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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FOSS Patents' publication of leaked information on status of mediation effort gave rise to peripheral controversy in Nokia v. Daimler trial

Almost all of the time, this blog merely reports and comments on key issues facing the technology industry, but doesn't create or constitute an issue in and of itself. FOSS Patents has been mentioned in some U.S. court filings over the years, and judges (mostly in Germany, but from what I hear also in other parts of the world) have sometimes made reference to FOSS Patents without naming it. But today was the first situation in which two parties (a plaintiff and an intervenor) traded accusations involving FOSS Patents in different ways.

Various suppliers are intervening on Daimler's behalf in today's Nokia v. Daimler standard-essential patent infringement trial in Munich (continuing in a sealed courtroom as I write these lines). One of them is Peiker Acustic (yes, without an "o" before the "u"), a subsidairy of French automotive supplier Valeo. Just like in an October 2019 early first hearing in another Nokia v. Daimler case pending before the Munich I Regional Court, Dr. Benjamin Schroeer ("Schröer" in German) of the Hogan Lovells firm made an impassioned argument for his client's entitlement to an exhaustive component-level SEP license.

One of Dr. Schroeer's points was that the suppliers intervening in this case were specifically targeted by Nokia, whose complaint names certain suppliers and seeks an injunction and other remedies only with respect to Daimler cars incorporating telematics control units (TCUs) from those particular suppliers. Peiker's counsel noted that Nokia not only excluded Harman (a Samsung subsidiary) from that list but even explicitly stated that Daimler cars incorporating TCUs made by Harman were not being targeted at this stage.

Dr. Schroeer took Nokia to task over this selective, discriminatory targeting of particular Daimler suppliers (as opposed to all of them). While Harman's exclusion would simply be legally required if Harman had an exhaustive component-level license to Nokia's SEPs, he said that Harman quite apparently doesn't have such a license. In this context, he pointed to the fact that a FOSS Patents report on ongoing EU antitrust mediation between Nokia and Daimler as well as various Daimler suppliers mentioned Harman as one of the suppliers negotiating with Nokia. It's true that I listed all participants in mediation that I was able to find out about, and Harman was one of them.

A few minutes later, Nokia's lead counsel, Arnold &, Ruess's Cordula Schumacher, accused Dr. Schroeer of having violated the non-disclosure agreement covering the mediation process by confirming in open court the accuracy of a fact leaked to this blog.

One of the limitations concerning German court proceedings is that there are no transcripts. Otherwise one could verify what exactly Dr. Schroeer said. I don't remember him affirmatively confirming the accuracy of anything I wrote. It might be that the way he expressed himself was ambiguous and could be interpreted as either just referencing what I had written or making it sound like the fact I reported on it deprived the information of protection under the NDA.

In any event, Dr. Schumacher asked the court to add a sentence about this to the official minutes. In that same situation, Nokia's director of European dispute resolution, Dr. Clemens-August Heusch, made a remark to the effect of accusing Dr. Schroeer of having been FOSS Patents' source on the mediation status in the first place. Dr. Schroeer demanded a retraction and an apology (and also asked for something being included in the official minutes). He firmly denied having been my source. Nokia's Dr. Heusch declined the court's invitation to comment.

I don't disclose my confidential sources, which is also why I don't deny that anyone has been a source (or validate or contradict denials). What I did indicate in the Nokia mediation context is that I obtained information from more than one source.

The fact that Harman participated in mediation while not being an intervenor in the Nokia v. Daimler infringement proceedings was interesting for sure, but the blog post in question contained far more sensitive information than that one. It appears overreaching to try to keep the names of the parties to an antitrust mediation (requested by the European Commission) confidential.

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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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Commissioner Vestager makes competition-chilling remarks on automotive complaints against Nokia at Chillin'Competition conference

"Chillin'Competition" is a nice wordplay for a conference title. To my dismay, that event provided the setting for competition-chilling utterances by EU competition commissioner Margrethe Vestager. "Competition-chilling" in the sense of doing nothing to promote fair and vibrant competition--and free movement of goods, one of the bloc's key objectives--with respect to automotive components that come with cellular connectivity. The best way to promote competition in that field is to ensure the makers of those components receive exhaustive component-level licenses on FRAND terms. Commissioner Vestager made herself a name as being supposedly tougher than even the legendary "Steely Neelie," but with respect to standard-essential patents (SEPs), her predecessor Joaquín Almunia used to take swifter and more decisive action.

Daimler's antitrust complaint was filed more than a year ago. Then, a few months later, four suppliers (Continental, Valeo, Gemalto, and BURY Technologies) lodged their complaints. There's no justification whatsoever for not bringing the antitrust hammer down now.

Khushita Vasant, a Brussels-based reporter for the Policy & Regulatory Report (PaRR), was first to break the news on Nokia's mediation offer to Daimler and its Tier 1 (= direct) suppliers, and also first to report on Monday that Mrs. Vestager told reporters after the aforementioned conference that "it would be a good thing if there was mutual understanding [between Nokia and the automotive complainants]." The Commission expects an update "by mid-February," writes PaRR.

This means another two months will be wasted. With the greatest respect for the Internaational Chamber of Commerce, this matter here doesn't lend itself to mediation, and there are only two possible outcomes:

• Daimler surrenders. Or:

• No deal.

The binary question is: do the component makers get an exhaustive license on FRAND terms? If so, they'd also be free, for an example, to sell excess quantities openly on the market to anybody. That's what is called a free market. The EC knows that.

The monetary terms are, of course, non-binary. If Nokia sought a license fee that wouldn't enable those component makers to stay in this business, it wouldn't help. But the very first step must be for Nokia to stop disputing the component makers' entitlement to a license.

Huawei is suing Nokia in a German court with only the objective of finally getting a component-level licensing offer. No one should ever have had to bring such a complaint, or to ask the European Commission to investigate. Nokia's refusal is downright irrational as it never disputed a phone maker's entitlement to a SEP license, and Huawei's connectivity modules come with all the same types of hardware components as a phone, apart from the screen. The telematics control units (TCUs) made by the likes of Continental incorporate such network access devices (NADs) and come with even more hardware. There's nothing in the claims of those standard-essential patents that a mobile phone has and a NAD or TCU doesn't. I've seen many SEPs, possibly more than anyone involved with the EU investigation, and I have yet to see a cellular SEP that claims a screen.

Daimler and its suppliers should have made Nokia's commitment to an exhaustive component-level license on FRAND terms a precondition for even sitting down and talking. Then, once Nokia has made that commitment, one can talk about FRAND royalty amounts. Those amounts are amenable to negotiation, mediation (where no one is forced to agree), determination by a court of law, or arbitration--the latter, however, provided that the parameters are properly defined, including the right to dispute essentiality and validity, and if there are safeguards against the SEP holder going into arbitration (the results of which tend to gravitate toward the middle) making out-of-this-world demands.

This maneuver helped Nokia in two ways:

• As expected, the Commission is just going to wait, as if they hadn't been waiting more than long enough already.

• Nokia now has the chance to obtain a provisionally-enforceable injunction from the Munich court prior to Daimler and its suppliers getting a potentially more favorable decision on the licensing question from the Mannheim court.

There is no indication of Huawei being a party to the mediation talks (at least I couldn't find any in the media), so at least that Dusseldorf antitrust lawsuit against Nokia is going forward.

A leading German patent litigator, who is mostly on the enforcing (not defending) side and is not involved with the Nokia cases in any way, told me he's convinced Nokia can't win. He said this was going to be their "Vietnam." While I'm glad to see Daimler taking a stand against Nokia's conduct, and also hope that all that Nokia is going to get out of this is some hefty legal bills, Daimler and its suppliers must not let their guard down.

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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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Nokia outmaneuvering Daimler with settlement effort that has zero credibility--but Mannheim court confirms hearing date

One week ago, Reuters' Foo Yun Chee (who's been covering EU competition matters for more than a decade and whom I regard very highly) reported on a statement by Nokia according to which "the Finnish telecoms equipment maker had submitted a proposal for resolving the patent licensing fee row." This relates to the situation between Nokia and Daimler as well as Daimler's suppliers. Nokia brought ten German standard-essential patent (SEP) infringement actions against Daimler earlier this year--several months after Daimler had lodged an antitrust complaint with the European Commission's Directorate-General for Competition (DG COMP) over Nokia's refusal to extend exhaustive SEP licenses on FRAND terms to Daimler's suppliers. At around the same time, four suppliers (Continental, Valeo, Gemalto, and BURY Technologies) also filed complaints against Nokia with DG COMP.

I've always been outspoken about stalling. HTC's mastery of that skill in its dispute with Apple was first-rate. I could write a book or hold a full-day seminar on stalling tactics especially in U.S. and cross-jurisdictional disputes. So when I see the parties' divergent comments in that Reuters piece, I know Nokia is stalling:

"'Nokia continues to work toward constructive ways to resolve commercial disputes related to licensing of our standardized cellular technologies,' Nokia said in a statement, without mentioning any specific proposal to end the row."

"Daimler declined to comment specifically on Nokia's proposal but a spokeswoman said: 'We want clarification on how essential patents for telecommunications standards are to be licensed in the automotive industry. Nokia so far refused to comprehensively and directly license our suppliers.'"

This juxtaposition tells it all. Nokia is pretending to make a bona fide effort to address the issue. But that's just not credible for a simple reason: we're not talking about adjustable fishing quotas. This here is a binary question. Either the component makers get an exhaustive license on FRAND terms (which terms would later have to be negotiated or, if necssary, determined by a court of law or, if the parties agree on the parameters, an arbitration tribunal) that allows them to go about their business--or they don't. Huawei raised that binary question in its Dusseldorf antitrust lawsuit against Nokia.

It's an illusion that there could be anything in between. You can't be just a little bit pregnant.

So what's needed is not lip service, such as hollow-ringing words like "constructive." What's imperative is a sharp decision that puts the disputed matter to rest for good. And that's what Daimler's statement suggests between the lines. They want "clarification" on component-level licensing. Apparently they just haven't figured out yet how to get there, given that they filed their EU complaint more than a year ago and the Commission still isn't investigating.

A Mannheim trial was scheduled for next Tuesday. It would have been the first real trial--as opposed to an early first hearing--and a ruling could have come down anytime thereafter (in January with a likelihood comfortably above 90%, thus ahead of the first Munich trial scheduled for early February).

But out of an abundance of caution, I sent Yun Chee's story to the Mannheim court's press office and requested confirmation that the trial was still going forward. Judge Ruppert, a spokesman for the court, told me that the case would be heard on Tuesday at the scheduled time, but he also highlighted it was only an "early first hearing."

The Mannheim court--which I've described as the most responsible German court when it comes to staying cases involving likely-invalid patents--typically decides these cases after just one trial (which normally lasts only a couple of hours because they are so focused and efficient). However, they call it an "early first hearing" even if they conclude they can hand down a judgment afterwards. So the court's wording doesn't necessarily mean the Tuesday court row has been downgraded from "trial" to "early first hearing."

In Munich they have Patent Local Rules under which an early first hearing is mostly just about claim construction and initial infringement analysis. However, there are exceptions even in Munich. In the first Nokia v. Daimler hearing in June, Presiding Judge Dr. Matthias Zigann also addressed FRAND, even before Nokia's prayer for injunctive relief. But in Munich, when they say "early first hearing," you know for sure that there'll be a second one--the actual trial. In Mannheim, most cases are decided after the "first hearing."

Whatever the scope of the Tuesday hearing will be, the German car maker must be cautious so it won't get outwitted by Nokia. It's absolutely in Daimler's interest to get a Mannheim judgment prior to the first one in Munich, given that the Munich court has so far taken very unFRANDly positions on component-level licensing, while there is at least one Mannheim precedent where Deutsche Telekom benefitted from a supplier's willingness to take a SEP license. A Mannheim decision wouldn't be binding on the Munich court, but could help psychologically since Dusseldorf (unreasonable in other ways, but rather progressive on component-level licensing) will almost certainly decide in Daimler's favor. Munich would then be the outlier, but the appeals court there may very well be more favorable to component-level licensing. In order to get a Nokia injunction stayed quickly, a Mannheim decision upholding FRAND in the component-level licensing context would serve as persuasive authority that could make a decisive difference.

Nokia is playing games, and Daimler must be extra cautious. In the current situation, the European Commission will continue to drag its feet, and won't make a decision on that late-2018 complaint before early 2020 at the earliest. More aggressive parties in Daimler's shoes would already have lost their patience and exerted more pressure; they'd also have considered bringing in, in addition to or as a replacement of current counsel, some other EU antitrust lawyers to make more headway. It should be a simple decision for the Commission to investigate: not only is the CJEU's case law pretty clear that everyone is entitled to a FRAND license but Nokia and Ericsson are basically dying companies compared to the automotive industry and the wider IoT industry (smart meters etc.).

Quinn Emanuel defends Daimler against German patent infringement complaints all the time and is superb at that, but not involved with the EU complaints--unfortunately, QE is largely on the other side of the FRAND debate, which hopefully won't benefit Nokia (a QE client in the United States, by the way) at some point.

Nokia's EU counsel, Thomas Vinje of Clifford Chance, is extremely effective. I was adverse to him ten years ago (Oracle-Sun merger review), and he made a statement to the media about me in 2010 that was just an unsubstantiated rumor, but that's par for the course in Brussels. It's just interesting to see how his positions on standard-essential IP have evolved over the last 15 years, from his fight against Microsoft (where he led the "European Committee for Interoperable Systems") and his zero-royalty advocacy efforts in the EU procurement context over his representation to Samsung and now Nokia. I may talk about that some other time, and that's not why I wouldn't trust Nokia's talk about settlement. The reason for that is the one I gave further above: it's a binary question like being pregnant or not, so there's no middle ground, period.

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EU-based industry body outlines criteria for standard-essential patent pools to have positive impact on innovation

Earlier this month, the Brussels-based Fair Standards Alliance (FSA) announced (press release) a set of recommendations on standard-essential patent (SEP) pools (document). The primary conclusion is that patent pools can increase the efficiency of SEP licensing and, provided that the terms are FRAND (which, among other things, includes the availability of licenses to all levels of the supply chain), make a net-positive contribution to innovation, with a particular focus on the Internet of Things (IoT).

Let's start with terminology. The FSA's paper mostly uses the term "patent pool" and makes a few references, mostly when quoting other documents, to "licensing platforms." So what's the difference between a pool and a platform? A European Commission competition enforcement official explained how the 3G Patent Platform Partnership ("3G3P")--not to be confused for the 3G Project Partnership ("3GPP")--sets itself apart from a "patent pool":

1. the Platform [referring to 3G3P] is open to both licensors and licensees, whereas a patent pool consists only of licensors;

2. the licensors retain their freedom to license outside the Platform (non-exclusivity) and they do not assign patent rights to the Platform;

3. the patents are not bundled, i.e. no real pooling of patents occurs: instead licensees have the opportunity to pick and choose between patents and the licensing is carried out on a bilateral basis;

4. there is no single licence between a given licensee and the Platform, whereas in a patent pool a licensee typically has one licence agreement with the patent pool;

5. the Parties to a licence can choose between the Platform's Standard Licence and a negotiable individual licence.

The negotiability of individual licenses is presumably always a given unless a patent holder actually assigns (transfers) patents to a pool firm. Otherwise, companies would be reluctant to give up their right to enter into individual license agreements for various reasons, one of which is the ability to enter into full-portfolio cross-license agreements.

Avanci generally calls itself a platform, but on LinkedIn, Eric Stasik was surprised to see that even Avanci's lawyers, in the Continental v. Avanci et al. litigation in the Northern District of California, referred to their client as a "pool."

The FSA's paper on patent pools doesn't mention any particular pool, but the most controversial pool at the moment is Avanci: three of its contributors are suing Daimler in a total of 16 German patent infringement actions; Daimler and four suppliers have lodged antitrust compaints with the European Commission over Nokia's refusal to license component makers; Huawei is suing Nokia in Dusseldorf for the purpose of obtaining a component-level license; and Continental is doing the same in the Northern District of California.

Avanci arguably fails to meet the criteria the FSA summarized in its press release as follows:

• "[patent pools must be FRAND and at the very least] not discriminate against any entity that practices the standard and seeks a license;

• grant licenses on FRAND terms to those companies that want a license;

• ensure that royalty rates:

  • take into account the value of SEPs in the patent pool’s portfolio as part of the entire SEP landscape relevant to the standard;

  • reflect the value of the patented inventions included in the pool – and not the added value of standardization or innovations and features not covered by the SEPs.

• be transparent about license(s) offered by the pool ie publish information about the relevant SEPs and proposed licensing terms and conditions in a timely manner."

Avanci's license fees for cars ($15/unit) are supra-FRAND and that firm licenses only end-product makers (with some indirect effect of such a license on tier 1 suppliers, but not to the effect of actually licensing the suppliers on an exhaustive basis). While Avanci's agreements with its contributors apparently don't preclude them from entering into separate license agreements, Sharp apparently referred Daimler only to the availability of the Avanci pool license when bringing its German infringement actions.

At last week's Brussels conference, three small or medium-sized companies (AirTies, Kamstrup, and Nordic Semiconductor) explained their problems related to SEP licensing. Nordic's problem is that various SEP holders refuse to grant them exhaustive licenses, and AirTies and Kamstrup are companies that would benefit if they could either buy components that come with the SEP licenses they need or if they could--at least--obtain such a license from a pool.

The FSA's paper also says "[m]ultiple patent pools for a given standard may lead to duplicative royalty demands that do not take into account the aggregate royalty burden for a standard." The potential problem of royalty stacking is well-known (and even rampant). However, it may in some cases actually be better to have at least two types of pools--one with FRAND terms and one for the unreasonable ones among the licensors. Then competition enforcers--or parties that have the ability and the determination to challenge supra-FRAND demands--can focus on the unreasonable group. If there's only one pool for a standard, there is a risk of companies that would actually make more reasonable demands deciding to joina pool for convenience--even if it means they have to support license terms that go beyond what they would normally seek. Getting back to the Avanci example, it's not like all Avanci contributors are unreasonable licensors--but the convenience Avanci promises may have led some of them to join a pool that makes supra-FRAND demands.

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German judge wants EU competition commissioner Margrethe Vestager to do his job: Nokia v. Daimler

The biggest news from today's Nokia v. Daimler doubleheader patent infringement hearing in Munich was Huawei's potentially groundbreaking German antitrust lawsuit against Nokia over the former handset maker's refusal to extend an exhaustive component-level standard-essential patent (SEP) license to Huawei, which is at least an indirect--through telematics control unit (TCU) makers like Continental--supplier to Daimler. But there's more (I typed 11 pages of notes)...

The two divisions of the Munich I Regional Court that hear patent infringement cases (the 7th Civil Chamber and--which held today's hearings--the 21st Civil Chamber) appear to have an interesting self-concept. While they very much focus on patent cases, their responsibility extends to all fields of civil law, depending on what issues get raised in their cases. Competition law is not an exception. But their protective instincts consistently benefit patent holders, even trolls and other abusers, and apparently never those whose businesses are profoundly impacted by antitrust violations.

Hogan Lovells's Dr. Benjamin Schroeer ("Schröer" in German), counsel for Nokia v. Daimler intervenor Peiker (a Valeo subsidiary), was one of several attorneys for Daimler suppliers who explained to the court how their clients are affected by Nokia's refusal to extend exhaustive component-level licenses to them, choosing to sue Daimler instead. But what matters to the court is that Nokia holds patents and elected to sue Daimler over them--end of story, for the time being...

Dr. Schroeer suggested that Daimler is just serving as a proxy for Nokia to sue because, in reality, it's about the telematics control units (TCUs) supplied by the likes of Peiker and Continental. In that context he even hinted at a violation of the intervenors' right to be heard. Whether he meant to indicate to the Munich court that they're considering a complaint with the Federal Constitutional Court of Germany wasn't clear--but that's where a complaint over a denial of the right to be heard would ultimately go.

When Dr. Schroeer stressed his client's antitrust injury, Judge Dr. Hubertus Schacht, who filled in for Presiding Judge Tobias Pichlmaier today, said the following:

"Complaints [over Nokia's allegedly anticompetitive conduct] are also pending with the [European] Commission. It appears there are legal remedies for [what you've described]."

It's a well-known fact that Daimler and at least four suppliers (Continental, Valeo, BURY, and Gemalto) have lodged such complaints this year. The EU Commission will at some point--possibly in the near term--decide whether to open formal investigations. Assuming the Directorate-General for Competition (DG COMP) does investigate, and finds that Nokia has violated Art. 102 of the Treaty on the Functioning of the EU (TFEU), and further assuming that such Commission decision would be upheld by the Court of Justice of the EU, Nokia might indeed get fined. But in the meantime, the German courts will have to adjudicate the pending Nokia v. Daimler patent infringement actions (at least ten are known, and more may be--or may even have been--filed). If a patent injunction is ordered against Daimler, and actually enforced, the car maker will be left with no choice but to bow to Nokia's demands--and those may be totally out of line, as counsel for Huawei said today that he's ready to produce the existing Huawei-Nokia patent license agreement covering mobile end products within five minutes of Nokia waiving the confidentiality requirement, and the court would see that what Nokia is seeking from Daimler is a disproportionately higher license fee for its cars than the one it's actually getting from Huawei for its mobile phones and tablets.

As I noted in another post on today's hearing, the positions the Munich court took today were highly preliminary. It's happened before in some Munich cases--though never with respect to an antitrust defense to the best of my knowledge--that the court adopted a different position at the time of the second hearing, which is the actual trial. Should Nokia be granted injunctive relief in these cases, it would amount to a dereliction of duty with respect to the application of competition law. In that light, I found it disappointing and disconcerting that a German judge would tell automotive suppliers to complain with the EU's competition authority instead of recognizing the ramifications of Nokia's refusal to license component makers.

Relying on EU competition commissioner Margrethe Vestager is not the answer to serious antitrust issues raised in a German patent infringement litigation.

If Daimler's suppliers are--as any remotely reasonable reading of the CJEU's Huawei v. ZTE makes perfectly clear--entitled to an exhaustive SEP license, the Munich court can't just argue that the bottom-line commercial effect of Daimler taking a license from Nokia would be that Daimler can continue to make and sell cars that come with cellular connectivity. With Huawei's private antitrust lawsuit against Nokia, it's fairly possible that the central question here--access to exhaustive component-level licenses that enable suppliers to sell to any customer anytime (one of the fundamental freedoms of the EU: freedom of movement of goods)--will reach the EU's top court within a few years. Should the CJEU then find that Nokia's refusal to deal was an antitrust violation, some people may end up looking very bad because they would have condoned or even abetted illegal conduct despite having had every chance to do their job and thwart SEP abuse.

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Requiring SEP holders like Nokia to license automotive suppliers would spur European IoT innovation on bottom line

While I agree with Politico.eu's question of whether it's a good idea for one EU commissioner to be put in charge of both digital innovation and antitrust enforcement, and have previously criticized the de facto merger of two other directorate-generals of the European Commission, I sharply disagree with the suggestion that a formal antitrust probe of Nokia's refusal to extend exhaustive SEP licenses to component makers on FRAND terms would threaten to weaken Europe's position in the 5G era.

Nice try, Politico and IP Europe (an industry body representing patent monetization-focused companies)--but most likely you're barking up the wrong tree as Margrethe Vestager may simply be immune to anyone's attempt to implant in their head a conflict of interests between two areas of responsibility. [Update] On Twitter, Thibault Larger, the author of the Politico article, has explicitly denied having had the intention to influence the process. He furthermore provided explanations I would summarize as arguing that while he believes there are innovation policy concerns (I view the dynamics differently), his article didn't rule out that Mrs. Vestager might decide in favor of antitrust law enforcement regardless of the industrial-policy concerns Politico believes to have identified. [/Update] Even more so when an article fails to meet journalistic standards: it would have been more honest to let IP Europe author an op-ed. [Update] Also via Twitter, the author noted that "Competitive Edge" is an opinion column. However, I replied that the fact it contains extensive quotes--with an emphasis on and strong endorsement of IP Europe's views (he finds them "very cool" as he said), but also from the Fair Standards Alliance--blurs the distinction between an opinion piece (which normally comes either with no quotes or, if there are any, they are few and far between and only for the purpose of endorsing or criticizing them) and a report. [/Update]

The backdrop is that the Directorate-General for Competition (DG COMP) received antitrust complaints earlier this year from Daimler and four of its suppliers--Continental, Valeo, Gemalto, and BURY--over Nokia's licensing practices. With the Juncker Commission on the way out and the confirmation of the incoming von der Leyen Commission facing delays, the EU's executive body is basically in a state of interregnum. At any rate, Mrs. Vestager will remain in charge of competition enforcement as she sailed through her confirmation hearing. She proved just yesterday that antitrust violators can't hope for a breathing space.

The aforementioned Politico article basically argues that Mrs. Vestager would have to leave Nokia and, by extension (as its practices are similar), Ericsson alone at this stage because they posted losses last year and are the only European makers of 5G network infrastructure, but merely launching formal investigations would adversely affect their licensing negotiations.

Either of those two Nordic companies has a market capitalization between 25 and 30 billion euros--and from my many interactions with investment banks and funds as a consultant, I assume the market has already prized in a fairly high likelihood of formal investigations. Those companies used to be much stronger than they are today, so they have become ever more reliant on patent licensing revenues. But they're in the infrastructure business because they believe it's a good one to be in. If they believed otherwise, they'd spin it off and focus on patent licensing, which would be even more profitable after eliminating the need to secure cross-licenses and the risk of infringement countersuits.

Whatever the outcome of formal investigations might be, no one will get a free ride: Nokia, Ericsson, and all other SEP holders will continue to be entitled to FRAND royalties. They believe they can make more money licensing end-product rather than component makers. Ericsson said as much in a presentation, and Qualcomm told the IRS. So for the sake of rational analysis, let's grant Nokia (and, by extension, Ericsson) that their licensing revenues might suffer some reduction as a result of an obligation to license component makers. Would that fact, in and of itself, complicate Mrs. Vestager's task when wearing her other future hat, the one for digital industry policy? Only if one defined the "digital industry" so narrowly that it would basically be limited to two companies.

Component-level SEP licensing doesn't impede innovation. It enables more of it.

Connected cars are a particularly important part of the Internet of Things (IoT). In that industry, which employs roughly 14 million people in Europe (quite a bit more than mobile communications technology companies), supply chains have great depth. Access to SEP licenses at all levels of the supply chain would result in market efficiencies as component makers would have more legal certainty with respect to IP liability--at least they'd control their destiny to a considerably greater extent. So their ability to innovate would be strengthened.

Europe is probably never going to catch up with U.S. digital platform companies like the so-called GAFA group of companies. However, car makers are still Europe's most successful exporters of technology, and plenty of other European companies have already jumped on the IoT bandwagon or will in the coming years. Every single day, some products somewhere are made fit for the digital age by means of mobile connectivity--and new products are created that would be unthinkable without it. It is, therefore, in Europe's best interest to ensure that the desire of a few to maximize their patent licensing income doesn't drive or keep countless others out of the IoT space.

The tiered supply chain has enabled the industry to innovate, bringing safer and more intelligent vehicles to consumers. Over the last five years, the worldwide automotive industry spent approximately 500 billion euros on R&D. In the EU alone, the automotive industry invested more than 170 billion euros in R&D, with stand-alone investments of EU automotive suppliers (i.e., R&D not supported by customers) accounting for more than 41 billion euros according to PwC Most Innovative Companies (2017).

In 2017, Valeo alone--only the third-largest of the five complainants--invested 1.9 billion euros in R&D and filed 2,053 patent applications. Digital innovation comes in many shapes and forms, and Mrs. Vestager will be responsible for optimizing the bottom line of an entire sector, not just that of two companies.

Not only are Nokia and Ericsson just a tiny subset of Europe's digital economy (and IoT potential) but there is also no such thing as "5G infrastructure autonomy." 5G deployment will mostly just involve upgrades to existing base stations, and Huawei already has a fairly high market share in Europe. It's probably hard to find any European carrier who wouldn't be using at least some Huawei base stations anyway.

Europe's share of 5G patents shouldn't be overestimated either. Nokia and Ericsson played a bigger role in connection with earlier cellular standards. In 5G, some Asian companies are stronger, and let's not forget about Qualcomm either. Anyone seeking licenses to 5G patents is going to need licenses to more non-European than European patents.

Most of the work on 5G has been done, so Nokia's and Ericsson's continued ability to invest in research and development won't tip the scales in that regard.

Finally, the Politico story mentioned concerns that licensing negotiations might be adversely affected by an antitrust investigation. I don't even believe that there would be much of an impact on licensing negotiations during the formal investigations. No one would be able to rely on any particular outcome of the EU case. If anyone (at any level of the supply chain) nevertheless delayed the conclusion of license agreements, such as because a car maker might prefer to wait and see whether its suppliers will be entitled to a license, license fees would still be owed on every single unit of a product that is sold. In that hypothetical scenario, a patent holder might sometimes get paid later, but liquidity is a non-issue for companies with market caps in the 25-30 billion euro range.

If launched, formal investigations shouldn't take exceedingly long as this case is important, but not huge. And Nokia itself could always cut everything short by offering commitments that would solve the problem.

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At least five German Nokia v. Daimler patent infringement trials to take place between December 2019 and May 2020

Continental was just forced by a German anti-antisuit-injunction injunction ("AAII") to withdraw, in part, the U.S. antisuit motion it had brought in its San Jose FRAND/antitrust lawsuit against the Avanci patent pool firm and some of its contributors (especially Nokia and a couple of trolls Nokia fed with patents). As I explained in the post I just linked to, the scope of the withdrawal-in-part may give rise to an enforcement dispute. Considering that the Munich court wrote in its first AAII that German law doesn't recognize antisuit injunctions, it appears fairly likely that the appeals court will lift that AAII pretty soon.

Meanwhile the press offices of the Regional Courts of Dusseldorf, Mannheim and Munich have thankfully provided me with the numbers of the patents Nokia is asserting against Daimler in Germany and the hearing or trial dates to the extent they have been scheduled. Let's start with the the upcoming hearings and trials, in chronological order:

• October 30, 2019 (morning): Munich I Regional Court, first hearing (mostly about claim construction and infringement analysis) in case no. 21 O 3891/19 over EP1388234 and the related German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets"

• October 30, 2019 (afternoon): Munich I Regional Court, first hearing (mostly about claim construction and infringement analysis) in case no. 21 O 3889/19 over EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission"

• December 10, 2019: Mannheim Regional Court, trial in case no. 2 O 37/19 over EP1273199 on a "method and arrangement for maintaining synchronization in association with resetting a communication connection"

• January 21, 2020: Mannheim Regional Court, trial in case no. 2 O 35/19 over EP2286629 on a "method and apparatus to link modulating and coding scheme to amount of resources"

• February 6, 2020: Munich I Regional Court, trial in case no. 7 O 3890/19 over EP1671505 on a "redundancy strategy selection scheme"; the first hearing was held on June 5, 2019, and the court's inclination is to hold Daimler to infringe (and to reject its FRAND defense)

• March 17, 2020: Mannheim Regional Court, trial in case no. 2 O 36/19 over EP2145404 on a "method and apparatus for providing control chanels for broadcast and paging services"

• May 19, 2020: Mannheim Regional Court, trial in case no. 2 O 34/19 over EP2981103 on an "allocation of preamble sequences"

German regional courts typically rule on patent infringement cases within four to eight weeks of trial. Decisions come down sooner only if a case is easily dismissed, and they take longer only under special circumstances such as when there are doubts over the validity of a patent and some guidance from the EPO (in an opposition proceeding) or the Federal Patent Court of Germany is expected in the meantime.

Three more German cases are pending with the Dusseldorf Regional Court, but no trials have been scheduled yet in any of them:

• case no. 4c O 17/19 over EP2087629 on "a method of transmitting data within a telecommunications system"

• case no. 4a O 26/19 over EP2087626 on "additional modulation information signaling for high speed downlink packet access"

• case no. 4a O 27/19 over 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"

In the spring Daimler, Bury, Continental and possibly also other suppliers lodged antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) over Nokia's alleged abuse of standard-essential patents.

Another contributor to the Avanci pool, Sharp, has recently also filed a bunch of German patent infringement complaints against Daimler.

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Foxconn-owned Sharp is suing Daimler over five patents in two German courts: concerted action by contributors to Avanci pool?

Through a filing with Judge Lucy H. Koh's court in the Northern District of California, I've become aware of the following patent infringement complaints (presumably but not necessarily involving one or more requests for injunctive relief) filed by Foxconn subsidiary Sharp Corporation against Daimler in Germany:

• Mannheim Regional Court (Second Civil Chamber under Presiding Judge Dr. Holger Kircher):

  • EP2154903 on a "mobile communication system, base station device, and mobile station device" (case no. 2 O 46/19; complaint filed on 12 April 2019)

  • EP2129181 on a "mobile communication system, base station apparatus and mobile station apparatus" (case no. 2 O 87/19; complainted filed on 5 June 2019)

• Munich I Regional Court (Twenty-First Civil Chamber under Presiding Judge Tobias Pichlmaier):

  • EP2854324 on a "communication system and mobile station apparatus" (case no. 21 O 8609/19; complaint filed on 25 June 2019)

  • EP2312896 on a "base station device, mobile station device and corresponding communication methods using carrier aggregation" (case no. 21 O 9918/19; complaint filed on 27 June 2019)

• Munich I Regional Court (Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann)

  • EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method" (case no. 7 O 8818/19; complaint filed on 28 June 2019)

The sequence of those filings may be attributable to the following dynamics:

• Sharp filed the first lawsuit in Mannheim in mid April just to demonstrate to Daimler that they were serious about forcing Daimler to license their patents through the Avanci pool.

• When Daimler didn't bow, they brought another one in early June (same venue: Mannheim). It may have been assigned to the same chamber by coincidence, but more likely Sharp just amended the complaint, in which case German courts automatically sever any new patents-in-suit, but keep the case in the same chamber.

• The three Munich filing in late June were presumably made to have a high likelihood of getting at least one case assigned to either of the two Munich panels hearing patent infringement cases. Historically, the 7th Civil Chamber used to be considered faster and more patentee-friendly than the 21st, but that may change now.

I haven't been able to find any other report on those Sharp v. Daimler cases prior to this blog post. Others have, however, reported on complaints brought by Broadcom and Nokia.

Like Nokia's German patent infringement suits against Daimler, those Sharp cases involve, at least in part, cars that come with a telematics control unit (TCU) supplied by Continental, which alleges that "Sharp's lawsuits are evidence of the immediate, substantial threat that Avanci will encourage or direct its members to engage in a concerted litigation campaign in an effort to force Continental’s OEM customers to take a non-FRAND license through Avanci." The allegation I just quoted is made in Continental's reply in support of its motion for a U.S. antisuit injunction against Nokia (this post continues below the document):

19-08-09 Continental Reply ... by Florian Mueller on Scribd

Some high-level observations on the reply brief:

• Just like the original motion, it's strong on policy and economic reasoning, but suffers from some deficiencies. The document looks like a lot of effort has gone into it, as they are under significant pressure. However, at this stage Continental's lawyers can try to explain away some facts but can't change them anymore.

• They keep pursuing the U.S. antisuit injunction, arguing that Nokia hasn't properly served its Munich anti-antisuit-injunction injunction under the Hague Convention. Consistently with that position, they haven't even objected to the Munich injunction yet, but they have announced their intent to do so once they believe the Hague Convention has been complied with.

• Continental's lawyers want Judge Koh to gloss over their suboptimal structure. While it's true that the question of functional identity between the parties in the enjoining U.S. case and the enjoined foreign action shouldn't be looked at it in exceedingly formalistic terms, Continental simply could have made it a whole lot easier for Judge Koh. It's true, but besides the point, that Daimler wasn't in a position to serve a third-party notice under German law on Continental U.S. for lack of direct liability. But then Continental simply should have made sure that an entity with a closer connection with those German infringement cases would have been another plaintiff in the U.S. case (and, consequently, one of two or more movants seeking the antisuit injunction against Nokia).

• With respect to the functionality identity of parties, Continental concedes that the proposed application of the customer suit exception (which usually governs motions to transfer cases within the U.S.) should be applied in the context of a cross-border antisuit injunction "is a case of first impression." I'm sympathetic to Continental's position on the customer suit exception, and as Continental notes, Nokia can't "point to any case wherein application of the customer suit exception doctrine was rejected in the context of a motion for anti-suit injunction." But, again, you make your bed and you lie in it. I still believe it was a major and potentially (though I hope it won't be) fatal for the motion that they didn't make a better choice as to the legal entities behind the U.S. antisuit motion. It would be great if Judge Koh granted the motion anyway, but Continental's lawyers have no one to blame but themselves in case she concludes otherwise.

• As a matter of policy and industry practice, Continental is right that SEP licenses, also including the ones granted by Avanci, typically cover an entire corporate group. Therefore, Continental U.S. and the legal entities implicated in the German infringement proceedings are in the same boat: the whole purpose of the U.S. case (before they even brought an antisuit injunction motion) was to secure a license on FRAND terms that would benefit the entire Continental group.

• Continental's reply brief says "Nokia's contention that 'under no circumstances will Daimler be 'forced' (in the German proceedings) to accept a license proposal on anything other than truly FRAND terms' is highly disingenuous." That is hyperbole. The two SEP antisuit injunctions in the Ninth Circuit that Continental points to are Microsoft v. Motorola and Huawei v. Samsung (where Samsung, the defendant, was the successful movant). The latter case was more recent, but about Chinese patent injunctions. The former case is older, and the case law in Germany regarding SEP injunctions subsequently changed fundamentally when the Court of Justice of the EU's Huawei v. ZTE ruling did away with Germany's misguided application of the Federal Court of Justice of Germany's Orange Book doctrine. In that Microsoft case, which I watched closely (both the U.S. FRAND case and the German infringement proceedings, where I attended the trial as well as the announcement of the decision), there was a far greater discrepancy between U.S. and German SEP injunction case law. It's true that Judge William H. Orrick defined the potentially-frustrated U.S. policy rather broadly in Huawei v. Samsung, but that was a FRAND determination case that Huawei itself had chosen to bring in the U.S.--and it's unclear how the Federal Circuit would have ruled as the parties settled before an appellate opinion came down.

• They downplay--actually, deny--the relevance of timing, but comment on it anyway. In that context it strikes me as odd that Continental would point to the timing of an EU antitrust (DG COMP) complaint: that is simply not a substitute for bringing an action in the U.S. at an earlier point in time.

• In another timing context, they still argue that Nokia sought an extension of time in the U.S. only to seek a German anti-antisuit-injunction injunction (though there are different lawyers working on the cases in those jurisdictions), and that Nokia overstated the urgency of that matter to the Munich court, with Continental saying a decision by Judge Koh ahead of the August 9 reply brief "would be virtually unheard-of in connection with a fully-noticed motion in the U.S.," though "virtually unheard-of" does not mean "procedurally impossible," but more importantly, I already explained in a previous post that Continental could have waived the optional reply brief, just like they now sort of waive the right to a hearing (Judge Koh might have taken this here under advisement anyway, which is one of her strategies for high efficiency), or they could have filed it very shortly after Nokia's opposition brief (the pace at which Continental's lawyers have moved so far suggests they always need a lot of time for anything, but again, procedurally it would have been possible).

• The part of Continental's reply brief that I completely disagree with is where they claim it doesn't matter that Nokia's German lawsuits also involve Daimler cars that don't come with Continental components. Here's a key passage:

  "Although it is true that Continental is not Daimler’s only supplier, the purpose of Continental’s lawsuit is to confirm that suppliers like it are entitled to a license, and set the FRAND terms and conditions for such a license. It would be perverse, to say the least, if Nokia could avoid an anti-suit injunction in a lawsuit brought by a component supplier willing to take a license on FRAND terms, and thereby perpetuate its illegal strategy of only licensing OEMs rather than component suppliers, by relying on the existence of other component suppliers which Nokia also refuses to license!"

  Sorry, guys, but your explanation mark and rhetoric fail to convince me. It's your damn job to either seek an injunction that isn't overbroad (by limiting it to Daimler cars that come with Continental TCUs) or to persuade other suppliers to join you in this case. But just because your case may also have a bearing on--or may even be the next best thing to direct applicability to--the legal interests of some other entities doesn't mean you can behave like a class-action plaintiff... which is why there are special rules for class actions.

  The court can obviously tailor the requested injunction more narrowly, and should Continental prevail, I think that's more likely than not to happen. And if it were up to Avanci and Nokia, the court to decide wouldn't even be Judge Koh's court.

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