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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French court may hold ETSI FRAND declarations to be binding contracts to the benefit of third parties: cross-jurisdictional ramifications

Two weeks ago, the Tribunal judiciaire de Paris (TJP), which was known as the Tribunal de Grande Instance (TGI) until the turn of the year, handed down an order in TCL v. Philips & ETSI, a case that has the potential to affect cellular standard-essential patent (SEP) jurisprudence throughout and beyond the rest of Europe. That's because the European Telecommunications Standards Institute (ETSI) is based in Sophia Antipolis in the south of France, and the FRAND licensing pledges made by participants in cellular standard-setting to ETSI must be interpreted under French law wherever on this planet a party invokes an ETSI FRAND declaration by a patent holder.

I don't see a potential impact on how U.S. courts adjudicate cellular SEP licensing disputes as they have consistently recognized third-party beneficiary rights in connection with FRAND licensing pledges. However, on the other end of the spectrum there are those extremely biased German courts that have for many years stopped at pretty much nothing in their quest to favor patent holders over implementers, and as part of that have denied third-party beneficiary rights. Continuing to deny the existence of third-party beneficiary rights in connection with ETSI FRAND pledges will be quite problematic (to say the least) if and when the French court to which all French patent disputes are assigned has provided clarification with respect to a FRAND declaration that indisputably must be interpreted under French law. For implementers of standards it would definitely be a positive to be able to rely not only on antitrust law (abuse of dominant market position) but, additionally, on contract law (as defendants to U.S. SEP cases do all the time).

Once again, China's TCL, a company that expanded from TV sets into other segments of the consumer electronics market (though I can't remember ever having seen any of their products in a store, neither in the U.S. nor in Germany), is party to an important SEP case. A couple of months ago, the Federal Circuit vacated in part, reversed in part and remanded TCL v. Ericsson to the Central District of California. What the Federal Circuit took issue with is that Ericsson was denied a jury trial regarding a release payment (past infringement damages by any other name) for past unlicensed sales.

The dispute between Philips--an aggressive SEP enforcer that miserably failed in the mobile handset business just like Ericsson and Nokia--and TCL didn't originally appear to be remarkable in any way. TCL refused to bow to Philips's royalty demands (as had others before TCL), so Philips sued TCL in the UK for infringement of two select SEPs (in 2018). But then came the French connection: almost exactly a year ago, TCL brought a complaint under contract law against Philips and ETSI in France--ETSI's legal domicile.

The objective is to get Philips to make a FRAND licensing offer to TCL, which would be reviewed or, if Philips fails to make an offer, simply be determined by the French judiciary. ETSI itself does not hold patents, but TCL wants ETSI to make a contribution to the process. That sounds vague (as Philips's attorneys accurately note). It's easy to see why ETSI--or any other standard-setting organization--wouldn't want to be drawn into that kind of dispute.

The decision that came down in Paris earlier this month is basically the equivalent of a U.S. court order denying a motion to dismiss (this post continues below the document):

20-02-06 TJP Order in TCL v... by Florian Mueller on Scribd

Philips wanted to get rid of the French case and instead just have any FRAND licensing matters resolved, to the extent this would obviously be necessary before an injunction could come down, by the England & Wales High Court. But pointing to the fact that the UK case is the earlier-filed one wasn't enough.

What crystallized at this early stage of proceeding is that TCL and Philips have divergent views on the legal significance of the ETSI FRAND licensing pledge signed by the participants in its standards-development processes. Philips described it as merely a precontractual matter, while TCL insisted that it constitutes what is called a "stipulation pour autrui"--a covenant benefitting a third party, i.e., a contract that can be enforced by anyone implementing a standard such as 3G/UMTS or 4G/LTE (thus also by non-ETSI members).

TCL's related prayer for relief is "juger que les déclarations d’essentialité faites par les sociétés PHILIPS à l’ETSI constituent une promesse de concéder une licence à des conditions FRAND aux sociétés membres du groupe TCL, portant sur l’ensemble des brevets des sociétés PHILIPS déclarés essentiels pour les normes UMTS et LTE." My unofficial translation: "declare that the essentiality declarations made by the Philips entities to ETSI constitute a covenant to grant a license on FRAND terms to TCL entities, covering the entire portfolio of patents declared by the Philips entities to be essential to the UMTS and LTE standards"

At this stage, the court has not entered (declaratory) judgment yet. However, it has denied Philips's request for dismissal in its entirety and allowed the case to go forward (with a caveat I'll explain in a moment). It's slightly--but legitimately--speculative to say that the case would probably have been dismissed if Philips had succeeded in persuading the court that TCL didn't have a hard contract case.

I've seen at least one commentary, by a group of three French lawyers, who interpret the order as "the first time that a French court rules that the promise made by the owner of SEPs as per ETSI's IPR Policy governed by French law constitutes a 'stipulation pour autrui'." But my reading of the decision is more conservative. Outside the sections in which the court summarizes the parties' pleadings without stating its own opinion, it mentions the key term "stipulation por autrui" only once (the bottommost paragraph on page 10):

"Si les fondements juridiques des demandes dirigées contre l'ETSI et les sociétés PHILIPS sont différents (les premières sont fondées sur le contrat d’association qui régit les rapports entre l'ETSI et ses membres et les secondes sur la stipulation pour autrui par laquelle les sociétés PHILIPS se sont engagées à consentir des licences à des conditions FRAND issues des règles de fonctionnement de l'ETSI), il ne s'agit pas d'un obstacle à la reconnaissance d'une identité de situation de droit, ainsi que l'a jugé la Cour, ce d'autant moins qu'en l'occurrence les demandes sont toutes expressément soumises à la loi française ainsi que le prévoient les règles de procédure élaborées par l'ETSI." (emphasis added)

The highlighted part means "the covenant to the benefit of a third party by which the Philips Entities have promised to grant licenses on FRAND terms further to ETSI's by-laws." I can see why some would read this as a holding by the court that the relevant passage of the ETSI FRAND declaration (Article 6.1) indeed constitutes a contract to the benefit of a third party. There would be a grammatical argument here: the court could have used "seraient" instead of "sont" in order to distance itself, by means of indirect speech, from TCL's assertion. Imagine "seraient" as being the same as "sont," but with the equivalent of "allegedly" before it. I am sensitive to that grammatical difference because there was a time when I did a whole lot of work on EU policy matters, and when French, Belgian or Luxembourgian politicians gave speeches, the grammatical form indicated whether they stated a fact or merely restated someone else's account. But in this case I'm still hesitant to view this as a judicial conclusion. The reason for my conservative approach is the context. Not only is the wider context an order on a motion to dismiss, but the highlighted passage merely appears in parentheses in a conditional subclause ("Si" = "If").

The order is not a declaratory judgment, but a denial of a motion to dismiss, so it would be a dictum at best. But for the reasons stated above, I believe the context calls into question that the grammatical form alone indicates a judicial holding regarding third-party beneficiary rights.

While Philips's motion to dismiss has failed for the time being, ETSI's still requires further analysis. The court will hold a hearing in June on the question of whether ETSI is properly named as a defendant. Further briefing will be provided by the parties in the meantime.

Now there's a tricky procedural aspect. In order for the French court to find that the French contract case can go forward despite the UK patent infringement case having been filed earlier, there had to be a close connection between the claims against Philips (which is neither a French nor a UK party) and ETSI (a French organization). The court found that ETSI's role in monitoring the implementation of its licensing rules would be sufficiently closely related to Philips's obligation (at least as alleged by TCL) to extend a FRAND license to TCL. Such a close relationship is sufficient to establish French jurisdiction as ETSI is a French defendant. But what if the further proceedings resulted in a holding that there are no justiciable claims here against ETSI?

I can't predict whether French procedures would result in a dismissal of the case against Philips, too, given that suing ETSI was key to TCL's theory for French jurisdiction. But, at a minimum, such a holding would raise the bar for other parties who may bring French contract cases in the future against holders of patents declared essential to ETSI standards.

At this stage, the court has merely found that ETSI may be properly named as a defendant. But the actual decision on whether ETSI remains in the case will be made later this year. And thereafter we may see a declaratory judgment on the ETSI declaration, a prospect that makes this a case worth watching as it has the potential to provide much-needed clarification (which in some less conservative people's eyes it already has!).

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Nokia and its trolls are losing left and right: LG defeats Conversant case in Munich over Nokia patent two days after Nokia itself lost to Daimler

This is a dreadful week for Nokia on the patent assertion front. A pathetic Nokia patent was held non-essential (thus non-infringed) by the Mannheim Regional Court on Tuesday, and yesterday (Thursday) afternoon, the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) of the Munich I Regional Court threw out a Conversant v. LG case over a Nokia patent (click on the image to enlarge; this post continues below the image):

The patent-in-suit, EP1173986 on a "method and arrangement for managing packet data transfer in a cellular system," was incorrectly alleged to be essential to the 4G/LTE cellular standard. Nokia's privateer asserted its broadest method claim (claim 1) and two apparatus claims of similar breadth, but to no avail. The court concluded that the transmission of a traffic volume indicator (TVI) in accordance with the LTE specification does not involve a direct selection of a channel as claimed by the patent. As a result, the LTE standard does not require any technical step going beyond the prior art.

The Nokia patents transferred to Conversant, which is basically acting as a licensing agency for the Finnish failed handset maker, have generally performed very poorly in litigation. Last month the Munich I Regional Court held an early first hearing in a Conversant v. Daimler case, and that patent doesn't appear to have impresssed anyone either.

Nokia failed on Tuesday (Mannheim), indirectly (because it used Conversant as its front) failed on Thursday (Munich), and we'll probably hear very soon that mediation with Daimler and its suppliers failed this week, too.

The mostly Nordic protectionists in the European Commission who are preventing the Directorate-General for Competition (DG COMP) from formally investigating Nokia's unFRANDly refusal to license component makers need to wake up. If anyone still thinks that Nokia is "the Pride of Europe" in terms of wireless innovation, the performance of its patents in litigation shows that it's not. It would be a far smarter decision for Europe to focus on opportunities in connected cars and the wider Internet of Things (IoT). Nokia is basically fin(n)ished.

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

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

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

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

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

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

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

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In pursuit of injunction against Daimler, Nokia relies on patently absurd interpretation of CJEU's Huawei v. ZTE ruling

While Nokia's in-house and outside counsel are among the very best in the technology industry, the company's failure in the mobile handset business and the challenges it faces in mobile network infrastructure have resulted in an increased focus on patent monetization, which in turn forces even world-class lawyers to take positions that border on the insane. Nokia's counsel advanced a misinterpretation of a crystal clear passage of the Huawei v. ZTE opinion by the Court of Justice of the European Union in an effort to gain leverage over Daimler.

I am writing this while today's Nokia v. Daimler standard-essential patent trial in Munich is continuing in a temporarily-sealed courtroom. The focus during the first half of today's trial was on infringement and validity. There is every indication that the Munich I Regional Court's 7th Civil Chamber under Presiding Judge Dr. Matthias Zigann is inclined to hold Nokia's EP1671505 on a "redundancy strategy selection scheme" infringed by Daimler cars--and not to doubt the patent-in-suit's validity to the extent that the case would be stayed pending a parallel nullity action before the Federal Patent Court of Germany. While it's theoretically possible that the court changes mind on the merits, the outcome--whether or not Nokia will be granted injunctive relief--most likely hinges on whether Nokia is in or out of compliance with EU antitrust law.

Earlier this week, the Munich I Regional Court published its Standard-Essential Patent (SEP) Guidelines, which I translated within little over two hours of publication. I was nonjudgmental at that point, mostly because I firstly wanted to see how the court would apply those rules in today's trial. As Judge Dr. Zigann explained, the guidelines are meant to apply to cases filed subsequently to their publication. But those guidelines reflect a certain perspective on the law, which is why they obviously do play--despite that disclaimer--a significant role here.

Freshfields Bruckhaus Deringer's Dr. Frank-Erich Hufnagel, who represents Continental (one of the various Daimler suppliers intervening on the defendant's behalf), called into question whether the court's outline of the implications of the parties' conduct in licensing negotiations was consistent with European law. Dr. Hufnagel just can't see how--under EU antitrust law as interpreted by the CJEU--the Munich court could hand Nokia an injunction against Daimler despite having found (on a preliminary basis) that Daimler's counterproposal (for taking a license to Nokia's SEPs) appears FRAND-compliant, unless the court thoroughly evaluated both parties' proposed terms and reached a determination that Daimler's offer was not FRAND.

The primary authority on this question is paragraph 71 of the CJEU's Huawei v. ZTE ruling, which says (and with which paragraph 66 is merely consistent, except that it looks at the question from the implementer's perspective):

"It follows from all the foregoing considerations that the answer to Questions 1 to 4, and to Question 5 in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products, is that Article 102 TFEU must be interpreted as meaning that the proprietor of an SEP, which has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, does not abuse its dominant position, within the meaning of Article 102 TFEU, by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as:

• prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and

• where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics." (emphases added)

The highlighted word "and" at the end of the first bullet point means that the safe haven (of not violating antitrust law) for the SEP holder is tied to the combination of two conditions: the SEP holder must have acted in a FRAND-compliant way, and the implementer must have failed to do so.

Arnold & Ruess's Cordula Schumacher, who delivered oral argument for Nokia on FRAND licensing matters today while Dr. Arno Risse ("Riße" in German) focused on infringement and validity, contradicted Continental's position. She represents her client vigorously, and even if one disagrees (as I do) with much of what she says, her attempt to explain away the logical AND condition in the CJEU's safe harbor for SEP holders is more than just unpersuasive: Nokia's position is that the two bullet points constitute alternative, not cumulative, conditions in the sense of the SEP holder being above board provided that one condition or the other is met.

Not only does that interpretation imply that the CJEU wouldn't simply have used "or" when it meant "or," but a closer look at the second bullet point shows that it is logically dependent on the first. In the citation further above, I also highlighted the words "that offer." The demonstrative pronoun "that" makes it totally clear that the second bullet point can't stand on its own: the word "offer" in that second bullet point specifically and indisputably references the offer mentioned in the first bullet point. Therefore, the implementer's FRAND compliance comes into play only on the basis of the patentee previously having made a FRAND licensing offer.

If the Munich court adopted Nokia's interpretation, which isn't merely far-fetched but fundamentally flawed, and granted Nokia an injunction despite not holding Daimler's counteroffer to be non-FRAND, the appeals court would probably stay the injunction in no time (even though it's not the fastest appeals court when it comes to resolving motions to stay enforcement). Also, the Munich court would become a total outlier among Germany's three leading patent infringement venues.

Nokia's complaint might still be rejected for whatever other reason. But based on where things stand, this particular question is going to be the decisive one. If the court agrees with Continental that "and" means "and" (which is furthermore warranted by "that offer" as I just explained), there may have to be a retrial with expert witnesses to assess the FRANDliness of Daimler's counteroffer. If, however, the court sides with Nokia on all questions, including on the notion that "and" means "or," then an injunction could come down on April 9, 2020 (the scheduled ruling date).

This is just the first post on today's trial; stay tuned.

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Munich I Regional Court publishes Standard-Essential Patent (SEP) Local Rules

The Landgericht München I (Munich I Regional Court) has just released its Standard-Essential Patent (SEP) Local Rules (PDF, in German)--formally, just "guidance," but in practical terms, those will be the rules for litigants to follow. This set of guidelines had been in the works for many months.

Here's my quick unofficial translation:

Guidance on the application of the antitrust-based compulsory-license affirmative defense under Huawei v. ZTE in connection with the Patent Local Rules of the Munich I Regional Court

(Version: February 2020)

These guidelines set out the Munich I Regional Court's two patent divisions' application of the antitrust-based compulsory-license affirmative defense according to the principles laid out by the Court of Justice of the Euoprean Union in Huawei v. ZTE (case no. C-170/13). These guidelines are in effect until the Patent Local Rules (which also apply to disputes under the Utility Model Act and the Semiconductor Protection Act) are updated.

I. Scope of applicability

The CJEU's [Huawei v. ZTE] ruling and these guidelines relate exclusively to actions seeking a prohibitive injunction, recall, and destruction [of infringing goods] over standard-essential patents to the extent that such patents bestow market dominance on their owner and to the extent that the owner or its predecessor in title made a FRAND pledge to a standard-setting organization. Transfer of a patent does not annul a FRAND [licensing] commitment. Other case patterns are governed by the principles of the decisions of the Court of Justice of the European Union in IMS/Health (case no. C-418/01) or, respectively, the Federal Court of Justice [of Germany] in Standard-Spundfass (case no. KZR 40/02) and Orange Book (case no. KZR 39/06).

II. Overview of the contract-negotiation procedure to be followed prior to bringing suit

As per the principles of the CJEU decision in Huawei v. ZTE and their interpretation by the two patent litigation divisions of the Munich I Regional Court, the patent holder and the implementer of the patented teaching must, in principle, go through the following stages prior to the filing of the complaint:

1) Notice of infringement, covering at a minimum the future patent-in-suit, provided by the patent holder to the implementer

2) Communication of the desire to take a license by the implementer to the patent holder, covering at a minimum the future patent-in-suit, whereas the implementer may reserve the rights to assert, immediately or subsequently, non-infringement and/or invalidity of the patents to be licensed

3) Comunication of a draft FRAND license agremeent by the patent holder to the implementer, covering at a minimum the future patent-in-suit

4) In the event of non-acceptance: communication of an alternative draft FRAND license agreement by the patent implementer to the patent holder, covering at a minimum the future patnet-in-suit, whereas the implementer may (once again) reserve the rights to assert, immediately or subsequently, non-infringement and/or invalidity of the patents to be licensed

5) In the event non-acceptance: accounting and provision of security by the implementer

6) optional and voluntary determination of the license terms by a third party [such as an arbitration tribunal]

With respect to item 3, the patent holder has the obligation to explain its licensing approach and to specify whether and on what terms it has already concluded license agreements that are comparable with respect to duration and fact pattern, and, furthermore, why -- if applicable -- it has included in its licensing offer any patents beyond the ones with respect to which the implementer requested a license. Should the implementer enter into a reasonable non-disclosure agreement, the patent holder has the obligation to additionally provide confidential details relating to agreements previously concluded, to the extent that the patent holder is formally able to do so within the framework of previously-entered non-disclosure obligations. Should such provision of information not be possible in the absence of a court order, the infringement plaintiff must seek such order at the earliest opportunity. Reference is made to the guidelines on the processing of motions for protective orders, brought during or outside of oral proceedings in patent cases before the Munich I Regional Court.

III. Possibility of rectifying [an omission] until the end of oral proceedings

Whether the [above] steps have been properly taken will be determined at the end of oral proceedings (Art. 136 para. 4 Code of Civil Procedure). Under the Court's Patent Local Rules, that moment is the end of the trial. Some shortcomings can, therefore, be rectified during the pendency of the case in compliance with statutory or judicial deadlines. Within the framework of the Court's Patent Local Rules, this opportunity exists particualrly during the period between the early first hearing and the trial, provided that the rectification of specific shortcomings was announced no later than during the course of the early first hearing. The two patent infringement divisions will -- to the best of their ability -- already discuss the antitrust-based compulsory-license affirmative defense in particular cases in the early first hearing so as to give the parties the opportunity to address specific deficiencies. If multiple complaints by the same patent holder are pending before the same division of the Court and have provoked a uniform compulsory-license affirmative defense, this shall occur in a joint early first (non-technical) hearing. Should multiple complaints with a uniform compulsory-license affirmative defense be pending before both divisions of the Court, the divisions will strive to coordinate closely.

IV. Overview of the procedures:

1. Prerequisites for a substantive discussion of the antitrust-based compulsory-license affirmative defense:

a) The defendant has raised an antitrust-based compulsory-license affirmative defense.

b) The complaint seeks a prohibitive injunction and/or recall and/or destruction [of infringing goods].

c) The defendant has -- in the event that at least one offer relating to at least the future patent-in-suit had been made and not accepted -- made at least one counteroffer relating to at least the future patent-in-suit and, further to its rejection by the plaintiff, has provided an accounting as well as security.

d) Should the defendant previously have licensed the patent-in-suit, but terminated it or otherwise contributed to its termination, such as by defaulting on royalty payments, it can no longer raise the compulsory-license affirmative defense.

e) Should the defendant have been offered a license covering the patent-in-suit, but failed to include this in its counteroffer, it can no longer raise the compulsory-license affirmative defense.

Regarding (a), the defendant has to raise the compulsory-license affirmative defense at the earliest opportunity, which is typically the answer to the complaint.

Regarding (c), the patentee's final binding offer must not be downright unacceptable (Art. 242 Civil Code). This also applies to the implementer's counteroffer. The counteroffer may be of a lesser scope or shorter term, but must, at a minimum, cover the (future) patent-in-suit. The defendant can reserve the rights to assert, immediately or subsequently, non-infringement and/or invalidity of the patents to be licensed. In the alternative to specifying the license fees, the defendant may also offer a determination of those fees by the patentee subject to [judicial review for reasonableness under] Article 315 Civil Code. The [defendant's] accounting and provision of security must, at a minimum, take into account the counteroffer, with respect to the period from the initial implementation to the estimated time of a provisionally-enforceable decision by the Court, as well as common commercial practice. In the event of a non-quantified counteroffer, accounting and security must take the offer into account. In the event of a worldwide offer or worldwide counteroffer, accounting and security can be limited to the German market; they may also be estimated. 110% of the relevant amount must be given as security.

Regarding (d), the said situation can, for instance, arise if the parties concluded a license agreement that provides an opt-out clause to the implementer's benefit with respect to particular patents. Implementers exercising their opt-out right cannot raise an antitrust-based compulsory-license affirmative defense as they had already been licensed.

Regarding (e), the same applies to the event that the defendant did not include the patent-in-suit in its counteroffer, considering that it could therefore have obtained a license.

2. Prerequisites for a substnative discussion of the antitrust-based compulsory-license affirmative defense in an early first hearing:

a) (precautionary) argument by the plaintiff in the complaint

b) affirmative defense raised by defendant in the answer to the complaint

Regarding (a), if the plaintiff seeks a substantive discussion of the antitrust-based compulsory-license affirmative defense in the early first hearing, the complaint shall already contain (precautionary) argument relating to the defendant's expected antitrust-based compulsory-license affirmative defense--not only if the complaint seeks a prohibitive injunction, recall and destruction from the outset but also if this is reserved for an amended complaint (based on the Court's outline of its prelimianry views in the early first hearing or between the two hearing dates if announced in the early first hearing). In exceptional cases, such as in the event of an unforeseeable compulsory-license affirmative defense, the plaintiff may be granted leave, further to a motion for leave, to file a further pleading.

Regarding (b), the answer to the complaint should, even if only for the event of a reserved or possible amended complaint, already contain (precautionary) argument relating to the antitrust-based compulsory-license affirmative defense if the defendant, for it spart, already seeks a substantive discussion of the antitrust-based compulsory-license affirmative defense in the early first hearing.

3. Prerequisites for amending a complaint by adding prayers for prohitive injunction, recall, and destruction:

a) The intent to amend the complaint later shall already be stated in the complaint. The amendment is to be made no later than in the early first hearing or, at least, should be announced in the early first hearing for the period between the two hearings.

b) If the amendment necessitates an increase of the advance payment of court fees and/or the security provided for the other party's recoverable litigation expenses, such increase shall be processed and paid swiftly.

c) Bringing a complaint seeking information, an accounting and determination of damages serves a substitute for an infringement notice in accordance with step (1). Any outstanding steps in the negotiation further to Huawei v. ZTE must, at the latest, be taken during the period between the two hearings. The division hearing the case will allow time based on the circumstances of each case. The required time can be shortened by already providing in the complaint any (precautionary) argument related to the foreseeable compulsory-license affirmative defense. If the defendant has already argued on a precautionary basis its foreseeable compulsory-license affirmative defense in its answer to the complaint, the division may already outline a preliminary assessment in the early first hearing.

4. Particular pleading requirements:

a) The plaintiff has to raise, in particular, the compulsory-license affirmative defense and to plead and prove that its factual requirements are met, particularly that and on what grounds the plaintiff's final binding offer failed to comply with antitrust law (FRAND).

b) If the defendant failed to make a counteroffer, it has to plead and prove that the patentee's final binding offer was downright unacceptable from an antitrust point of view or that the plaintiff would have been required to grant a license to the defendant's suppliers. However, said "derivative" compulsory-license affirmative defense is ineligible if the defendant itself would have had the option to enter into a license agreement taking account--reasonably, sufficiently, and retroactively--of the implications of patent exhaustion or license grants elsewhere in the value chain and esnuring that any pertinent information may also be communicated to other parties in the defendant's supply chain. It must furthermore be ensured that double payment of license fees to the patentee cannot be achieved through the collection of damages.

c) The plaintiff has to meet a secondary burden of pleading with respect to its licensing approach and whether--and, if so, on what terms--license agreements comparable in term and scope have previously been concluded, to the extent that such information is not publicly available or already in the defendant's possession. With respect to previously-concluded agreements, this also applies to portfolios that have been transferred. Should a multiplicity of portfolio transfers and/or portfolio recompositions have created a confusing ("patchwork") situation, the division hearing the case will define the pleading requirements in a given case.

d) If the defendant criticizing the amount of the offered license fee has been offered a license agremeent with a reasonable, sufficient and retroactive most-favored-nation clause, which is particularly appropriate in the event of a first-time license, the defendant has to plead and prove that the offered license fee is nevertheless excessive. If the defendant argues that previously-concluded license agreements resulted from circumstances of pressure, it has to specifically plead and potentially prove what other and lower license rate or what other licensee-friendleir terms the parties to those other agreements would have agreed upon but for said circumstances of pressure.

e) If the defendant, after reserving this right (cf. steps 2 and 4) raises, in an infringement dispute, a nullity and/or non-infringement and/or exhaustion and/or licensing defense (collectively referfed to as "defenses") of particular patents in the portfolio that have been offered but are not presently asserted in litigation, it must plead with specificity and potentially prove that and why the defenses relating to particular portfolio patents offered have more than non-negligible impact on the amount of the license fee offered. If the offered portfolio is dynamic, this possibility exists only with respect to licensed patents and patent applications already granted or, respectively, published by the end of the oral proceedings. In this case, the plaintiff has to meet a secondary burden of pleading to the extent that it has to plead why those patents were included in the offered portfolio and whether and, if so, in which way the asserted defenses relating to particular portfolio patents affect the amount of the license fee offered. The defendant may not raise, in the infringement dispute, these defenses relating to particular portfolio patents if the plaintiff offered the defendant a license agreement that comes with a reasonable, sufficient and retroactive adjustment formula taking account of the subsequent raising of these defenses with respect to particular portfolio patents in a separate proceeding or within the framework of other contractual mechanisms.

f) If the defendant has raised the nullity, non-infringement, exhaustion and/or license-based defenses of these portfolio patents in a separate proceeding and/or -- to the extent permissible -- in countersuits, the burden of pleading and proof will be determined by the applicable general principles.

V. Consideration of motions for protective orders during and outside oral proceedings

Reference is made to the separate guidelines for the consideration of motions for protective orders during and outside oral proceedings in patent infringement disputes before the Munich I Regional Court.

VI. Period between the two hearings

The period between the two hearings of a Munich patent infringement case may be used by the parties for further negotiations, attempts at mediation before a judicial mediator, or for other alternative dispute resolution mechanisms.

VII. Contract terms

Against the background of the principle of contractual freedom and the autonomy of market actors, the Court's two [patent infringement] divisions refrain from specifying the particular content of the contractual terms. However, the wordins chosen [by the parties] must meet the requirements of a given case and strike a fair balance between the parties' opposing interests. It may be an option to rely on contract language provided and communicated by third parties for the same purpose.

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Over WiFi-related patents, L.A. jury awards Caltech $838 million from Apple, $270 million from Broadcom

A Los Angeles jury just awarded the California Institute of Technology (Caltech) $838 million from Apple and $270 million from Broadcom--a total of approximately $1.1 billion--over patents related to the WiFi standard (IEEE 802.11).

WiFi is just a limited part of the technology in a smartphone, and there are numerous patents allegedly essential to that standard as well as non-essential patents with some connection to WiFi. It wouldn't be possible to profitably make phones if one extrapolated a royalty of $1.40 per iPhone--which appears to have been the outcome--to the totality of patents potentially implemented in such a highly complex and multifunctional device.

Based on the complaint as well as Apple and Broadcom's answer to the complaint, I haven't found an indication that the patents are subject to a FRAND licensing commitment. They might cover efficiency gains related to the actual implementation of the standard. I'll update this post, or do a follow-up post, once I've found out.

This is the biggest WiFi damages verdict to my knowledge. Apple and Broadcom have announced their intent to appeal, so we'll see how much of that amount is ultimately awarded. Those verdicts tend to get slashed later on.

The verdict form isn't available on the docket (case no. 2:16-cv-03714, Central District of California) yet.

In jury trials, but not on appeal, university trolls have two psychological advantages over other patent trolls:

• While conventional trolls have to come up with creative names like "American [Insert Something] Innovations," jurors intuitively associate universities with research and inventiveness.

• They can claim to pursue a greater good, as opposed to those greedy corporations infringing their patents, as if those university trolls were Robin Hood's patent-related equivalent.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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BlackBerry wins German patent injunctions against Facebook, WhatsApp, Instagram over four (most likely invalid!) software patents

Sueddeutsche Zeitung (SZ), a Munich-based newspaper, reported yesterday evening on a set of Germany-wide patent injunctions that BlackBerry--once a smartphone maker, now basically a patent troll--just obtained against Facebook and its WhatsApp and Instagram subsidiaries over a total of four different patents covering chat features.

The injunction is provisionally enforceable. If BlackBerry posts a bond or makes a deposit, it can enforce the injunctions at this stage, though Facebook can appeal to the Munich Higher Regional Court and is, in parallel, challenging the validity of those patents before the Federal Patent Court of Germany. But Facebook has already told the media that the affected services--Facebook Messenger, WhatsApp, Instagram--wouldn't go out of service in Germany: workarounds have been prepared, so the related features would have to be removed.

BlackBerry sued Facebook (with a focus on Facebook Messenger rather than the social media stream) and those two subsidiaries over five different patents, which I listed earlier this year and will list again further below.

The Munich I Regional Court has now handed down injunctions over four of the five patents. These are the five BlackBerry patents-in-suit, some of which they claim to be infringed by only one or two of Facebook, Instagram, and WhatsApp, and some of which they claim are infringed by all three (note that the injunctions BlackBerry just won relate to patents #1, #2, #3, and #5 on the list, but not #4, as explained further below):

1. EP1734728 on a "method and apparatus for switching between concurrent messaging sessions" (first hearing held on 01/10/2019)

   accused functionality: showing two chat histories in parallel

2. EP1633114 on a "system and method for maintaining on a handheld electronic device information that is substantially current and is readily available to a user" (first hearing held on 01/17/2019)

   accused functionality: automatically identifying user profiles containing partly identical data

3. EP1746790 on a "method of sharing an Instant Messaging history" (I attended and reported on the related first hearing)

   accused functionality: sharing messages from the chat history

4. EP1540495 on a "method and system for displaying group chat sessions on wireless mobile terminals" (first hearing: 02/28/2019)

   accused functionality: displaying chat history while text is being edited

5. EP2339799 on an "IM contact list entry as a game in progress designate" (first hearing: 02/28/2019)

   accused functionality: chatting during gameplay

BlackBerry has so far prevailed on all of them but the fourth one ("method and system for displaying group chat sessions on wireless mobile terminals"), over which even the Munich court had sufficient validity doubts that BlackBerry felt forced to further narrow the claims during trial. In that case, no immediate decision was possible (for due process reasons), and instead, there will be another trial over that one on March 12, 2020. If BlackBerry persuades the court not to stay, then it may win again.

I am stunned that the court didn't stay all five cases over serious doubts concerning the validity of those patents. When I looked at the claims of the patents-in-suit earlier this year, I quickly concluded that they'd all be highly likely to be annulled by the Federal Patent Court of Germany (which also happens to be based in Munich, which is sort of the Capital of the Patent Movement, at least for Europe). That's partly because software as such isn't patent-eligible in Europe. While the courts rarely ever invalidate a patent as a whole on that basis, they do exclude any non-technical features from their novelty and non-obviousness analysis--and it's hard to see how anything novel or inventive could be found in those patent claims that isn't just software stuff without a technical effect. I already operated a chat service (as part of an online gaming network) in the 1990s and wrote an IRC client in 2000, so I know a lot of the prior art from hands-on experience.

What I have been able to find out is that BlackBerry, represented by Quinn Emanuel (a great firm that has not so great clients at times), had to narrow multiple patent claims-in-suit during the infringement proceedings just to address the court's concerns over non-novelty. There are two problem with German patent infringement courts in the context to grant or deny a stay pending a nullity action. First, they apply an unreasonably high standard (and the "guru" from the Dusseldorf appeals court who has been promoting that high standard for many years more aggressively and fanatically than anyone else recently made dozens of employees of a small company lose their jobs--with Quinn Emanuel again on the enforcing side--over a patent subsequently held invalid). Second--though in many cases that's even more important than the standard--they take only non-novelty (anticipation) arguments seriously and largely refuse to consider obviousness contentions (lack of inventive step) for no good reason (if they can rule on infringement without appointing expert witnesses, they certainly could also assess the existence of absence of an inventive step, but they just don't want to).

The Munich I Regional Court orders stays in only about 10% of all cases, and I have the impression the number is far below 10% for this year. That's a huge problem considering that the vast majority of all patents in this industry turn out invalid once they're challenged before the Federal Patent Court. In fact, not a single one of all the patents asserted in the cases I covered in detail survived a nullity trial (but many never reached that point due to earlier settlements).

I hope Facebook will keep on fighting. They do appear to be determined not to feed the troll. By striking down these patents, even if it takes years, they can teach the German patent judiciary--except for Mannheim, where you find by far the most responsible German patent infringement court--an important lesson. The federal government is drafting a reform bill, and reform is needed so badly that it will likely be enacted even before Facebook's nullity actions against BlackBerry are resolved.

If your company, too, would like to push for patent injunction reform in Germany, please contact me at fosspatents@gmail.com. I'm already in touch with many companies from a variety of industries--and of all sizes--who have enough of this crap resulting from a broken system, and as a former European Campaigner of the Year (2005; an award I won against Bono and which went to a pope and to Governor Arnold Schwarzenegger in other years) I know a thing or two about patent legislation. I'm convinced a more eBay v. MercExchange-like regime in Germany is achievable, and far more cases than now should get stayed in the future.

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Injustice is a built-in feature of Germany's bifurcated patent litigation system -- it would be unconstitutional in other countries

I am presently researching the most appalling miscarriage of justice that ever occurred in a German patent case: dozens of people lost their jobs over a patent--held by a publicly-traded U.S. corporation--that later got invalidated by the Federal Patent Court of Germany (a problem commonly referred to as the "injunction gap"). That patent-in-suit is either (if construed broadly) clearly invalid or (if construed narrowly) not infringed by the accused product, but could not reasonably be held valid and infringed at the same time. The case raises questions not only about the outcome but also about the reasoning and the circumstances that led to it. There's even a secondary question that reminds me of why Federal Circuit Chief Judge Rader resigned. But as the issues are so very serious, and the fallout from the facts being published might be massive and lasting, I'm making every humanly possible effort to analyze the matter with utmost diligence. That's why it's too early to provide names, but when the time is right, I will. The case number contains "39."

Germany needs patent reform badly. The German patent litigation system is not just broken: it was ill-conceived and it's been prone to abuse all along, but abuse has become so rampant that the time is ripe for change. The situation is unsustainable, and the system doesn't really deliver justice.

Right now there's only one leading German patent infringement court of first instance that I believe does a stellar job under the circumstances, and that's the Landgericht Mannheim (Mannheim Regional Court). Many years ago I thought the court was too plaintiff-friendly, but by now it's my favorite one. To a far greater extent than their counterparts in other German venues, the Mannheim judges--whose understanding of technical issue is unsurpassed--have realized just how irresponsible it is to let patent holders enforce invalid patents all the time. In Mannheim, there are judges who deserve an honorary doctorate in (at least) radio frequency electronics and have the expertise to figure out when a patent is likely invalid as granted, coupled with the backbone to stay such cases (while we're on this subject, I found out they recently also stayed one Broadcom lawsuit against BMW and one against Daimler, both over non-standard-essential patents). It will be interesting to see how they address the issue of component-level licensing in Nokia's automotive SEP cases.

The appeals court in Munich also impressed me on a couple of occasions this year, but can't really solve the problem that too few cases (only about 10%, which is an insanity considering that the vast majority of patents are invalid as granted) get stayed by the lower court there pending a validity determination. Dusseldorf--where the aforementioned tragedy occurred--is a near-total disaster at both levels, except on certain FRAND issues, where it's recently been a thought leader and more balanced than ever. Fortunately, Dusseldorf is a slow venue, which is why the kinds of cases I watch hardly ever get filed there.

As part of my research into the (most likely) unprecedented miscarriage of justice mentioned further above, I've come across a symptomatic decision by the Federal Court of Justice, the top German court for patent infringement cases (as only a very few issues, such as due process, go up to the Federal Constitutional Court). The Bundesgerichtshof (Federal Court of Justice) decision in the Kreuzgestänge (cross-linkage) case is nothing short of a declaration of structural and moral bankruptcy of the German patent litigation system. It's a mystery to me how one of the five judges who reached that decision could heap tons of praise on the German patent judiciary with a straight face in a closed-door government meeting in May instead of advocating much-needed reform.

In that case, the Federal Court of Justice pronounced the following doctrine:

"The court adjudicating a patent infringement lawsuit has to independently construe the patent-in-suit and neither legally nor factually bound to this Court's claim construction in a nullity [= invalidation] action relating to the same patent."

Let me provide some context on bifurcation first:

• Unless a patent is so fresh it can still be challenged at the patent office (a scenario I'll ignore for the remainder of this post), one needs to bring a validity challenge before the Federal Patent Court of Germany. That's the court of first instance for nullity (= invalidation) actions.

• The Federal Patent Court is typically far slower to resolve a nullity action than the Munich and Mannheim regional courts--and even sluggish Dusseldorf--are to rule on infringement. In the infringement cases, defendants can merely seek a stay pending resolution of (or a key milestone in) the parallel nullity action, but they don't have a full invalidity defense. The decision on a stay is based on some superficial (summary) analysis. The most problematic part is that the courts are largely receptive to non-novelty arguments but not obviousness contentions (and when they do evaluate obviousness, all but Mannheim apply an unreasonably high standard).

• From a Federal Patent Court decision on a nullity complaint, parties can appeal (of right) to the Federal Court of Justice. However, infringement determinations by a regional court are appealed to a higher regional court (in Munich and Dusseldorf, cases stay in the same city; from Mannheim, they go to Karlsruhe). In most cases, that's the end of the journey for infringement cases, though the higher regional courts sometimes allow a further appeal to the Federal Court of Justice--or, if they don't, one can bring a Nichtzulassungsbeschwerde, which is practically the equivalent of a U.S. cert petition (a request for top-court review) and denied in most cases.

• If the infringement case is brought in Munich or Mannheim, a nullity action will rarely reach the Federal Court of Justice (second nullity instance) soon enough that the above-cited doctrine would play a role. In Dusseldorf, it's more of a possibility, but even in Munich and Mannheim/Karlsruhe there might be an infringement determination by the appeals court after the Federal Patent Court ruled on validity, however, practically only imaginable if the nullity action was launched as a pre-emptive strike ahead of the infringement complaint or if the patent previously got challenged by another party.

Everywhere else in the world, there's a basic rule: you must apply the very same claim construction to the infringement analysis and the validity determination.

Only one country does it differently, and that's Germany.

The result is that a patent holder may benefit from a broad claim construction in the infringement proceeding and a narrow one with respect to validity. The system is (deliberately) asymmetrical: A defendant would never ever benefit, as the above-cited doctrine relates to a case where the nullity action has been fully resolved (all appeals--just one available anyway--exhausted) and the patent has been upheld (otherwise the infringement case would also be terminated immediately).

The Federal Court of Justice explained that--and this is per se correct--the infringement proceeding, if slower, may actually result in facts entering the record or legal theories being advanced that warrant a deviation from the (earlier) claim construction in the nullity action. That is conceivable, but the problem is that they drew a conclusion that results in the asymmetry I just outlined: if the infringement court finds that the claim construction should be broader than the one used in the (concluded) nullity action, the defendant can't get a new validity determination.

It's a tilted playing field. It's all meant to give leverage to those owning patents that should never have been granted in the first place. It's high time the legislature enacted reform.

If Congress wanted to introduce bifurcation in the U.S. by depriving defendants of a full invalidity defense, and if it then promulgated a rule allowing an inconsistency that can only benefit those enforcing--but never those defending against--patents, I'd predict that the Supreme Court would hold it unconstitutional. The incurable inconsistency of rulings would possibly be sufficient grounds for a holding of unconstitutionality--but, at a minimum, the asymmetry of the inconsistency's impact would be. Even Germany's Federal Constitutional Court might arrive at that conclusion, but it's unlikely that a challenge will be brought anytime soon--and even if it happened, that court is nowhere near as strong and principled as the SCOTUS.

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