Three dozen U.S. states are about to settle Android app store antitrust case with Google, leaving Epic Games and Match Group as two remaining plaintiffs: San Francisco trial starts in November

At 6 PM Pacific Time on Tuesday, Google, approximately three dozen state attorneys-general, and consumer class-action lawyers filed a "stipulation and [proposed] order re deadlines in consumers' and states' actions in light of tentative settlement" in connection with the Google Play (Android app store) antitrust litigation in the Northern District of California that resulted from the procedural consolidation of multiple parallel actions. The settlement was reached the same day and is subject to certain approvals (by the state attorneys-general, which should be a formality unless there was more political resistance than I can imagine, and Google parent Alphabet's board of directors, which should be even more of a formality), after which it needs to be blessed by the court, which is also unlikely to pose a major hurdle. The plan is for a long-form settlement agreement to be submitted to Judge James Donato in about a month.

The terms have not been announced yet, not even in broad lines.

The United States District Court for the Northern District of California will hold a trial starting November 6. With the states and the consumer plaintiffs out (and developer class actions--which achieved nothing of major value to the developer community at large--having settled long before), this means that there will be only two plaintiffs: Epic Games, which brought the complaint in August 2020 after Google ejected Fortnite from the Google Play Store, and Match Group (Tinder).

First, the notice of a tentative settlement (this post continues below the document):

In Re Google Play Store Antitrust Litigation: Stipulation and [Proposed] Order re Deadlines in Consumers' and States' Actions in Light of Tentative Settlement

It is not surprising that the class-action lawyers would settle with Google: in the end they just want to get paid. The far bigger win for Google here is that the three dozen U.S. states are also prepared to drop the case. Governmental support would have been very useful for Epic and Match at the trial. A settlement with only the class-action lawyers would have been of little value to Google if the state AGs had continued to sue on behalf of their citizens. The consumer class might not even have been certified in the end.

Given the fundamental problems surrounding app distribution on Android, it is hard to imagine that the settlement will solve the most pressing problems. But we will know for sure only when the exact terms have been announced. It's unlikely but not impossible that the state AGs negotiated something of value.

The only advantage this development has for Epic and Match is that the trial will be streamlined. The trial structure was threatening to become very complex, and now the focus at the pretrial conference on Tuesday will be on how to proceed with an Epic & Match v. Google trial. I don't think a trial that will be interrupted by the Thanksgiving holiday is a good idea, but it probably won't be postponed in light of the impending settlement.

Epic and Match may still government support: the DOJ, which supported and may continue to support (at the certiorari stage) Epic's appeal of the decision in the parallel Apple case, could file amicus briefs later on.

On Tuesday morning by Pacific Time, all the parties filed a joint pretrial statement highlighting the differences between their positions. There was no mention of a settlement in that filing: it was totally adversarial. But a settlement was mentioned as a hypothetical possibility in footnote 4:

"Further, while all Plaintiff groups expect to be at trial with the experts they disclosed to Google, there are circumstances that, at least theoretically, could change these plans (e.g., a settlement, a pending Daubert motion, etc.).

Here's that document:

In Re Google Play Store Antitrust Litigation: Joint Statement Regarding September 7, 2023 Pretrial Conference

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Patent licensing firm IPCom announces settlement with LG while litigation against Samsung apparently continues

IPCom, a well-known patent licensing firm based in the Munich area, today announced on its website a settlement agreement with South Korea's LG Electronics. All infringement cases and validity challenges pending between the two have been withdrawn. IPCom's managing director Pio Suh is quoted in the press release as "confirm[ing] that LG and IPCom have finally reached a resolution that also includes all of IPCom's assets."

Several years ago it became known that an IPCom affiliate named FIPA was suing both Samsung and LG over patents formerly owned by Hitachi. Samsung was known to have licensed IPCom's former Bosch patents a long time ago, and the same may apply to LG. There is no indication at this stage of a settlement with Samsung.

In recent years, IPCom has achieved various settlements such as with HTC (after more than 12 years of litigation) and various telecommunications carriers. Its cases against Apple were also withdrawn. IPCom's current management has been consistently positioning the firm as a constructive and cooperative patent holder.

The reference in today's announcement to "all of IPCom's assets" suggests that LG is licensed not only to those IPCom patents that formerly belonged to Bosch and Hitachi but also to IPCom's "homegrown" patents. Starting in the middle of the last decade, IPCom started filing patent applications on its employees' inventions. The timing and the fields of technology make it a possibility that at least some of those patents are 5G-related. Should that be the case, some of the companies who took licenses from IPCom a long time ago may not be licensed to those younger patents, subject to what exactly the capture clauses of those license agreements say. So we may hear more from IPCom in the years ahead.

LG exited the smartphone market two years ago, but the settlement was likely about back royalties for the most part anyway. A license agreement between LG and InterDigital served as the primary point of reference when Justice Mellor made his recent InterDigital v. Lenovo FRAND determination.

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Qualcomm opposes class-action lawyers' attempt to obtain its 2019 contracts with Apple

About a month ago, Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California further narrowed the class-action lawsuit against Qualcomm that sought to piggyback on FTC v. Qualcomm. By now, the case is down to exclusive-dealing claims under California state laws. There are no more Sherman Act claims, and no more claims that are specifically about the licensing of FRAND-pledged standard-essential patents (SEPs).

The question is where to go from here. Qualcomm would obviously like to get rid of the remnants of that litigation at the earliest opportunity, and I could easily picture a summary judgment motion succeeding. The class-action lawyers' last chance to extract any fees from Qualcomm is to make the continuation of this litigation costly for Qualcomm in different ways. A filing that was made about an hour ago shows that they are now primarily betting on Qualcomm's desire to keep the terms of its 2019 settlement with Apple under wraps. Here's the joint case management statement the parties just filed to state their divergent positions:

In Re: Qualcomm Antitrust Litigation (case no. 3:17-md-2773-JSC, N.D. Cal.): Joint Case Management Statement

The class-action lawyers have made an about-face in the sense that the case was originally about Qualcomm allegedly charging supra-FRAND SEP royalties, and now it's about Qualcomm's discounts to Apple (and potentially other device makers, but the plaintiffs can't name any) that were subject to certain exclusivity arrangements. The class-action lawyers say those discounts were actually just "loyalty penalties" (meaning that Qualcomm could claw them back in the event of disloyalty).

The following sentence shows how the focus has changed:

"Specifically, Plaintiffs’ experts are likely to focus on the chipset overcharge caused by Qualcomm’s exclusive dealing, instead of the overcharge caused by Qualcomm’s licensing practices, which heretofore had been the focus in both Plaintiffs’ and the FTC’s case."

After all these years, they now ask for "limited, additional discovery related to their exclusive dealing claim and to submit expert reports, which will focus entirely on Plaintiffs’ exclusive dealing claims and the antitrust impact those exclusive deals had on consumers." As Qualcomm puts it, "Plaintiffs request to re-open fact discovery for nine months, followed by several months of expert reports and expert discovery, and eventually briefing on the certification of some class, in an attempt to manufacture a claim where none currently exists."

This is how the class-action lawyers seek to justify that request:

"Qualcomm’s 2019 Agreement with Apple: Plaintiffs request that Qualcomm produce its 2019 agreements with Apple (including its settlement agreement, license agreement, and chipset supply agreement). Among other things, based on the public statements describing this agreement, it appears relevant to showing the extent to which Intel was truly foreclosed by Qualcomm’s prior exclusive dealing, thereby requiring Apple to return to Qualcomm for chipset supply even after initially awarding some of its chipset business to Intel."

To me that passage is a non sequitur. What I suspect is that they primarily hope Qualcomm doesn't want to take the risk of that agreement being discussed in public filings and potentially a trial. A secondary motive may be that they hope to find something in those 2019 Apple-Qualcomm contracts that would enable them to develop a new theory, such as in a whole new complaint. They are also talking about the possibility of a third amended complaint, though--as Qualcomm notes--Judge Corley already said last year that the Second Amended Complaint was going to be the last one.

I'd certainly be curious to find out more about the terms of the Apple-Qualcomm settlement, but I think Qualcomm has strong arguments against a reopening of discovery in this multi-year litigation, given that the contract was concluded AFTER the class period.

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Bypassing Apple's and Google's app tax: Tencent's Supercell extends web-based alternative for in-app purchases to its blockbuster Hay Day game; Warner, Scopely run similar web shops

Apple never made a game, but by "virtue" of its App Store monopoly abuse makes more profit from games than any company that does make games. Google has made billions of dollars from its equity position in Pokémon GO maker Niantic, yet collects even more from other companies' game revenues through the Google Play Store's app tax.

One of the world's largest games companies, China's Tencent (which is also Epic's largest shareholder besides founder Tim Sweeney), has just doubled down on its efforts to circumvent the infamous app tax. Finland-based Supercell is an almost-wholly-owned Tencent subsidiary. Its Supercell Store, which since late June has already been offering digital items (named Gold Pass and Gold Pass Bundle) for the Clash of Clans strategy game, now also comes with a section related to the Hay Day farming game, which has been an enormous commercial success for about a decade. The first iOS version of Hay Day was launched in mid-2012, and the first Android version in late 2013. It quickly became the Farmville of the mobile gaming world. Even I played it for a few years--sometimes with extended periods of absence from the game, but it was always fun to come back.

The leading Hay Day YouTuber, R3DKNIGHT (Ricky Burnett), released a video yesterday that shows how one can purchase digital currencies (diamonds and gold) as well as a premium feature called Farm Pass (which is purchased for a given month, accelerates one's gameplay progress, and provides access to additional decorative and entertaining elements) through the web-based Supercell Store, where Apple and Google can't tax purchases:

https://www.youtube.com/results?search_query=r3dknight

Items purchased from the Supercell Store can be used in the iOS and Android versions of the game. On the web store, they cost approximately 10% less than inside the app. This means both the game maker and end users save money:

• The game maker grows its revenues and increases its profitability because Apple and Google would otherwise take a 30% cut-- actually, Apple even collects significantly more than 30% in some countries. If an item is purchased through the Supercell Store, Supercell gets 86%-87% (90% minus, depending on the country, 3% to 4% for external payment processors) instead of 70% (or less) of the ex-VAT in-app price, which is roughly 23%-24% more than otherwise ((86%/70%)-100% = 22.9%; (87%/70%)-100% = 24.2%).

• Gamers save 10%, which is their incentive and reward for accepting the inconvenience of having to visit the web shop (versus just tapping on a Buy button inside an app) and potentially having to enter their billing information there (which is unnecessary when a browser instance is already logged into a service like Paypal).

On their external web shops, game makers have more flexibility with setting price points. The inflexibility of Apple's approach is, by the way, another reason (besides the 30% cut) why NFT startups complain about the app tax.

Apple's inflexibility also affects currency conversion (Apple recently announced massive price increases in the eurozone and several other countries, and many app makers might actually prefer to keep the old euro prices).

When I last commented on the pending Pepper v. Apple class action (and a study according to which Apple's App Store commission would be cut in half if only one alternative app store was allowed on iOS), I said that it's unrealistic to assume that the entire difference between Apple's current supracompetitive commission and a hypothetical competitive commission would go to consumers: some app makers might indeed reduce their prices by approximately 30%, but in most cases it would likely be a mix of developers making more money and consumsers saving some money, just like we can now see with Supercell's web shop.

Supercell is not the only major games company to offer mobile app items via a web shop at lower prices:

• Warner Bros. Interactive Entertainment runs a webshop for Game of Thrones: Conquest. A package of 10,000 jewels (the digital currency in GOT: Conquest) costs 10% less via the web than in the game. Other packages cost the same as in the game, but come with more jewels for the same price (depending on the package, the "value add" ranges from 5% to 20%).

• Scopely's Marvel Strike Force also comes with attractive offers, including a daily free offer that is exclusive to the web store.

• Together with CBS Interactive, Scopely created Star Trek Fleet Command, which also has a web shop now.

Analysis

Apple's and Google's app tax regimes are under pressure in numerous ways. Some of what is going on has the potential for meteoric impact:

• If Epic Games' Ninth Circuit appeal succeeded (as I believe it should), Apple could still seek some fair, reasonable, and non-discriminatory (FRAND) compensation for the use of its intellectual property, but that would be very little compared to what they're charging now.

• In Europe, the Digital Markets Act (DMA) takes some time to roll out and will invite legal challenges, but it's going to happen.

• There is still hope that the United States Congress may adopt the Open App Markets Act (OAMA) this year.

Then there are parallel developments that won't have meteoric impact, but which I would describe as potentially erosive (aka "death by 1,000 cuts"). The most interesting trend in that area is what Supercell is now doing not only with respect to Clash of Clans but also Hay Day: some major game makers increasingly give their customers the option of purchasing digital items on websites, i.e., outside the mobile apps--items that they can then consume in the iOS and Android apps nonetheless.

That is an extension of the concepts called "cross-wallet" (buying in-game currency on one platform, but spending it on another) and "cross-purchase" (buying digital items such as a decoration on one platform, but using it on another). It's the only commercially significant respect in which even Apple has for some time been less restrictive than Sony--which says a lot about the PlayStation maker and its credibility as a complainant over Microsoft's acquisition of Activision Blizzard.

For the avoidance of doubt, the websites I'm talking about don't feature gameplay. They're just storefronts, not HTML5/OpenGL games. So this is "cross-wallet" and "cross-purchase" in the sense of "buy here, play there."

Those websites must be entirely external, i.e., they cannot be accessed inside the iOS or Android version of the game (though technically apps would be able to provide web browser functionality such as through Apple's WKWebView).

That technical separation--which, again, is due only to Apple's and Google's contractual restrictions--presents game makers with the following challenges:

1. A web shop must be set up. That is a minor effort per se, especially with all the ready-to-use web shop technologies out there, but:

2. There must be an account system that works across platforms. A purchase made in the web shop must be credited to an account with which the user plays the game on an iOS or Android device. This means the user has to register with an email address (a phone number would also be a technical possibility) as opposed to just effortlessly using an Apple or Google account.

   Apple forces app developers to support Sign-in with Apple as an alternative to registering with an email address. However, at least Supercell has gotten away with giving users various in-game incentives for signing up by email. Not only can they play the game alternatingly on Android and iOS if they do, but they also get other benefits from having a Supercell Id. I remember that Hay Day again and again encouraged me to obtain a Supercell Id, and at some point I did.

3. The game maker has to raise awareness for the new purchasing option while abiding by Apple's and Google's restrictions in that regard (in case of non-compliance, the game will be ejected from the App Store and the Google Play Store). However, most people don't visit a game's website if they're already playing the game. Word-of-mouth may help to some extent. For example, Hay Day gamers typically join a "neighborhood" where they play and chat with other players. And the most avid Hay Day players follow R3DKNIGHT and other YouTubers. But in the end, the question is: how can a game maker promote its web shop to its customers if it can't simply offer the web-based alternative within the app (with a link to click on )?

That question leads us to some recent class-action settlements and court rulings.

Until recently, Apple and Google even prohibited app makers from sending promotional emails to registered users that would draw attention to alternative purchasing options. In this regard, they've made concessions lately--concession that in my view don't go far enough to address competition concerns, but which nevertheless represent (limited) progress.

On June 10, 2022, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California formally approved (PDF) a class-action settlement between small app developers and Apple. While some of the terms of the agreement benefit only companies that fall under Apple's Small Business Program, others apply to all "U.S. Developers" (developers "who self-identified as U.S.-based when registering for the Developer Program").

Section 5.1.3 of that settlement agreement "[p]ermit[s] all U.S. Developers to communicate with their customers via email and other communication services outside their app about purchasing methods other than in-app purchase, provided that the customer consents to the communication and has the right to opt out." Apple agreed to revise its App Review Guideline 3.1.3 accordingly.

However, "[i]n-app communications, including via Apple Push Notification service, are outside the scope of this provision." It means Supercell can't link from the app itself to the web shop. It can't tell customers that a given item costs X amount if they buy it via Apple's IAP system, but 10% less on the web. That is a painful restriction:

• Especially in-game purchases are impulse purchases. Many of those purchases happen because someone just wants to surmount a hurdle in the game, and wants to do it now. That is not the situation in which many gamers would proactively search for cheaper options of which they don't even know whether they exist.

• By not being able to communicate with users in the app about cheaper alternatives, Supercell can't promote those cheaper options as a key reason for obtaining a Supercell Id in the first place.

A similar class-action settlement has been reached (and will presumably be approved) between some small app developers and Google.

What about the injunction that Judge YGR granted Epic against Apple last year?

For now, it's not presently enforceable anyway. But the United States Court of Appeals for the Ninth Circuit will hear the parties' cross-appeal in less than three weeks' time (on the 21st to be precise). It's possible that the injunction would be affirmed, and would then be enforced. However, the anti-anti-steering injunction was just a consolation prize, and it's not even something Epic specifically asked for. What really matters is market definition, and if that question is resolved in Epic's favor (as I believe it should be), the UCL part will become pretty unimportant because app makers could then offer alternative purchasing options within an app, so there would be no more need to visit external websites.

While Epic should prevail on the part that really matters, Apple does have strong arguments against that injunction, especially in a scenario in which Epic's federal antitrust claims would fail. I consider it rather unlikely that--when all is said and done, which will include an appeal to the Supreme Court--the outcome would be the same as last year. A winner-takes-all scenario (one way or the other) is most likely, especially in light of California case law (Chavez) according to which a claim that failed under federal antitrust law can't succeed under the Golden State's UCL. However, the State of California will argue otherwise at the October 21 hearing (and already did so in an amicus curiae brief).

Let's now assume, just for the sake of the argument, that the injunction does enter into force, and that it actually matters (which it won't if Epic prevails on its Sherman Act claims). What it would certainly enable game makers to do is to highlight inside the app the fact that lower prices are available outside the app. This means Supercell could strongly encourage gamers to obtain a Supercell Id and to visit Supercell's web shop.

But even in that scenario, those web shops would still have to be completely external. The injunction was never meant to allow IAP alternatives in the sense of alternative payment systems within an app. Judge YGR clarified that in an order last year, thereby validating what this blog had been saying all along. While Judge YGR's order didn't explicitly mention in-app browsers like WebView, there can be no reasonable doubt about that part.

So, while I very much hope for the meteoric events outlined further above to bring about fundamental change, there is a possibility of major game makers like Tencent/Supercell chipping away at Apple's and Google's app tax revenues in the meantime--and the injunction that Epic won could accelerate that process.

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Developer class action settlement with Google over Google Play tax on Android apps: same sham as in Apple App Store case, offers material benefits only to monopolists and lawyers--meanwhile, new consumer class actions filed in Australia

I don't mean to engage in media bashing, especially not in connection with mobile app stores where press coverage has really informed many people of the serious issues affecting my fellow developers and me. But Elon Musk does have a point about class-action law firms (often) being "the real plaintiffs, not the puppets they find to masquerade as such":

The press always plays along with the class-action law firms, who are the real plaintiffs, not the puppets they find to masquerade as such. Why is this?

— Elon Musk (@elonmusk) June 4, 2022

When class actions are brought against large corporations, they usually appear more formidable than they ultimately turn out to be. In-house lawyers often tell their colleagues in charge of running the business to keep calm because "it's just another class action." In other words, it's only going to be about money, particularly for the lawyers.

However, sometimes good things with a structural effect do come out of class action lawsuits. In the app store context, the Pepper v. Apple case is a great example: it went all the way up to the Supreme Court, which (unlike Judge Yvonne Gonzalez Rogers, and only by a narrow vote) determined that iPhone users are directly harmed by--should there be any--monopoly abuse by Apple in the form of excessive App Store commissions. In a way, Epic Games then jumped on the bandwagon and brought its own cases against Apple and Google, knowing that the class actions (from which Epic opted out as it had to) were not going to be the definitive answer.

Having said that, here's the latest development in mobile app store class actions--a motion for preliminary settlement approval in several cases targeting Google over its Google Play Store terms and practices in the Northern District of California:

https://www.documentcloud.org/documents/22077056-22-06-30-app-developer-class-action-v-google-motion-for-preliminary-settlement-approval

This motion didn't come as a total surprise: a May 25 filing had already announced that an agreement on the principal terms had been reached, and the original plan for last night's motion was to be submitted two weeks sooner.

Those class actions were consolidated with the far more serious cases brought in the same district by Epic and the attorneys-general of 36 U.S. states. There's now going to be some back and forth about whether the settlement should be approved, but it's unlikely that the court will say "no, you gotta keep litigating."

There was also a lot of outrage at a similar deal (involving partly the same people) with Apple, such as a statement by the Coalition for App Fairness, from which I'll quote now because this equally applies to the structurally very similar proposal for a class action settlement with Google:

"Apple’s sham settlement offer is nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide. This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem. [...] We will not be appeased by empty gestures and will continue our fight for fair and open digital platforms."

Just like in the Apple case, it's about

• roughly $100 million to be distributed to small developers,

• meaningless promises (for instance, Google won't backtrack on its small business program for the next few years, which I'm sure it wouldn't have intended during that timeframe at any rate), and

• above all, it's about this:

  "Plaintiffs will make a request for attorneys’ fees of up to $27 million, which represents 24% of the sum of the cash Settlement Fund ($90 million) and structural relief ($22 million) that can be reasonably quantified ($112 million total). This does not account for the other forms of structural relief that were likewise included in the Apple settlement and found, at final approval, to be 'valuable to the settlement class.'" (emphasis added)

What could be more befitting of a sham settlement than seeing Google--the company that says it manages the world's information--not even getting the date of its blog post on this deal right? Look at this screenshot (I'm pretty sure they'll fix it shortly, but I took this screenshot around midnight Pacific Time with Chrome for Windows):

The post was made on June 30, but Google (until they fix(ed) it) said July 30.

The real issue, however, is that this is simply a cheap way for Google to be let off the hook and to make it look like the issues that Epic and 36 state AGs are still suing them over have gone away--which they haven't.

The blog post says this about the lower commission rate for little guys:

"To continue to provide developers with a tiered pricing model, we’ll maintain Google’s 15% commission rate for the first $1 million in annual revenue earned from the Google Play Store for U.S. developers, which we implemented in 2021."

What Google omits there is that it's only a short-term commitment. The court filing itself says this:

"The Settlement requires that Google maintain this program for U.S. developers through at least May 25, 2025." (emphasis added)

Like in the Apple case, some out-of-app communication with users will be allowed. With respect to how little value that has, may I just refer you to the Coalition for App Fairness statement mentioned further above.

Google is also leveraging this settlement to make it sound like alternative app stores had a level playing field on Android:

"In new versions of Android, Google will maintain certain changes implemented in Android 12 that make it even easier for people to use other app stores on their devices, while being careful not to compromise the safety measures Android has in place." (emphasis added)

With that safety (security) pretext, Google can still strongly discourage users from using other app stores than Google Play, or "sideloading." Let's again take a look at what the actual court filing says:

"Competing Stores. Developer Plaintiffs have alleged that one impediment to distributing apps outside of Google Play is that apps downloaded from other Android app stores do not automatically update. [...] The Android 12 operating system, released by Google on October 4, 2021, facilitates auto updates by allowing 'installer apps to perform app updates without requiring the user to confirm the action.'" (emphasis in original)

So this is about a feature that is almost a year old. I'm not saying it's totally useless. But this falls far short of addressing the host of issues identified and tackled by Epic and the 36 states.

Google also promises to do something it hasn't done yet, but which I'm pretty sure it intended to do at any rate:

"One of the most significant challenges for small developers is getting their apps discovered. The Settlement improves discoverability by requiring Google to create an 'Indie Apps Corner' on the apps tab on the U.S. homepage of Google Play and maintain it for at least two years following final approval. [...] This feature will spotlight a revolving roster of apps created by independent and small startup developers. Developers within the Settlement Class will be able to submit their apps for inclusion in the Indie Apps Corner, and Google will select qualifying apps based on objective criteria."

This isn't bad at all, but again, the issues are so fundamental that they can't be cured with cosmetics. Also, in my experience, "objective criteria" for app review (whether for the purpose of approval or for the selection of apps to be showcased) don't really exist beyond whatever may be measurable, such as memory footprint.

There's also an item that Google doesn't even mention in its blog post:

"For at least three years from final approval, Google will publish an annual 'transparency report' that (at a minimum) will convey meaningful statistics such as apps removed from Google Play, account terminations, and objective information regarding how users interact with Google Play."

The bottom line is that class action lawyers and Google have agreed on a window-dressing package. The primary beneficiary are the lawyers; the secondary one is Google, which saves litigation costs, avoids the risk of potentially having to pay really large amount to developers (as most developers will likely not care to opt out of the settlement) should Epic and the 36 states prevail, and will way overstate the significance and usefulness of those promises.

Meanwhile, Apple and Google have been slapped with new class action lawsuits in Australia.

The Australian Financial Review was first to report (though largely behind a paywall) on "twin legal actions" against Apple and Google brought on behalf of Australian consumers, arguing that Apple and Google are charging excessive commissions on in-app purchases, which consumers end up paying for. That's the same kind of argument as in the Pepper v. Apple case I mentioned further above.

News.com.au picked up the story as well.

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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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Munich trial canceled as Apple settles with Japan's national patent licensing firm IP Bridge; ITC assigned Apple's case against Ericsson to ALJ Bhattacharyya

This morning's patent licensing and litigation news comes from the world's #1 patent enforcement hotspot, the Landgericht München I (Munich I Regional Court):

The Munich trial in IP Bridge v. Apple that was scheduled to take place today and tomorrow before the Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann) has been vacated as per a joint stipulation by the parties.

The only plausible explanation is that Apple and IP Bridge have settled. Otherwise plaintiffs want to get their day in court.

Previously, Daimler (which was also going to be among the defendants in this week's megatrial) also settled--by means of taking an Avanci pool license (which became known in December).

The two remaining defendants are now Ford (see my report on case no. 7 O 9572/21) and Chinese smartphone maker OPPO (case no. 7 O 8133/21). The patent-in-suit is EP2294737 on "control channel signalling for triggering the independent transmission of a channel quality indicator"). EP'737 was originally obtained by Japanese electronics maker Panasonic, which declared it essential to 4G/LTE and later assigned it to Japan's national patent licensing firm IP Bridge. IP Bridge was set up by Japan to help the country's innovators monetize their intellectual property more effectively, comparable to entities like France Brevets or Korea's ETRI. In order for IP Bridge to have standing, companies like (in this case) Panasonic must assign patents to the non-practicing entity, which can then go out and sue implementers and infringers.

The trial is taking place in a courtroom below Munich's Stadelheim prison. That spacious room is mostly used for criminal trials, but since the outbreak of the pandemic the Munich court has sometimes held patent trials there.

Enforcement in Germany--above all, in Munich and Mannheim--gives patent holders decisive leverage. Just yesterday I reported on the unavailability of most Nokia-branded smartphones (which are made by trademark licensee HMD Global) as a result of the ongoing enforcement of a Mannheim injunction by Fortress-funded VoiceAge EVS. Apple settled with VoiceAge EVS and other Fortress-financed entities last year--and with its past experience, particularly Judge Dr. Zigann's 2018 Qualcomm v. Apple injunction relating to some older iPhone models, Apple apparently didn't want to take its chances.

One of the world's largest cellular SEP holders, Ericsson, is also suing Apple in Germany (as well as the U.S. and a few other jurisdictions, with preliminary injunction requests pending in Brazil and the Netherlands, including a recently discovered case against a Brazilian Apple distributor).

In the U.S., the closest jurisdiction to Germany in terms of leverage from injunctive relief is the United States International Trade Commission ("USITC" or just "ITC"). The ITC's Chief Administrative Law Judge assigned Ericsson's SEP case to ALJ Shaw, and the first of Ericsson's two non-SEP cases to ALJ McNamara. The second Ericsson non-SEP case (third Ericsson case in total) was assigned to ALJ Elliot. An investigation of Apple's countersuit was instituted last week as well, but only today have I been able to access a document according to which the investigation has been assigned to ALJ Monica Bhattacharyya, who became an ALJ only a few months ago but has been with the U.S. trade agency for a long time as a staff attorney with the Office of Unfair Import Investigations (OUII) and previously worked in private IP litigation practice. The OUII participates in some ITC investigations as a third party representing the public interest, which does not mean that the OUII focuses on the parties' public-interest argument concerning the appropriateness of limited exclusion orders (import bans): the OUII's job is to increase the likelihood of correct decisions on the merits. Apple's attempt to get mobile base stations banned does raise public-interest concerns, however.

Interestingly, ALJ Bhattacharyya "studied comparative legal systems as a Bundeskanzler [Federal Chancellor] Scholar at Goethe University in Frankfurt, Germany" (quoting from an ITC press release), so when she hears about patent injunctions handed down by German courts or other litigation events in that jurisdiction, she may be in a privileged position to draw parallels between the world's two most important jurisdictions for patent injunctions.

The likelihood of an Ericsson-Apple settlement will definitely increase around trials and rulings by the ITC and by German courts, as well as when certain courts in Brazil and the Netherlands adjudicate Ericsson's preliminary injunction motions.

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After more than 12 years, HTC and Fortress's IPCom settle standard-essential patent dispute over former Bosch and Hitachi patents

I'm still waiting for an official confirmation of IPCom's recent "eight-figure US$ settlement deal" that IAM mentioned on Twitter, citing to "reports out of China." While I was on the lookout for that, I just spotted the following terse statement on IPCom's website that according to the timestamp went live yesterday afternoon:

"We are pleased to announce that HTC and IPCom have settled their long-running dispute by entering into a license agreement covering all of IPCom's assets."

What an understatement. In the standard-essential patent (SEP) space, any dispute that last more than two years is already "long-running" by my definition--and I doubt anyone watching that space would dispute that a four- or five-year patent spat is "long-running." This one here lasted more than a dozen years--an eternity that has finally come to an end.

Over the years I attended several IPCom v. HTC trials in Germany, mostly in Mannheim, where Deutsche Telekom recently sued for a refund to the tune of 270 million euros. HTC and Nokia were the first two smartphone makers IPCom sued after acquiring a 3G SEP portfolio from Bosch, a company that used to make phones but exited that business even earlier than the likes of Nokia and Ericsson. The fact that HTC and Nokia had to defend against many of the same patents turned those two competitors--otherwise rivals--into brothers-in-arms. In-house and outside counsel of both companies coordinated their defenses like they were one company. Even when Nokia sued HTC over non-SEPs in 2012 (and ultimately got HTC to pay some additional royalties), their friendship survived. They were seen drinking beer on high-speed trains from Mannheim to the Cologne-Dusseldorf region just hours after fighting hard in court.

While I occasionally disagreed with him and disapproved of a couple of remarks he made at the Nokia-HTC settlement party (after inviting me as a surprise keynote speaker), I do wish to give credit to the late Martin Chakraborty, a Hogan Lovells partner and HTC's outside counsel against IPCom and Nokia at the time.

Nokia once claimed that IPCom was seeking a royalty payment of 12 billion euros, which IPCom disputed. The IPCom v. Nokia dispute lost relevance as Nokia's smartphone sales were dwindling, and ultimately Microsoft took over Nokia's handset business. Microsoft told investors that "[i]n November 2014, Microsoft and IPCom entered into a standstill agreement staying all of the pending litigation against Microsoft to permit the parties to pursue settlement discussions," and somehow those talks eventually came to fruition.

Unlike Nokia, HTC even faced contempt proceedings when IPCom was enforcing an injunction. What IPCom demonstrated (and many other litigants don't even seem to know) is that it's far harder to actually enforce a SEP injunction in Germany than to obtain one. In the merits proceeding, you can base your infringement theory on the specification of the standard. At the enforcement stage, you have to prove an actual infringement. HTC had guts.

For IPCom's relatively new management, it's meaningful progress to put some cases behind that it inherited from its predecessors led by Munich-based patent litigator Bernhard "Bernie" Frohwitter. IPCom still has Fortress Investment as its key backer, but it's been noticeable for a couple of years that IPCom's new leadership has taken steps to position the organization--which by the way has its own researchers on staff who keep applying for new patents--as a constructive and solution-oriented licensing firm. They even emphasize corporate social responsibility in such contexts as diversity. The message is like "we're still a non-practicing entity, but don't call us a troll."

IPCom's agreements with HTC and (I'll take IAM's word for it) Apple show that the new IPCom is putting some old problems behind it and focusing on its future in the patent licensing industry. I'll be watching IPCom's activities with interest. There is an interesting parallel: Sisvel, which like IPCom is headquartered in Europe (though it has been around for much longer, and is also a pool administrator) and a "key account customer" of the Mannheim court, also appears to have a new leadership style versus where they were a decade ago. Sisvel announced some interesting settlements last year, most importantly with Xiaomi. Actions speak louder than words. Both IPCom and Sisvel have now demonstrated over the course of several years that their current leaders have nothing to do with exceedingly aggressive--or "trollish" if you will--tactics employed by their predecessors. They still enforce patents if they have to--but with a more constructive attitude.

I believe EU policy-makers have an interest in both Sisvel and IPCom doing well. They are the most prominent European patent licensing firms, and IP licensing is a very high priority when the EU defines its economic policies and strategies. At the same time, the EU also has to take the interests of major SEP implementers into account, of course.

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Deutsche Telekomedy in Mannheim: court informally dismisses antitrust claims against IPCom but urges global settlement including infringement action against Sprint in Texas

This Tuesday, the Mannheim Regional Court gave short shrift to Deutsche Telekom v. IPCom, an "antitrust case" in which the mobile network operator is seeking roughly $300 million in restitution (recovery of past royalty payments plus interest). The court's public hearing list described the cause of action in case no. 2 O 130/20 as "anticompetitive discrimination involving standard-essential patents in connection with patent license agreement dated June 7, 2013." Some other claim(s) had already been voluntarily dismissed by the plaintiff ahead of trial. The remainder was stayed at the end of the trial, but on a basis that allows either party anytime to ask the court to resume the proceedings, which would result in a swift ruling that could have only one outcome: a formal dismissal of the case as clearly meritless. As part of its hold-out strategy, Deutsche Telekom even stipulated to that kind of revocable stay, while IPCom would have preferred a decision. Typically, defendants are happy to just put a case against them on hold, but I'll get to the parties' motives later (here's a shortcut to that part of the post)--and they have a lot do with an IPCom v. Sprint case pending before Judge Rodney Gilstrap in the Eastern District of Texas and slated to go to trial next spring.

If I wanted to go into detail on everything that is deficient about Deutsche Telekom's Mannheim complaint, I'd have to write an even longer post, every single paragraph of which would have to start with "Let that sink in" or "Lo and behold," which would get a bit repetitive. Let's focus on the forest rather than get lost in a multitude of trees--and please take any references to Deutsche Telekom's outlandish theories and allegations as if "Let that sink in" had been put in front of a parenthetical expression in a mathematical formula.

What Deutsche Telekom has been trying to do would--if it worked, which it never will--make it practically impossible for parties to enter into reliably stable settlement agreements that put standard-essential patent (SEP) cases to rest. The licensee could always come back later and relitigate settled issues. And even if--as here--a clause specifically and incontrovertibly ruled that behavior out, the licensee would argue--as Clifford Chance "of counsel" Dr. Joachim Schuetze ("Schütze" in German) did on Deutsche Telekom's behalf--that parties cannot dispose of antitrust law no matter what they put into an agreement.

Deutsche Telekom argues that IPCom acted in a discriminatory manner by--well, the court noted it's not even clear what particular action other than not rescinding the 2013 license agreement Deutsche Telekom is complaining of. Deutsche Telekom says it has been discriminated against because no other carrier besides them has so far taken a license from IPCom. Is that IPCom's fault? Deutsche Telekom alleges that IPCom didn't make enough of an effort to force its rivals to take a license. IPCom's lead counsel, Quinn Emanuel's Jérôme Kommer, stated for the record toward the end of the trial that this is not even factually correct, as there are infringement actions (such as against Vodafone in the UK), but the discussion between the court and the parties didn't even get to facts like that because the case necessarily fails as a matter of law.

What would it really mean--talking about the forest, not just the trees--if Deutsche Telekom, in an alternative universe, could prevail? If they could get out of a license agreement because others engaged in holdout for years on end? Let me give you a couple of examples from the automotive industry, where patent infringement is rampant. Almost five years ago, BMW became the first publicly-announced licensee of the Avanci platform (a pool that contains dozens of cellular SEP portfolios--by coincidence it even includes some Deutsche Telekom patents--and represents a one-stop solution for car makers). Earlier this month, Avanci announced its latest license deals and stated that roughly 25 million connected vehicles had been licensed. An all-time licensing volume of 25 million cars is not a lot given that approximately 70 million passenger cars are sold every year, and infringement is even more widespread when considering that most Volkswagen cars have a license only up to 3G while actually coming with 4G connectivity. So, BMW could have turned around after Avanci's recent announcement like Deutsche Telekom did against IPCom. If Deutsche Telekom got its way, BMW could bring claims against Avanci or every one of its licensors (except maybe Qualcomm, whose de facto licensing rate is higher as its chips are in a lot of cars) that the actual licensing rate is very low and BMW has costs that others have so far avoided by means of holdout. "Discrimination. Avanci's licensors aren't suing Toyota, Volkswagen, you name them."

What if Daimler tried to get out of this year's settlement with Nokia, arguing that the patent holder hasn't been licensing other car manufacturers at a pace that the Mercedes maker would deem non-discriminatory?

Those analogies even fall far short of an accurate characterization of the absurdity of Deutsche Telekom's non-case. I don't know the language of BMW's agreement with Avanci, but it wasn't a settlement of pending litigation. By contrast, antitrust issues had actually been raised by Deutsche Telekom in its multi-year litigation with IPCom, but when Deutsche Telekom--not under duress but purely for the convenience of its then-outgoing CEO--wanted to settle, IPCom negotiated a Section 8.2 of the 2013 agreement that Presiding Judge Dr. Holger Kircher of the Mannheim court's Second Civil Chamber read out during the Tuesday trial. That clause explicitly stated that IPCom was under no obligation whatsoever to conclude license agreements (much less on a particular set of terms) with Deutsche Telekom's competitors. Deutsche Telekom originally demanded that the very opposite be put into the agreement (whether an obligation to sue third parties would have been enforceable is another question), but the final contract stated otherwise. It's not hard to imagine that IPCom saw what Deutsche Telekom was preparing for, and wasn't going to fall into that trap.

It is that clause 8.2 that Judge Kircher noted in his initial discussion of the case which is unusual and single-handedly dispositive, obviating the need to reach any of the other questions, of which there are many and the court appeared very unconvinced of Deutsche Telekom's ability to meet any of a plurality of other criteria for the refund (plus interest) the carrier is seeking. Let me give just some examples: it's unclear what particular conduct on IPCom's part constituted discriminatory behavior; Deutsche Telekom contradicts itself by alleging an abuse of market power without ever recognizing the essentiality of a single one of IPCom's patents to any industry standard; and even if Deutsche Telekom inexplicably prevailed somehow, the refund might be offset by a damages award for past infringement. The latter is an interesting aplication of the Latin rule of dolo agit qui petit quod statim redditurus est ("he who has to immediately return what he is seeking brings a bad-faith claim"): normally that concept benefits implementers of standards because they can avert a SEP injunction if they're entitled to a license (and if their behavior meets certain requirements to benefit from that affirmative defense). The injunction would then be enforced in bad faith as a license agreement would resolve the issue. Here, it cuts in the other direction: if Deutsche Telekom managed to extricate from the license agreement, it would retroactively become a multi-year infringer and owe damages (which, by the way, could even be supra-FRAND).

Similarly, the 2013 license agreement comes with a saving clause, so even if a clause was deemed anticompetitive, it would merely have to be replaced with the closest enforceable alternative.

Judge Kircher acknowledged that Deutsche Telekom's complaint raises legal questions of first impression, and the parties could not cite to any applicable precedent. But if you ask me, the case is simply an idiocy of unprecedented proportions in connection with SEP licenses and patent settlements. In any event, Judge Kircher noted that the court would never reach those novel questions because of that clause 8.2.

I admire Deutsche Telekom's lead counsel for arguing with a straight face that the decision the court described as inevitable (a dismissal of the complaint) "would allow non-practicing entities to impose a license agreement on one party and then save the costs of enforcing their patents against others." It doesn't make sense because either the patents are weak, in which case the first licensee in an industry doesn't have to take a license anyway, or they can be enforced, in which case it's always going to make economic sense to sue others--not all of them at the same time, but sooner or later a patent holder will collect back-royalties or sue for past-infringement damages even if the patents had expired.

The court debunked Deutsche Telekom's argument that settlement agreements cannot override, or disable, antitrust law. Obviously parties cannot enter into valid and enforceable agreements in a way that would harm the competitive process. But they can enter into agreements--especially settlement agreements--under which they dispose of individual claims, such as the right to seek a refund under specified circumstances. Neither the court nor IPCom's counsel said so, but my view is this: if Deutsche Telekom wanted to do so, it could complain about IPCom's post-contractual conduct to the Bundeskartellamt (Federal Cartel Office of Germany). The contract wouldn't preclude them from that--no valid and enforceable contract ever could. As Judge Kircher explained on behalf of the court (based on his prior internal discussion with Judge Boettcher, who is the rapporteur on this case, and Judge Elter), Deutsche Telekom was full well aware of a scnario in which its rivals might not take licenses from IPCom on similar terms. That's why they originally wanted a clause 8.2 in the agreement that would have stated the very opposite. They ultimately contended themselves with an agreement that leaves no room for the kind of refund claim they're pursing now. They made their bed and have to lie in it.

Judge Kircher said toward the end (when he urged IPCom to stipulate to a revocable stay so the court might never have to hand down a judgment in this case) that everyone in the room (including yours truly) heard from the court in no uncertain terms that IPCom would win. Also, in his introductory discussion of the case, Judge Kircher noted that besides the legal questions he addressed (and none of which the court appeared inclined to answer in Deutsche Telekom's favor), there were several others, all of which he described as predictable--but he wouldn't even get to them.

So why is Deutsche Telekom pursuing that kind of losing case in the first place?

There are three versions of the story. The simple, obvious, and not reasonably deniable truth is that Deutsche Telekom is being a bully (ab)using some of its vast resources against a small German licensing firm, and the chronology of events shows that this complaint was brought a few months after IPCom sued Sprint, which had meanwhile become a Deutsche Telekom subsidiary, in the Eastern District of Texas. There had been some negotiations between the parties over whether Sprint was or was not licensed under that 2013 agreement (which presumably has some "affiliate entities" type of clause), and if so, on what terms Sprint might get licensed. Deutsche Telekom's lead counsel said that it was during those licensing talks last year that Deutsche Telekom became aware of the fact that no other carrier had taken a license from IPCom (which, again, is why IPCom is suing some of them, and no one can seriously expect them to sue the whole world at the same time). Therefore, the semi-retired Clifford Chance lawyer said Deutsche Telekom's C-level executives identified a need to obtain legal clarification of whether this constituted discrimination.

Even Judge Kircher cautiously put the German action into the context of the Texas case and suggested--in other words--that Deutsche Telekom thought an offense was a necessary part of a good defense. He noted that this German case was about having an action with the reverse caption: Deutsche Telekom v. IPCom in Mannheim as opposed to IPCom v. Sprint (a Deutsche Telekom subsidiary) in Texas. The whole reason the judge urged the parties to stipulate to a revocable stay (with the promise to reach a swift decision if a party changed mind) was that he thought it might make sense for them to also settle the Texas case, which according to his representation involves a $70  million damages claim. Assuming that IPCom is seeking willfullness enhancemenets (aka "treble damages"), that would be more like $210 million, and Deutsche Telekom's behavior does appear unusually reckless. So Judge Kircher would like them to take a break from litigation and talk. They spent about an hour outside the courtroom (quite a long interruption--the court originally gave them 20 minutes). But when they returned to the courtroom, IPCom doubted Deutsche Telekom's sincere intentions to settle. Still, based on Judge Kircher promising that, if need be, the court can resume the proceedings and reach a decision in the very short term, IPCom accepted that the case would be stayed--for now.

Deutsche Telekom's counsel actually considered it offensive that Judge Kircher made it sound like they had brought a meritless case in Germany only in retaliation for a patent infringement action in the United States. Actually, if it worked the other way round, a U.S. federal judge would just tell it like it is. I've heard U.S. judges dismiss complaints or appeals as "frivolous", or saying that a party is pursuing some other goals and using the court as a pawn in a global chess game. In Germany, judges have to be more careful: if they speculate on a party's motives while dismissing the merits of a case, it can give rise to motions of censure, seeking (though typically unsuccessfully) the recusal of a judge because of bias. Such complaints can go up all the way to the country's Federal Constitutional Court. Judge Kircher carefully nuanced his remarks, and acknowledged that Deutsche Telekom is in its right to bring novel claims. While I can't read his mind, I know he's got Deutsche Telekom all figured out. But again, a German judge has to tread carefully in a delicate situation like that, and knowing that the plaintiff will leave no stone unturned because money doesn't matter, and seeing that the Clifford Chance firm appears to be more concerned with pleasing a long-standing blue-chip client than with maintaining its reputation in antitrust law.

Whatever I say or write here won't reach the Federal Constitutional Court, so I'll be blunt: Deutsche Telekom's case is nonsensical crap. It's an insult to human intelligence. At all three layers of the law (policy, law, facts), it's a downright insanity. I had a logistically convenient chance to attend the trial, and I went there because I expected I'd have a lot to laugh--and Judge Kircher is always very interesting and often entertaining to listen to. It was a sitcom, not a serious litigation. I had the gut feeling that if Deutsche Telekom had insisted on a ruling, Judge Kircher and his colleagues might even have ruled straight from the bench.

In my opinion, it is not fair that IPCom has to wait until it can recover from Deutsche Telekom its attorneys' fees under the German "loser pays" rule. I also think IPCom is reasonably entitled to a German ruling ahead of the U.S. trial. Judge Kircher is right that normally a defendant has no interest in a case like that going forward. But when a case is this crazy, when it's easily discernible as an attempt to drive up litigation costs in Germany, and considering that it's uncomfortable to stare down the barrel of a gun even if you know it's not loaded, then it is in the interest of justice to throw out a case (though Deutsche Telekom would obviously exhaust all appeals).

What's even more important is to discourage other SEP licensees from turning around many years later just because they can afford it and because a firm like Clifford Chance may gladly do anything to please them. Just the fact that this case even went to trial (because defendants to German complaints--unlike in U.S. litigation--can't bring motions to dismiss, motions for judgment on the pleading, or motions for summary judgments) is now going to lead many patent holders to ensure that license agreements come with a clause like that Section 8.2 of the IPCom-Deutsche Telekom license agreement. What appeared to be an abundance of caution on IPCom's side at the time is now probably going to become a standard clause of SEP settlement contracts, as a result of Deutsche Telekom's action and this trial report, but I owe it to my readership, which includes many (actually, practically all) of the technology industry's top licensing executives to explain what can happen when someone like Deutsche Telekom acts in bad faith further down the road.

The sad reality is that some settlement negotiations will now take longer, or in a worst-case scenario, might even fail when parties find it hard to agree on a "Deutsche Telekom-IPCom" clause. The bottom line could be even more--and more protracted--litigation, courtesy of a deep-pocketed and utterly unreasonable German carrier. The case is a comedy, even a travesty, but the potential impact of Deutsche Telekom's outrageous behavior on global SEP licensing negotiations is more of a tragedy.

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InterDigital on a roll, settles with Xiaomi: patent infringement complaints and anti-antisuit injunctions in Germany and India prove decisive--license covers 5G and HEVC

The summer is treating U.S. research and patent licensing firm InterDigital well. Less than a week after netting a strategic victory in a UK patent infringement case against Lenovo, InterDigital (often referred to by its stock ticker symbol, IDCC) today announced a license deal that settles all pending litigation against Chinese smartphone giant Xiaomi. The covered patents include InterDigital's 3G/4G/5G cellular portfolio as well as its HEVC (aka H.265) video codec patents.

The amounts involved are not known, but the volume must be rather significant. Just last month, Bloomberg reported that Xiaomi had overtaken Apple to become the world's no. 2 smartphone maker by unit sales. Xiaomi is truly an amazing entrepreneurial success story, and also has ambitious plans in the electric vehicle market. Maybe Xiaomi will once again manage to "come out of nothing" and rise to the top.

While InterDigital had greater leverage in litigation at this point, Xiaomi has so far been doing a good job demonstrating to patent holders that it is neither a soft target nor an unwilling licensee or "hold-out." Xiaomi seems to have learned the patent licensing and litigation game fast. Given its market share, I guess I'll have to pay closer attention to its future patent cases.

A little over a month ago, Xiaomi already settled with Sisvel.

Other than IDCC making money and being in a stronger position vis-à-vis other implementers, these are the key takeaways:

• Xiaomi tried to gain leverage from a Chinese FRAND determination action, but ultimately InterDigital's anti-antisuit injunctions from the Delhi High Court and Munich I Regional Court thwarted that litigation strategy. The Munich A2SI/A4SI in that dispute is now a landmark ruling, as Presiding Judge Dr. Matthias Zigann and his panel laid out a list of criteria that may justify even pre-emptive anti-antisuit injunctions. As a result, immediate and unconditional surrender is the only safe harbor for anti-antisuit defendants in Munich.

• InterDigital had appealed the Munich A2SI/A4SI to the Munich Higher Regional Court, but as a result of today's settlement, there won't be any review. At this stage it is questionable whether any A2SI/A4SI will be reviewed by the Munich appeals court ahead of Judge Dr. Zigann's impending promotion.

• According to Juve Patent, InterDigital's lead counsel in the Munich A2SI/A4SI action, and possibly also in the recently-filed infringement cases, was Arnold & Ruess's Dr. Arno Risse ("Riße" in German). The key SEP holders among Arnold & Ruess's clients are Nokia, InterDigital, and Sisvel. Despite the Nokia-Daimler and InterDigital-Xiaomi settlements, they'll continue to be busy. Deservedly so.

• I guess Lenovo is also going to settle with InterDigital rather soon, with a FRAND trial scheduled for early next year that can get very costly and likely won't save Lenovo money over taking a deal now.

• Every settlement frees up litigation resources, so I wonder whom InterDigital will pick as the next target from its list of unlicensed implementers. Maybe an automotive company, for a change? Most of the volume is in smartphones, though.

• Munich makes patentees money. In this case, an Indian court also played a key role. But many implementers are more vulnerable in Germany than in India.

• Chinese policy makers and judges may already be brainstorming about how they can preserve their country's jurisdiction over cellular SEPs, considering that most smartphones are manufactured in China and the country is also a huge target market. Xiaomi had its reasons for seeking a FRAND determination in China, but in the end other jurisdictions gave InterDigital decisive leverage.

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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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