FOSS Patents: Antisuit

Showing posts with label Antisuit. Show all posts

Friday, April 21, 2023

Draft SEP regulation threatens EU Commission's credibility at WTO level, may backfire big-time: issues outlined by former U.S. government officials and senior Qualcomm lawyer

More and more issues are identified concerning the European Commission's draft regulation on standard-essential patents (SEPs) that may or may not be formally put on the table next Wednesday (April 26) by EC Executive Vice President Margrethe Vestager. While the Commission is briefing reporters today (with critics of the proposal apparently planning the same for Monday and Tuesday), Mrs. Vestager told MLex (after speaking at a conference) that the 26th remained the target date, but delays could not be ruled out due to the EC's busy agenda. I first shared the information on LinkedIn (after reaching out to MLex about it).

For my previous reporting and commentary on the subject, see the link list toward the end of this post.

Yesterday (Thursday, April 20), an important letter was sent to key members of the EU Commission and an insightful write-up was published on LinkedIn. I'll discuss both below.

Letter from former senior officials of U.S. government agencies to EC leaders
While attacking Chinese antisuit injunctions at WTO level, the EC intends to create its own antisuit regime to interfere with foreign legal proceedings

Former leaders of U.S. government agencies under POTUS #42-#46 (Clinton, G.W. Bush, Obama, Trump, Biden) sent the following letter yesterday to EC President Ursula von der Leyen, EVPs Margrethe Vestager and Valdas Dombrovskis, and Commissioner Thierry Breton:

1. Letter from former senior officials of U.S. government agencies to EC leaders

Comments on European Commission's Draft "Proposal for Regulation of the European Parliament and of the Council Establishing a Framework for Transparent Licensing of Standard[-]Essential Patents" (April 20, 2023 letter by Christine Varney, David Kappos, Walter Copan, Makan Delrahim, Andrei Iancu, and Noah Phillips)

Most of them work in private practice now. Notably, three of them (former Antitrust AAG Christine Varney, former USPTO Director David Kappos, and former FTC commissioner Noah Phillips) are Cravath partners. Makan Delrahim (Trump's Antitrust AAG) is a Latham & Watkins partner, and Apple (which holds rather different positions) is major Latham client.

The letter expresses "shared concerns regarding an apparent pivot in the European Commission’s longstanding intellectual property (IP) policy that threatens European and American innovation leadership, and by extension, European and American economic success and security." (emphases added)

In diplomatic terms, that is a much stronger statement that it may appear to be at first sight. If we were talking about a statement by the signatories' successors, EU-U.S. relations would almost be on the brink of a trade war. The EC's leaders should ask themselves whether the objective of bringing down patent royalties paid by Apple and some automotive companies is really worth such complications. The answer should be clear, and what's also clear is that some people in the lower echelons of the Commission have acted irresponsibly in drafting a bill that raises such concerns without engaging in proper stakeholder consultation. Asking general questions about SEP-related grievances is not a substitute for discussing the implications of specific ideas.

The signatories of that letter know from their vantage point as former high-ranking government officials about "the critical yet fragile balance that must be struck when regulating [SEP] licensing" and warn that "even seemingly small policy changes can have outsized impacts." So does, by the way, a counterpart of theirs in London, UKIPO CEO Adam Williams, who told IAM in a recent interview (paywalled) that "massive intervention" in that area is rarely the right thing, and one needs to find a middle ground.

That's consistent with what I've observed as a cross-jurisdictional litigation watcher.

Near the top of page 2, the letter says SEP policies "should be data-driven and should consider the practical impact on industry and relevant geopolitical realities" (emphases added). Neither the draft regulation nor the draft impact assessment suggest a data-driven approach. Much to the contrary, I've already identified passages that are shockingly out of touch with reality and based on some people's opinion rather than any evidence, such as in connection with certain patent pools operated by Avanci and Sisvel. I also highlighted "geopolitical" in that quote because the Commission--especially at the most senior level--should be more sensitive to diplomatic and trade considerations.

The former U.S. government officials' letter warns that if the Commission proposed a regulation like the draft they've seen--even if it was not ultimately adopted in a similar way, shape, or form--"would also pave the way for Europe’s implementer-dependent international competitors to set binding aggregate royalty rates that severely devalue European innovation." Elsewhere (Section III), the letter describes those other jurisdictions as "[u]ndemocratic."

The EU would shoot itself in the foot. Given that even just making an ill-conceived proposal (regardless of what will subsequently happen in the legislative process) harms EU interests, the Commission should step back and think it all over again, with help from stakeholders on both sides of the debate.

Section II of the letter points out another credibility issue for the EU. As the letter recalls, it's been less than a year since the executive director of the EUIPO, Christian Archambeau, said “[o]f course, we will never have the competency in patents. But national offices do have competency in patents. So through the network, we can leverage their capabilities for common projects." And now the Commission wants to task the EUIPO with overseeing one of the most complex tasks in patent law (some would even argue it's the single most difficult one): portfolio valuation.

I agree with the overarching concerns raised by that letter and disagree only with the signatories' support of the EU complaint over Chinese antisuit injunctions ("The European Union rightly argued that [...] violated China’s obligations"--in my opinion those Chinese antisuit injunctions are just a defensive response to extraterritorial overreach by foreign courts).

2. While attacking Chinese antisuit injunctions at WTO level, the EC intends to create its own antisuit regime to interfere with foreign legal proceedings

The letter shown and discussed above discusses geopolitical and international trade issues that would arise even from just putting a fundamentally flawed proposal on the table next week. In that regard, let's now look at the attempt to create de facto antisuit injunctions at the EU level that would interfere with the sovereignty of foreign jurisdictions and go against the concept of international comity.

In a LinkedIn article published yesterday, Qualcomm's chief licensing lawyer, Fabian Gonell, explains why the draft SEP regulation would do "exactly what [antisuit injunctions] do in China: penalize patent holders that bring an action in foreign courts." And Mr. Gonell is rightly wondering how the Commission, which will soon have to file its substantive brief in support of its WTO complaint over China's antisuit injunctions, will seek to distinguish the antisuit element of its proposed SEP regulation "from the [Chinese] conduct of which [the EC] is complaining."

That LinkedIn article makes all the right points, and actually discusses only one of the two antisuit mechanisms envisioned by the EU contrary to its position in the WTO proceedings that no instrument of that kind should restrict patent rights in the first place. So let me explain it here in my way--in even more basic terms with a view to those who may be less familiar with the topic--and discuss both antisuit elements of the draft SEP regulation in parallel.

First, let's clarify what amounts to an antisuit mechanism. Two years ago I participated as a speaker in an EC webinar (the blog post also shows my slide deck)--a webinar that has now been declared part of the consultation process for the draft regulation, which I deem a mischaracterization. I'm now going to take a position totally consistent with the effects-based approach of my May 2021 presentation:

An antisuit mechanism

effectively precludes a party from enforcing its rights in another (almost always a foreign) jurisdiction (the enjoined jurisdiction)
by means of (typically drastic) sanctions in the enjoining jurisdiction.

The EU complains that China (in that context, the enjoining jurisdiction) imposes antisuit injunctions on patent holders, effectively precluding them from enforcing their patent rights in the EU (through the enforcement of SEP injunctions) by imposing per diem contempt fines.

Back then I said that requiring defendants to EU SEP cases to take a global portfolio license to avoid the enforcement of an injunction ultimately also means that they can't seek a rate-setting decision in other jurisdictions (with respect to the patents valid in those countries) because they will either lose sales or be sanctioned for contempt of court (by disobeying the injunction). In yesterday's article, with a focus on the draft SEP regulation, Mr. Gonell now argues--and I agree--that one must just focused on whether a party is "penalize[d]" for "bring[ing] an action in foreign courts." That is the nature of the antisuit beast, and Mr. Gonell rightly calls it "a distinction without a difference" that Chinese antisuit injunctions result in fines on SEP holders while the EU's envisaged antisuit mechanism penalizes them with a "loss of rights to enforce EU patents."

The EC's draft SEP regulation would penalize SEP holders in one context and implementers in another. Oddly, the antisuit context is the only one in which the draft regulation is at least somewhat symmetrical, while in all other regards it just seeks to impose costs on SEP holders, and to delay and complicate enforcement, while doing nothing to combat hold-out by unwilling licensees.

How can parties set off the draft regulation's antisuit mechanism?

Art. 48 of the draft regulation defines the term "parallel proceeding" as

(a)
civil court proceeding, any other court procedure or procedure before a tribunal or administrative or state authority of a jurisdiction outside of the Union called upon by law to make legally binding and enforceable decisions;
(b)
concerning a licensing dispute concerning the same standard and its implementation, or including SEPs from the same patent family involving one or more of the parties to the FRAND determination as a party, and
(c)
[a duplicative "and"] concerns the same matter which serve as a basis for the FRAND determination.

This is extraterritorial overreach, plain and simple. It's about non-EU jurisdictions like the UK, U.S., China, India, or Brazil, to name but a few examples of jurisdictions in which SEP holders often enforce their rights. And it covers "licensing dispute[s]" as well as patent infringement actions that may result in injunctions putting an end to violations.

Whoever came up with that essentially wants the EU to take the position that all other jurisdictions in the world have to wait until the EU has made a FRAND determination--or if one doesn't wait, one will get penalized in the EU. It's a "my way or the highway" attitude. It has nothing to do with international comity. It's more like what one would expect from so-called "rogue states"...

Let's look at the two sides of the licensing negotiations:

If SEP holders started "parallel proceedings", they'd seek a FRAND determinations and/or enforce their rights in foreign jurisdictions.
If implementers started a "parallel proceeding", it would be a FRAND determination that would result in an obligation to enter into a license (the statute is limited to proceedings that result in "legally binding and enforceable decisions" as opposed to mere declarations).

The draft regulation doesn't even distinguish between foreign FRAND determinations that would cover patents valid in the EU or not. So, for instance, if an implementer asked a Chinese court to order the SEP holder to grant a license to only its Chinese SEPs on court-determined terms, it would run afoul of the EU's rules! That's insane.

The penalty is defined by paragraph 2 of that article in conjunction with two paragraphs of another article:

[Art. 48(2)]
In case of a parallel proceeding [as defined in para. 1] filed prior or during the FRAND determination by a party, the FRAND determination panel, or in case it has not been established, the competence centre, shall terminate the procedure upon the request of the other party. Article 47(3) and Article 47(4) shall apply.

We have to turn to Art. 47(3) and (4) to find out more specifically what is meant by "terminat[ing] the procedure upon the request of the other party." Art. 47 is the statute that defines what constitutes a "[f]ailure of a party to engage" in the EU's FRAND determination proceedings. So, even if a party that is enforcing its rights elsewhere contributed constructively to an EUIPO-led FRAND determination, the mere fact that it's also asserting non-EU patent rights in foreign jurisdictions would be penalized like a failure to engage.

Art. 47(3) addresses the scenario in which the implementer fails to engage (which as per Art. 48(2) includes a scenario in which a party avails itself of a foreign court for certain purposes, even if no EU patents are concerned):

3.
The competence centre shall issue a notice of termination of FRAND determination to the SEP owner, including for the use before the customs authorities of a Member State, if the FRAND determination was terminated under [t]his article, and the party referred to in paragraph (1) is the prospective implementer.
4.
The competence centre shall issue a notice of termination of FRAND determination to the implementer, if the FRAND determination was terminated under [t]his article, and the party referred to in[ ]paragraph (1) is the SEP owner.

So, if a party--licensor or licensee--avails itself of a foreign court, the other party will get a notice of termination--but the party that exercised its rights outside the EU will not get one. What does that mean in practice? It means that only one party--the one that didn't run to a foreign court--is free to do in the EU what it wants.

If the party that doesn't get such notice of termination is the patent holder, Art. 58(4) precludes it forever from enforcing its rights in the EU:

A court of a Member State or the Unified Patent Court, requested to decide on any issue related to a SEP in force in a Member State, shall not proceed with the examination of the admissibility of the request, unless it has been furnished with a notice of termination of the FRAND determination.

It's a total enforcement deadlock, a sanction that can--and in many cases will--be more drastic than a contempt fine.

For implementers, the penalty is that they lose the protection the draft regulation would afford them with a view to enforcement in national courts as well as USITC-style customs seizures. Implementers--unlike SEP holders--wouldn't be worse off than today if they asked a foreign court to enforce their rights under a foreign country's laws. But if that draft regulation had entered into force, availing themselves of foreign courts (even in my example of someone just seeking a Chinese FRAND ruling with respect to Chinese patents) would deprive them of a shield they'd otherwise have in the EU.

This is judicial imperialism. Should the EC actually put that kind of proposal on the table, I'd be left to wonder why the EU Commission doesn't have the checks and balances in place to prevent such a terrible mistake. It shouldn't be hard for the ultimate decision makers to figure out, with help from their advisers, that the draft regulation is a dumpster fire.

Links to prior FOSS Patents posts on the envisaged EU SEP regulation

In chronological order:

Only indirectly related, yet pretty relevant:

April 18: Samsung joins Avanci's automotive standard-essential patent pools as licensor (in addition to previously announced participation in Avanci Broadcast)

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Thursday, April 6, 2023

Unified Patent Court presumably can't order anti-antisuit injunctions, but can national courts bar defendants from seeking antisuit injunctions against UPC enforcement?

The ultimate answer to the question I'm discussing here may determine whether the UPC is or is not going to become an important venue for the enforcement of standard-essential patents (SEPs), given that most defendants are Chinese or American implementers (and even Samsung has availed itself of a Chinese antisuit injunction in a dispute with Ericsson).

In recent years, it has become pretty common for SEP owners to seek pre-emptive anti-antisuit (and anti-anti-anti-antisuit) injunctions at or prior to the start of any patent enforcement action. The first AASI in a SEP case was ordered by the Munich I Regional Court in 2019 (Nokia v. Continental) and affirmed by the Munich Higher Regional Court. The Dusseldorf Regional Court is also prepared to grant such injunctions in some circumstances.

I've already raised the question on LinkedIn: how will this work with a view to patent infringement cases filed with the UPC?

The UPC is only a patent court. My reading of the UPC Agreement is that it can order injunctions to stop or prevent the infringement of patents, but that's it.

A patentee preparing the filing of UPC enforcement actions may have a reasonable apprehension that the defendant-to-be is going to seek an antisuit injunction (be it in the United States, China, or elsewhere). But--unless I'm mistaken--the UPC itself can't do anything about that.

The European Commission's draft SEP regulation (initial reaction, table of contents and synopsis, impact on net licensees, lack of appellate options, conflicts with fundamental rights and treaties) imposes all sorts of requirements on patent holders that delay enforcement, but if someone seeks a FRAND determination abroad that encroaches on the EU's Single Market, the patentee is free to sue right away and even to seek customs seizures. However, that still doesn't bar the implementer from seeking an antisuit (or anti-enforcement) injunction abroad; it just creates a potential (but very weak, if not negligible) disincentive.

To obtain anti-antisuit injunctions that protect their UPC cases, SEP holders will still need help from national courts such as the Munich I Regional Court or Dusseldorf Regional Court. Can and will those courts do that?

It's a tricky question if my reading of Article 34 of the UPC Agreement is correct:

Territorial scope of decisions
Decisions of the Court shall cover, in the case of a European patent, the territory of those Contracting Member States for which the European patent has effect.

I understand the above as an all-or-nothing proposition: if you sue in the UPC over an EPO-granted patent, you can't just say "leave out Germany" or "leave out all countries other than Germany." Fragmentation by partial opt-out would defeat the purpose of the UPC.

German AASIs are based on the need to protect property rights (even to the extent of using self-defense as a justification). EPO-granted patents are typically valid in Germany (the largest economy among the UPC's Contracting States), and the existence of a German part of a European patent makes it a property right protected by Art. 1004 of the German Civil Code.

But German AASI decisions also have to respect EU law. That first SEP AASI (Nokia v. Continental) already referenced EU law, arguing that it was possible to take action against a potential U.S. antisuit injunction (which never issued) because non-EU jurisdictions are not covered by EU law, more specifically: the Brussels Regime, the latest iteration of which is Regulation EU No. 1215/2012. According to that one, a principle of mutual trust applies to rulings made by courts of other EU Member States.

The Munich appeals court argued in its December 12, 2019 Nokia v. Continental decision that international law is only part of--and not above--German federal law. It also said that any extraterritorial effects of an AASI are legitimized by the need to defend against a threat of interference with German patent rights.

There has never been a debate that a Munich AASI also bars an implementer from seeking an ASI against proceedings in other venues, such as Dusseldorf or Mannheim. The UPC raises a novel question, however, and that is primarily due to Art. 34 UPCA:

There is an argument that a foreign ASI that would enjoin the enforcement of a UPC SEP injunction (based on an EPO-granted patent) violates German federal law because it vitiates German property rights (the German part of the European patent in question), and that it would merely be collateral damage (or, from the patentee's perspective, a collateral benefit) that an enforcement of an EPO-granted patent must be shielded from a potential ASI. The European patent could then be enforced in all countries in which it is valid, as per Art. 34 UPCA.
An implementer, however, might argue that a German court can only order an AASI that prevents ASIs affecting German court proceedings, but does not have jurisdiction over the non-German parts of a European patent.

Art. 34 UPCA would be key either way. The patentee will argue that there is no way under Art. 34 UPCA to opt out from enforcement in all other countries, so the AASI will inevitably have some territorial overreach. The implementer will argue that such overreach deprives the German court of jurisdiction.

Now, what if the patentee petitioned for--and actually obtained--AASIs in each and every one of the UPC Contracting States in which the patent is valid? In that case, they would all agree and the UPC enforcement action should go forward. But they can't coordinate. In each country, the decision will have to be made without potentially knowing any (or in most cases one will at least not know all) other countries' decisions. If a German court ordered an AASI, it can't know whether a French court will grant or deny the petition before it. Would the answer be that the patentee has to seek conditional AASIs that say they apply to UPC cases provided that equivalent decisions have been made by the courts of competent jurisdiction in the other relevant Contracting States?

Is there an argument that even if the UPC ordered an injunction relating to all Contracting States in which a SEP is valid, the patentee could still tailor the actual enforcement by telling the infringer in writing that the injunction only has to be respected with a view to one or more--but not all--countries? There could always be national decisions, such as compulsory licenses, that would have that effect anyway.

At what point will we find out how the courts decide?

If a patentee seeks an AASI that explicitly references enforcement in the UPC, then the national court will have to decide.
If a patentee instead seeks an AASI that focuses on the intellectual property at stake (patent rights in Germany including German patents of EPO-granted patents) without referencing specific courts (or at least not making it sound like UPC enforcement wasn't meant to be covered), the implementer will have to decide whether to take the risk of potentially violating that AASI through the pursuit of a foreign ASI that would target UPC cases.
At this post-AASI stage the implementer can't seek an ASI against cases before German courts anyway, so if the patentee has enough (and presumably strong) patents available that it can enforce in national courts, the implementer's problem can't really be solved (only reduced) through a UPC-only ASI.
If the implementer decides to go for a UPC-only ASI anyway, then the patentee will move for contempt sanctions based on the AASI, and the question will have to be resolved.

As a patentee, I would be a little bit concerned that my AASI petition might be put before a judge with the attitude that if you have a problem with your UPC cases, you should ask the UPC for help, and if it can't help, you should file your complaints with national courts. That would not be a legal principle, but a human factor, especially with judges handling cases in national courts knowing how much more money (after taxes) their colleagues sitting on the UPC make and trying to attract as many cases as possible to the national courts in order to potentially get on the prestigious gravy train in the future.

The UPC will create interesting--even exciting--opportunities for patent holders. But there will also be some initial uncertainty about various questions, one of which is the availability of anti-antisuit injunctions.

It won't be easy for the IP chiefs of major SEP holders to convince their CEOs and CFOs of something that results in significant incremental costs, but the way to hedge your bets and to be in the strongest possible position is to engage in double patenting. Does that term make anyone wince? It's admittedly counterintuitive because it appears antithetical to the way the patent system works. But it's not strictly double patenting if the claims are distinguishable, and some national laws (in Germany and France) actually open the door to what practically amounts to double patenting. The best strategy with a view to the UPC is to obtain both European (EPO-granted) patents and national patents, particularly in Germany. I recommend an IP Quick Tip podcast by the Bardehle Pagenberg firm for further information on that topic. The transitional period with opt-outs will end sooner or later, and any patents resulting from the applications you file now are going to be affected during their lifespan.

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Thursday, July 28, 2022

U.S. court declines to complicate Ericsson's enforcement of Colombian 5G iPhone/iPad sales ban, warns Apple against sanctions for misuse of court rules

Earlier this month, Ericsson secured a preliminary injunction against Apple in Colombia over a 5G standard-essential patent (SEP), in response to which Apple ran to the United States District Court for the Eastern District of Texas and requested an antisuit damages order. Ericsson's enforcement is ongoing, and the impact can be seen on Colombian store shelves--and is furthermore evidenced by media coverage, such as an opinion piece in Colombia's largest newspaper. It's a high-profile achievement for Ericsson's Colombian counsel, OlarteMoure's Carlos R. Olarte.

While Apple generates only about a fifth of a percent of its global sales in the South American country, the patent license fees Ericsson is seeking on a worldwide basis are modest compared to the average selling price of an iPhone.

Judge Rodney Gilstrap held a motion hearing one week ago, and this morning published his decision. The antisuit part was denied, and only a limited part of a discovery-related request by Apple was granted. Technically, this means the motion was granted-in-part and denied-in-part, but rather tellingly, the docket text of the order emphasizes the denial of the antisuit-related core part of the motion:

"ORDER denying 116 Motion for Relief Against Ericssons Attempt to Use Secret, Ex Parte Actions in Bogota, Colombia to Subvert Proceedings in This Court. Signed by District Judge Rodney Gilstrap on 7/28/2022. (nkl, ) (Entered: 07/28/2022)"

Footnote 5 distinguishes this matter from last year's anti-antisuit injunction (or "anti-interference injunction") in Ericsson v. Samsung, and notes the following:

"Here, Apple invites this Court to inject itself into an ongoing proceeding in Colombia. The Court declines Apple’s invitation."

While expressing "some level of for the frustration visited upon Apple by Ericsson’s strategic conduct in other diverse forums," Judge Gilstrap doesn't think it constitutes "imminent, irreparable harm" to Apple that it may--as a result of enforcement actions in other jurisdictions--have to sit down and negotiate a license with Ericsson. The Texas FRAND case will go to trial in December, and no later than September, Apple and Ericsson have to engage in formal mediation.

It almost sounds like Apple is an unwilling licensee. Ericsson v. Apple cases are pending in three German courts, and should Apple be deemed an unwilling licensee there, it will feel far greater settlement pressure than presently in Colombia.

There's also a procedural issue. Apple should have brought a regular motion as opposed to an emergency motion. "Emergency motions are to be filed only in truly extenuating circumstances and should not be used as a means to secure an expedited briefing schedule and hearing before the Court," Judge Gilstrap clarifies--and "finds that Apple has misused and misapplied the rules for emergency motion practice in this Court." Therefore, he places Apple "on notice that further such conduct will warrant, and likely result in, sanctions against it."

The antisuit damages order that Apple wanted--which wouldn't have formally barred Ericsson from continuing its Colombian PI enforcement, but would have made it costly--was the motion's primary objective. In addition, Apple wanted the U.S. court to "expand the terms of [its] [P]rotective [O]rder to permit Apple to provide its Colombia counsel [who personally attended last week's hearing in Texas] with copies of the Colombia filings Ericsson recently produced in this litigation together with the two Ericsson-Samsung licenses also produced." While I've seen § 1782 discovery requests for use in foreign litigation on a number of occasions, this one seemed a bit odd to me. According to the order, Apple withdrew "its request to share license agreements with Colombian counsel." So, in the end it was just about 76 documents from the Colombian part of the dispute--where Ericsson had brought multiple ex parte motions--that Apple listed in a notice last week. Pursuant to Judge Gilstrap's order, "[s]uch documents shall be delivered by Apple to its Colombian counsel only upon condition that those receiving them are fully bound by, and subject to, the Protective Order entered in this case."

Arguably, this consolation prize for Apple also constitutes some form of interference with proceedings in a foreign jurisdiction. From a U.S. perspective, defendants' limited access to ex parte injunction requests in Colombia may appear unfair. But if that's the law in Colombia, it might be appropriate to defer to that country's legislature, given that the U.S. proceedings aren't affected. And it's hard to see how that part of Apple's motion would satisfy the standard for emergency motions in the Eastern District of Texas, which the antisuit part failed to do.

Whether Apple will get any mileage out of the provision of those documents to its Colombian counsel is doubtful.

If Apple wants to sell 5G iPhones and iPads in Colombia again, it either has to successfully appeal in Colombia--or take a license, which will be the outcome anyway (the question is just when and on what terms).

Finally, let me show you the court order:

https://www.documentcloud.org/documents/22122790-22-07-28-edtx-376-order-denying-in-part-apples-emergency-motion

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Thursday, July 21, 2022

USPTO-WIPO agreement on resolution of SEP disputes won't truly 'enhance the efficiency of licensing of standard[-]essential patents'--institutional self-importance meets Big Tech's SEP devaluation agenda

Normally, neither the World Intellectual Property Organization (WIPO) nor the United States Patent & Trademark Office (USPTO) should advance a patent devaluation agenda. It's plainly inconsistent with those institutions' mandates. But yesterday the USPTO and WIPO issued a press release on an agreement "to partner on dispute resolution efforts related to standard[-]essential patents" that I don't view favorably at this stage.

When President Biden appointed Kathi Vidal, a patent litigator known for her Big Tech ties, to head the USPTO, there was widespread concern in the IP community that she might take initiatives that benefit infringers rather than innovators. With respect to PTAB inter partes reviews, it's too early to tell. With the stroke of a pen she undid some of her predecessor's PTAB rules favoring discretionary denials. We'll see what comes out of the current decision-making process, and it's important that stakeholders on both sides of the debate accept her invitation to submit amicus briefs.

With respect to standard-essential patents (SEPs), three of the Biden Administration's agencies (DOJ, USPTO, NIST) refrained from adopting a policy statement that was heavily criticized by SEP holders (or reinstating an older policy position of that kind). The question is now what the USPTO's partnership with WIPO means.

It could be that in the end it's just bureaucratic activism: governmental agencies like to draw attention to their work on a hot-button issue regardless of whether such work will actually have much of an effect. But there is also the possibility that Director Vidal is indeed pursuing a SEP devaluation agenda, while WIPO just has a "business development" objective with respect to its alternative dispute resolution (ADR) services. As I'll discuss in a moment, it looks like WIPO's SEP ADR initiative isn't going too well.

The press release quotes Director Vidal as saying that "SEP policy is an international issue of international importance." That is correct: SEP licenses are typically global portfolio licenses.

Given that WIPO and the USPTO agree on the international dimension of SEP policy, antisuit injunctions and antisuit damages motions should actually be the number one item on their list. Instead, they leave the heavy lifting to the courts. Case in point, later today (Thursday) Judge Rodney Gilstrap of the United States District Court for the Eastern District of Texas will hold an Ericsson v. Apple motion hearing on Apple's request for an antisuit damages order as the iPhone maker is currently unable to sell 5G devices in Colombia due to a SEP injunction obtained by Ericsson.

There is nothing in the USPTO-WIPO announcement to specificially suggest that WIPO and the USPTO seek to "enhance the efficiency of licensing of standard essential patents" (a quote from Director Vidal's statement) in a balanced fashion. To increase the efficiency of SEP licensing, one needs to tackle the problem of hold-out, which is widespread, and of outlier cases of hold-up. But this is all that the announcement says about the scope of the five-year agreement:

Cooperate on activities that will lend efficiency and effectiveness to the resolution of disputed standard essential patent matters by leveraging existing WIPO Arbitration and Mediation Center and USPTO resources, and
Engage in stakeholder outreach to raise awareness of the services provided by the WIPO Arbitration and Mediation Center through joint USPTO-WIPO programs.

The second bullet point is laughable: the stakeholders on both sides of the SEP licensing negotiation table are sufficiently sophisticated to know that WIPO offers arbitration and mediation services. This is not like teaching traffic rules to children.

Toward the end of the press release, WIPO Director General Daren Tang promotes WIPO's ADR services. On WIPO's website I found the following information:

"In recent years, the WIPO Arbitration and Mediation Center (the 'WIPO Center') has administered some 55 WIPO mediation cases relating to FRAND licensing negotiations."

Interestingly, they're not saying anything about SEP arbitration proceedings. The key difference is that arbitration will result in a decision, while mediation is just an attempt to bring parties together. The "Summary of WIPO FRAND ADR case examples" is also just about mediation, and WIPO can't even claim that its mediation efforts actually resolved a single dispute. The first example just "prompted renewed licensing negotiations" between a patent pool and implementers, half of which were Asian companies. The second one is that "IP courts in China have referred ten ICT patent infringement cases to WIPO Mediation. Seven of those cases involved claimants from Europe." And then "a large Asian manufacturer submitted a unilateral request to WIPO Mediation concerning its SEP infringement litigation against a large European SEP holder"

If this was the track record of a private mediator, he or she would find it hard to be hired again.

There are reasons to suspect here that it's not really SEP holders who expect WIPO's ADR services to be of any help to them. It's more like some players on the implementer side hope to be deemed willing licensees based on their requests for WIPO ADR.

Hopefully I'm just being too skeptical and this is more than a scheme to facilitate hold-out and devalue SEPs. In the short term, I actually think an initiative like LIFT--which was announced this week-- is more likely to enhance the efficiency of SEP licensing. Gustav Brismark and Bowman Heiden discussed it in an IAM article, Building incentives to overcome the SEP licensing prisoner’s dilemma (paywalled).

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Saturday, July 16, 2022

Ericsson to court: Colombia "account[s] for approximately 0.2% of Apple’s worldwide sales"--but here's why the preliminary injunction still matters

Further to an order by Judge Rodney Gilstrap (United States District Court for the Eastern District of Texas), Ericsson has filed its opposition to Apple's emergency motion seeking antisuit damages as well as an extraterritorial discovery order that I hadn't even mentioned before (the Colombian preliminary injunction is already having impact on the market and therefore draws far more attention). It's so outlandish that I still can't imagine it will go anywhere, but what it comes down to is that Apple wants the Texas court to authorize Apple to provide confidential documents from the Texas FRAND case to its Colombian counsel...

Here's Ericsson's filing in preparation of the Thursday (July 21) motion hearing:

https://www.documentcloud.org/documents/22088234-22-07-15-ericsson-opposition-to-apple-emergency-motion

I already expressed my doubts about the prospects of Apple's motion and the strength of Apple's arguments when I published the motion as well as in a subsequent post on dual standards.

It was almost a euphemism when I described as an "apples-to-oranges comparison at best" that Apple's attempt to persuade the Texas court that the circumstances here resembled those under which an anti-antisuit injunction in Ericsson v. Huawei came down last year. Ericsson's opposition brief argues it's actually worse and Apple now wants the Texas court to enter the kind of antisuit injunction that a Chinese court had granted Samsung against Ericsson, in response to which Ericsson requested and obtained an anti-interference or anti-antisuit injunction. As Ericsson's filing points out, last year's Texas AASI didn't prevent infringement proceedings from continuing, or infringement rulings from being enforced, in all jurisdictions. Much to the contrary, the Texas court sought to defend infringement actions from foreign interference.

I found it "telling[]" that Apple applied the Unterweser antisuit injunction factors while denying that it's seeking an antisuit injunction. Ericsson's brief also notes that inconsistency. Instead, the focus would have to be on the traditional injunction factors.

Another issue with Apple's motion that I had raised before and that Ericsson's opposition filing addresses is that the Texas case simply isn't guaranteed to result in a binding license agreement, which the Texas court had clarified before (even twice).

In response to Apple's "coercion" argument, Ericsson notes that its last licensing offer "is still on the table, and Ericsson has not increased that offer since obtaining the injunction." A related footnote then states the following:

"Moreover, Apple’s 'coercion' argument ignores that Colombia is a very small market for Apple, accounting for approximately 0.2% of Apple’s worldwide sales. See Ex. E (filed under seal)."

The Colombian PI still matters. It obviously does in Colombia (for example, see the infographic in this article). Ericsson is pursuing injunctions in other jurisdictions as well. But even in the global licensing dispute, a loss of 0.2% of potential sales is relevant, and that's because the amount Ericsson is asking for ($5 per iPhone) is also far less than a percent of Apple's sales.

If, in theory, Ericsson managed, by demonstrating patent infringement and showing that its own conduct was FRAND-compliant, to exclude Apple from a few markets the size of Colombia, and not just in the form of a preliminary injunction but actually in the long run (permanent injunctions), a license would already be a better deal. While sales and profits are different things, Apple's margins are sky-high, so the difference in Apple's case is not that great--and Apple extracts a lot of revenue out of its customers subsequently to the sale of a phone, especially through its infamous app tax. So the opportunity cost far exceeds the profits made with the sale of one device, also because a user who migrates from iOS to Android may not switch back (I actually migrated from Android to iOS a few years ago, and remigrated to Android last year, but most people wouldn't do that).

Let me dedicate just one paragraph to the app tax topic here. Apple is facing class actions over its App Store terms that it may not be able to settle as cheaply as with certain "developer plaintiffs" in the United States. Even in the U.S., the Pepper case remains interesting; a UK consumer class action has passed a legal and factual plausibility test by a competition-specialized court; and a similar action has recently been brought in Australia. Just imagine what it would mean if Apple had to pay out money to end users after being found to have illegally overcharged them. Developers are just serfs in Apple's Hermit Kingdom, and Tim Cook's deposition in Oakland last year made it clear that he doesn't give a damn about whether developers are satisfied with how Apple treats them, but Apple does care about end users (who could alternatively buy Android devices).

It's really a mystery what Apple hopes to achieve through that "emergency motion" in Texas. It's really hard to see how Judge Gilstrap would grant it. In the next step, Apple could try to appeal a denial to the Fifth Circuit, but that would take time, and in the meantime the Colombian case will be closer to a decision on the merits and the Texas FRAND case will have gone to trial.

On a somewhat related note, I read that Ericsson didn't meet some expectations with respect to current licensing revenues. I don't hold shares in Ericsson, but if I did, I'd actually be more concerned if they left money on the table at this stage. It's a now-or-never situation for reaching a more reasonable royalty level. It may take time before a company like Apple settles, but it will literally pay dividends in the long run to reject offers that undervalue one's patents.

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Wednesday, July 13, 2022

Federal Circuit throws out Thales appeal: no irreparable harm shown, no position on ITC import bans against willing licensees taken

Thanks to the Comparative Patent Remedies blog I've just become aware of today's Federal Circuit opinion in a case in which Thales was appealing the denial of a preliminary injunction against Philips. In the court below (Delaware), Thales sought an antisuit injunction of the anti-enforcement type so that Philips would not have been able to enforce a potential U.S. import ban had the US International Trade Commission (USITC, or just ITC) granted one.

At the appellate hearing, the question of whether it is appropriate to seek an enforce an import ban against a willing licensee of standard-essential patents was on the agenda. Today's decision doesn't touch on it: the short Federal Circuit decision holds that Thales had "failed to show it is likely to suffer irreparable harm from Philips' ITC action." Here, however, the appeals court believes that "The district court did not clearly err in determining that Thales’ evidence of harm was conclusory and that it failed to meet its burden of establishing likely irreparable harm. Thales did not present any evidence that it lost customers, had customers delay purchases, or struggled to acquire new business because of the ongoing ITC proceedings." Therefore, it all just amounted to speculative harm (such as "affidavits stating only that the threat of an ITC exclusion order caused several customers to “voice concerns” and express doubt regarding Thales’ ability to deliver products."), which falls far short of what it takes to "justify the rare and extraordinary relief of a preliminary injunction."

It may or may not be a coincidence that the Federal Circuit came down shortly after a final ITC decision that in my opinion practically mooted the appeal: no violation was found (which was also the view of the Administrative Law Judge presiding over the investigation). Philips can appeal that decision, but it would take quite some time before an import ban would loom large.

The question of whether a patentee can pursue an import ban despite the alleged infringer being, or claiming to be, a willing licensee--which is also at issue in Ericsson v. Apple--has been left for another day.

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Tuesday, July 12, 2022

Texas court to hear Apple's grievances about Colombian 5G iPhone/iPad sales and import ban on next week's Thursday (a week later than Apple requested)

Ericsson is presently enforcing a Colombian patent injunction over a 5G standard-essential patent (SEP). As a result, Apple can't sell any 5G iPhones (iPhone 12 and 13) and iPads in Colombia. It can't even import them into the South American country because the injunction simultaneously instructs Colombia's customs authority to seize any shipments. Apple is now trying to get help from the United States District Court for the Eastern District of Texas, and requested an emergency hearing before the end of the week, while Ericsson wanted to firstly complete fact discovery (the deadline is on Friday, July 15). After Apple demanded that a hearing be held this week, Ericsson informed the court that its lead counsel "has tested positive for Covid and due to quarantine requirements would not be available for an in-person hearing before July 18," and that "lead counsel and other members of Ericsson’s legal team are scheduled for an all-day hearing July 21 in another matter."

Judge Rodney Gilstrap then came down closer to Ericsson's than Apple's position. He agreed that Ericsson should get one week from the filing of the motion (which was last Friday) to file a response. While Ericsson wanted the right to file a sur-reply in case of Apple filing a reply brief, Judge Gilstrap does not want the parties to file a reply or sur-reply "unless so ordered by the Court." The hearing will be held on next week's Thursday (July 21, 2022) at 9 AM Central Time.

I doubt that Apple will be able to solve its Colombian problem through its action in Texas. But the Colombian judiciary will be none too pleased that Apple is trying to get a foreign court to interfere with a Colombian matter.

U.S. patents are valid only in the U.S., and therefore enforceable only in U.S. courts.

Colombian patents are valid only in Colombia, and therefore enforceable only in Colombian courts.

I know I was just stating the obvious to all patent practicioners (and even many people with a non-professional interest in the subject), but it bears remembering in this context.

Apple portrayed Ericsson's litigation tactics as outrageous, though it and its counsel have previously done the same, or even worse (it's arguably worse to shop the same patent around in Germany, failing in one court and retrying in another).

There can be special circumstances that justify actions in one jurisdiction relating to what's happening in another. However, any encroachment on another jurisdiction's sovereignty must be carefully considered. Extraterritorial overreach complicates SEP enforcement and has already resulted in some escalation, which is why there are now not only antisuit injunctions but even anti-anti-anti-antisuit injunctions (as absurd as it may sound).

If Apple had previously made the commitment that Ericsson sought in Texas, some cross-jurisdictional interference might be justified. Ericsson wanted Apple to commit that it would take a license (at a rate of $5 per iPhone) if the outcome of the Texas case was that Ericsson acted in compliance with its FRAND licensing obligations when asking for that royalty. However, the Texas court had no other choice but to deny Ericsson's motion to firm up Apple's commitment to be bound by the Texas ruling, as Apple remains free not to take a license even if Ericsson's rate is determined to be FRAND. I expect that question to come up in Ericsson's opposition brief and at next week's hearing.

I'm not sure it was the right decision on Apple's part to seek an antisuit damages order in Texas. This is certain to alienate the courts in Colombia as I mentioned further above--and it's actually in Colombia where Apple should now try to appeal the decision (and have faith in the judges down there, even though this may be the first SEP case in Colombian history). It's also going to be viewed unfavorably by judges in other places whose jurisdiction could be affected in a similar way next time--such as Germany, where this may contribute to a finding that Apple is an unwilling licensee (and may give rise to an anti-antisuit injunction in case Ericsson tries).

The same logic with which courts in Germany and elsewhere (inspired by the Munich court) have granted anti-interference injunctions to fend off foreign antisuit injunctions would also apply to what Apple is trying to get in Texas (antisuit damages). It just takes a broader wording now to prevent foreign antisuit injunctions as well as foreign antisuit damages orders.

With respect to the term "antisuit damages" I would like to point to this post by Professor Thomas Cotter on his Comparative Patent Remedies blog. He notes that it may not be the same as wrongful-enforcement or other consequential damages, as the requested relief "specifically refers only to 'fines, fees, penalties, and costs,' though it also states that Ericsson should 'take financial responsibility for the consequences here of its action in Colombia' (emphasis in original)."

It is indeed unclear right now what Apple would seek from Ericsson. All that we know for sure is that Apple isn't seeking an antisuit injunction, which would be an outright violation of the Colombian anti-antisuit injunction. It could be that in Apple's preferred scenario, Ericsson would have to pick up any contempt-of-court sanctions (contempt fines) from Colombia. In that case there wouldn't be any wrongful-enforcement damages, as Apple would continue to violate the injunction, but Ericsson would bear the costs.

The problem is that at some point Apple's continued contempt of the Colombian court--even if Ericsson had to reimburse Apple for any monetary sanctions--could lead to the imprisonment of Colombia-based Apple executives, and there is no way that the Texas court could decide that Ericsson--not Apple--executives would have to go to jail in Colombia...

Apple is afraid of the Colombian situation repeating elsewhere, and particularly mentioned Ericsson's Brazilian action. Also, the European Court of Justice decided earlier this year that preliminary injunctions must be available to patentees who show a likelihood of success on the merits, so in Germany and other EU member states we may also see SEP injunctions soon (if not in Ericsson v. Apple, then in other disputes).

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Monday, July 11, 2022

Colombian 5G iPhone ban: Apple urges Texas-based court to hold emergency hearing this week to discuss antisuit damages motion against Ericsson

In a new court filing, Apple just stressed the "magnitude of the harm to Apple" from Ericsson's enforcement of a preliminary injunction over a 5G standard-essential patent (SEP). As I noted in a second post on the Colombian situation and Apple's related "emergency motion" in the Eastern District of Texas, Apple and its Colombian counsel have done just what they are now faulting Ericsson for--and it's odd to see Apple, which closed its two Apple Stores in that district, complain about someone trying to "subvert" Judge Gilstrap's jurisdiction.

On Sunday, Ericsson noted that Apple's Texas motion "primarily seeks monetary relief" and, therefore, "it is far from clear that Apple’s motion should be accorded emergency treatment." But Ericsson was willing to agree to a reasonably tight briefing schedule, under which Ericsson would reply by the end of this week (one week from when the motion was brought and served on Ericsson), giving Apple seven days for a reply, and should Ericsson have to file a sur-reply, it would ask for another three days. In the meantime, Ericsson would rather "allow[] the parties to focus their energy on completing fact discovery, which closes in this case this Friday, July 15."

Apple has now responded and says "Ericsson’s proposal does not reflect the immediacy and magnitude of the harm to Apple from Ericsson’s furtive actions in Colombia." I can't help but put the word "furtive" into context: while it is true that Ericsson brought ex parte motions that enable courts to decide urgent matters without hearing the non-moving party, the Colombian order that started enforcement came down after Apple had actually filed an opposition brief.

Apple now wants to give Ericsson only until midnight Central Time tomorrow (i.e., in the night from Tuesday to Wednesday), and urges the court to hold a hearing on "July 13, 14, or 15, whichever is most convenient for the Court." It's possible that none of the three proposed dates (this week's Wednesday, Thursday, and Friday) is "convenient" for the court.

Based on what Apple has told the courts so far, the economic impact of the Colombian injunction is in the millions, not billions--but Apple itself disputed any urgency a few years ago after its contract manufacturers had ceased SEP royalty payments they were making to Qualcomm on Apple's behalf. And that amount was in the billions.

The Ericsson-Apple dispute is getting ever more interesting, which includes that the Munich I Regional Court's press office answered an inquiry from me today with details of two Apple v. Ericsson cases, one of which is Apple's first known SEP assertion in the history of the company.

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Sunday, July 10, 2022

Apple applied double standards in its attempt to prevent Colombian iPhone ban over 5G standard-essential patent

Yesterday (Saturday) I immediately reported on filing by Apple (with the United States District Court for the Eastern District of Texas) from which I learned that Ericsson had won a preliminary injunction in Colombia against 5G iPhones and iPads over a standard-essential patent (SEP), which is apparently being enforced now. I have now taken a second look at an English translation of a Colombian court order that Apple provided to the Texas-based court.

I find three contradictions remarkable:

In one or more of its filings with a court in the Colombian capital of Bogotá, and in Friday's filing with the U.S. court, Apple criticized Ericsson's tactic of filing multiple Colombian patent infringement actions with different courts (one action per patent). A sworn declaration by Apple's Colombian counsel (Brigard Castro's Juan Pablo Cadena Sarmiento) describes this as "an improper attempt of forum shopping until [Ericsson] obtains a favorable decision allowing Ericsson to exclude Apple from the Colombian market."
Apple does not explain why splitting up an enforcement campaign into multiple cases over one patent each is "improper." In Germany it's even the law: the only way that a German court will hear more than one patent in a given case is if they're from the same patent family.
Apple itself actually went further than what it is now criticizing Ericsson for. In 2012, Apple failed with a motion for a preliminary injunction against two Samsung products in Munich, where the court doubted the validity of the patent-in-suit. Apple then withdrew its Munich case and reasserted the very same patent shortly thereafter in Mannheim, hoping for a more favorable outcome there. It didn't work, but Apple tried.
Ericsson sought and obtained in Colombia an ex parte preliminary injunction, meaning that it requested the court to grant it without hearing the other party (though the defendant can then move for reconsideration, whic his what Apple did, even if unsuccessfully so). Apple then told the court that Ericsson had violated its right to due process and access to justice.
But as Ericsson's counsel in the Colombian Apple cases, Olarte Moure's Carlos R. Olarte, noted, "the same Apple representative has requested and obtained ex parte preliminary injunctions before the Delegation of Jurisdictional Affairs of the SIC [Dept. of Industry and Commerce], which is why it is not understood why it states forcefully on this occasion that ERICSSON's action is unfair, when it itself has implemented these legal mechanisms in defense of their clients."
Apple's motion for emergency relief in Texas (in the form of an antisuit damages order that Apple hopes will deter Ericsson from continuing to enforce the Colombian injunction) accuses Ericsson of "incessant attempts to subvert the [Texas-based] Court’s jurisdiction."
Actually, a few years ago Apple closed two stores in the Eastern District of Texas to "subvert"--I'd rather say "avoid"--that court's jurisdiction.
Figuratively speaking, Apple is now prepared to kiss Judge Gilstrap's ring just to get help from him against a foreign jurisdiction's patent infringement ruling.

It's also difficult to understand what Apple means by "irreparable harm." The English translation of that court order indicates that Apple pointed to "the net sales of Ishop, one of the distributors of Apple Colombia within the Colombian territory": US$2.6 million in 2017.

I don't expect Apple's motion for an antisuit damages order to succeed, but the fact that Apple did this may have the effect that future anti-antisuit injunctions in Germany and other jurisdictions will also bar a defendant from seeking enforcement damages abroad.

The impact of the Colombian injunction is limited. All that Apple needs to do to solve the problem is to take a license. So far Apple is spending only about 2% of its device sales on SEP royalties (less than $15 per phone). The same Apple collects 30% from those app publishers who account for the bulk of App Store revenues, and has an App Review Department that rejects thousands of submissions every day. Apple acts as a gatekeeper every day, and now there's a court in Colombia that is playing that role, too, and has ordered Apple to stop selling its 5G iPhones and iPads in Colombia, simultaneously instructing the country's customs authority to seize any shipments. For Apple, Colombia is a tiny market. For app developers, Apple's customer base of about one billion people (many of whom are among the world's richest billion people) is a huge market, but Apple denies access to that market based on partly very unreasonable--and inconsistently applied--criteria.

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Saturday, July 9, 2022

5G iPhones and iPads banned in Colombia after court grants Ericsson preliminary injunction over standard-essential patent; Apple seeking antisuit damages order in Texas

Less than six months after the current wave of Ericsson v. Apple patent infringement actions started, the first sales and import ban is already being enforced:

Apple is currently unable to sell 5G iPhones and iPads in Colombia, or import them into the South American country (though Apple says there is currently no 5G network available to consumers in Colombia, an unpersuasive argument that I'll comment on further below).

The Juzgado 043 Civil del Circuito de Bogotá--a court in the Colombian capital of Bogotá--found Apple's 5G iPhones and iPads to infringe claim 13 of Colombian patent no. NC2019/0003681, which has been declared essential to the 5G standard and was granted to Ericsson in 2019 an will remain valid until December 2037. That patent is a member of global patent family that also includes (among others) U.S. Patent No. 10,516,513 on "controllable CSI-RS density" and EP3510716 on "obtaining and indicating of component combination used for CSI-RS." The abbreviation CSI-RS stands for "channel state information reference signals."

The infringement determination was already made in April. In May, Ericsson posted a bond of approximately US$50K as a prerequisite to enforcement. On Wednesday (July 6), the court ordered a preliminary injunction, which Apple's Colombian subsidiary (Apple Colombia S.A.S.) now has to obey (while Apple is, unsurprisingly, appealing the decision).

The preliminary injunction bars Apple from the import, sale, commercialization, and advertisement of products infringing that patent. Under the order, Apple must "warn and communicate with" shops, retailers, owners of social media platforms, mass media, and e-commerce platforms within the territory of Colombia in order to ensure compliance. The affected devices are various iPhone 12 and 13 models, as well as newer iPads. The preliminary injunction furthermore directs the Dirección de Impuestos y Aduanas Nacionales (DIAN)--Colombia's customs authority--to prevent the importation into Colombia of infringing Apple devices.

In addition, Judge Ronald Neil Orozco Gómez decided that Apple must not seek or enforce an antisuit injunction from foreign country that prevent or restrict Ericsson's enforcement of the Colombian preliminary injunction. This kind of court order is called an anti-antisuit injunction: an injunction against an (actual or--as in this case--potential) antisuit injunction. The first court in the world to grant an anti-antisuit injunction in a standard-essential patent (SEP) case was the Munich I Regional Court (Nokia v. Continental, 2019; 21st Civil Chamber, then under Presiding Judge Tobias Pichlmaier). Since then, the Munich court has further developed its anti-antisuit case law to shield its jurisdiction over German patents (or, in most cases, the German parts of European patents) from foreign interference, including that anti-antisuit injunctions are available on a pre-emptive basis if certain conditions are met. Not only has at least one other German court (the Dusseldorf Regional Court) adopted that approach but courts in other jurisdictions have found at least some of the Munich court's logic compelling--which has now apparently also occurred in Colombia.

Apple's hands are tied now because of the anti-antisuit injunction: seeking an antisuit injunction against Ericsson to thwart the enforcement of that Colombian patent would be a flagrant violation of the Colombian anti-antisuit injunction, with potentially grave consequences for its Colombian subsidiary and its executives.

Another part of the problem for Apple is that Ericsson will find it easier in certain jurisdictions (particularly Germany) to obtain SEP injunctions if Apple, through its conduct, meets those courts' criteria for being an unwilling licensee. So far, in the SEP cases I've watched in Munich and Mannheim in recent years, each and every defendant--most recently, Chinese smartphone maker OPPO in its dispute with Nokia--has been deemed an unwilling licensee, and has consequently been enjoined. In an InterDigital v. Xiaomi case, the Munich court's Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann held that the pursuit of an antisuit injunction against the enforcement of a SEP injunction gives rise to a strong presumption of unwillingness to take a license.

So, instead of an antisuit injunction, Apple's lawyers are now seeking antisuit damages in the Eastern District of Texas. On Friday, Apple brought an emergency motion with the court, saying that the Colombian inunction gives Ericsson "economic and logistical leverage [...] to pressure Apple to abandon this litigation and capitulate to Ericsson’s [royalty] demand," and asks Chief Judge Rodney Gilstrap to decide as swiftly as possible that Ericsson must "indemnify Apple from any fines, fees, penalties, and costs it incurs as a result of the Colombian injunction." Elsewhere, Apple describes this as "tak[ing] financial responsibility" in Texas for what it's doing in Colombia. Apple wants to "hold Ericsson accountable" in Texas for any damages, hoping that Ericsson would then "reconsider" its patent enforcement campaign.

Apple is apparently hoping that the distinction between seeking an antisuit injunction (a court order under which Ericsson would be penalized in the U.S. for enforcing a patent injunction in Colombia) and an antisuit damages claim may help Apple avoid contempt-of-court sanctions in Colombia. But I'm not sure:

Ericsson could now seek another preliminary injunction in Colombia (or an extension of the existing one) against Apple's antisuit damages claim in Texas. While the current Colombian anti-antisuit injunction is an anti-antisuit-injunction injunction, Ericsson would now additionally obtain an anti-antisuit-damages injunction.
Tellingly, Apple's legal argument is based on the Unterweser case law for U.S. antisuit injunctions.
The course of action that Apple has chosen could be taken into consideration by courts in other jurisdictions, particularly Germany, in their analysis of Apple's (un)willingness to take a license.
Ericsson might seek a German anti-antisuit injunction (which would protect against both antisuit injunctions and antisuit damages claims) now. It could also go back to a court in the Netherlands, which denied an anti-antisuit injunction last year because Apple said it didn't intend to seek an antisuit injunction.

There are interesting questions involved, but what I find extremely weak (if not absurd) is that Apple likens its antisuit damages claim to an anti-antisuit injunction Ericsson sought and obtained from Judge Gilstrap last year in its dispute with Samsung. That's an apples-to-oranges comparison at best. Ericsson went to the Texas court because Samsung had obtained an antisuit injunction from a Chinese court that interfered with the Texas proceedings, including the potential enforcement of U.S. patents. In Ericsson v. Apple, there is no foreign antisuit injunction that would affect Apple's ability to litigate the FRAND dispute in Texas, or (if it so elected) to enforce any U.S. patents in the Texas court. Apple's argument is that the Colombian injunction might force Apple to "capitulate"--i.e., settle--in which case the Texas case might never go to trial.

Judge Gilstrap himself has actually made it clear before that Ericsson simply has the right to enforce its patents, and that Apple, by not taking a license, "subject[s] itself to actions for infringement."

No (public) 5G network in operation in Colombia

A sworn declaration by Apple's Colombian counsel is attached to Apple's filing in Texas and says, among other things, that "5G networks are still not available for consumer use in Colombia." The U.S. court filing indicates that Apple wants the Colombian court to "confirm[] that an injunction on a purportedly 5G essential method patent cannot be enforced until a 5G network is activated in Colombia."

The patent claim underlying the injunction is a method claim ("un método para obtener, en un dispositivo inalámbrico [...]"--"a method for obtaining, in a wireless device..."). Infringement occurs when the method is executed. However, Apple cannot rule out that

infringement may already occur, such as when Colombian network operators conduct 5G tests in preparation of a rollout, and
infringement will occur as soon as any Colombian network operator activates 5G service.

I've found articles according to which 5G trials by major Colombian carriers were already authorized in June 2020 (with one company, Claro, already conducting the first tests in 2018), and the plan was for 5G networks to be "deployed before the end of 2022." A more recent article, however, suggests that Colombia's 5G deployment could be delayed by a couple more years.

Even limited pilots make it a possibility that the method covered by the relevant patent claim would be executed in Colombia at this point. Furthermore, it could be that Colombian patent law is violated even if Colombian iPhone buyers only infringed when traveling to countries where 5G is already widely available.

Apple could theoretically--though for practical reasons it presumably wouldn't want to--sell 4G phones only in Colombia, thereby working around the injunction.

Finally, let me share the key documents. First, Apple's motion for emergency relief in the form of an antisuit damages order:

https://www.documentcloud.org/documents/22082776-22-07-08-apple-emergy-motion-re-colombian-pi

Second, an exhibit to that motion, which also includes translations of Colombian court orders:

https://www.documentcloud.org/documents/22082777-22-07-08-exhibit-translation-of-colombian-ericsson-v-apple-pi-order

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Thursday, July 7, 2022

Final ITC decision moots Federal Circuit appeal in Philips v. Thales over appropriateness of pursuit of U.S. import ban against willing SEP licensee

This is a follow-up to what I wrote four weeks ago, Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing. There is a certain overlap--not in terms of parties or patents, but legal questions--with an Ericsson v. Apple standard-essential patent (SEP) case before the ITC, where Apple just failed to obtain permission to amend its FRAND defenses and a U.S. trade judge found Apple's conduct puzzling.

On Wednesday, the Commission--in this case meaning the five-member decision-making body at the top of the United States International Trade Commission (USITC, or just ITC)--gave notice of a final determination that terminates the Sec. 337 Unfair Imports Investigation of a Philips complaint against French industrial giant Thales and other defendants (Telit, Quectel, Xirgo, Laird Connectivity). Bottom line: no import ban (unless Philips successfully appeals the decision to the United States Court of Appeals for the Federal Circuit).

In the post I linked to further above I discussed a Federal Circuit hearing of a preliminary injunction appeal by Thales. Let me also refer you to a late-March post on the multi-jurisdictional Philips v. Thales dispute (Delaware, ITC, France...). Suffice it to say here that what the Federal Circuit heard was an appeal that Thales brought after the Delaware district court, in a case in which the federal court was going to set the rate for a global portfolio license, denied a preliminary injunction--an antisuit or, at minimum, anti-enforcement injunction that would have precluded Philips from enforcing a U.S. import ban against Thales had Philips obtained one from the ITC. But Philips hasn't. What's next?

At last month's hearing, the Federal Circuit panel raised the question of whether there was actually a need to render an opinion. An Administrative Law Judge--ALJ David P. Shaw, who was in charge of the ITC investigation of an Ericsson v. Apple complaint over standard-essential patents (SEPs) until that one was reassigned to ALJ Bryan Moore--had made a final initial determination (a recommended decision that is subject to approval by the Commission) finding no violation of any of the four SEPs-in-suit. However, he did make a recommendation on remedy and said that an import ban should issue in the event he'd be reversed on the merits.

So the Federal Circuit panel thought one might just await the final ITC decision (which was pushed back by a few weeks, but still on the horizon), as Thales might no longer need a preliminary injunction. Counsel for Thales told the Federal Circuit that even a final finding of no violation wouldn't reliably solve the problem as it would merely take a successful appeal for an import ban to come down. That appeal, however, would also have to be filed with the Federal Circuit. Looking at what precisely the Commission has decided and (especially) elected not to decide, it would make a whole lot of sense for the Federal Circuit to declare the appeal moot.

The Commission

"determined to review and, on review, take no position on [some] issues," and
"determined not to review, and thus [to] adopt[], the remaining findings in the [ALJ's initial determination]."

The non-reviewed issues (the second group) are more than sufficient to throw out the case: not only did ALJ Shaw hold none of the four patents-in-suit to be infringed but he also didn't see the technical prong of the domestic industry requirement satisfied with respect to any of them. Moreover, he invalidated several of the asserted claims.

The first group--issues on which the Commission took no position despite having taken a look at them--includes three kind of SEP-specific defenses raised by Thales:

Implied waiver: ALJ Shaw found that "it has been shown by clear and convincing evidence that the four asserted patents are unenforceable under the doctrine of implied waiver" because "Philips had a duty of disclosure to the standard setting organization [ETSI], and it breached that duty."
Commissioner Jason E. Kearns , a Democrat who served as Chair of the USITC from mid-2020 until three weeks ago, stated that he would affirm the implied-waiver finding with respect to one of the four patents-in-suit but takes no position on the other three.
Implied waiver is specific to this case and has no bearing on Ericsson v. Apple.
Express/implied license: ALJ Shaw disagreed with the following line of defense by Thales:
"Philips has granted Thales both an express and an implied license to its self-declared SEPs, including the asserted patents, based on the FRAND licensing commitments that Philips made to ETSI and Thales’s unconditional agreement to license the patents on the FRAND terms determined by the Delaware District Court."
ALJ Shaw held that Thales would have "to prove that Philips conducted in such a way that led Thales to infer consent to use Philips’ patents," and not only was there no evidence for that, but "Philips and Thales entered into lengthy negotiations demonstrating no such inference."
Commissioner Kearns agrees with ALJ Shaw.
Equitable estoppel: ALJ Shaw also disagreed with this Thales defense (as does Commissioner Kearns):
"The record evidence demonstrates that Philips is equitably estopped by its FRAND commitments from seeking, and has waived its right to seek, an exclusion order against Thales, which is a willing licensee that negotiated in good faith. The equitable estoppel defense has been recognized by the ITC and requires: '(1) misleading conduct by the patentee, which can be either an affirmative act or inaction, that leads the alleged infringer to reasonably infer that patent rights will not be asserted against it; (2) reliance by the alleged infringer on the patentee’s conduct; and (3) material prejudice to the alleged infringer.” Where the defense of equitable estoppel is established, the claim is barred in its entirety.'"
ALJ Shaw noted that there was nothing misleading about Philips's FRAND pledge, and "Philips was entitled to bring an infringement action, including one seeking an exclusion order, after those years of negotiations failed to lead to a license." The latter is also a key argument made by Philips in the Federal Circuit.

There would be very strong reasons for the Federal Circuit not to adjudicate Thales's PI appeal. For each of the patent claims-in-suit, Philips faces at least two, in most cases even three hurdles to overcome on appeal. I also believe that even in a hypothetical best-case scenario for Philips, a remand to the ITC would be more likely than a direct decision by the ITC resulting in an import ban. And in any event, Thales's SEP-specific defenses (especially the claim that equitable estoppel bars Philips from pursuing an import ban against a willing licensee) are still in the case and could be raised again with the Federal Circuit.

All in all, Thales's PI appeal raises a purely academic question, and other cases could clearly be better vehicles for deciding the appropriateness of an import ban against someone who claims to be a willing licensee--such as Ericsson v. Apple, where the ITC staff believes Apple has met the pleading standard for an "unclean hands" defense (whether meritorious or not), but agrees with Ericsson that Apple failed to plead equitable estoppel, waiver, and patent misuse.

In the Philips-Thales dispute, the fact that Philips won't get leverage from an ITC import ban (at least not in the near term) means that the terms of the license will likely be determined in Delaware, and a French court--the Tribunal judiciare de Paris--may award Thales damages against Philips and ETSI (though only nominal damages against the letter) based on U.S. litigation expenses.

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Thursday, June 9, 2022

Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing

For the most part, this has been a bad week for implementers of standard-essential patents (SEPs) because three U.S. government agencies (DOJ, USPTO, NIST) merely did away with a Trump-era policy but neither agreed on an implementer-friendlier position nor did they reinstate the Obama Administration's SEP policy. But the picture wouldn't be complete without a development over at the United States Appeals Court for the Federal Circuit that could--in a worst-case but far-from-impossible scenario--complicate matters for SEP holders in the only U.S. forum where they have a realistic shot at getting (the equivalent of) an injunction against implementers: the United States International Trade Commission (USITC, or just ITC).

It's already so difficult to obtain SEP injunctions in U.S. federal court that even small U.S. non-practicing entities like Longhorn IP are flocking to the Munich I Regional Court for help. That trend could be reinforced should the ITC no longer be able to impose import bans on willing licensees--unless, of course, the ITC ultimately set the bar for an implementer's willingness to take a FRAND license similarly high as German courts under Sisvel v. Haier I & II.

The ITC can't award damages. Its only remedy is a U.S. import ban on infringing products (which it can reinforce through a cease-and-desist order, to be precise). As I explained at yesterday's Concurrences webinar keynoted by FTC commissioner Christine Wilson and moderated by Paul Lugard of BakerBotts, the ITC does consider public-interest arguments prior to entering an exclusion order, and respondents to ITC complaints can try to raise eBay-like arguments (or even import entire antitrust cases into the public-interest part of an ITC investigation), but the ITC is not bound by the eBay precedent. It operates under its own statutory framework (Sec. 337 Unfair Import Investigations) and is not an Article III court.

Even the Presidential veto in a Samsung-Apple case in 2013, which was based on FRAND considerations, didn't discourage SEP holders from bringing ITC complaints. In my observations, pending ITC investigations have repeatedly made a key contribution to getting SEP disputes settled.

A Presidential veto, however, is only one of two bites at the apple for implementers seeking to have an ITC import ban overturned. The other avenue is an appeal to the Federal Circuit, which could (by granting an emergency motion) stay the enforcement of an ITC exclusion order pending the appellate proceedings. In light of what a Federal Circuit panel--Chief Judge Kimberly Moore and Circuit Judges Timothy Dyk and Raymond Chen--said at a Tuesday hearing in Thales v. Philips, ITC complainants asserting SEPs would be well advised to ensure that their adversaries are deemed unwilling licensees. If ITC SEP complainants are looking for inspiration, I strongly recommend that they study German SEP cases, especially recent Munich case law and statements made by judges and counsel at Munich trials--a treasure trove of ways to argue that an implementer is an unwilling licensee.

It's an ordeal to listen to the recording of the Federal Circuit's Thales v. Philips hearing due to an extremely unpleasant sound effect. I went through it nonetheless. On the aforementioned Concurrences panel, Axinn's Michael Keeley, who is on Thales's legal team in the Philips dispute and therefore wasn't at liberty to discuss that case (which Commissioner Wilson had referenced), recommended it.

In the first part, the circuit judges appeared outright hostile to Axinn's Paul Zeineddin, who argued that a district judge in Delaware was wrong to deny a U.S.-internal antisuit injunction that would bar Philips from enforcing an ITC import ban. A circuit judge even called one of Mr. Zeineddin's arguments "ridiculous." The appeals court placed the emphasis on whether Thales could establish irreparable harm--a requirement for any injunction. The procedural state of affairs is that an Administrative Law Judge (ALJ) did not find a violation (i.e., an infringement of a valid Philips patent), but he did say that in the event his ruling should be overturned by the ITC's final decision-making body, an import ban should issue. The ITC postponed the deadline for deciding whether to review that decision until next week. Should it not review the final initial determination, or agree with it at the end of a review, it would really become final, though it could be appealed to the Federal Circuit. So the question is whether Thales is really suffering irreparable harm just because of the effects that the shadow of a potential import ban may have on existing or prospective customer relationships.

It's definitely possible that the Federal Circuit will duck the tricky and sensitive question of whether U.S. district courts should enjoin litigants under certain circumstances from pursuing an ITC import ban over SEPs. The circuit judges didn't appear convinced that Thales had provided enough evidence of the actual business implications of the threat of an import ban. Frankly, I think there is no irreparable harm: Thales has five licensing offers from Philips on the table, and Thales's customers have no reason to assume that Philips would actually want to bar Thales from selling its products. Philips just wants to get paid--though it has repeatedly been criticized to make supra-FRAND demands and even been held out of compliance with its FRAND licensing obligations by the Mannheim Regional Court (in two different disputes a few years ago).

Another potential weakness in Thales's case is that it allegedly limited its "willing licensee" argument before the Federal Circuit to the fact that it wants the Delaware district court to set a FRAND rate and to take a license on whatever the court-determined dterms may be.

Thales v. Philips is, however, one of those cases in which the Federal Circuit appeared hostile to an appellant (in fact, a judge even considered one of Mr. Zeineddin's arguments ridiculous) only to put similar or even greater pressure on the appellee. Foley & Lardner's Eley Thompson got a rough ride, too. The Federal Circuit may or may not conclude that Thales has established irreparable harm, but that would be highly case-specific and a different litigant could take that hurdle, such as by means of customer testimony. But the very fundamental question raised by the Federal Circuit is whether it was appropriate for Philips to seek an exclusion order, given that the Delaware proceedings will result in a license agreement on FRAND terms.

It became clear during the hearing that the Federal Circuit struggles with the notion of the ITC--if it were to ultimately find a violation and to adopt the ALJ's recommendation on remedy--potentially enjoining Thales despite the ALJ having conceded that Thales is a willing licensee. Philips argues that it's not enough for Thales to be a willing licensee: Philips has made five offers, and if at least one of them is FRAND, Thales should take it. Still, the Federal Circuit panel appeared to be concerned that an import ban would be inappropriate against a willing licensee--though the circuit judges at the same time look at the willingness question holistically and may not be sold that someone who (and this was just a hypothetical scenario they outlined) shows no willingness to take a license for five years and then, after being sued, runs to a district court and asks for a rate-setting decision.

Whatever the outcome of that particular appeal may be (the dispute could even be settled before the appellate opinion comes down), the ITC and its ALJs will likely read the writing on the wall, so ITC complainants asserting SEPs should develop a robust "unwilling licensee" argument.

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Wednesday, July 13, 2022

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Thursday, July 7, 2022

Final ITC decision moots Federal Circuit appeal in Philips v. Thales over appropriateness of pursuit of U.S. import ban against willing SEP licensee

Thursday, June 9, 2022

Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing

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