reach ALJ Chappell's office on Friday, couldn't find out what was going to happen, and then brought its motion to quash because it was--in the absence of an extension--running out of time.

Either way, it shows that Microsoft was right to oppose Sony's fourth motion for an extension of time. If Sony had reasonably requested more time, the judge would simply have granted Sony's motion on Friday.

Sony is not just fighting Microsoft's subpoena: it's surprising, if not shocking, that Sony is also unwilling to comply with the FTC's own subpoena. First they asked the FTC to bring this case like no one else did. Then they don't want to answer questions. It's possible that ALJ Chappell also found that behavior bewildering, and that he had this in mind when he saw Sony's motion for a fourth extension of time.

The FTC should generally think again about whether it wants to follow that lawyer--a former FTC official and now a Cleary Gottlieb partner. He also urged the FTC to take a losing position in the Meta-Within context (see my analysis of the order denying the FTC's motion for a preliminary injunction) and told the FTC last week, via Bloomberg, not to worry about losses. Of course he would say that because he knows the FTC can't legally block Microsoft's purchase of Activision Blizzard, but on Sony's behalf he wants them to try at any rate...

There has been some misreporting by others with respect to Sony's motion. I saw some tweets according to which Sony's motion--which was simply incorrect--had been granted and the new deadline would have been this week's Friday (February 10). The source that was credited in those tweets--an EU antitrust lawyer who uses the "Idas" pseudonym to comment on a discussion board for gamers--normally provides accurate information about the Microsoft-ActivisionBlizzard merger reviews around the globe, but in this case he was wrong: his misconception presumably was that he saw the ALJ's order granting the third motion for an extension, but that one had been agreed upon between Sony and Microsoft, and the question was what was going to happen to the fourth request for more time. On Twitter, I--as a litigation watcher who has been following countless U.S. patent and antitrust cases over the past 12+ years--warned people against relying on Idas's unfortunate misinterpretation:

I don't mean to imply that Idas wanted to disinform anyone. He's tried to be totally nonjudgmental about those cases.

Based on Sony's February 6 notice of withdrawal that the FTC published today, we know that rumors of Sony's motion for an extension of time having been granted were greatly exaggerated. The motion was denied for all practical intents and purposes, which is why Sony gave up on it and filed its motion to quash.

I have a problem with the fact that Sony's motion was filed confidentially. It can't remain sealed forever in my opinion: this is a public proceeding. Sony must at least make a public redacted version available, should the motion contain any confidential business information.

Sony may just not want the world to see how uncooperative it is in a proceeding that the FTC brought primarily because of Sony complaining over how it believes to be impacted by the deal. It reserved its rights to fight the FTC's subpoena, it is officially fighting Microsoft's subpoena, and it will likely bring one or more motions to quash in the Northern District of California, where Sony has been subpoenaed already in the so-called gamers' (actually lawyers') lawsuit.

While we're on the subject of that private action in California, Microsoft and the class-action lawyers submitted a proposed briefing schedule yesterday:

DeMartini et al. v. Microsoft (case no. 3:22-cv-8991-JSC, N.D. Cal.), February 6, 2023: Stipulation Re: Briefing Schedule

That filing reflects a cooperative spirit: if approved by Judge Corley (who said at the status conference on Thursday that she'd be fine with anything that meets her key parameter, which is the latest filing date for a reply brief), Microsoft will have until March 2 to file its opposition to the motion for a preliminary injunction, but the class-action lawyers get an extra three days for their opposition to Microsoft's motion to dismiss.

[Update at 9:42 AM Pacific Time] Judge Corley has granted the stipulation and set the deadlines accordingly. [/Update]

A few days ago I published a chart that shows the key deadlines in the Microsoft-ActivisionBlizzard proceedings in the U.S. (FTC and Northern District of California), UK, EU, and New Zealand (click on the image to enlarge):

Share with other professionals via LinkedIn:

Nokia gets preliminary opinions from European Patent Office according to which two more OPPO patents-in-suit are invalid as granted: outcome will likely hinge on amended claims

It's been more than 19 months since Nokia sued OPPO, and almost as long since OPPO filed its first countersuits. It's already an "epic" dispute. Most other patent spats in this industry are settled within about a year, as a result of which there are normally--at best--some infringement decisions, but nothing significant happens on the post-grant review front before it's already over.

OPPO has managed to get seven Nokia lawsuits stayed over validity doubts, most recently a Munich case. But Nokia is also working hard to poke some holes into OPPO's patent portfolio, and has received preliminary opinions supporting its invalidity theories in several cases.

Late last week, the European Patent Office (EPO) rendered preliminary opinions on two more OPPO patents-in-suit challenged by Nokia:

  • EP3624524 on "wireless communication methods, network device, and terminal device"; and

  • EP3557938 on a "method and device for random access."

As my Nokia-OPPO battlemap shows, EP'524 is being asserted in Mannheim (Second Civil Chamber; Presiding Judge: Dr. Holger Kircher) and EP'938 in Hamburg.

The preliminary opinions reflect that the Opposition Division deems either of those patents invalid in its granted form. But there is still time for auxiliary requests as the related opposition hearings have been scheduled for (different days in) September. Preliminary opinions are "newsworthy", but the longer I watch those EPO post-grant reviews, the more I focus on actual decisions such as this one in January.

No auxiliary requests have been filed for EP'938 so far, and on the ones for EP'524, the EPO did not take a position on the existence of an inventive step:

  • "Claim 1 of Auxiliary Request 1 differs from claim 1 of the patent in that the alternative feature 1.3B has been deleted. Feature 1.3A, which is still present in the claim[,] is not disclosed in D3. For this reason, the subject matter [...] is new [...]."

    The Opposition Division leaves it to the parties to argue for or against the presence of an inventive step, and "note[s] that feature 1.3A is disclosed as such in D1, D2 and D5 [...]."

    A disclosure "as such" is just the starting point of an inventiveness debate. The question is then whether there is a teaching, suggestion, or motivation to combine.

  • "Claim 1 of Auxiliary Request 2 differs from claim 1 of Auxiliary Request 1 in that the features of dependent claims 2 and 3 have been added. So, the 'first time domain unit' has been replaced with the more specific feature 'time slot' and the 'second time domain unit' has been replaced with the more specific feature 'symbol'. So, claim 1 of Auxiliary Request 2 is more restricted than claim 1 of Auxiliary Request 1. Since[] the latter claim is new [...], this also applies [to] claim 1 of Auxiliary Request 2. This applies mutatis mutandis to the other independent claims 5, 8 and 9."

    Here, again, the Opposition Division does not take a position on the inventive step, and "note[s] that 'slot/subframe' and 'symbols' as such are disclosed in D1, D2, D3 and D5 [...]."

  • Auxiliary Request 3 further narrows the scope by specifying that the first research is a search space. Novelty is not an issue, but "a 'search space' as such is disclosed in D1, D2, D3 and D5." This means there will again have to be a discussion of whether there is a teaching, suggestion, or motivation to combine certain prior art references.

The preliminary opinion on EP'524 stresses that Nokia cannot "freely develop as many inventive step attacks as [it] wishes in the hope that one of said attacks has the chance of succeeding." Instead, Nokia will have to present a single theory starting from what it considers to be the closest prior art, unless there are specific reasons for which several starting points are "equally valid."

The Mannheim Regional Court will hold the EP'524 infringement trial on May 23. That court--especially its Second Civil Chamber--is known to be difficult to persuade of invalidity contentions based on an alleged lack of an inventive step. In Mannheim you ideally want to rely on non-novelty as an obviousness theory will not persuade the court to stay the case unless there really is no reasonable argument that can be made for the presence of an inventive step.

Defendants routinely argue in Mannheim and other German courts that an amended claim should not enjoy a strong presumption of validity as it has not been examined. Here, however, OPPO can now point to a preliminary opinion by the EPO's Opposition Division (i.e., by a panel of three patent examiners) that acknowledges novelty and leaves open the question of the inventive step at this procedural juncture. Plus there still is time to file additional auxiliary requests.

There is an asymmetry here: OPPO has left the German market, and there are no signs of it coming back anytime soon. As a result, Nokia's German injunctions do not put OPPO under any particular pressure to settle, but Nokia presumably does want to retain its ability to ship mobile base stations to its German customers. Right now, Nokia has more at stake in Germany than OPPO. If several OPPO patents get invalidated, but one or two are upheld even if in an amended form (so long as they are still infringed), a situation can arise in which Nokia will deem it prudent to settle the global dispute.

Meanwhile, proceedings are ongoing in a Chinese court (Chongqing) to set a global FRAND rate for an OPPO license to Nokia's standard-essential patents.

Should this dispute not be settled in the coming months, then both parties may file complaints with the Unified Patent Court (UPC)...

Share with other professionals via LinkedIn: