Nokia's choice of software patents asserted against Daimler exposes pretext for refusing to license automotive suppliers

PaRR's EU antitrust reporter Khushita Vasant received information from two sources according to which a third round of mediation talks--after the first two, held in January and February, failed--might take place between Nokia and Daimler as well as many (though not all) of its suppliers of telematics control units (TCUs). Knowing how these things work, I guess the situation is now simply one in which the European Commission remains hesitant, for purely political reasons, to take action, and is playing for time, as is Nokia, whose patent portfolio is going down the tubes with every month that passes.

Commissioner Margrethe Vestager is even way tougher than her famous predecessor in office "Steelie Neelie" was when it comes to enforcement against U.S. companies, but (so far, so bad) soft as a jellyfish on Nokia. She and Nokia might just hope that the patent infringement ruling scheduled by the Munich I Regional Court for April 9, 2020 would scare Daimler into a settlement. It's hardly a coincidence that the rumored new round of mediation talks has the same target date...

Regardless of that latest disgraceful development, I was taking a closer look at Nokia's ten patents-in-suit against Daimler from the perspective of whether there is a scintilla of doubt about Nokia acting abusively by refusing to license Daimler's TCU suppliers. There is not.

As Daimler's lead counsel in the German infringement cases accurately noted last fall, cellular standard-essential patents (SEPs) cover techniques that are essentially embodied in the baseband chip. From a car maker's vantage point at the bottom of the supply chain, that's a tier 3 product, which gets incorporated into a (tier 2) network access device (NAD; one might also call this a connectivity module, which in turn resides in a TCU (tier 1). In other words, TCUs already contain a whole lot more hardware than is actually needed to exhaust the patentee's rights by licensing the upstream.

The European Commission employs an elite of public servants. There's no way the Commission's experts wouldn't have figured out during all of that time since Daimler's 2018 (!) complaint that Nokia's allegation of a TCU not actually practicing the standard is, euphemistically so as to avoid an analogy to bovine excrements, a pretext.

The Golden Rule of patent law: the name of the game is the claim. "Claim" in the sense of a patent claim, not a claim in terms of a (mis)representation.

The patent claims determine the scope of protection a patent enjoys. When looking at the claims of Nokia's patents-in-suit, and even when looking at the specifications (whose sole purpose in litigation is to help interpret the claims), it becomes clear that Nokia's patents don't cover end products such as a car (quite often, the Nokia-Daimler dispute is misleadingly referred to as a "connected vehicle" dispute, though none of Nokia's wireless SEPs have anything to do with what sets cars apart from phones).

In fact, seven (70%) out of Nokia's ten patents-in-suit against Daimler are even officially declared to be software patents (which the remaining three are as well, as I'll explain in a moment). That is so because they come with computer program claims--patent claims covering software without any hardware being required to infringe. As a former anti-software-patent campaigner, I'm particularly sensitive to this, and I believe the European Patent Office granted those claims in violation of the European Patent Convention, but they do come in handy now as they belie Nokia's anti-antitrust-enforcement narrative. You can find the claims toward the end of each patent specification, and I'll give an example of one program (in terms of software) claim per patent:

• claim 5 of EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission"

• claim 15 of EP2087626 on "additional modulation information signaling for high speed downlink packet access"

• claim 15 of EP2981103 on an "allocation of preamble sequences"

• claim 7 of EP2286629 on a "method and apparatus to link modulating and coding scheme to amount of resources"

• claim 8 ("computer-readable storage medium comprising software instructions" is a computer program by any other name) of EP2145404 on a "method and apparatus for providing control chanels for broadcast and paging services"

• claim 31 of EP1929826 on an "apparatus, method and computer program product to request data rate increase based on ability to transmit at least one more selected data unit"

• claim 22 of EP2087629 on "a method of transmitting data within a telecommunications system"

The software that controls data transfers over a cellular model resides in a baseband chip. That's the mastermind of the whole operation. It determines what is sent out via the antenna, and it interprets what is received.

All ten of Nokia's patents-in-suit against Daimler could also be called "protocol patents": they describe how two ends of a wireless connection communicate--what A has to tell B to cause B to do something, or vice versa. It's like I say "hello, how are you?" and you respond "fine, how are you?"

That kind of communication is, of course, implemented in software (it already has been for a very long time).

There's nothing in those Nokia's patents that has to do with superior hardware. I ran full-text searches over the patent specifications, and looked closely at the device (or "apparatus") claims to identify any references to the types of hardware components that Nokia claims aren't part of TCUs:

• Eight (80%) out of the ten patents-in-suit contain not a single occurrence of at least one the following words: antenna, microphone, loudspeaker, power.

• EP'626 refers to "antenna weights" and mentions the presence of an electrical power source (without claiming to invent anything new relating to electrical power supply). The patent covers bits (zeroes or ones) that are sent and received, and the apparatus claims don't require any specific hardware but merely refer to "means for interpreting ... bit[s]" and "means for coding." That, too, is a typical software patent.

• DE'446 (the German equivalent of EP'234) only mentions "power" in the sense of "power control" as a numerical parameter. Here, again, it's instructive to look at the apparatus claims, which as opposed to claiming specific hardware relate to a "medium access control layer configured to encapsulate packets."

• The means-plus-function structure found in EP'626 and EP'234/DE'446 is also found in the other patents. Nokia's patent attorneys obviously optimized those claims for scope, and that's why they don't claim specific hardware elements such as an antenna, but instead focus on functionality. However, as long as there isn't a need for some very specific (and inventive!) hardware, but it merely suffices that something be around to do a certain job, the baseband chip as the controller of the data transfer operation is where the claimed inventive steps are implemented.

Those ten patents are the ones Nokia's litigators--among the very, very best in the industry--selected from the company's huge portfolio because they thought they'd be their strongest weapons. We could look at dozens or even at hundreds of additional cellular SEPs owned by Nokia or other companies, and the findings would be materially consistent with this sample of ten Nokia "star" patents.

It's time to get real. There's no justification for not licensing automotive suppliers, especially not under the CJEU's Huawei v. ZTE case law.

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Mediation between Nokia and Daimler as well as its suppliers fails definitively: European Commission must act swiftly and forcefully

This afternoon I broke the news on Twitter that the mediation process between Nokia and Daimler as well as various of its suppliers failed definitively:

BREAKING NEWS: Today the #antitrust mediation process between #Nokia and #Daimler as well as its suppliers has ended without an agreement. The issues were the same ones that made the first series of talks (in January) fail, see https://t.co/VT4DWvtI8T #frand #patents @vestager

— Florian Mueller (@FOSSpatents) February 14, 2020

A first round of talks had failed in January for the reasons I mentioned then. The fact that the supposedly super-secretive mediation process was pretty transparent to me--thanks to certain sources--even sparked a peripheral controversy at last week's Nokia v. Daimler trial in Munich.

A second round of talks was held this week, and went nowhere--for the very same reasons that the first round had failed. Nokia simply wouldn't consider extending an exhaustive component-level license to Daimler's suppliers, and Nokia continued to refuse to put highly relevant SEP license agreements with smartphone makers on the table.

Let's give the mediator the benefit of the doubt: he gave this another try just because he was unrealistic, not because it helped produce billable hours.

The European Commission's request that the parties engage in mediation--instead of doing the job European citizens pay them for--was a bad idea in the first place. It set a terrible precedent and made Mrs. Vestager, who earned herself a reputation as a determined competition enforcer during the first time, appear very weak.

Interestingly, the fact that last week's Munich trial went very well for Nokia didn't bring the parties closer to a deal. Maybe no one believes that the Munich court will seriously interpret a key sentence in the Court of Justice of the EU's Huawei v. ZTE ruling as if "and" meant "or." It's also possible that Nokia's piecemeal injunction strategy--with an explicit carve-out for Samsung subsidiary Harman Becker for the time being--means even a ruling in Nokia's favor on April 9 wouldn't give the failed handset maker much leverage.

Whatever the reasons may be, if the European Commission respects itself, it just can't let Nokia obtain an injunction on a highly illegal basis--refusing to license Daimler's suppliers is a clear violation of EU antitrust law. In December 2012, the Commission pressured Samsung into dropping any pending requests for SEP injunctions against Apple. If the Commission doesn't put the same pressure on Nokia with a view to the Munich ruling scheduled for April 9, it will lose much of its credibility as an antitrust watchdog.

This has been a bad week for Nokia. On Tuesday, it lost a case against Daimler in Mannheim. On Thursday, one of its privateers, Conversant, lost a case against LG in Munich (over a Nokia patent). Plus, it failed to bully Daimler and its suppliers into a deal.

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Nokia loses first German patent infringement case against Daimler: weak patent not essential to LTE

The devaluation of a dying company's overrated patent portfolio has begun today. At 9 AM local time, the Mannheim Regional Court announced its final judgment in the first of ten German Nokia v. Daimler patent infringement cases to have been adjudicated. As expected, the court with by far the best technical understanding of cellular standards in the world tosses Nokia's complaint over EP2286629 on a "method and apparatus to link modulating and coding scheme to amount of resources." Contrary to Nokia's assertion, the patent is a far cry from being essential to the 4G/LTE standard.

Industry insiders know that Nokia, which failed in the mobile handset market because it was more focused on saving costs than delivering a great user experience, had already lost many of its best engineers when most 4G/LTE-related patents were filed. In its official communications, Nokia talks about the tens of billions of euros it invested in research and development in years and, especially, decades past. But the 2010s were the decade when Nokia took a definitive downturn from which it's not going to recover, short of a Finnish Steve Jobs emerging somewhere.

As I mentioned in my previous post (on a Munich case that Nokia can only "win" if the court is happy to be overruled within a couple of months at the most), Nokia's SEP portfolio is largely untested. The only judgment I remember was one that Nokia lost in Mannheim to a tiny rival (ViewSonic). In a recent conversation, a German patent litigator who has asserted SEPs for different plaintiffs on numerous occasions told me that Nokia itself presumably doesn't even have a clue as to the strength of its cellular SEPs, just because they've typically always settled before decisions came down.

So far, the SEP litigation score is "Defendants 2, Nokia 0."

It's fairly possible that Nokia, if it can't settle with Daimler (which Daimler shouldn't do because Nokia owes its suppliers an exhaustive FRAND license), will lose all of its ten pending SEP cases against Daimler when all appeals (including the nullity cases before the Federal Patent Court) have been exhausted. In the meantime, Nokia will have to negotiate renewals with various major licensees in the smartphone segment, and those licensees are probably watching what happens in those automotive cases--and wondering what they're actually paying Nokia for (though they all pay a fraction on a per-unit basis of what Nokia wants from Daimler in contravention of EU antitrust law).

The next round of mediation talks (unreasonably requested by a European Commission shirking its competitoin enforcement duty so far) will take place now, and most likely, nothing will come out of it. The fact that Nokia's ten SEPs-in-suit may not inclde a single valid patent that is actually essential to a cellular standard won't help.

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Nokia's piecemeal injunction strategy against Daimler's demand of €4.5 billion bond or deposit: what's Nokia's objective in auto patent battle?

This is my third post on Thursday's Nokia v. Daimler patent infringement trial in Munich. I've previously commented on Nokia's intentional misinterpretation of the Court of Justice of the EU's Huawei v. ZTE ruling and reported on the fact that this blog's publication of leaked information from secretive mediation talks between Nokia and the automotive industry gave rise to a peripheral controversy in court.

Toward the end, counsel for Nokia mentioned that Daimler asked for security to the amount of 4.5 billion euros (that's more than 4.9 billion U.S. dollars) in the event Nokia would seek to enforce a hypothetical injunction while an appeal would be pending. The likelihood of an injunction depends primarily on whether the court will adopt Nokia's utterly unreasonable misreading of CJEU case law. If the court does side with Nokia on this one, I don't have the slightest doubt that the appeals court would reverse (and probably faster than it usually does). Another question is whether the case will be stayed as an earlier wireless data communication standard (GSM-based EDGE) apparently came with exactly the selection strategy Nokia later claimed to have invented in connection with 3G/UMTS.

In both contexts, all I heard in court was one party's argument. Daimler presented its invalidity theory, which appeared to be a pretty strong case of non-novelty, but Nokia, despite Daimler asking them to respond, was evasive. And when Nokia argued that security to the amount of € 4.5 billion wasn't needed because Daimler could continue to source telematics control units (TCUs) from Samsung subsidiary Harman, and furthermore because Daimler could just deactivate 3G/UMTS support (leaving them with 2G/GSM and 4G/LTE), the court terminated the hearing without allowing counsel for Daimler (or the intervenors) to respond.

As counsel for Nokia explained, they are not asking for an injunction that would force Daimler to hold its manufacturing. Their prayer for injunctive relief is specific to German sales, and limited to Daimler cars that come with TCUs from certain suppliers (most likely, the direct suppliers among the intervenors in this action, who are Continental, Bosch, TomTom, Valeo subsidiary Peiker, and BURY), with Samsung subsidiary Harman being explicitly excluded for the time being, though Nokia does reserve the right to bring a new complaint targeting Daimler cars equipped with Harman TCUs.

What Nokia didn't specify is an amount that they would consider reasonable. The purpose of such security is only to ensure Daimler can still enforce a hypothetical future wrongful-enforcement damages award even if Nokia went bankrupt in the meantime. What Daimler will actually get may differ greatly from the amount of the security. Technically, Nokia could choose between either posting a bond or making a deposit. I guess they would have to make a deposit for an amount this large. A bond would be costly, and with Nokia's business being in decline, it's unclear whether any bank would vouch for Nokia to the tune of billions of euros without Nokia actually making a deposit with the same bank (in which case Nokia might as well put the money in a German court's bank account, which wouldn't charge fees).

Nokia's argument that enforcement damages would be mitigated by Daimler disabling 3G isn't convincing. There are some mobile telephone networks in Germany that still rely on 3G in wide swaths of the country (such as Telefónica's O2 service). Also, I don't know whether any carrier would certify a 4G end-user device (such as a connected car) without being backwards-compatible to 3G. That might leave Daimler with 2G.

As for Harman's ability to just supply enough TCUs, I don't know to what extent Harman itself can do it, or whether the powerful Samsung group as a whole could enable Harman to do so.

There's no reason to assume Nokia will ever license Harman, except under antitrust pressure (such as from the European Commission, or as per a court order). So this looks like a peacemeal resolution strategy: by means of a carve-out for Daimler cars with Harman TCUs, Nokia tries to make it easier for the court to grant an injunction (in the middle of the German patent reform debate, where the proportionality of injunctive relief is the #1 topic of debate), and probably hopes that the European Commission won't take decisive action before an injunction comes down. When Samsung was pursuing injunctive relief against Apple almost a decade ago, the Commission at some point put so much pressure on Samsung that all injunction requests over SEPs were withdrawn EU-wide. The Commission's hesitance to strike down on Nokia's clear abuse of EU antitrust law is already making the agency look very bad. Its dual standards are already more than obvious. But at the point where Nokia would enforce a SEP injunction agianst Daimler, enabled only by Nokia's refusal to license Daimler's suppliers, the Commission would either be exposed as the Western world's least credible and least independent competition authority--or it would have to call Nokia off, as it once did in the Samsung case.

If Nokia brought a follow-on complaint targeting Daimler cars with Harman TCUs, the Munich court could adjudicate that one pretty quickly. I'm not sure they would even hold their usual two hearings in that case. However, they couldn't resolve it faster than the appeals court would most likely overturn the original decision.

While it's easy to see how Nokia hopes its tailored injunction strategy may persuade the court to just go ahead and grant an injunction, and dissuade the Commission from intervening, it's harder to tell from the outside what Nokia really intends to achieve here.

It wouldn't make sense for Nokia to obtain an injunction against Daimler cars incorporating TCUs from half a dozen suppliers as long as Daimler has other sources. A follow-on complaint would be a given. And at that point (though I don't think Nokia could formally win a second case before the appeals court tosses a hypothetical first win), Nokia would likely have to make a multi-billion euro deposit. Last summer its cash reserves amounted to approximately 7 billion euros, but it's another question how comfortable Nokia's shareholders would be with half or more of that amount being deposited in a German court's bank account.

Nokia would need a German injunction that bites and lasts. A tailored injunction might just be an annoyance to Daimler without forcing a settlement. And even an injunction that can't be worked around logistically would matter only if it was more than ephemeral.

With its current strategy, Nokia is jeopardizing the reputation of the Munich I Regional Court (by asking it to misinterpret Huawei v. ZTE in an outrageous way) and of the European Commission, whose call for mediation suggested that it is a purely political organization as opposed to a regulator that truly cares about safeguarding competition. The grand prize Nokia is hoping for is a settlement with Daimler, and I don't see that happening anytime soon. This could become Nokia's Vietnam. On Tuesday, the Mannheim Regional Court will most likely hold a Nokia patent non-infringed. Nokia's SEP portfolio is largely untested in litigation. If the patents-in-suit I've seen so far are Nokia's strongest weapons, then they are in serious trouble. At the end of the Daimler dispute, Nokia's SEP portfolio might be totally devalued, and we're just about a couple of years away from the next round of renewals of Nokia license deals in the smartphone industry, where I predict they're going to get far less money than last time.

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Nokia on losing track in LTE-essential patent infringement case against Daimler in Mannheim and rumored to struggle in Munich case, too

Next Tuesday (January 21, 2020), the Mannheim Regional Court is scheduled to hold a trial in a Nokia v. Daimler case over EP2286629 on a "method and apparatus to link modulating and coding scheme to amount of resources." With mediation having practically failed (though the mediators might invite everyone to another meeting, it wouldn't be likely to yield a result), the assumption is still that the trial will go forward.

Nokia is going to lose that one in all likelihood. Presiding Judge Dr. Holger Kircher notified the parties and the numerous intervenors (various Daimler suppliers) that, on a preliminary basis, his panel has concluded the patent-in-suit is not essential to the 4G/LTE standard--neither on the basis of a literal infringement theory nor the German equivalent of the Doctrine of Equivalents (DoE).

Therefore, the court doesn't anticipate that FRAND/antitrust matters, the most important one of which is whether Daimler's suppliers are entitled to an exhaustive component-level SEP license from Nokia, would be reached in this case.

Another Nokia v. Daimler case in Mannheim was supposed to go to trial last month, and was postponed (because the parties had agreed on mediation) to March 27.

The next Nokia v. Daimler court clash after next week's trial (which in all likelihood will just result in the rejection of Nokia's complaint on the grounds of non-infringement) will take place in Munich on February 6 (see this list of trial dates). Rumor has it that Presiding Judge Dr. Matthias Zigann of the Munich I Regional Court's 7th Civil Chamber recently indicated that Nokia's royalty demands from Daimler are not FRAND-compliant, in which case Nokia would be denied injunctive relief even if the patent was deemed valid and infringed (as the court thought at an early first hearing last June). I don't know whether the court's preliminary assessment of non-compliance with the FRAND licensing obligation is purely numerical (the royalty Nokia is seeking on a per-car basis is way out of line, but I don't know whether that's where the court has a concern) or related to non-monetary terms.

Things are not going well for Nokia at the moment, but a reversal of fortunes is always a possibility in these types of disputes.

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BREAKING NEWS: Nokia makes antitrust mediation with Daimler and automotive suppliers over standard-essential patent licensing fail

[HAPPY NEW YEAR -- AND BREAKING NEWS]

Nokia wanted to keep its EU antitrust mediation with Daimler and various automotive suppliers strictly confidential. Nice try, but I've been able to obtain reliable and mutually-corroborating information from more than one source. (I obviously protect my sources.)

On Friday (January 10) and Saturday (January 11), Nokia--represented by Bird & Bird's Richard Vary (formerly head of litigation at Nokia) and Roschier's Niklas Östman--met with Daimler and various suppliers (Bosch, BURY Technologies, Continental, Harman, Peiker, and TomTom) at a recently-opened Munich hotel. But nothing came out of a whole series of meetings moderated by a British mediator and two British lawyers appointed by the International Chamber of Commerce. The mediator will communicate with the parties by telephone in the days ahead and make a procedural decision. Theoretically, there could be another series of meetings on the 22nd and the 23rd. However, based on how these past two days went, it would be a total waste of time to reconvene.

In practical terms, it's already clear that mediation is pointless for two reasons that made the Munich meetings fail, neither of which comes as a surprise:

• Mediation would only have made sense if Nokia had departed from its dogged refusal to extend a true and exhaustive standard-essential patent (SEP) license to Daimler's tier 1 (= direct) suppliers. Continental had made Nokia a binding offer to take such a license before mediation began, but Nokia remains unwilling to grant any such thing as a true license to component makers. It proposes a "have made" right, which is just an extended-workbench type of arrangement as opposed to a component-level license.

• Furthermore, the meetings inevitably proved unproductive because Nokia refused to make it existing cellular SEP licensing agreements (such as the one with Huawei) available to the other parties. Nokia's excuse was that those agreements allegedly weren't relevant (not only U.S. courts but even some--if not all--German courts would disagree). Therefore, Nokia's counterparts would have had to negotiate without having the slightest idea of what Nokia's existing licensees actually pay for those SEPs.

  At best, Nokia is willing to disclose an obscure and highly atypical license agreement with a car maker who apparently accepted--but only for a transitional period and with the right to terminate as per the end of 2019--a "have made" right. That same car maker is likely to sign an Avanci pool license in the near term based on what I heard.

The information I've obtained suggests that Nokia has not been constructive, neither structurally (exhaustive license vs. "have made" right) nor procedurally (disclosure of existing SEP license agreements). If Nokia had agreed to grant component-level licenses (real licenses, not "have made" rights), and if it had then presented its existing SEP licensing agreements, mediation could have worked in theory. But no one could seriously have expected it to happen, which is why I predicted the failure of this mediation effort before. By now it's failed for all practical purposes, whether or not the mediator will order another series of meetings later this month.

EU competition chief Margrethe Vestager said last month that she expected an update on mediation by mid-February. She's not going to get any good news out of mediation, that's for sure.

What I've found out about the way the talks were structured is that the first day consisted of bilateral talks between Nokia and each of Daimler's suppliers. The suppliers invited to mediation included the ones intervening in the German infringement cases, plus Samsung subsidiary Harman, but not Huawei, which wanted to join but Nokia wasn't willing.

On the second day, Nokia might have hoped to drive a wedge between Daimler and its suppliers. Daimler met separately with each supplier (for antitrust reasons, they couldn't just all sit at the same table and discuss numbers), but neither Daimler nor the suppliers were prepared to agree with Nokia that the problem could simply be solved by Daimler reaching an agreement with each supplier on how to split the outrageous, supra-FRAND royalties Nokia demands.

The European Commission's Directorate-General for Competition (DG COMP) will have to make a decision. They hoped to avoid it, but it was clear that there's a binary, structural question at issue. Either the suppliers get a license and can make components they are free to sell not only to Daimler but also to others (in case they end up sitting on some excess quantities, for instance), or it's not a license.

The next Nokia v. Daimler SEP infringement trial is scheduled for January 21 and will take place in Mannheim unless the court decides to push the trial date back. Another Mannheim trial, originally scheduled for December, was postponed on short notice, but I heard from more than one source that the patent-in-suit in that one was so ridiculously weak that the court likely wouldn't have reached the FRAND defense anyway...

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Nokia stresses confidentiality of EU antitrust mediation with Daimler and suppliers

I asked Nokia, which has recently issued a couple of public statements on its EU antitrust row with Daimler and four of its suppliers, for comment on Continental's new licensing offer. Nokia declined to comment, and stressed that they "respect confidentiality, including that of the mediation process, which will itself be confidential."

This means we're unlikely to hear anything for some more time. EU competition commissioner Vestager said she was going to wait until mid-February.

So if you don't read about the case here in the months ahead, don't be surprised. Should I later decide not to follow the matter at all, I will announce it on this blog, but at a minimum I'll always remain interested in any legal overlaps with Huawei's antitrust lawsuit against Nokia (a case that has the potential to go up to the Court of Justice of the EU, as Huawei v. ZTE did years ago) and anything that appears relevant in connection with German patent reform (proportionality of injunctive relief; bifurcation).

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BREAKING: Continental makes Nokia binding patent licensing offer ahead of EU antitrust mediation with Daimler, other suppliers

BREAKING NEWS

FOSS Patents has found out from unnamed but reliable sources that, just this week, German automotive supplier Continental has made a legally binding offer to Nokia for taking a license to its cellular standard-essential patent (SEP) portfolio. The offer forces the Finnish former mobile device maker to come clean on whether it genuinely intends to address and alleviate the competition concerns raised under EU antitrust law (Art. 102 TFEU) by Daimler and four of its suppliers (Continental, Valeo, Gemalto, BURY Technologies).

Nokia announced yesterday that Daimler and its tier 1 (= direct) suppliers agreed to mediation, which theoretically could put the highest-profile EU antitrust matter pending at the moment to rest. EU antitrust chief Margrethe Vestager, usually not one to shy away from decisive action, is oddly going to hold off until the outcome of the mediation effort will be reported to the European Commission's Directorate-General for Competition (DG COMP) by mid-February.

Under Continental's offer, if and when accepted by Nokia,

• Nokia would receive a per-unit patent royalty. Nokia would be free to choose between

  • accepting the (unknown) amount offered by Continental or

  • demanding more money, in which event a court of law would have to resolve this purely quantitative (as opposed to structural) dispute by setting a fair, reasonable and non-discriminatory (FRAND) rate.

• Continental would receive a component-level SEP license, which would be exhaustive (i.e., the downstream, such as Daimler, would fully benefit in terms of being licensed with respect to the implementation (= use) of the covered patents by Continental's telematics control units (TCUs). The proposed structure would also provide Continental with the operational freedom necessary to safeguard a functioning, competitive market for TCUs and the freedom of movement of goods (famously, one of the "Four Freedoms" of the bloc's Single Market).

Hypothetically, if Nokia offered the same deal structure to the other suppliers among the complainants, or if Nokia accepted offers of the same nature from other suppliers, the EU antitrust row would be resolved. Daimler, Continental, Valeo, Gemalto, and BURY Technologies could all withdraw their complaints, and Nokia's ten pending patent infringement cases in Germany against Daimler would be instantly mooted with respect to Daimler cars that don't come with cellular connectivity components from other suppliers. The aforementioned companies, and Nokia, could all mind their respective businesses again.

Should Nokia reject the proposed structure without simultaneously proposing a reasonably acceptable alternative capable of enabling competition and free movement of goods, its mediation offer would be exposed as a transparent attempt at stalling. While they probably won't listen to me, I would recommend to Daimler's suppliers to walk out in that scenario. Every second spent at the mediation table would be a waste of time.

As far as Daimler is concerned, the question is not whether they should walk out. It's why they participate in mediation in the first place. The dispute is not about whether Daimler can get a license. They can. Even Nokia doesn't dispute that. It's the suppliers, stupid.

Yesterday, Nokia won two court decisions unrelated to the merits of Continental's request for a license: Continental's U.S. FRAND/ antitrust case, which likewise aims to secure an exhaustive component-level license on FRAND terms, will be transferred from the Northern District of California to the Northern District of Texas, and Continental's ability to obtain a U.S. antisuit injunction against Nokia's German patent lawsuits against Daimler will be severely restricted to say the least, as the Munich appeals court affirmed an anti-antisuit injunction.

But neither a venue transfer nor an anti-antisuit injunction (no matter how spectacular the latter actually is) have the potential to answer the underlying question of access to component-level licenses. Earlier this decade, when some SEP holders abusively sought and enforced injunctive relief over SEPs, they argued that unwilling licensees were engaging in "holdout." Now there is a totally willing licensee--Continental--who has made every effort, up to the point of bringing a U.S. antitrust lawsuit, lodging an EU complaint, and now making Nokia an offer even though it's a SEP holder's obligation to make a first offer when requested. And there's a company that now risks being fined for an EU antitrust violation by being an unwilling licensor, unless Nokia departs from its prior refusal to grant the type of license requested.

The mediation effort will be farcical if Nokia continues to offer only insufficient (from a competition perspective) types of arrangements, such as "have made" rights that come down to extending a true license only to the car maker while hobbling component makers (who under such structure could not simply sell their components to any customer of their choosing).

Before mediation has even begun (the parties have just agreed to it), Nokia is already cornered. This week's offer is the best decision I've seen from Continental in this context to date. I've criticized some of their moves, I've disagreed with some of their arguments (in the U.S. litigation), but this is brilliant, provided that the European Commission is determined to protect innovation and competition.

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Nokia v. Daimler Mannheim trial postponed from tomorrow to March 2020: rare case in which postponement is bad for defendant

Tomorrow's Mannheim patent trial between Nokia and Daimler, with many suppliers intervening, has been postponed to March 17, 2020, as Judge Dr. Joachim Bock, the court's spokesman, confirmed to me today.

In most cases, pushing back a trial date is in the defendant's interest. What's obviously a different situation is when the "defendant" is actually a declaratory-judgment plaintiff and seeks to get a ruling in one jurisdiction in time to influence a decision in another (such as UK complaints designed to get German cases stayed). But this is the very first time in my observation for a postponement of a German patent infringement case to benefit the plaintiff, not the defendant.

[Update] Here's a statement from Nokia: "We continue to believe that constructive negotiation is the best way to resolve licensing disputes, and have offered independent mediation to Daimler and its tier 1 suppliers to that end. To ensure there is time for this mediation to be successful, we have unilaterally chosen to postpone the pending hearing on 10 December in Germany. We trust that Daimler and its tier 1 suppliers will now engage in these meaningful efforts to reach settlement. There is more to gain for all if we work together." [/Update]

As I'll explain further below, and in fact already explained last week, the question of whether or not Daimler's suppliers are entitled to an exhaustive component-level license on FRAND terms is not amenable to mediation.

I've seen a number of situations in which one party wanted the Mannheim court to stay a case--or postpone a ruling after a trial--but the court kept its schedule unless both parties stipulated to it. One case I remember particularly well involved Nokia and ViewSonic, with the latter saying that settlement talks were at an advanced stage (which is more than Nokia can say), so a ruling wasn't urgent. But Nokia disagreed, and the court handed down a decision.

Should anyone have recommended to Daimler to consent to a postponement of the Mannheim case in exchange for Nokia's zero-credibility settlement efforts, that firm would have given the German automotive company disastrously bad advice.

As I explained in the post I just linked to (on Nokia pretending to be prepared to settle), the Mannheim cases are actually an opportunity for Daimler and its suppliers to obtain positive clarification on the obligation to license component makers. It's a given that Dusseldorf will do so, but things take very long up there. It's also well-known by now that the Munich court, which incessantly cranks out injunctions (most recently against Facebook and its WhatsApp and Instagram subsidiaries), is so far not really interested in Daimler's suppliers' complaint that Nokia owes them a license. But Mannheim could send out a clear signal by siding with the Dusseldorf stance on upstream licenses, and that would make Munich an outlier (and possibly leads Munich to reconsider, or at least would bear weight with the Munich appeals court).

There was no good reason not to hold tomorrow's trial from the defendants and, especially, the intervenors' perspective. The parties could still have negotiated, which isn't going to lead anywhere unless Daimler surrenders. Nokia is not going to offer an exhaustive component-level license. If they wanted, they could do so anytime. You don't need to talk to the press (Reuters, for instance). You can just make a commitment. Any day of the week.

There is no news of Nokia having met Huawei's demand in an antitrust case pending in the Dusseldorf court: Huawei wants to enforce Nokia's obligation to make a licensing offer on FRAND terms.

Daimler's EU antitrust complaint against Nokia is more than one year old. The EU's automotive industry employs roughly 14 million people. Nokia's (and Ericsson's) refusal to license component makers is in clear violation of CJEU case law (Huawei v. ZTE, where the EU's top court stated clearly that everyone is entitled to a SEP license). It's a mystery why the European Commission still isn't formally investigating. Granted, they had some delays with the appointment of the new Commission, but even in a state of interregnum, the Commission's competition enforcement made progress in other areas.

According to Reuters's Foo Yun Chee, quoting an unnamed source, the Commission "indicated in October it could launch a probe." In order to avoid this, Nokia apparently decided to wave a fake white flag. They want to lay the foundation for finger-pointing at Daimler, claiming that Nokia wanted to settle but Daimler and its suppliers weren't constructive.

That game gets played all the time. But there's a right way and a wrong way to play it. The right way in a situation like this is to fully expose the other party's disingenuity as opposed to readily falling--even jumping--in a trap.

If Nokia indicated even over the media that they wanted to talk, Daimler could have said: "Let's talk." But Daimler should have insisted that the sequence of decisions in Germany would remain intact: Mannheim first, Munich second. (There's nothing anybody can do about Dusseldorf being much slower.)

I've seen a number of exchanges between parties' counsel in such situations. Such letters and emails often get attached to U.S. court filings. Microsoft played it very smart against Motorola. They responded in a way that ultimately forced Motorola to drop its mask. Microsoft never made a concession unless it was a great deal. Here, I can't see the great deal. It's a mistake to make it more likely, or even near-certain, that Munich will rule ahead of Mannheim.

The parties could have let the trial go forward, but could have asked the court not to rule unusually quickly. Judge Dr. Holger Kircher, the presiding judge of the Second Civil Chamber of the Mannheim Regional Court, is always in charge and doesn't allow his court to be used as a tool. But the parties could have asked him not to rule before, say, late January. That would have been the realistic time frame anyway (in light of the Holiday Season hiatus).

It's not in Daimler's interest to give the European Commission an excuse for not taking action for yet another month or more.

For an example, Daimler could have told Nokia that they're happy to talk, but there's a precondition: Nokia must recognize in writing the suppliers' entitlement to an exhaustive SEP license on FRAND terms. There's nothing to negotiate, arbitrate, or mediate about that one: it's a binary question.

Again, for an industry that employs almost three times as many people in Europe as Nokia's home country has inhabitants, or about as many as Finland (Nokia) and Sweden (Ericsson) combined, it shouldn't be hard to get such a set of legally and economically strong complaints investigated. They just relied on the wrong people, and maybe they hoped that some would be more helpful than they ultimately were, but in that case one has to keep searching for allies until there is momentum. By the way, I believe I haven't even read a single article on Daimler's EU complaint apart from this one on IT-specialized news website heise.de. If they don't even know how to draw attention to this in Germany, how can they expect swift and decisive action in Brussels?

The fact that the European Commission is dragging its feet isn't a reason to delay resolution of some important FRAND questions (especially access to licenses) in court. Much to the contrary, if the regulators don't help you, the courts are your only chance to solve the problem. Right now the only company that is pursuing a promising and convincing strategy against Nokia is Huawei with its Dusseldorf FRAND lawsuit.

If the automotive industry can't bring its economic weight to bear, it has no one to blame but itself.

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Super Mario company paved the way for BMW and Daimler's invalidity defense against a Broadcom patent

There was a time when a video game console manufacturer like Nintendo and car makers like BMW and Daimler were technologically so far apart that one could hardly have imagined the same patent would get asserted against those three organizations. But times have changed, and a patent on programmable texture processing (a computer graphics patent) can now be alleged--whether with or without merit--to read on game consoles as well as car navigation systems (or other computing technology incorporated into a modern automobile).

There also was a time when Broadcom was more interested in making products than asserting patents, and often filed pretty good amicus curiae briefs advocating reasonableness in patent enforcement (particularly, but not only, with respect to standard-essential patents). That, too, has changed.

Time is ticking away for some very old Broadcom patents on the verge of expiry. Last year, however, Broadcom forced the Volkswagen group into a billion-dollar settlement, exploiting the sad state of affairs of German patent law, where injunctions are granted--mnst of the time over patents that would later be held invalid--without an eBay v. MercExchange-like proportionality analysis. One of Europe's best patent judges believes Germany is in breach of EU law for that reason, and at a conference I recently organized in Brussels, a lawyer said the European Commission could, if it wanted, fine Germany for infringement of an EU directive.

The latest insanity--Germany-wide patent injunctions obtained by BlackBerry against Facebook and its WhatsApp and Instagram subsidiaries over four different (most likely invalid) software patents--shows that this situation is unsustainable, and I'm confident that change will come. Germany's patent infringement judges unanimously oppose reform, but they're not going to be the ones to decide. At the most, they can influence the unelected officials at the ministry of justice, but the German legislature will make the actual decision and is going to be a million times more interested in strengthening the German economy and protecting German jobs and consumers than in attracting lots of patent troll litigation to the country. There won't be a single party in the German parliament that would support the status quo. The judges are going to lose this battle.

Getting back to Broadcom's efforts to shake down the German automotive industry, it doesn't look like what worked against Volkswagen is too likely to work out the same way against BMW and Daimler--partly because time is not on Broadcom's side, and partly because Broadcom faces more resistance this time around.

Before Broadcom sued BMW and Daimler over EP1177531 on a "method and system for providing programmable texture processing," they also asserted that patent against Nintendo. The company known for video game consolers and for iconic game franchises like Super Mario and Pokémon was alleged to infringe that patent. But Nvidia then brought a nullity action (a complaint seeking invalidation of the patent by the Federal Patent Court of Germany), and Nintendo's lawyers from the Bardehle Pagenberg firm (which often defends BMW as well) convinced the Mannheim Regional Court that the patent was likely going to be annulled because an Nvidia chip sold before the patent's priority date already came with the technique the patent purports to cover.

Of Germany's leading patent infringement venues, the Mannheim Regional Court is by far and away the most responsible one when it comes to staying infringement actions over likely-invalid patents. Daimler will defend itself against a Nokia SEP case in Mannheim on Tuesday (December 10) as the court just confirmed to me on Friday.

Broadcom filed an interlocutory appeal against the order to stay the Nintendo case, and it remains to be seen what the appeals court--the Karlsruhe Higher Regional Court, where Judge Andreas Voss ("Voß" in German) presides over the patent-specialized division--will decide. The Mannheim court stayed the cases against BMW and Daimler for the same reason as in the Nintendo case, but reminded the parties in its order to stay the case against Nintendo and the pending interlocutory appeal.

A Broadcom subsidiary named Avago has meanwhile lodged some patent infringement complaints against BMW and Daimler. Daimler will have until January 22, 2020 for its answer to the complaint. But the patent is set to expire a few months later. So Broadcom/Avago may never actually get to enforce an injunction. The timeline in the case against BMW remains to be seen. Avago interestingly brought a lawsuit against BMW in Hamburg, a venue in which I have so far not watched a single patent infringement case. While patent infringement suits can be brought in any federal district in the United States, Germany designates specific courts, and almost all patent cases are filed in Dusseldorf, Mannheim, and Munich. It's not unheard of for someone to file in Hamburg (or Frankfurt, Berlin, or Nuremberg), but it's highly unusual.

I asked BMW for further information on those cases, and after telling me they referred my inquiry to the spokesperson in charge of this topic, I never heard back. Daimler declined to provide any information other than expressing the view that the complaint is meritless. So I had to tape some other sources.

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Car makers don't want to pay the likes of Qualcomm wireless patent royalties on leather seats: FTC v. Qualcomm amicus briefs

Earlier this year it became known that Qualcomm used to charge (and maybe still does, depending on the terms of the recent settlement) Apple a 5% wireless patent royalty on iPhone repairs. That's bad enough, but imagine what would happen if all of us had to indirectly pay wireless patent royalties on vehicle repairs? Or on leather seats? The latter is an issue that two automotive industry bodies have raised in a filing with the United States Court of Appeals for the Ninth Circuit.

For a list of previous posts on amicus curiae briefs in FTC v. Qualcomm, and on the order scheduling the oral hearing for February 13, 2020, let me refer you to this post. I will now, finally, comment on the remaining two amicus briefs supporting the FTC.

The Association of Global Automakers (AGA) and the Alliance of Automobile Manufacturers (AAM) made a joint filing (this post continues below the document):

19-11-29 AGA and AAM (Autom... by Florian Mueller on Scribd

What lends their support of the FTC particular significance is that the AMA's members include Ford and Fiat-Chrysler. Ford and Chrysler are American industrial icons.

That brief stresses the importance of patent exhaustion, which is so key to the automotive industry's longstanding modus operandi. And here's my preferred passage:

"If the Court ratifies Qualcomm's behavior, then Qualcomm and its peers could demand a cut of the profits attributable to even a car's leather seats." (emphasis in original)

That just perfectly illustrates the importance of the royalty base.

What makes the refusal to extend exhaustive FRAND licenses to component makers even harder to justify in the automotive industry is that the telematics control units (TCUs) sold by Tier 1 suppliers (the ones that directly sell to the car makers) come with pretty much the same functionality as a phone, apart from the screen.

Two Tier 1 suppliers--Continental Automotive Systems (whose FRAND/antitrust lawsuit against Nokia this blog has been following for several months) and Japan's DENSO--also filed a joint amicus curiae brief (this post continues below the document):

19-11-29 Continental and De... by Florian Mueller on Scribd

The automotive suppliers' lead counsel in this matter is Orrick, Herrington & Sutcliffe's Jay Jurata, who also spoke at my recent component-level licensing conference in Brussels. At the time--and even until I downloaded the above document--I had no idea he was going to make a filing in FTC v. Qualcomm.

What I finally learned from the brief is how Continental Automotive Systems, the Michigan-based U.S. entity suing Nokia in the Northern District of California, relates to Continental AG, the German group parent:

"Continental Automotive Systems, Inc. is wholly owned by Continental Automotive, Inc. Continental Automotive, Inc. is wholly-owned by Continental Automotive Holding Netherlands B.V., which is wholly-owned by CGH Holding B.V., which is wholly-owned by CAS-One Holdinggesellschaft mbH, which is wholly-owned by Continental Caoutchouc-Export-GmbH, which is owned 51% by Continental Automotive GmbH and 49% by Continental A.G."

Complicated. Possibly even more tiers than an automotive supply chain. They probably need a navigation system to find their way around in that widespread network of subsidiaries.

The most interesting business information that the brief reveals is this:

"[...] Continental has forgone working with both MediaTek and Samsung—upstream manufacturers whose chipsets would allow Continental to upgrade its products to provide consumers with both superior prices and technical capabilities—because their chips come without licenses to SEPs that they practice."

There's already plenty of industry testimony in the evidentiary record of this case that proves this problem. What the Continental-Denso amicus brief adds, however, is an example from the automotive industry. There's also a mentioning of an innovative product Continental would have liked to make, and could make if not for SEP licensing issues ("a single circuit board with cellular communications and high-end infotainment functions").

The European Commission should also take note of those problems, as Continental is one of five EU antitrust complainants over Nokia's Qualcomm-like refusal to license anyone but end-product makers.

I also like this passage:

"Although the cellular connectivity technology at issue in this case is only a small part of connected-vehicle technology, it is a necessary one. And so the inability of Western device companies to access licenses to SEPs on FRAND terms is hamstringing their ability to compete in this critical device-innovation race."

The brief addresses--and practically destroys--Qualcomm's "efficiency" argument for licensing only end-product makers. That part culminates in the following passage:

"And that is, in a nutshell, one of the fundamental problems with the SEP-holders' rule: It takes a decision that should be sorted out naturally through market forces, and places it in solely the hands of the very party that stands to benefit most from inefficiency."

The proposal is to ensure everyone in the supply chain (not just a patent holder's "preferred link in the supply chain," as the brief calls the patentee's sweet spot) has access to an exhaustive license on FRAND terms, and to then let market forces decide what type of patents is best licensed at what level. But in order for market forces to come into play at all, access must be available to everyone. Otherwise it all just depends on a SEP holder's opportunistic choice.

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Munich appeals court schedules ruling on Nokia's anti-antisuit injunctions against Continental for December 12

Just a quick follow-up to yesterday's report on the appellate hearing in Munich on Nokia's anti-antisuit injunctions against Continental:

The Munich I Higher Regional Court's press office told me today that a ruling has been scheduled for December 12.

I still predict the same outcome: reversal. The court's position on the irreconcilability of an antisuit--including anti-antisuit--injunction with German law didn't appear to change at any moment during the hearing that lasted well over two hours. What I attribute the delay to is simply that this appeals court--at least when it comes to patent cases--tends to write very comprehensive opinions. Those judges won't necessarily address each and every argument they don't have to reach. But unlike their U.S. counterparts, they do cover a lot of ground beyond the shortest path to a particular outcome when fundamental questions are at stake. Earlier this year, an injunction Qualcomm had won and enforced against Apple in Germany was tossed on three independent grounds, any single one of which would have been self-sufficient.

The practical effect of this target date is that Continental can't make a third attempt at a U.S. antisuit injunction for another four weeks. Meanwhile, on December 10, the first Nokia v. Daimler trial will be held in Mannheim (there have been first hearings in three Munich cases, but the second hearings there are the actual trials and the soonest one of them will take place in February). In all those years I've seen only one bench ruling in Mannheim, so realistically, there won't be any German patent injunction in place against Daimler before sometime in January. Meanwhile, a renewed motion for an antisuit injunction in the U.S. could be resolved if a motion to shorten time succeeded--which it might if a Mannheim injunction loomed large after the December 10 trial, especially since the issues have been briefed before, even if not by Sharp and Conversant.

The Mannheim Regional Court is more likely than the one in Munich to be receptive to the argument that Nokia shouldn't be granted injunctive relief against an end-product maker (Daimler) only because of a refusal to extend an exhaustive license to upstream companies in the supply chain. I'm cautiously optimistic it may work out that way (or Nokia's Mannheim case might also fail on the merits and be rejected or stayed). In that case, a U.S. antisuit injunction won't even be needed before the first final Nokia v. Daimler judgment is entered in Munich.

Nokia may lose everything in the end. Huawei is probably going to win its private antitrust lawsuit against Nokia in Dusseldorf. The European Commission might launch formal investigations anytime. And if Nokia can't gain decisive leverage over Daimler in the short term, it will probably end up paying tens of millions of euros under Germany's "loser pays" rule as there's an army of intervening companies on Daimler's side and Nokia has to pick up the bill for all those legal entities if it loses. Statistically, most of those types of complaints don't go anywhere, so Nokia needs a lucky punch, but it faces some hurdles. I was less optimistic about Daimler and its suppliers' ability to fend off Nokia's patent assertions, but Huawei's Dusseldorf action is a game changer: even if Nokia could force Daimler to take a license (be it from Nokia or from the Avanci pool as a whole), Huawei's lawsuit would continue unabatedly.

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Munich appeals court likely to reverse Nokia's anti-antisuit injunction against Continental: Judge Koh may have to rule on third antisuit motion soon

Before we go to today's Munich appellate hearing, let me just say that this week's Component-Level SEP Licensing conference in Brussels exceeded expectations, which applies to the quality of the presentations of those who strongly advocate component-level licensing obligations under antitrust and contract law as well as of those who are skeptical of, or even adamantly opposed to, at least one of those legal bases--everyone I invited was terrific. I'll publish the slides no later than this coming weekend. Now, the latest from Nokia v. Continental.

3 1/2 months ago I voiced a concern over what appeared to be a contradiction in the Munich I Regional Court's decision to grant Nokia an ex parte (i.e., without notice or hearing) anti-antisuit injunction against Continental, barring the automotive supplier from shielding Daimler from Nokia's numerous German patent infringement actions:

There's something odd about the anti-antisuit-injunction injunction. The order notes that antisuit injunctions of the kind that exists in the U.S. are not known in Germany. But then the court somehow threads the needle and actually does issue an antisuit injunction for the purpose of thwarting a potentially-upcoming antisuit injunction from overseas.

A month later, when the Munich court entered another such injunction (against a different Continental legal entity), I wrote "[t]he appeals court may very well find that two wrongs don't make a right."

That's precisely what's most likely to happen this evening by Central European Time (morning by Pacific Standard Time), though it won't become known until tomorrow morning local time.

To be fair, Presiding Judge Tobias Pichlmaier of the 21st civil chamber of the lower court--in a speech delivered a couple of weeks ago--as well as the late-August decision (which came after briefing and hearing, unlike the ex parte in July) were definitely more nuanced than the first, hastily-prepared decision. Still, Presiding Judge Konrad Retzer of the 6th Civil Senate of the Oberlandesgericht Muenchen (Munich Higher Regional Court) started today's appellate hearing with a summary of the factual and legal issues that included two grounds of reversal:

1. A preliminary injunction might not be warranted as no Continental antisuit motion against Nokia is currently pending in the United States. But Nokia's lead counsel, Arnold Ruess's Cordula Schumacher, accurately pointed out that Judge Lucy H. Koh of the United States District Court for the Northern District of California had not resolved the issue on a definitive basis: Continental could refile. I would file under lawyer's hyperbole that she said Judge Koh had twice "invited" Continental to refile. Once: yes. Twice: well, the denial of Continental's motion for an anti-anti-antisuit temporary restraining order merely noted that Continental had been told they could bring another motion for a preliminary injunction, but it's in the eye of the beholder whether that's an invitation.

2. Judge Retzer appeared to be unconvinced by the attempt to distinguish the German anti-antisuit injunction from a U.S. antisuit injunction only because of a narrower scope (relating to a motion rather than an entire litigation). While he credited the lower court for its diligent analysis of some other aspects of the matter, he appeared to view this part as reversible error. Also, being the incarnation of equanimity, he did not appear receptive to an equality-of-arms argument (U.S. court can issue antisuit injunctions, so--Nokia said--German courts should provide a countermeasure). Neither did Nokia's self-defense argument get much traction: Judge Retzer explained that self-defense is when a court can't help you before it's too late, and not when you can still go to or defend yourself in court. The analogy he used was somewhat similar to Second Amendment activists' "when seconds count but the cops are minutes away" argument.

   Recent anti-antisuit decisions in Paris and London didn't bear any non-negligible weight with the German appeals court either as they didn't (because they couldn't) address the questions to be resolved under German law.

The court declared its intent to reach a decision today, but it would be late, so Judge Retzer asked parties, counsel, and the general public (like me) to go home and call his chambers tomorrow morning.

The decision will be final as preliminary-injunction rulings cannot be appealed to the Federal Court of Justice.

Affirmance of Nokia's anti-antisuit injunction would be a major surprise. Also, while the presiding judge's initial outline also mentioned the intermediary or complicit liability of Continental AG with its indirect U.S. subsidiary Continental Automotive Systems as a potentially outcome-determinative issue with respect to one of the two injunctions, that question wasn't discussed in the hearing--presumably because it won't have to be reached.

Nokia voluntarily joined two U.S. standard-setting organizations--ATIS and TIA--and made U.S. FRAND declarations. In doing so, Nokia submitted to U.S. in personam and in rem jurisdiction, which entails, ínter alia, the possibility of antisuit injunctions. Continental couldn't have enforced its rights as a third-party beneficiary in any other jurisdiction than the U.S., where the automotive supplier has significant business activity in the Wolverine State as well as the Golden State. Assuming that Nokia's anti-antisuit injunction (which was in any event a brilliant tactical move and definitely had an impact, though probably a short-lived one) gets lifted, Continental is likely to refile in the U.S.--where the standard for an antisuit injunction is fairly high and may not be met in this case.

In a related development, Judge Koh canceled the hearing on the Avanci-Nokia venue transfer motion, which she often does when the parties' briefs constitute a sufficient basis for adjudication. But there may be a hearing--in a week from today--on the defendants' joint motion to dismiss.

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Game changer in automotive patent wars? Huawei brought antitrust complaint against Nokia in German court to get exhaustive module-level SEP license

The Munich I Regional Court scheduled a Nokia v. Daimler "double-header" for today: first hearings (several months after which there will be trials followed by decisions) in two of the Finnish company's ten patent infringement cases pending against the German car maker.

The wireless standard-essential patents-in-suit are EP1388234 and the related German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets" as well as EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission." On June 5, the same court held a hearing on Nokia's infringement action against Daimler over EP1671505 on a "redundancy strategy selection scheme," and indicated a strong inclination to rule in Nokia's favor, unless things change when the actual trial takes place on February 6, 2020.

A number of suppliers of telematics control units (TCUs) to Daimler are intervening in the infringement case on the automotive company's behalf: Continental (which tried twice, but unsuccessfully so far, to shield Daimler from Nokia's lawsuits by means of a U.S. antisuit injunction), BURY, Bosch, TomTom (world-famous for its navigation systems), and Valeo subsidiary Peiker. Another intervenor, Huawei, makes cellular communications modules that are at the heart of many TCUs made by others; Huawei is also known to offer TCUs, but its counsel mentioned only its connectivity modules today.

Another factor that sets the Chinese mobile technology company apart from the other intervenors is that Huawei is presently obtaining several times more SEPs--and has a far higher share of existing 4G patents--than Nokia. By contrast, the TCU makers intervening in this case largely don't own cellular SEPs. What lends this particular importance is that it shows it's about product-focused innovators (car makers, TCU makers, and the likes of Huawei, Samsung, and LG) versus companies like Nokia and Ericsson, whose current product business is a shadow of its former self, so they increasingly focus on patent monetization.

Something I had heard through the grapevine was finally confirmed today:

Huawei has recently filed an antitrust complaint against Nokia with the Dusseldorf Regional Court, asking the court to order Nokia to make a FRAND licensing offer to Huawei--which (as was also mentioned today) already has a license agreement in place with Nokia for its end products (phones, tablets etc.)--that would result in an exhaustive SEP license covering Huawei's cellular connectivity modules.

Huawei is more likely than not to succeed with its Dusseldorf antitrust action. Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German), who chairs one of the two patent-specialized "senates" (divisions) of the Dusseldorf Higher Regional Court and is the principal author of the leading German reference work on patent infringement proceedings, published an article this year in the periodical of the German Association for the Protection of Intellectual Property (GRUR). In that article, Judge Dr. Kuehnen explained why implementers at all levels of the supply chain are entitled to an exhaustive FRAND license--and after analyzing various procedural avenues, he concluded that the most practical approach is for the implementer to ask a court--as Huawei is doing now--to obligate the SEP holder to make a FRAND offer. That appears more reasonable than a prayer for relief over a specific set of terms, given that a SEP owner has more information available to make a FRAND offer that complies with the criteria laid out by the Court of Justice of the European Union (CJEU) in Huawei v. ZTE.

Huawei's counsel in the Dusseldorf antitrust action--and representing Huawei to the extent it is an intervenor in Nokia's patent infringement actions--is Preu Bohlig's Professor Christian Donle. Preu Bohlig is one of Germany's oldest IP law boutiques. In the smartphone patent wars that firm successfully defended HTC against a couple of Apple patents. When I heard of Professor Donle's component licensing antitrust action, I invited him to speak at my Brussels conference on November 12 (that's already the week after next), and he thankfully accepted, so he will share a panel with Bristows' Pat Treacy, BakerBotts' Paul Lugard, and Orrick's Jay Jurata. But back to the German cases:

If at the end of Huawei's antitrust action Nokia is required to grant an exhaustive module-level SEP license on FRAND terms (and a real license as opposed to an "extended workbench" type of deal under which the de facto licensee would still be the car maker, with the component supplier merely acting as a licensing agent on the OEM's behalf), Nokia's patent infringement actions against Daimler will, to the extent they involve Daimler cars that come with a then-licensed Huawei component, be not only meritless, but even downright unlawful.

For that reason, Huawei has intervened in the German Nokia v. Daimler cases, requesting that--to the extent Huawei is affected--the cases be severed and stayed. I don't know what percentage of Daimler cars come with a cellular communications module from Huawei--all that has been mentioned so far is that Continental is one of Huawei's various customers among TCU makers, so the percentage could be extremely high.

In today's first hearing, the Munich court (I'll comment separately on their attitude toward antitrust defenses to patent infringement cases) basically said that since Nokia has chosen to sue Daimler, they are for now inclined to be ignorant of the issues raised by Huawei--though we're simply talking about the very (il)legality of what Nokia is doing by refusing to license Huawei while suing its (indirect) customer, Daimler. But it was just a first hearing, so there still is a chance for Huawei to obtain a stay even from the Munich court (which is an outlier court even within Germany in this specific context), or maybe it won't even be necessary in case Nokia fails to prevail on infringement and/or cases get stayed over validity concerns.

I've quickly drawn up a few diagrams to explain the relationship between the different parties and cases. First, here's a hypothetical scenario in which Nokia would--which it probably won't unless forced to--finally honor its FRAND pledge and extend an exhaustive SEP license to Huawei, which would in turn supply TCUs (which it may or may not do, but definitely could do anytime) to Daimler (click on the image to enlarge):

Patent exhaustion works downstream, so the net effect is that Daimler, as the end-product maker, would find itself fully licensed. While an argument was made today about exhaustion under German law requiring that the first licensed sale already involves a product practicing all claim limitations, Nokia did not--as I'm convinced it could not--make an argument that its SEPs claim cars, and Huawei's connectivity modules are full-featured communications devices that--to put it in a slightly oversimplified way--contain all the hardware you find in a phone apart from a screen.

Patent exhaustion works across any number of levels of a supply chain. Here's the second of my three charts--the present commercial reality of Huawei supplying its modules to Continental, which in turn sells a TCU to Daimler, but with the assumption of Nokia finally (which is not the case yet) granting a component-level license to Huawei (click on the image to enlarge):

The third and final chart combines the two previously-shown paths down the supply chain with Nokia's ongoing (allegedly unlawful) patent litigation campaign against Daimler and Huawei's Dusseldorf antitrust action against Nokia (click on the image to enlarge; this post continues below the diagram):

The chart mentions the basis for the Huawei v. Nokia antitrust case: Art. 102 TFEU, the unilateral-conduct (abuse of dominant position) paragraph of EU law.

Daimler and four other suppliers (Continental, Valeo, BURY, and Gemalto) filed EU antitrust complaints against Nokia earlier this year. Huawei would be in its right to do so, but no such filing is known. What is known by now is the Dusseldorf antitrust case, and just like Huawei v. ZTE started in that same town, where I attended the January 2013 trial that resulted in the referral of various SEP injunction-related questions to the CJEU, Huawei v. Nokia, too, has the potential to make EU antitrust history.

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