Quinn Emanuel scores huge EU win as German managing partner gets mixed press: Daimler's defeats hurt firm's reputation in standard-essential patent litigation in Germany

The most important court ruling of the week--at least for the tech sector, if not beyond--was Qualcomm's successful appeal of a European Commission antitrust decision. The San Diego chipmaker was represented by Quinn Emanuel's Brussel's office, a couple of whose partners already had a very good reputation before that landmark victory, but now they're really a go-to firm for appealing DG COMP decisions. It's a highly specialized field in which Jean-François Bellis is arguably still the number one (I heard that the European Commission's lawyers fear him more than anybody, and they'll meet him again in the ECJ in the International Skating Union case on July 11).

QE is now undoubtedly playing in that league, the European Champions League, and was right to celebrate its enormous achievement--it's not just that they won, but also how--on social media with this banner:

There's not only light but also shadow when it comes to QE's German offices. They just opened another one in Berlin, which suggests they're still growing in Germany. However, next time a major business publication wants to write about them or their managing partner, they should seek out advice from professional public relations consultants...

On June 10, Wirtschaftswoche, the German equivalent of Bloomberg Businessweek (previously BusinessWeek), published a fair but thoroughly-researched article on Dr. Marcus Grosch, who built and still chairs QE's German offices. The headline, With Maybach and Karate, refers to his car (an upgraded S-Class that is basically Mercedes's answer to Rolls-Royce), in which he has a chauffeur drive him to courthouses, and his favorite sport, in which he won a regional championship in his youth.

Marcus Grosch has often been mentioned on this blog--in the early 2010s for his very effective work on Googlorola's behalf (Google and Motorola, the latter of which temporarily belonged to the former), but in less positive contexts in recent years: two serious cases raising the question of wrongful enforcement (one of them targeting Apple, the other one against a cigarette paper manufacturer), and because Daimler--relying on QE Germany to defend it--was slapped with four German patent injunctions within only 11 weeks (ultimately, Daimler took an Avanci license, so in retrospect it would have been way smarter for the Mercedes maker never to spend a single cent on litigation with Avanci licensors).

The Wirtschaftswoche article, too, mentions the four injunctions against Daimler in 11 weeks. As I revealed information from the highly secretive Nokia-Daimler mediation talks in 2020 (which drove the mediator crazy), it's obvious that I had sources--more sources than Nokia thought at the time--among the joint defense group. Never once during the Nokia v. Daimler dispute did I hear that any member of the joint defense group was enthusiastic about the work QE was doing. Instead, some members of that group were questioning Daimler's choice, given that QE Germany previously had a track record only in enforcing--not defending against--SEPs. At least two members of the joint defense group were constantly concerned that there was a conflict of interest, not so much because of QE having worked for Nokia in the U.S. on some occasions, but due to some of QE Germany's recent clients like Qualcomm and BlackBerry being interested in strong SEP enforcement.

Even when it comes to SEP enforcement, QE needs to excel in order to justify premium prices. The Wirtschaftswoche article says Dr. Grosch charges €1,200 (US$1,250) per hour, while even senior partners of large and reputable firms practicing patent law in Germany bill less than $1k. Talking about results, the champions of SEP enforcement campaigns in Germany have recently been certain Wildanger partners, with Arnold Ruess also having impressed me a great deal. And a "hidden champion" in that field is Dr. Christof Augenstein of Kather Augenstein--one of the largest and most sophisticated net licensors, Ericsson, relies on him and his team again and again, but as they typically win settlements early on, there haven't recently been any German patent injunctions involving Ericsson patents. Bird & Bird's Christian Harmsen consistently delivers results for Nokia as well as Huawei. I could name others, but wanted to just focus on the most prominent players in cellular SEP enforcement.

If QE's clients feel they get their money's worth, that's OK, but what I consider incompetent--even downright stupid--is when in-house litigators fail to insist on QE bringing patent attorneys along. QE is free to recommend whatever QE believes--in good faith, I'm sure--works best. In-house counsel, however, shouldn't take unnecessary risks. Samsung was smart; for them it was non-negotiable (and while they use QE in the U.S. all the time, they've actually relied on other firms in Germany, apart from a couple of Apple cases about a decade ago).

The Wirtschaftswoche article also mentions QE Germany's principle of not teaming up with patent attorneys. Dr. Grosch told the reporter that attorneys at law are just as capable of explaining technology to a court as patent attorneys. An unnamed lawyer told Wirtschaftswoche, rather diplomatically, that "there is the risk of failing to identify an argument." I don't even want to get into what else the article says, but let me just explain it from my vantage point as a litigation watcher:

• In German patent infringement proceedings, patent attorneys are usually just listening--not delivering oral argument--when it comes to the infringement contentions. They typically come into play only when validity (with a view to a requested stay pending a parallel nullity or opposition proceeding) is discussed. One may indeed be led to believe that patent attorneys aren't critically needed if one looks at the infringement proceedings. But patent attorneys have certain advantages in the nullity or opposition proceedings. That's where some (nullity) or all (opposition) decision-makers have a technical background. It's where technical considerations such as whether an alternative solution might result in degradations or improvements--or whether it would work at all--gain importance (while the infringement courts are usually just interested in cases of clear non-novelty, not in the inventive step). Patent attorneys--identifiable by their partly blue robes--have the psychological advantage of sharing an engineering background with technical judges and patent examiners.

• Dr. Grosch told Wirtschaftswoche that a plaintiff's or defendant's own engineers are in the best position to explain the technology at issue to litigation counsel. In some cases that's simply not true: for example, if a downstream customer gets sued (such as Daimler over cellular SEPs), only the suppliers have the relevant technical knowledge. But even in cases where it is true that engineers can better explain the technology at issue, patent attorneys have the advantage of understanding both the technology at issue and patent law. They look at the question from both angles, not just one--and they, too, get briefed by a client's engineers.

• Top-notch patent attorneys involved in German patent litigation are all highly specialized. If a party or its litigation counsel asked an expert in telecommunications whether he or she would help them in a case over a medical device, he or she would refer them to a colleague in order to stay in his or her lane. They wouldn't claim to be generalists. It's simply not realistic to assume that highly specialized patent attorneys with a full engineering background (often a Ph.D. in a technical field) couldn't make contributions.

• I heard about something that further illustrates why patent attorneys are not just dispensable in patent litigation. I know about one Munich-based patent attorney--who often helps Samsung with its German cases--who was advising a company that had sold some of its patents without retaining the right to practice those inventions. He then teamed up for a significant period with that company's engineers, and they jointly developed a workaround that ultimately even represented an improvement over the patented invention. Another example is that an in-house counsel I know very well once visited a patent attorney firm in Munich and noticed that there were LEDs on the wall of a storage room, shining extremely bright. The patent attorney then explained that they had set up that installation because of a photovoltaics patent infringement case and needed to conduct an experiment. I strongly doubt that QE Germany has ever done anything remotely similar.

When I see QE appear in a German patent case and they don't bring patent attorneys along, I know that their clients have simply elected to put themselves at a disadvantage. QE is to the best of my knowledge the only firm not to bring patent attorneys along to German patent infringement trials--and not even to nullity and opposition hearings. Their clients accept this and have to live with the results. They should ask themselves one question:

If that is the right approach, why has no other German patent litigation firm adopted it in all those years? It must give anyone in his right mind pause that after more than a decade of QE Germany doing this, no one else has even concluded that this is worth trying.

Samsung insisted on the involvement of Zimmermann & Partner, and QE accepted it--maybe begrudgingly, but still. Daimler didn't insist, but then they also wasted tens of millions on litigation instead of taking an Avanci license right away. Qualcomm didn't insist either, but I attribute it to the fact that they rarely ever have to litigate as most licensees also buy their chips. A long time ago, Qualcomm was represented by Bardehle against Nokia, and Bardehle is the leading German firm with both attorneys at law and patent attorneys on board. But Bardehle would have been conflicted against Apple. Qualcomm doesn't need my help to compare how things went in those disputes.

What about Google? They have an in-house litigator who was a QE associate. He also contributed his ideas to proposed legislation that didn't really move the needle for German patent injunctions. I would also encourage Google to think very hard about why no other German patent litigation firm than QE deems the involvement of patent attorneys unnecessary.

If clients decided to pay QE's premium rates and have patent attorneys involved in addition, it would have obvious implications for litigation economics, and some in-house counsel might find it harder to internally justify the total cost of being represented by QE Germany. But as Dr. Grosch rightly told Wirtschaftswoche, clients are well advised to focus on quality rather than price.

He should, however, have given himself that same advice when it comes to public relations. The former PR chief of his (current or former) client Daimler founded one of the leading firms specializing in crisis communications, litigation PR, and also advised executives such as a former Daimler CEO with respect to their personal PR needs. Presumably, a firm of that kind would have told Dr. Grosch a couple of things:

• Don't show up for an interview with two watches--an Audemars Piguet (which may have cost as much as, if not more than, a German patent judge earns in a year) plus a smartwatch.

• Given QE's hourly rates and per-partner profits, it must have made sense for him to hire a chauffeur to drive him to the courts. This way he doesn't waste a minute. But PR professionals would have cautioned him against the risk of how that would be perceived should it ever be reported in the media.

The only client heaping praise on Dr. Grosch in the Wirtschaftswoche article is IPCom founder Bernhard "Bernie" Frohwitter, whose own law firm earned an estimated ten million euros in fees per year while IPCom never got leverage over Nokia during all those years. Mr. Frohwitter describes Dr. Grosch as a bird of paradise, meaning a dazzling personality, who delivers--and says he loves that combination. Wirtschaftswoche also quotes the heiress to the cigarette paper company I mentioned further above. QE even sued her and her husband personally, trying to hold them responsible for patent infringement and hoping to scare them into a settlement. She now says she would recommend Dr. Grosch, which may be attributable to the Stockholm syndrome as well as to her desire to criticize the German patent enforcement framework.

I'm not surprised that a QE client like Daimler wouldn't speak out, as they tend to be very low-key (and it remains to be seen whether they will use QE Germany next time). However, the key point here is that QE Germany should have obtained professional PR advice, and PR pros would have tried very hard to find at least one client (other than Mr. Frohwitter) who would have volunteered to speak with Wirtschaftswoche and say complimentary things.

Then, PR consultants may be just as superfluous as patent attorneys in the world according to Dr. Grosch.

Toward the end, the Wirtschaftswoche article raises the question of where things will go from here. Ten years on I'm still impressed by his great work on Motorola's behalf, and how he snatched victory from the jaws of defeat when a German injunction against Google Maps was imminent. He's extremely smart, and he fights hard. At the same time, QE Germany has grown, and he may have to act as lead counsel in far more cases than back in the Motorola days.

While this is about boxing and not karate, I believe he's facing a Rocky III type of situation. Without a doubt, he has the potential to become the undisputed champion again, but such outcomes as the four injunctions against Daimler during the course of 11 weeks must give him pause. If he finally decided to involve patent attorneys, that would be a good sign.

I don't want to mention specific patent attorney firms now, but the firms that companies like Apple, Samsung, Huawei, Nokia, and Ericsson rely on in their German patent cases are an excellent pool to begin with.

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Huawei, Nokia antitrust dispute over component-level licensing of automotive suppliers: Dusseldorf complaint over standard-essential patent license withdrawn

In retrospect, Nokia's standard-essential patent (SEP) dispute with Daimler was just a distraction, but its net effect is that car-level SEP licensing has won. In the end, even Daimler simply took an Avanci pool license--a result it could have had sooner and cheaper. Continental is still throwing good money after bad in its U.S. antitrust and contract lawsuits that aren't going anywhere (even if Conti's petition for a rehearing was granted despite the case as a whole being meritless, Conti would still be a far cry from making the slightest headway, after almost three years of suing). "Incompetental" might be a more appropriate name in this context. Thales made the mistake of suing in Munich, a venue where the judges had taken a pretty clear position on the issue already during various infringement proceedings. And as we speak, Ford--which has already been sued by seven Avanci licensors--is defending itself against IP Bridge before the Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann) of the Munich I Regional Court. Component-level license deals have been made and will continue to be struck--but in one of the clearest signs that policy makers and competition regulators don't take issue with most SEP holders' preference for granting licenses at the end-product level, the European Commission recently told a Member of the European Parliament that SEP holders should simply sue automakers if they don't get paid--a position that the Commission wouldn't possibly have taken if the licensing level was a hot-potato issue.

There was only one initiative in recent years that might have been a game-changer: Huawei's third-party counterclaim against Nokia. Huawei was one of the intervenors in Nokia v. Daimler. Unlike Continental, which supplied Daimler directly, Huawei was a tier 2 supplier that sold network access devices to the likes of Conti. Huawei wanted to protect its indirect customer Daimler. For example, roughly 85% of all Daimler cars were covered by a component-level license agreement between Huawei and Sharp. Huawei had a cross-license in place with Nokia, but not necessarily one that bailed out Daimler by extension. Huawei wanted legal certainty and brought that Dusseldorf case, with a legal theory that Judge Dr. Thomas Kuehnen ("Kühnen" in German), the Presiding Judge of one of the two patent-specialized divisions of the Dusseldorf Higher Regional Court (regional appeals court) had outlined in an academic article.

Presiding Judge Sabine Klepsch of the lower Dusseldorf court's 4c Civil Chamber severed that antitrust counterclaim from the patent infringement action that gave rise to a referral to the European Court of Justice (which never resulted in a decision as Nokia and Daimler settled). Huawei v. Nokia was assigned case no. 4c O 17/19. The fate of that case was potentially linked to the preliminary reference in Nokia v. Daimler, but after Daimler settled with Nokia, Huawei would still have been free to demand that Nokia make a FRAND offer for an exhaustive component-level license.

I was wondering what ever happened to that case, and contacted the Dusseldorf Regional Court's press office. The court's spokeswoman informed me today of the voluntary dismissal of Huawei's complaint. [Update] I subsequently reached out to Nokia for comment. Nokia informed me that the complaint was withdrawn in late 2021. "Huawei voluntarily withdrew the complaint without any settlement between the parties," Steve Bartholomew (Head of Communications and Marketing for Nokia's licensing business) insists. Now, this doesn't necessarily mean to me that the dismissal wasn't part of some broader arrangement between the parties. But it sure does mean that no agreement on a license covering automotive components was struck. [/Update]

In the end, both Huawei and Nokia are major SEP holders. Huawei has a much larger product business, but is currently--as a result of trade sanctions and the overall chipset shortage--unable to serve customers in the Western hemisphere the way the company otherwise could. If Huawei and Nokia put the Dusseldorf dispute aside, it's a safe assumption they're not going to sue each other over patents anytime soon.

Instead of relying on the preliminary reference in Nokia v. Daimler and the severed Huawei v. Nokia antitrust action, the likes of Thales and Continental could have filed their own Judge Kuehnen-inspired antitrust complaints in Dusseldorf. Instead, as I noted further above, Conti decided to waste huge amounts of money on U.S. lawsuits that lacked substance from the get-go, and Thales sued in Munich, compared to which it would even have made more tactical sense to sue Nokia in its home country of Finland (to its credit, Thales did make a smart and really interesting venue choice for its action against Philips and ETSI, a Paris case that may end up complicating Philips's aggressive patent monetization efforts).

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Nokia 4G patent upheld by European Patent Office, stronger than ever thanks to Daimler's wasteful litigation effort

The dispute with Daimler is the gift that keeps on giving to Nokia. The case settled seven months ago, but yesterday Nokia's EP2550762 on "signalling of channel information" got upheld by an opposition panel of the European Patent Office with only a minor amendment, which still allows Nokia to claim that it is essential to the 4G/LTE standard. The patent relates to carrier aggregation (aggregating bandwidth from different parts of the spectrum).

Nokia didn't assert that standard-essential patent (SEP) against Daimler, but it was on a list accompanying Nokia's infringement notice, so Daimler and its supplier TomTom challenged it, possibly also hoping to drive up Nokia's litigation costs. Daimler wasn't actually listed as a party, but their lawyers (Quinn Emanuel) obviously weren't opposing the patent pro bono.

Let me quote from the EPO's summary and a pagraph that will now be inserted into the patent specification:

"In independent claims 1, 4, 7, 11 and 14 of the present patent, a disclaimer has been included for differentiation from this prior art document"

This makes the patent more valuable for Nokia's future 4G enforcement campaign. It is a significant accomplishment for Nokia's patent attorneys, Cohausz & Florack partners Bjoern Brouwers and Dr. Christoph Walke. It wasn't easy because the opposition board raised some issues in a preliminary opinion. The opposing parties, however, withdrew well in advance of yesterday's oral hearing.

Some automotive companies have yet to learn how to get their money's worth in patent litigation. Sometimes the economically smarted choice is to take a license. Before Daimler reached that conclusion and took an Avanci pool license, it had already paid substantial "tuition fees" in the form of ultimately unsuccessfully defending itself against Nokia, Sharp, and Conversant--and an IP Bridge case against Daimler would have gone to trial in Munich later this month.

Earlier today I also questioned the wisdom of Ford defending itself against Avanci licensors Sisvel, IP Bridge, and Longhorn IP.

When Daimler settled with Nokia, the Finnish wireless company had won "only" one injunction each in Mannheim and Munich. But shortly after that settlement I looked more closely at the state of affairs in various proceedings, only to find that Nokia would probably have been able to enforce the Mannheim injunction without a need to provide security in possibly just a matter of months, and that Nokia would very likely have won several more injunctions. That is not to say that no one can defend against Nokia: sophisticated smartphone companies would do a better job than Daimler. An interesting benchmark: OPPO outperformed Daimler against Sharp.

Daimler's litigation department managed that litigation a bit like people who order whatever item on the restaurant menu is priciest. You could take a burger straight out of McDonald's, put it on the menu, charge $350, and those types of people would order it even if they could get a filet mignon from wagyu beef at half the price at what would still be an upscale restaurant on the other side of the street. There came a point when others in the organization were no longer prepared to support that wasteful spending. Now they just have to realize at Daimler that it's a mistake in German patent litigation not to hire interdisciplinary teams consisting of attorneys at law and patent attorneys. Patent attorneys won this one for Nokia.

Nokia definitely got a lot of value out of the Daimler dispute. But again, sophisticated tech companies, above all smartphone makers, are the real challenge, provided that can come up with a new challenge to EP'762 as merely rehashing Daimler's unavailing arguments won't help.

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Daimler takes Avanci patent license--all major German car makers now Avanci-licensed, but Volkswagen only up to 3G

Germany's leading business weekly, Wirtschaftswoche, has just been first (and I might still be second) to report that Daimler has finally taken a standard-essential patent (SEP) license from the Avanci pool, whose licensors include Qualcomm, Nokia, Ericsson as well as dozens of other companies from around the globe.

If you can't beat'em, join'em.

It was actually Avanci's approach of licensing the end product--the vehicle as opposed to a component thereof--which Daimler had originally rejected. As a result, the Nokia v. Daimler patent infringement dispute lasted more than two years and ended in a bilateral (just Nokia and Daimler) license agreement that was announced on June 1, 2021. Daimler had also brought an EU antitrust complaint (over Nokia's refusal to grant Daimler's suppliers an exhaustive SEP license) that it withdrew after the settlement.

Prior to settling with Nokia, Daimler had already taken bilateral licenses from Japanese electronics giant Sharp and non-practicing entity Conversant Wireless. All those companies--plus Japan's IP Bridge--had sued Daimler in Germany over patent infringements. And all of them are among the Avanci pool's more than three dozen licensors.

Piecemeal resolution--licensing one portfolio at a time--apparently turned out uneconomic, and litigation involves major uncertainty, so Daimler's decision-makers opted for a one-stop solution. In the alternative, I guess one Avanci licensor after the other would have wanted Daimler to take a bilateral license. If you're a Qualcomm or an Ericsson, why would you not want to get paid if Nokia does? If you're an Unwired Planet or Longhorn IP, why wouldn't you want to collect royalties if Daimler took a license from Conversant? Why would anyone condone an ongoing infringement while similarly situated patent holders are raking in license fees? Daimler avoided a lot of issues by signing a deal with Avanci. I've criticized Daimler on various occasions, but this pragmatic choice just makes sense under the current circumstances.

Of the three major German car makers, BMW was first to take a 4G Avanci license (in January 2017). In 2019, Volkswagen subsidiaries Audi and Porsche followed--and the following month, other car makers in the Volkswagen Group took a 3G license, but is now being sued by Acer because its license does not cover the 4G standard Volkswagen actually implements. The fact that the other major German car makers had accepted Avanci's car-level licensing model was held against Daimler in the German Nokia cases. Daimler's license deal will now weigh against other car makers' FRAND arguments. I'm thinking of Volkswagen's defenses against Acer but also about Ford, which is facing an infringement case brought by Sisvel as well as other lawsuits (IP Bridge, Longhorn IP) over its refusal to take an Avanci license.

Continental and Thales remain on the losing track

Some Daimler suppliers are still fighting against end product-level licensing. Continental (which knows a lot more about making tires than about patent licensing, litigation, and policy) continues to be a vocal critic of the Avanci model. These days it's hard to attend a FRAND/SEP webinar without someone from Continental expressing concerns. French industrial conglomerate Thales, whose primary competence it is to make high-speed trains, brought an antitrust case in Munich that is highly unlikely to get traction.

The likes of Conti and Thales can keep trying to tell courts and competition watchdogs that they should be granted an exhaustive component-level SEP license by Avanci's licensors, but judges and antitrust officials will see that their customer--Daimler--has determined that a car-level pool license is the way to go. Neither Thales nor Conti will be able to explain away that market reality.

Also, a Fifth Circuit opinion affirming the dismissal of Continental's U.S. case against Avanci and several Avanci licensors will come down soon. Conti's Delaware case against Nokia has been sent back from the federal court to the state court, which means that the case was basically just going in a circle for about a year--and the state court could still find that the case actually belongs in federal court (which in my opinion it does, as patent exhaustion is a theory under patent law, which is federal law, even if contractual questions are involved). It could also dismiss Conti's case, which is actually a fairly likely outcome.

Tout ça pour ça? Questioning the wisdom of Daimler's dispute with Nokia

This outcome does beg the question of why Daimler picked a fight with Nokia (and other Avanci licensors) in the first place. In the end, Daimler wasted millions and millions of euros on Quinn Emanuel's litigation services, only to be enjoined four times (two injunctions in Nokia's favor, one for Sharp, and one for Conversant) just over the course of a few months in 2020. If the Nokia dispute had continued, there would most likely have been several more injunctions, as some cases had been stayed but the patents-in-suit survived Daimler's validity challenges. Daimler could have had this outcome with pretty much any other German patent litigation firm (and they're all less expensive than QE), and could have taken an Avanci license in the first place without ever having to defend against SEP assertions by an Avanci licensor.

For a company that generally prides itself on cost efficiency, such a waste is unusual, if not unprecedented, and I wouldn't be surprised if some people were now struggling to justify the decisions they made a couple of years ago.

It's not that it's necessarily wrong to fight--because if you win, it's hard for others to argue with your success. Daimler wanted to bring down patent license fees. That's their job, just like it's the job of those people's counterparts at other companies to maximize their revenues. But then you have to play a game that you know how to win, and there was no sign of the people in charge of Daimler's Nokia cases being up to the challenge. They lacked the experience and the broad perspective that you need to win a war like that. I'm quite convinced that a company like Apple would have done a far better job by virtue of the strategic sophistication of its in-house litigators (who play this game more holistically and know how to get a better price-performance ratio from outside counsel). They also never figured out how to successfully influence Germany's patent reform process, despite the automotive industry's privileged access to politicians.

By comparison, major U.S. corporations value their in-house counsel a lot more. As a result, they bring in people who could easily be partners at some of the world's leading law firms. By contrast, the general perception in Germany is that if someone becomes in-house counsel, it's because they're not up to the way more lucrative challenge in Big Law. Going in-house is pretty much a point of no return in Germany, not a revolving door like in America. This doesn't mean that there aren't some very capable people in the legal departments of German corporations, but on average they're clearly nowhere near as sophisticated as their U.S. counterparts. That's also what I hear from patent holders of different sizes trying to work out deals.

For German legal departments, it's less about achieving results than justifying their decisions internally, such as by fooling their superiors into believing that something (such as German patent "reform") is a success story when it actually isn't. But at this stage Daimler's lawyers can hardly justify their waste of money on those Nokia, Sharp, Conversant, and IP Bridge cases. The negative ROI is all too clear.

German corporations treat legal departments are mere service providers. In major U.S. corporations, they have a strategic role and are a sparring partner for management in certain contexts. A great example is Brad Smith, who joined Microsoft as in-house counsel, ran its legal department for many years, and was then promoted to President (beyond still being the company's top lawyer).

Possibly the most important breakthrough for Avanci to date

For Avanci, Daimler's decision to take the pool license is a breakthrough. Its importance can hardly be overstated as other car makers are now going to be increasingly inclined to do the same, as opposed to betting on that non-starter called Licensing Negotiation Groups. Early last month, an Avanci executive mentioned new license agreements with Jaguar, Land Rover, and Aston Martin. And while neither Avanci nor Tesla ever confirmed it, there's a strong assumption of Tesla having taken an Avanci license, as multiple infringement actions brought by Avanci licensors against Tesla were withdrawn near-simultaneously.

Shortly after Nokia's settlement with Daimler, another--unnamed, but possibly Ford--car maker took a bilateral license. We may see similar effects now, but with respect to Avanci.

Meanwhile, the automotive industry is awaiting with interest the (delayed) announcement of Avanci's 5G pool rate.

Ramifications for Ericsson v. Apple

As I touched in a previous section on how Apple would have performed in Daimler's place, the iPhone maker is now going to be indirectly impacted by this in case it fails to renew its license agreement with Ericsson. Should we see another round of Ericsson v. Apple infringement cases in 10 days' time, Ericsson will benefit from Daimler's Avanci license in two ways. Apple famously makes a smallest salable patent-practicing unit (SSPPU) argument, and the momentum behind the Avanci pool--even though in a different industry--ups the ante for anyone arguing that SEPs should be licensed at the chipset level. And even though there are differences between these industries, the more traction Avanci has, the harder it will be for Apple with its huge margins to argue that it can't just pay Ericsson $5 per iPhone for its entire patent portfolio all the way up to 5G (for a reminder, Avanci has yet to announce its 5G rate, but the rate is expected to be substantially higher--for good reason--than the 4G fee).

Wirtschaftswoche's recent patent coverage

Today's Daimler-Avanci breaking news is actually the third patent-related Wirtschaftswoche story on patents within less than a week that is recommended reading for those who understand German and are interested in patent licensing and litigation. "WiWo" also researched the creepy story of dozens of jobs lost at a small family-owned company due to Germany's bifurcation regime (which allows injunctions to be enforced prior to a ruling on the (in)validity of a patent-in-suit). That article appeared in Friday's print edition, and was additionally uploaded to wiwo.de yesterday.

Also yesterday, Wirtschaftswoche reported on the Acer v. Volkswagen patent lawsuit. In that article, I am quoted as saying that Volkswagen should long have acquired a SEP portfolio (given that such patents are for sale from time to time) and needs to approach IP more strategically at the top level. To be clear, VW has a fully functional patent department, and they're ahead of others in their industry, but without C-level executives taking a stronger interest in IP and deciding not to make themselves dependent on other companies (such as Daimler) through slavish adherence to industry associations, they're not going to be match for wireless patent licensors. Volkswagen told the VDA (Germany's automotive industry association) point blank that they'd leave the organization unless it fully commits to electric mobility.

C-level interest in IP differs greatly between the automotive industry and Big Tech. Big Tech CEOs have subscribed to this blog and the related Twitter account, but I'm not aware of the top brass of automotive companies ever having subscribed to FOSS Patents.

As Daimler's Avanci license shows, the automotive industry has to come to terms with the fact that major wireless companies are now in the position to impose their preferred business models on car makers, no matter how much the auto industry may point to century-old traditions regarding their supply chains and what have you.

The battle over the business model is practically over. Daimler's legal fees are a sunk cost, and its financial controllers will be crying tears. What all car makers--above all, Volkswagen--need to reflect on now is how to achieve the best results possible under a framework that wasn't their first choice, but which has simply prevailed. They've all learned a few lessons in recent years--and they've paid their tuition fees. The problem they face is that the world around them is changing faster than their organizations can adjust. Increasingly they're going to face competition from companies that hold SEPs, such as Apple, Google, or Xiaomi. In times of transformation, leadership from the very top of those organizations is needed. Otherwise the only beneficiaries will continue to be patent litigation firms.

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Intellectual Ventures predicted 'IP reckoning' for auto sector, then filed patent suits against General Motors, Toyota, Honda in Texas--even involving a former Daimler patent

This is the third post with an automotive industry topic in a row. On this occasion, I'd like to mention that I plan to attend the afternoon panels of the Auto IP Europe conference hosted by IAM in Munich on November 2, and point you to my two previous automotive posts:

• EU competition chief's tough talk on cartels doesn't bode well for automotive SEP licensing negotiation groups

• L2 Mobile Technologies claims Qualcomm chips in Ford, Lincoln cars infringe 3G standard-essential patents originally obtained by ASUSTeK

The automotive industry must license more patents. Some patent holders are patient because they recognize that car makers are relatively new to the wireless patent licensing business--but that doesn't mean everyone will wait forever. On October 13, IAM published an opinion piece by Arvin Patel, the COO of non-practicing entity Intellectual Ventures ("IV"): "Why the auto sector is heading for an IP reckoning" (paywalled)

IV is not going to take the alleged wholesale borrowing of technology in the connected-car era anymore. On October 19, less than a week after that op-ed, IV filed patent infringement complaints against General Motor in the Western District of Texas (over 12 patents), and against Toyota and Honda in the Eastern District of Texas (over 11 patents each).

Let me show you the GM complaint as am embedded document (ths post continues below the document):

21-10-19 Intellectual Ventu... by Florian Mueller

I've also uploaded the Toyota complaint and the Honda complaint to Scribd.

These are the patents-in-suit:

1. U.S. Patent No. 6,832,283 on a "method for addressing network components"; originally filed by Daimler; asserted against all three defendants

2. U.S. Patent No. 7,382,771 on a "mobile wireless hotspot system"; originally filed by In Motion Technology, a company that Sierra Wireless acquired in 2014; asserted against all three defendants

3. U.S. Patent No. 7,484,008 on a "apparatus for vehicle internetworks"; same family as '004 patent; asserted against Toyota

4. U.S. Patent No. 7,684,318 on "shared-communications channel utilization for applications having different class of service requirements"; asserted against all three defendants

5. U.S. Patent No. 7,891,004 on a "method for vehicle internetworks"; same family as '008 patent; asserted against GM and Honda

6. U.S. Patent No. 8,811,356 on "communications in a wireless network"; asserted against all three defendants

7. U.S. Patent No. 8,953,641 on "methods and apparatus for multi-carrier communications with variable channel bandwidth"; asserted against all three defendants

8. U.S. Patent No. 9,232,158 on "large dynamic range cameras"; asserted against all three defendants

9. U.S. Patent No. 9,292,475 on a "device, system and method for controlling speed of a vehicle using a positional information device"; asserted against all three defendants

10. U.S. Patent No. 9,602,608 on a "system and method for notifying a user of people, places or things having attributes matching a user's stated preference"; asserted against all three defendants

11. U.S. Patent No. 9,681,466 on "scheduling transmissions on channels in a wireless network"; from a patent family originally obtained by IPWireless, a company that General Dynamics acquired in 2012; asserted against all three defendants

12. U.S. Patent No. 9,934,628 on a "video recorder"; asserted only against GM

13. U.S. Patent No. 10,292,138 on "determining buffer occupancy and selecting data for transmission on a radio bearer"; from a patent family originally obtained by IPWireless, a company that General Dynamics acquired in 2012; asserted against all three defendants

I find it very interesting that even Daimler apparently divested IP assets to non-practicing entities. Daimler itself gets sued by NPEs all the time now, and can't credibly complain about any NPE's business model...

The complaints do not describe any patent as standard-essential. Reference to WiFI and 3GPP standards like LTE is made, and three of them have been declared essential to LTE according to IPlytics. For the vast majority of the patents-in-suit, standard essentiality can be ruled out just based on what techniques those patents cover.

Even though the profile of IV's patents-in-suit is, therefore, rather distinct from the types of patents in the Avanci pool, it is interesting that patent holders (SEP and non-SEP holders alike) appear less likely to sue Avanci licensees. IV is not an Avanci licensor, so it could even assert SEPs against Avanci licensees.

For SEP holders that are not Avanci licensors there is a serious issue if they sue Avanci licensees: those patent holders tend to seek far higher royalties relative to the value and size of their portfolios, and defendants would then point to the Avanci rate on a per-patent basis as a comparable license (the "ND" ("non-discriminatory") in "FRAND"). Anyone can point to Avanci's published royalty rates--but someone who doesn't even want to license patents at that rate just comes across as an unwilling licensee or even as an unrepentant infringer.

If a non-SEP case is put before a jury, U.S. judges might not accept a SEP pool rate as a relevant point of reference on patent valuation--but at a minimum the judges can see that the defendant is, in principle, a willing licensee. That, in and of itself, has value.

Another possibility is that companies with an Avanci license are also more likely to reach a negotiated agreement with other licensors.

I'll keep an eye on automotive patent infringement cases, and will pay attention to whether there is a pattern of Avanci licensees being sued less than non-licensees.

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Daimler reloaded: another automotive company takes patent license from Nokia, which consistently insists on end-product-level licensing

There's a big "See I told ya so" waiting for you toward the end of this post as far as patent licensing to car makers is concerned, but let's look at this news in a logical sequence of steps:

Nokia just sent out its earnings release for the second quarter (and the first half) of 2021. Irrespectively of how strongly I've sometimes disagreed with their positions in litigation, I always read their statements and have an active subscription to their news releases. What immediately struck my attention in today's announcement is this passage:

"Nokia Technologies continues to scale with two licensing agreements with automotive manufacturers including Daimler." (emphasis added)

That "including" part suggests they're not going to disclose the name of the other party than Daimler. Nokia's victory over Daimler--getting the Mercedes maker to take a car-level license after more than two years of litigation and nearly three years after Daimler's EU antitrust complaint over the question of where in the supply chain standard-essential patents (SEPs) should be licensed--was announced in early June.

The following part of Nokia's "Q2 2021 Investor presentation" (PDF) doesn't state the second name either, so unless someone leaks something, or whenever it gets mentioned in open court (because of the non-discrimination part of FRAND), we're not going to know (click on the image to enlarge):

It's not just highly unlikely but even unthinkable that Nokia, despite getting its way in the largest-scale and highest-profile automotive SEP dispute ever, would have changed course and granted an exhaustive and otherwise unrestricted license to an automotive supplier. The most plausible scenario is that after Daimler's defeat someone else decided that hold-out was just going to cost a ton of legal fees, for nothing.

You can't argue with success. Or, as investors often say, the trend is your friend.

If it were up to me, I'd prefer Avanci and all of its members (as some do) to offer an exhaustive component-level license at the chipset, network access device (NAD), and telecommunications control unit (TCU) level. But I don't get to decide. Marconi, the company behind Avanci, can do only what its members are able to agree upon. Apart from a few hold-outs, car-level patent licensing is now uncontroversial. It's a fact of life.

I doubt that those automotive patent deals are large enough to be a key factor behind this bullet point of today's earnings release:

"Considering our strong start to 2021, we revise our full year 2021 Outlook, including net sales expected to be EUR 21.7bn to 22.7bn (previously EUR 20.6bn to EUR 21.8bn) with comparable operating margin in the range of 10-12% (previously 7-10%)."

However, patent licensing in general seems to be working out well for them. The Daimler dispute cost a lot of money, but appears to effectively dissuade others from picking that kind of fight. By contrast, Daimler wasted tens of millions of euros--and the result is just that anyone else can sue them now and force them to take a car-level license, which sooner or later will make an Avanci license look cheap.

What does Nokia's announcement of not one but two automotive patent license deals mean for the wider automotive patent licensing debate?

"See, I told ya so." Joint licensing negotiation groups (LNGs) are not necessary to work out license agreements between cellular SEP holders and automotive companies. No matter how hard Volkswagen and some of its allies may be pushing for the legalization of otherwise highly anticompetitive buyers' cartels, the market keeps proving them wrong. Today's announcement doubly debunks Volkswagen's LNG story:

• Deals keep falling into place without LNGs, so the plot is thickening that the real issue is a group boycott by unwilling licensees (from which more and more companies are defecting).

• Avanci members like Nokia are not only contractually and theoretically, but in every practical sense, free to enter into direct license agreement with automotive industry players. That means Avanci is truly just one additional option, a one-stop option for more than three dozen portfolios, but not a licensors' conspiracy.

As a regulatory authority or policy maker, I would find it a very clear case to politely decline any invitation to authorize a buyers' cartel likely to slow down the licensing process and organize group boycott (as the Japanese government noted earlier this week) when there is not only a Business Review Letter by the USDOJ but also hard real-world evidence--actions speak louder than words--of there being no licensors' cartel that would have to be counterbalanced (apart from the fact that two wrongs don't make a right, so even if there were a sellers' cartel, the solution would not be to allow a buyers' cartel). Who would want to turn antitrust law on its head against all the empirical evidence from the market--and knowing that it takes only one major jurisdiction to break up a cartel?

It always feels good to see one's analysis validated. It feels even better when it happens so quickly. It's just one deal with an unnamed car maker, but previously BMW had taken an Avanci license in 2017, Volkswagen had taken a limited one (and has otherwise continued to infringe, so I wonder when they'll get sued), Tesla according to rumor settled multiple parallel lawsuits by means of an Avanci license, and Daimler took a car-level license from Nokia. And now another deal happened, without litigation because otherwise we'd know.

I'll ask around to find out more and will do a follow-up post if and when warranted. But there may already be news deals and/or new lawsuits by the time I find out the licensee's name. Also, I guess Huawei will continue to make headway with its automotive patent licensing efforts.

One thing I try hard not to be is obtuse. Opinionated I am, but that's another word starting with the same letter. Rationality forces me to recognize what has happened and where things are going. This is an unstoppable wave. Licensing--not lobbying--is the answer.

If you haven't previously read my thoughts on collective licensing negotiation groups, here are the links to all parts of my recent trilogy:

1. SEP Licensing Negotiation Groups -- Part I: analogy to patent pools entails false symmetry between facilitating and complicating automotive patent licenses

2. SEP Licensing Negotiation Groups -- Part II: justice delayed is justice denied when unwilling licensees can hide behind a consensus-building effort

3. SEP Licensing Negotiation Groups -- Part III: legalization of buyers' cartels would invite group boycott and collective hold-out

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Patent plaintiffs in U.S. and Germany recently tried fragmenting their infringement claims for tactical reasons, but at least the Federal Circuit won't support such gamesmanship

I have a penchant for clever litigation tactics. That's why I've repeatedly credited Arnold & Ruess's Dr. Arno Risse ("Riße" in German) for obtaining the first (at least the first SEP-related) German anti-antisuit injunction in Nokia v. Daimler and getting it, together with lead counsel Cordula Schumacher, affirmed by the Munich Higher Regional Court. Fast forward by two years, and Munich is the go-to venue for anti-antisuit purposes. Talk about breakthrough innovations and agenda-setting.

While we're on the anti-antisuit subject, according to Juve Patent, the Munich I Regional Court just upheld an anti-antisuit injunction it had granted IP Bridge against Huawei. I haven't been able to obtain a redacted copy of the decision. According to the court's press office, they can't release it yet. I did, however, attend, and report on, the late-April injunction hearing.

Sometimes litigators go too far, and the courts decline to condone excessive gamesmanship. On Wednesday, the United States Court of Appeals for the Federal Circuit granted a mandamus petition by Samsung and LG against a patent holder named Ikorongo, which belongs to Concert Technology Corporation. The two Korean smartphone makers (though LG is in the process of exiting that business and will become more patent enforcement-oriented) succeeded in getting Ikorongo's patent infringement claims against them transferred from Judge Alan Albright's Waco division of the Western District of Texas to the Northern District of California.

I already indicated in a Thursday post that Judge Albright's reluctance to relinquish his jurisdiction over patent cases is controversial. He gets overruled from time to time, and the Samsung/LG petition raised a particularly interesting issue:

Ikorongo had set up an entity named Ikorongo Texas to which Ikorongo Tech assigned an exclusive license to the patents-in-suit with respect to a few counties in the Western District of Texas. Ikorongo Tech (which retained the rights with respect to the far larger rest of the country) and Ikorongo Texas then acted as co-plaintiffs, and hoped that the narrow geographic scope of Ikorongo Texas's rights (they might as well have named the entity "Ikorongo Albright") would weigh against a venue transfer as Ikorongo Texas would not have been able to bring its case in the Northern District of California (for lack of having any rights to assert there).

That scheme worked only in the lower court, as it was reversible error in the Federal Circuit's view that Judge Albright "disregarded the pre-litigation acts by Ikorongo Tech and Ikorongo Texas aimed at manipulating venue." In accordance with Supreme Court precedent, the Federal Circuit held that "manipulative activities of the parties" must be "disregarded." Citing to a decision the appeals court made in 2011, the "incorporation, office, and documents in Texas" of Ikorongo Texas "were recent, ephemeral, and a construct for litigation and appeared to exist for no other purpose than to manipulate venue . . . in anticipation of litigation."

This part was not dispositive in its own right. The Federal Circuit also found that Judge Albright had not properly considered some other factors. But Samsung and LG firstly needed to overcome that Ikorongo Texas construct in order to have any chance of getting the case moved out of the Western District of Texas.

If the Federal Circuit had not put a stopper on this kind of gamesmanship, the "market share" of the Western District of Texas would have grown as other patent holders would have set up shell companies with geographically limited rights. Also, the same would then have worked in the Eastern District of Texas, which is a shadow of its former self thanks to TC Heartland, but could quickly have become just as popular as the Western District, if not more.

There's also a fragmentation scheme that has recently been tried in Germany.

The same creative lawyers I mentioned further above still had three patent infringement cases brought by Nokia against Daimler awaiting adjudication in Munich by the time the parties settled. Two of them had previously been filed in Dusseldorf, but were withdrawn there only to resurface in Munich shortly thereafter. The enforcement of a previous Munich injunction turned out unaffordable for Nokia after the Munich appeals court roughly multiplied the amount of the required security (a bond or a deposit, whichever the plaintiff chooses) from $22 million to more than $2 billion. It's not a cheap thing to shut down all Mercedes sales nationwide (plus some exports to other countries that Daimler makes out of Germany).

In order to get leverage over Daimler by being able to afford the enforcement of an injunction during the appellate proceedings (thereafter, no collateral needs to be provided anymore), Nokia tried a different kind of prayer of injunctive relief: instead of the common format, which bars a defendant from further infringement of a given patent claim on German soil, Nokia targeted combinations of (i) patent claims and (ii) particular Mercedes models. Presumably, Nokia would then have focused its enforcement on where the damage to Daimler would have been most hurtful, such as the most profitable line and flagship: the S Class.

I heard from one source that the Munich court was skeptical of the admissibility of such fragmentation. But due to the settlement, no formal decision was made, and maybe someone at Daimler was scared of the prospect of Nokia's strategy working out, and therefore preferred to take a license.

We will see whether this gets tried again in some other cases, whoever the plaintiff may be. Another question is whether the required security is still going to be a concern to patentees in 2022, when Munich may be the appellate circuit with the most consistent patent jurisprudence in Germany.

Geographic fragmentation like in the Samsung/LG case is a non-issue in Germany as there are no venue transfers if an infringement occurs nationwide (no forum non conveniens rules).

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Legislative intent couldn't be clearer: availability of patent injunctions not compromised by new German legislation

Two renowned German patent litigators stated in the podcast I published yesterday that patent injunctions would remain just as available as before the German patent "reform" bill that was adopted earlier this month by the Federal Parliament. Dr. Dietrich Kamlah of Taylor Wessing pointed to the high hurdle that "disproportionate hardship" represents. Dr. Christof Augenstein of Kather Augenstein highlighted that the legislation is merely meant to codify the case law of the Federal Court of Justice, a court that rejected a proportionality argument in the only case of this kind it ever decided (Wärmetauscher, or Heat Exchanger).

In case you missed it, here's the podcast again:

Arguably, Daimler has lost that Heat Exchanger case--in which defended itself against an inventor--a second time by not achieving a German patent injunction reform that would make a practical difference. But perseverance sometimes pays off, and maybe they will succeed on a third attempt, if they and their allies figure out how to win a patent policy battle.

As Mr. Augenstein said in yesterday's podcast, the Federal Court of Justice told Daimler that it could still make cars--convertibles in that case--even without the "Airscarf" feature. I'd like to add something that relates to my previously-published explanations of a "Keep It Simple, Stupid" test, which checks whether a patent holder can simply pre-empt any proportionality arguments by making a licensing offer. In that Heat Exchanger decision, the Federal Court of Justice also pointed to the availability of a license. Twice, in fact--and both references to licensing are found on page 25 of the decision:

"Dass keine oder keine angemessene Lizenzierungsmöglichkeit bestanden hätte, ist nicht aufgezeigt."

Unofficial translation: "Defendants have not pleaded that a license was unavailable, or not reasonably available."

"Von der Möglichkeit, den Gegenstand des Streitpatents in Lizenz zu nehmen, haben die Beklagten keinen Gebrauch gemacht."

Unofficial translation: "Defendants did not avail themselves of the possibility to take a license to the patented invention."

The plaintiff in that case was an inventor, and he was interested in getting paid--not in shutting down factories. So there was a licensing offer on the table, and Daimler argued that the lower courts had not identified an infringement.

Not only do the new injunction statute (§ 139 PatG) and the official rationale stated by the German federal government (which made the original legislative proposal) suggest continuity, but the conservative CDU/CSU group in the German parliament, which consists of parliamentarians from Chancellor Merkel's CDU as well as the CDU's Bavarian sister party, the CSU) made its legislative intent clear at every single juncture of the process.

German courts do not analyze the legislative intent as systematically as their U.S. counterparts do. But statements by lawmakers always provide potential guidance to the judiciary.

On June 2, after the CDU/CSU group had reached a political agreement with its coalition partner, the center-left SPD, on the patent bill, the legal affairs spokesman of the CDU/CSU group, Dr. Jan-Marco Luczak a member of parliament from a Berlin district), placed the emphasis on the intent to keep patent enforcement in Germany as strong as before. Here are some passages from what he said, and my translations:

"Ein starker Patentschutz ist für Deutschlands Wirtschaft zentral, um unsere enormen Potenziale bei Innovation, Kreativität und Erfindergeist zu heben."

Unofficial translation: "Strong patent protection is paramount for the German economy in order to exploiit our enormous potential in innovation, creativity, and inventorship."

"Diese Innovationskraft zu schützen, das stand bei der Reform des Patentgesetzes für uns als Union im Mittelpunkt. Deswegen haben wir im parlamentarischen Verfahren sichergestellt, dass das hohe patentrechtliche Schutzniveau mit einem robusten Unterlassungsanspruch erhalten bleibt."

Unofficial translation: "For our parliamentary group of the CDU/CSU, it was the central objective in connection with this patent reform bill to protect this innovative capacity. Therefore we have ensured in the parliamentary process that the high level of patent protection would be preserved in the form of a robust right to injunctive relief."

"Damit kodifizieren wir die Rechtsprechung des Bundesgerichtshofes [...]"

Unofficial translation:"This way we codify the case law of the Federal Court of Justice [...]"

I've found another statement by the CDU/CSU group that plaintiffs seeking injunctions can point to (if needed at all, which is doubtful). The plenary of the Federal Parliament voted to adopt the Legal Affairs Committee's report. That was the lead committee on this bill. The CDU/CSU statement I mean starts on page 59 of the committee report, and ends after five lines on page 60. I'll quote and translate it sentence by sentence:

"Die Fraktion der CDU/CSU betonte, dass die Synchronisierung der Verletzungsverfahren vor den Zivilgerichten und dem Nichtigkeitsverfahren vor dem BPatG gerade in Fällen des Missbrauchs von Patentrechten zu einer erheblichen Verbesserung beitrage."

Unofficial translation: "The CDU/CSU group stressed that synchronization infringement proceedings before the regional and higher regional courts with nullity proceedings before the Federal Patent Court brings substantial improvement particularly in cases of patent abuse."

"Hinsichtlich der Verhältnismäßigkeitsprüfung im Rahmen des Unterlassungsanspruchs bekräftigte sie, dass in der Änderung des § 139 Absatz 1 PatG in der Fassung des Änderungsantrags der Koalitionsfraktionen keine Aufweichung der geltenden Rechtslage zu sehen sei."

Unofficial translation: "With respect to the proportionality test relating to injunctive relief, [the CDU/CSU group] stressed that the modification of § 139 para. 1 PatG as proposed by the government coalition is not to be interpreted as a dilution of the legal status quo."

"Vielmehr werde die Rechtsprechung des BGH für besondere Ausnahmefälle kodifiziert."

Unofficial translation: "Much to the contrary, the case law of the Federal Court of Justice concerning rare exceptions is codified."

"Die Einbeziehung von Drittinteressen in die Verhältnismäßigkeitsprüfung bedeute kein Hinausgehen über die Wärmetauscher-Entscheidung."

Unofficial translation: "The consideration of third-party interests with respect to the proportionality test does not mean to go beyond the Heat Exchanger decision."

"Der BGH habe sich nur deshalb nicht mit Drittinteressen befasst, weil an dem Rechtsstreit kein Dritter beteiligt gewesen sei."

Unofficial translation: "The Federal Court of Justice did not address third-party interests [in its Heat Exchanger opinion] because no third party was involved with that dispute."

"Selbstverständlich umfassten die Grundsätze von Treu und Glauben jedoch auch Drittinteressen."

Unofficial translation: "It goes without saying that the obligation of good faith also extends to third-party interests."

"Auch in Zukunft könne der Unterlassungsanspruch nach den ausdrücklich normierten Grundsätzen von Treu und Glauben nur in absoluten Ausnahmefällen nicht durchgesetzt werden."

Unofficial translation: "Just like before, enforcement of the right to injunctive relief will be precluded only in absolutely exceptional cases in accordance with the explicitly stated principe of good faith."

"Ein Patentrechtsinhaber, der bspw. einen Impfstoff entwickelt habe, werde diesen auch zukünftig exklusiv nutzen und Dritten untersagen dürfen, ihn zu produzieren oder ohne Lizenz zu nutzen."

Unofficial translation: "A patent holder who invented e.g. a vaccine is still going to be able to exclusively use the invention and to prohibit third parties from making or using it without a license."

"Selbst noch so starke Drittinteressen, wie bspw. die Betroffenheit der gesamten Allgemeinheit, führten nicht zur fehlenden Durchsetzbarkeit des Unterlassungsanspruchs; anderes sei nur in absoluten Ausnahmesituationen denkbar."

Unofficial translation: "Even the strongest third-party interests one can imagine, such as when the entire general public is affected, do not render the right to injunctive relief unenforceable, except under absolutely exceptional circumstances."

"Bei Vorliegen einer solchen außergewöhnlichen Situation bestehe ein Anspruch auf angemessenen Ausgleich."

Unofficial translation: "Should such an unusual situation arise, there will be a right to adequate compensation."

"Insoweit werde die grundsätzliche Ausschließlichkeit des Unterlassungsanspruchs nicht angetastet."

Unofficial translation: "Therefore, the fundamentally exclusive nature of the right to injunctive relief is not compromised."

Tbe above statements are also found, in an almost identical form, in the speech that Ingmar Jung, the member of parliament who was the CDU/CSU group's rapporteur on this bill, filed on June 10. You can find his speech on page 274 of this PDF document.

Some may still delude themselves into believing that German courts would deny prevailing patentees, on proportionality grounds, the injunctions they request. Neither the statute nor the well-documented legislative intent support that view. Heat Exchanger has a simple message: take a license. There's absolutely no way that a statute that isn't meant to change the situation would result in non-SEP enforcement all of a sudden being more difficult than, or even just equally difficult as, SEP enforcement. That would be a nonsensical outcome.

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Nokia ultimately gets Daimler to take car-level patent license, but issues persist, questions remain regarding component-level SEP licensing

Nokia and Daimler just announced--in a minimalist fashion--the settlement of their standard-essential patent (SEP) dispute after more than two years of infringement litigation and closer to three years after Daimler filed its EU antitrust complaint against against Nokia. All pending cases will be withdrawn now, which most significantly entails that the European Court of Justice (the upper division of the Court of Justice of the EU) won't address the Dusseldorf Regional Court's questions regarding the application of EU antitrust law to component-level licensing and SEP injunctions in case no. C-182/21. That said, there'll most likely be Groundhog Day pretty soon and some other case(s) raising these issues will be sent to Luxembourg, possibly separate ones for the component-level licensing question on the one hand and SEP injunctions on the other hand.

The Nokia ECJ case was going to be a hot summer topic, as the European Commission, the 27 EU Member States and the 3 EEA-only states (European Economic Area) were going to file their written observations in August. Next time, however, the referring court(s) could optimize the wording of the questions presented for a preliminary ruling.

A journalist asked whether Nokia granted Daimler a direct license, and this was confirmed, meaning that various Avanci contributors could still demand patent royalties from Daimler and bring infringement complaints. Daimler previously took licenses from Avanci contributors Sharp and Conversant after those companies indirectly licensed most of Daimler's vehicles through a component-level deal with Huawei. Huawei sells network access devices to certain Daimler suppliers such as Continental and Samsung-owned Harman. Patent exhaustion works all the way downstream.

Being a tier 2 supplier to Daimler (meaning that Daimler buys from Huawei's customers), Huawei demanded a component-level license from Nokia and brought a Dusseldorf antitrust action in the form of a third-party counterclaim. The Dusseldorf Regional Court put that Huawei v. Nokia case on hold after it decided to refer the dispositive question of component-level licensing to the ECJ. Unless Huawei and Nokia have also reached an agreement (and there is nothing in the announcement that suggests so), this means the Dusseldorf court may now refer that case--in which Huawei demands that Nokia make an exhaustive component-level SEP licensing offer on FRAND terms--to the top EU court.

In that case, Part B of the questions for the ECJ (injunctive relief, application of Huawei v. ZTE) is not at stake (and either the lower ocurt or the appeals court in Dusseldorf could simply raise those questions with the ECJ in any other SEP case before them, such as the ones I blogged about yesterday, at least two of which have been appealed to the Dusseldorf Higher Regional Court). But Part A, possibly with some modifications, is outcome-determinative in Huawei v. Nokia, too (at least to a large extent). If the Dusseldorf court did another referral, I would strongly recommend streamlining the wording. It is possible to be sufficiently clear, yet reasonably focused. There are better ways to raise the same question, as it is not necessary to provide numerous qualifiers for what is simply called a "FRAND-pledged SEP". The FRAND pledge may not even be relevant here at all in a compulsory-licensing case. This is not a U.S. SEP case based in contract law; in the EU it's an antitrust matter.

But would it really be desirable to resolve component-level licensing in what will be portrayed in the political arena as a Chinese-European dispute?

On the one hand, Huawei has made SEP litigation history in the EU with Huawei v. ZTE. That, however, was originally a dispute between two Chinese players. Now that "digital sovereignty" is a high political priority for the EU, I strongly urge European automotive suppliers such as Continental, Bosch, Valeo, TomTom and BURY Technologies--and also a company like Gemalto, which had filed an EU antitrust complaint against Nokia--to bring their own Dusseldorf lawsuits against Nokia, modeled after Huawei's case. They might even sue one or more or other SEP licensors who refuse to extend component-level licenses. The Dusseldorf court would almost certainly consolidate those cases, and Presiding Judge Sabine Klepsch of that court's 4c Civil Chamber would ideally refer a slew of component-level licensing cases to Luxembourg.

This would have major political advantages:

• Nokia and its allies could not portray the matter as a Chinese attack on European IP, European innovation, and European digital sovereignty, which is a mischaracterization at any rate but might nevertheless be politically impactful unless some European automotive suppliers enter the fray.

• The EU Member States from which the other potential plaintiffs originate would find it hard to go against their own in their written observations.

• Even if one or more of multiple disputes raising the same issue got settled along the way, it would take only one surviving dispute for the ECJ to hear and adjudicate the matter.

So far, Daimler's suppliers--apart from Huawei, which took the lead on the FRAND enforcement front--joined the infringement cases intervenors, with the courts in Munich and Mannheim not being overly interested in what they had to say, and some of them such as Continental and Valeo additionally filed antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) in early 2019.

Daimler's own DG COMP complaint is history. Daimler will also find it hard to persuade the EU in the future that it really cares about a policy issue and not just money. From what I heard, the Commission always suspected (and therefore urged mediation at some point) that Daimler just wanted to bring down the royalty rate and didn't genuinely care about whether its suppliers would be exhaustively licensed. By taking several SEP licenses at the end-product level, Daimler has validated its critics and skeptics. There's a right way and a wrong way to settle. The right way is the principled one; the wrong way is one that exposes all prior statements as hypocrisy.

Whether Daimler benefited from this protracted litigation in the end is unclear. A standard Avanci 4G license would cost $15 per car, of which Nokia gets about $2.50. It's always possible in such settlements that someone pays a high nominal rate, but side letters provide kickbacks. Here, given that Daimler doesn't have cellular SEPs of its own to cross-license and can't sell chipsets or similar components to Nokia, it's not too likely that it's a great deal for them. The price Daimler primarily pays here is its credibility, and now any other SEP holder will be a in strong position to defeat them in court unless they agree to take a car-level license. Then, Tesla (though not officially confirmed) and BMW have done the same already. Volkswagen is a special case, as I mentioned toward the end of this recent post: it appears they mostly just have a 3G license.

Avanci will announce its 5G rate in the not too distant future, and that may further raise Daimler's licensing costs.

Automotive suppliers like Conti and Valeo may previously have been hesitant to bring their own FRAND enforcement actions against Nokia as it might have reduced the likelihood of DG COMP launching formal investigations. At this point, however, we all know that the European Commission would also have preferred for the matter to be resolved by the CJEU. It's also well known that French EU commissioner Thierry Breton is proud of certain European companies' large SEP portfolios. It's time for the automotive industry to face political reality, even though I'm sure the Commission's case handlers and even their direct superiors understood the issue and its implications for IoT companies (many of which are startups and just don't represent a match for SEP holders in licensing negotiations). The fact that Daimler ultimately wasn't really interested in getting the strategic issue resolved does nothing to persuade the European Commission to investigate the suppliers' complaints, especially in light of a clear and promising litigation path via Dusseldorf.

Some automotive suppliers must come clean now. I've heard from both net licensors and net licensees that not all suppliers are as pure and principled as they would have us all believe. It's one thing to tell a court in an infringement proceeding that one wants to take a license and another to actually try to make it work. Some entities are credible to me, just looking at their own efforts; others because of what I know on a confidential basis; and then there are some, whom I cannot name, who allegedly just refer SEP holders to the end-product makers.

The settlement announced today may be a setback for the cause of component-level licensing in the short term, but it's up to the automotive industry--particularly to automotive suppliers--to draw the right conclusions and step up to the plate. I'm cautiously optimistic that at least some of them will. Their strategies were flawed, which also applies to the cause of German patent injunction reform (which may not even happen during this legislative term), but everyone is free to learn from their mistakes and do better next time.

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European Court of Justice assigned case numbers to preliminary references in Nokia v. Daimler and Phoenix Contact v. Harting patent cases

In November, the Dusseldorf Regional Court decided to refer to the European Court of Justice certain questions of component-level licensing of standard-essential patents (SEPs) as well as questions regarding the application of the Huawei v. ZTE SEP injunction framework. In February, Nokia withdrew its interlocutory appeal of that order.

In January, the Munich I Regional Court's 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier) identified a different patent-related question that it would like the top EU court to answer. The Munich court, which is clearly the most popular patent injunction venue in the world by now, would like to enjoy broader discretion in preliminary injunction decisions than its appeals court (which decides patent PI cases consistently with the appeals courts in Dusseldorf and Karlsruhe) allows. I translated that order.

Both preliminary references have been assigned case numbers by the CJEU:

• C-44/21 for the preliminary injunction matter (Phoenix Contact v. Harting, Munich case no. 21 O 16782/20), and

• C-182/21 for the SEP case (Nokia v. Daimler, Dusseldorf case no. 4c O 17/19).

It may seem counterintuitive that the earlier preliminary reference (the one from Dusseldorf) has a significantly higher case number than the later-filed one (the one from Munich). I've asked the Dusseldorf Regional Court's press office, and that court actually sent the preliminary reference to Luxembourg on November 26, 2020--about two months before the Munich court's preliminary reference. But apparently the CJEU, in an effort to avoid a potential waste of time, firstly awaited what would come out of Nokia's interlocutory appeal.

From what I heard, the translations in the automotive case will be sent to the governments of the EU member states and the parties later this month, with a likely deadline for the European Commission's, the EU Member States' and the parties' observation in early to mid August. I have not been able to find out about the timeline in the preliminary injunction case.

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