Telit drops antitrust lawsuit against Avanci and Nokia over component-level licensing of standard-essential patents started by Thales in Munich, also withdraws U.S. discovery requests

A few months ago, IoT module maker Telit consummated the acquisition of the cellular IoT products unit of French industrial conglomerate Thales. As a result of the transaction, Telit inherited the antitrust dispute Thales had started in 2021, accusing the Avanci patent pool firm and one of its licensors--Nokia--of violating EU antitrust law by declining to grant exhaustive component-level licenses covering cellular standard-essential patents (SEPs).

From the beginning I had--and expressed--my doubts about the prospects of that complaint, just like I never believed in Continental's U.S. litigation against Avanci, Nokia, and others, a case that indeed went nowhere. At some point a Thales v. Avanci & Nokia trial was scheduled for September 2022, but it didn't take place. There were delays, and with what is known now it's fairly possible that Thales knew Telit--which was in the process of acquiring that business unit--wasn't really interested in pursuing that litigation.

I noticed the withdrawal of the three related U.S. discovery motions earlier this month. Thales was seeking discovery (for use in the Munich proceedings) of Avanci (Northern District of Texas), Ericsson (Eastern District of Texas), and InterDigital (District of Delaware). For instance, on May 4 Thales gave notice that the Delaware action was "dismissed without prejudice, with each party to bear own costs, attorney’s fees, and expenses." The other dismissals were also without prejudice, and there is generally no indication of an agreement having been worked out between the parties along the lines of a license agreement. If anything, there was probably just a procedural agreement to terminate the litigation.

Yesterday afternoon the Munich I Regional Court was able to confirm to me that Thales (Telit) withdrew its antitrust complaint on May 4, 2023. The case was pending before the court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner).

While Continental was primarily seeking injunctive relief (and is still suing Nokia in Delaware state court, though nothing important has happened there so far), Thales brought a complaint for damages, which was unusual. Whatever the strategy may have been, the net effect is that those automotive supplier lawsuits over component-level SEP licensing are just a waste of resources.

The automotive sector has stepped up its lobbying efforts, which is reflected by the European Commission's proposed SEP Regulation. That bill does not require SEPs to be licensed at a specific level of the supply chain, but the EUIPO may in the end encourage component-level licensing through its recommendations further to the regulation. It is too early to tell whether that will happen, as the legislative proposal is likely to undergo lots of changes in the further process. Given that car-level licensing demonstrably works (by now most car makers have an Avanci license), the case for governmental intervention, even if merely in the form of an official recommendation, is increasingly hard to make. The failure of those lawsuits brought by Conti and Thales also doesn't suggest that there's an actual problem to be solved.

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Federal Circuit throws out Thales appeal: no irreparable harm shown, no position on ITC import bans against willing licensees taken

Thanks to the Comparative Patent Remedies blog I've just become aware of today's Federal Circuit opinion in a case in which Thales was appealing the denial of a preliminary injunction against Philips. In the court below (Delaware), Thales sought an antisuit injunction of the anti-enforcement type so that Philips would not have been able to enforce a potential U.S. import ban had the US International Trade Commission (USITC, or just ITC) granted one.

At the appellate hearing, the question of whether it is appropriate to seek an enforce an import ban against a willing licensee of standard-essential patents was on the agenda. Today's decision doesn't touch on it: the short Federal Circuit decision holds that Thales had "failed to show it is likely to suffer irreparable harm from Philips' ITC action." Here, however, the appeals court believes that "The district court did not clearly err in determining that Thales’ evidence of harm was conclusory and that it failed to meet its burden of establishing likely irreparable harm. Thales did not present any evidence that it lost customers, had customers delay purchases, or struggled to acquire new business because of the ongoing ITC proceedings." Therefore, it all just amounted to speculative harm (such as "affidavits stating only that the threat of an ITC exclusion order caused several customers to “voice concerns” and express doubt regarding Thales’ ability to deliver products."), which falls far short of what it takes to "justify the rare and extraordinary relief of a preliminary injunction."

It may or may not be a coincidence that the Federal Circuit came down shortly after a final ITC decision that in my opinion practically mooted the appeal: no violation was found (which was also the view of the Administrative Law Judge presiding over the investigation). Philips can appeal that decision, but it would take quite some time before an import ban would loom large.

The question of whether a patentee can pursue an import ban despite the alleged infringer being, or claiming to be, a willing licensee--which is also at issue in Ericsson v. Apple--has been left for another day.

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Final ITC decision moots Federal Circuit appeal in Philips v. Thales over appropriateness of pursuit of U.S. import ban against willing SEP licensee

This is a follow-up to what I wrote four weeks ago, Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing. There is a certain overlap--not in terms of parties or patents, but legal questions--with an Ericsson v. Apple standard-essential patent (SEP) case before the ITC, where Apple just failed to obtain permission to amend its FRAND defenses and a U.S. trade judge found Apple's conduct puzzling.

On Wednesday, the Commission--in this case meaning the five-member decision-making body at the top of the United States International Trade Commission (USITC, or just ITC)--gave notice of a final determination that terminates the Sec. 337 Unfair Imports Investigation of a Philips complaint against French industrial giant Thales and other defendants (Telit, Quectel, Xirgo, Laird Connectivity). Bottom line: no import ban (unless Philips successfully appeals the decision to the United States Court of Appeals for the Federal Circuit).

In the post I linked to further above I discussed a Federal Circuit hearing of a preliminary injunction appeal by Thales. Let me also refer you to a late-March post on the multi-jurisdictional Philips v. Thales dispute (Delaware, ITC, France...). Suffice it to say here that what the Federal Circuit heard was an appeal that Thales brought after the Delaware district court, in a case in which the federal court was going to set the rate for a global portfolio license, denied a preliminary injunction--an antisuit or, at minimum, anti-enforcement injunction that would have precluded Philips from enforcing a U.S. import ban against Thales had Philips obtained one from the ITC. But Philips hasn't. What's next?

At last month's hearing, the Federal Circuit panel raised the question of whether there was actually a need to render an opinion. An Administrative Law Judge--ALJ David P. Shaw, who was in charge of the ITC investigation of an Ericsson v. Apple complaint over standard-essential patents (SEPs) until that one was reassigned to ALJ Bryan Moore--had made a final initial determination (a recommended decision that is subject to approval by the Commission) finding no violation of any of the four SEPs-in-suit. However, he did make a recommendation on remedy and said that an import ban should issue in the event he'd be reversed on the merits.

So the Federal Circuit panel thought one might just await the final ITC decision (which was pushed back by a few weeks, but still on the horizon), as Thales might no longer need a preliminary injunction. Counsel for Thales told the Federal Circuit that even a final finding of no violation wouldn't reliably solve the problem as it would merely take a successful appeal for an import ban to come down. That appeal, however, would also have to be filed with the Federal Circuit. Looking at what precisely the Commission has decided and (especially) elected not to decide, it would make a whole lot of sense for the Federal Circuit to declare the appeal moot.

The Commission

• "determined to review and, on review, take no position on [some] issues," and

• "determined not to review, and thus [to] adopt[], the remaining findings in the [ALJ's initial determination]."

The non-reviewed issues (the second group) are more than sufficient to throw out the case: not only did ALJ Shaw hold none of the four patents-in-suit to be infringed but he also didn't see the technical prong of the domestic industry requirement satisfied with respect to any of them. Moreover, he invalidated several of the asserted claims.

The first group--issues on which the Commission took no position despite having taken a look at them--includes three kind of SEP-specific defenses raised by Thales:

1. Implied waiver: ALJ Shaw found that "it has been shown by clear and convincing evidence that the four asserted patents are unenforceable under the doctrine of implied waiver" because "Philips had a duty of disclosure to the standard setting organization [ETSI], and it breached that duty."

   Commissioner Jason E. Kearns , a Democrat who served as Chair of the USITC from mid-2020 until three weeks ago, stated that he would affirm the implied-waiver finding with respect to one of the four patents-in-suit but takes no position on the other three.

   Implied waiver is specific to this case and has no bearing on Ericsson v. Apple.

2. Express/implied license: ALJ Shaw disagreed with the following line of defense by Thales:

   "Philips has granted Thales both an express and an implied license to its self-declared SEPs, including the asserted patents, based on the FRAND licensing commitments that Philips made to ETSI and Thales’s unconditional agreement to license the patents on the FRAND terms determined by the Delaware District Court."

   ALJ Shaw held that Thales would have "to prove that Philips conducted in such a way that led Thales to infer consent to use Philips’ patents," and not only was there no evidence for that, but "Philips and Thales entered into lengthy negotiations demonstrating no such inference."

   Commissioner Kearns agrees with ALJ Shaw.

3. Equitable estoppel: ALJ Shaw also disagreed with this Thales defense (as does Commissioner Kearns):

   "The record evidence demonstrates that Philips is equitably estopped by its FRAND commitments from seeking, and has waived its right to seek, an exclusion order against Thales, which is a willing licensee that negotiated in good faith. The equitable estoppel defense has been recognized by the ITC and requires: '(1) misleading conduct by the patentee, which can be either an affirmative act or inaction, that leads the alleged infringer to reasonably infer that patent rights will not be asserted against it; (2) reliance by the alleged infringer on the patentee’s conduct; and (3) material prejudice to the alleged infringer.” Where the defense of equitable estoppel is established, the claim is barred in its entirety.'"

   ALJ Shaw noted that there was nothing misleading about Philips's FRAND pledge, and "Philips was entitled to bring an infringement action, including one seeking an exclusion order, after those years of negotiations failed to lead to a license." The latter is also a key argument made by Philips in the Federal Circuit.

There would be very strong reasons for the Federal Circuit not to adjudicate Thales's PI appeal. For each of the patent claims-in-suit, Philips faces at least two, in most cases even three hurdles to overcome on appeal. I also believe that even in a hypothetical best-case scenario for Philips, a remand to the ITC would be more likely than a direct decision by the ITC resulting in an import ban. And in any event, Thales's SEP-specific defenses (especially the claim that equitable estoppel bars Philips from pursuing an import ban against a willing licensee) are still in the case and could be raised again with the Federal Circuit.

All in all, Thales's PI appeal raises a purely academic question, and other cases could clearly be better vehicles for deciding the appropriateness of an import ban against someone who claims to be a willing licensee--such as Ericsson v. Apple, where the ITC staff believes Apple has met the pleading standard for an "unclean hands" defense (whether meritorious or not), but agrees with Ericsson that Apple failed to plead equitable estoppel, waiver, and patent misuse.

In the Philips-Thales dispute, the fact that Philips won't get leverage from an ITC import ban (at least not in the near term) means that the terms of the license will likely be determined in Delaware, and a French court--the Tribunal judiciare de Paris--may award Thales damages against Philips and ETSI (though only nominal damages against the letter) based on U.S. litigation expenses.

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Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing

For the most part, this has been a bad week for implementers of standard-essential patents (SEPs) because three U.S. government agencies (DOJ, USPTO, NIST) merely did away with a Trump-era policy but neither agreed on an implementer-friendlier position nor did they reinstate the Obama Administration's SEP policy. But the picture wouldn't be complete without a development over at the United States Appeals Court for the Federal Circuit that could--in a worst-case but far-from-impossible scenario--complicate matters for SEP holders in the only U.S. forum where they have a realistic shot at getting (the equivalent of) an injunction against implementers: the United States International Trade Commission (USITC, or just ITC).

It's already so difficult to obtain SEP injunctions in U.S. federal court that even small U.S. non-practicing entities like Longhorn IP are flocking to the Munich I Regional Court for help. That trend could be reinforced should the ITC no longer be able to impose import bans on willing licensees--unless, of course, the ITC ultimately set the bar for an implementer's willingness to take a FRAND license similarly high as German courts under Sisvel v. Haier I & II.

The ITC can't award damages. Its only remedy is a U.S. import ban on infringing products (which it can reinforce through a cease-and-desist order, to be precise). As I explained at yesterday's Concurrences webinar keynoted by FTC commissioner Christine Wilson and moderated by Paul Lugard of BakerBotts, the ITC does consider public-interest arguments prior to entering an exclusion order, and respondents to ITC complaints can try to raise eBay-like arguments (or even import entire antitrust cases into the public-interest part of an ITC investigation), but the ITC is not bound by the eBay precedent. It operates under its own statutory framework (Sec. 337 Unfair Import Investigations) and is not an Article III court.

Even the Presidential veto in a Samsung-Apple case in 2013, which was based on FRAND considerations, didn't discourage SEP holders from bringing ITC complaints. In my observations, pending ITC investigations have repeatedly made a key contribution to getting SEP disputes settled.

A Presidential veto, however, is only one of two bites at the apple for implementers seeking to have an ITC import ban overturned. The other avenue is an appeal to the Federal Circuit, which could (by granting an emergency motion) stay the enforcement of an ITC exclusion order pending the appellate proceedings. In light of what a Federal Circuit panel--Chief Judge Kimberly Moore and Circuit Judges Timothy Dyk and Raymond Chen--said at a Tuesday hearing in Thales v. Philips, ITC complainants asserting SEPs would be well advised to ensure that their adversaries are deemed unwilling licensees. If ITC SEP complainants are looking for inspiration, I strongly recommend that they study German SEP cases, especially recent Munich case law and statements made by judges and counsel at Munich trials--a treasure trove of ways to argue that an implementer is an unwilling licensee.

It's an ordeal to listen to the recording of the Federal Circuit's Thales v. Philips hearing due to an extremely unpleasant sound effect. I went through it nonetheless. On the aforementioned Concurrences panel, Axinn's Michael Keeley, who is on Thales's legal team in the Philips dispute and therefore wasn't at liberty to discuss that case (which Commissioner Wilson had referenced), recommended it.

In the first part, the circuit judges appeared outright hostile to Axinn's Paul Zeineddin, who argued that a district judge in Delaware was wrong to deny a U.S.-internal antisuit injunction that would bar Philips from enforcing an ITC import ban. A circuit judge even called one of Mr. Zeineddin's arguments "ridiculous." The appeals court placed the emphasis on whether Thales could establish irreparable harm--a requirement for any injunction. The procedural state of affairs is that an Administrative Law Judge (ALJ) did not find a violation (i.e., an infringement of a valid Philips patent), but he did say that in the event his ruling should be overturned by the ITC's final decision-making body, an import ban should issue. The ITC postponed the deadline for deciding whether to review that decision until next week. Should it not review the final initial determination, or agree with it at the end of a review, it would really become final, though it could be appealed to the Federal Circuit. So the question is whether Thales is really suffering irreparable harm just because of the effects that the shadow of a potential import ban may have on existing or prospective customer relationships.

It's definitely possible that the Federal Circuit will duck the tricky and sensitive question of whether U.S. district courts should enjoin litigants under certain circumstances from pursuing an ITC import ban over SEPs. The circuit judges didn't appear convinced that Thales had provided enough evidence of the actual business implications of the threat of an import ban. Frankly, I think there is no irreparable harm: Thales has five licensing offers from Philips on the table, and Thales's customers have no reason to assume that Philips would actually want to bar Thales from selling its products. Philips just wants to get paid--though it has repeatedly been criticized to make supra-FRAND demands and even been held out of compliance with its FRAND licensing obligations by the Mannheim Regional Court (in two different disputes a few years ago).

Another potential weakness in Thales's case is that it allegedly limited its "willing licensee" argument before the Federal Circuit to the fact that it wants the Delaware district court to set a FRAND rate and to take a license on whatever the court-determined dterms may be.

Thales v. Philips is, however, one of those cases in which the Federal Circuit appeared hostile to an appellant (in fact, a judge even considered one of Mr. Zeineddin's arguments ridiculous) only to put similar or even greater pressure on the appellee. Foley & Lardner's Eley Thompson got a rough ride, too. The Federal Circuit may or may not conclude that Thales has established irreparable harm, but that would be highly case-specific and a different litigant could take that hurdle, such as by means of customer testimony. But the very fundamental question raised by the Federal Circuit is whether it was appropriate for Philips to seek an exclusion order, given that the Delaware proceedings will result in a license agreement on FRAND terms.

It became clear during the hearing that the Federal Circuit struggles with the notion of the ITC--if it were to ultimately find a violation and to adopt the ALJ's recommendation on remedy--potentially enjoining Thales despite the ALJ having conceded that Thales is a willing licensee. Philips argues that it's not enough for Thales to be a willing licensee: Philips has made five offers, and if at least one of them is FRAND, Thales should take it. Still, the Federal Circuit panel appeared to be concerned that an import ban would be inappropriate against a willing licensee--though the circuit judges at the same time look at the willingness question holistically and may not be sold that someone who (and this was just a hypothetical scenario they outlined) shows no willingness to take a license for five years and then, after being sued, runs to a district court and asks for a rate-setting decision.

Whatever the outcome of that particular appeal may be (the dispute could even be settled before the appellate opinion comes down), the ITC and its ALJs will likely read the writing on the wall, so ITC complainants asserting SEPs should develop a robust "unwilling licensee" argument.

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Confusion over U.S. government agencies' positions on antitrust aspects of standard-essential patents: 2019, 2021 DOJ-USPTO-NIST statements tossed; Commissioner Wilson distances herself from Chair Khan's submission to ITC

Almost mid-way into President Joe Biden's term, his Administration is unable to take clear and official positions on the antitrust aspects of standard-essential patent (SEP) licensing and enforcement. Two things happened yesterday that involve a total of four agencies--the Antitrust Division of the Department of Justice (DOJ-ATR), the United States Patent and Trademark Office (USPTO), the National Institute of Standards and Technology (NIST), and the Federal Trade Commission (FTC):

• At a Concurrences webinar, IP & Antitrust: Hot Issues 2nd Edition (in which I participated as a panelist, which I rarely do), FTC Commissioner Christine Wilson (a Republican) delivered a keynote, the #1 priority of which was to distance herself from a recent submission to the United States International Trade Commission (ITC) by FTC Chair Lina Khan and Commissioner Rebecca Kelly Slaughter (both Democrats) in the investigation of a patent infringement complaint by Philips against Thales and others.

  Mrs. Wilson, who publicly dissented in no uncertain terms from her agency's action against Qualcomm in years past, sharply disagrees with the content of the aforementioned recent filing with the ITC and expressed outrage at the absence of an explicit clarification that her colleagues were only speaking for themselves and not for the FTC. According to Mrs. Wilson, it is an FTC tradition that commissioners clearly distinguish their personal views from those of the Commission, and the public-interest statement in question had not been adopted by the FTC as an agency position.

  To me it was always clear that two commissioners--even if one of them is the FTC Chair--can't speak for the Commission as a whole: it's not a majority. The ITC itself has a similar decision-making setup as the FTC, so presumably no one there got confused. However, the official headline of the filing was "written submission on the public interest of Federal Trade Commission Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter" and may have confused some people--even more so when a letter on FTC stationery was sent to the ITC requesting leave to file a corrected statement (signatures were missing from the original document) out of time (which was granted).

  There was a timing problem: public-interest statements in that investigation were due on May 16, 2022, and the fifth member of the current FTC, Commissioner Alvaro Bedoya (a Democrat), was sworn in just that day. The Biden White House has not really excelled at getting its appointments confirmed (it also took an unusually long time until Kathi Vidal was finally appointed USPTO Director). There was a 2-2 Democratic-Republican stalemate at the FTC for a long time, only because the Biden White House wasn't effective. It's fairly possible that an earlier confirmation of Mr. Bedoya would have enabled the FTC as an agency to adopt a formal position with a 3-2 vote. But under the circumstances, Chair Khan and Commissioner Slaughter decided to just go ahead in their own names, and they arguably could have made it clearer that the FTC itself was unable to agree on a position on U.S. import bans over SEPs, even if apparently just for timing reasons. Commissioner Wilson may be right to criticize her colleagues, but the FTC can actually cure any formal defect by adopting a formal agency position now that there is a Democratic majority in office.

  It is, by the way, far from certain that the question of U.S. import bans over SEPs will ever play a role in that Philips case. If the ITC affirms the final initial determination by an Administrative Law Judge, there is no infringement of a valid patent. The ITC has extended until June 16 (one week from today) the deadline for deciding whether to review the ALJ's decision. Should it decide not to review, then Philips needs to appeal the rejection of its complaint to the Federal Circuit--which on Tuesday heard a related case originating from a district court (MP3 recording; and I provided an overview of the various Philips-Thales cases back in March).

• Also yesterday, the DOJ issued a press release together with the USPTO and NIST, announcing the withdrawal of the Trump Administration's 2019 SEP Policy Statement. The official document (PDF) withdrawing the three agencies' prior statement not only declares the 2019 statement (which was very much driven by then-Antitrust Assistant Attorney General Makan Delrahim) withdrawn but also abandons any "potential revisions to that statement" (i.e., the controversial 2021 draft statement) as "the Agencies have concluded that withdrawal best serves the interests of innovation and competition."

  Footnote 1 is key:

  "In withdrawing the 2019 Policy Statement, the agencies do not reinstate the January 8, 2013, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued by the DOJ and the USPTO.

  The 2019 (Trump Administration) statement replaced the 2013 (Obama Admistration) statement. The 2021 Biden Administration draft statement, if adopted in that or any similar form, would have been much closer to the 2013 than the 2019 statement. But now there's a vacuum: there simply is no formal statement. All we have is the aforementioned press release, which makes it a possibility that the three agencies couldn't reach an agreement: while USPTO Director Kathi Vidal and NIST Director Laurie Locascio stress the importance of U.S. companies' contributions to standard-setting (which sounds like those two agencies wouldn't want to weaken SEP enforcement too much, if at all), the DOJ's antitrust chief Jonathan Kanter warns SEP holders against "opportunistic conduct [...] that threatens to stifle competition" particularly through SEP abuse that would "disproportionately affect small and medium sized businesses or highly concentrated markets." In the end, however, Assistant Attorney General Kanter just promises a "case-by-case approach" as opposed to broad and sweeping rules.

  I hope Mr. Kanter and his staff have not been misled by deceptive lobbying alleging that there are serious issues harming small and medium-sized companies.

  In the end, the consensus is now that it's up to the courts to further develop their SEP case law as the judges see fit. Litigants can still quote the 2019 statement (if they're enforcing their SEPs, particularly if they pursue injunctions) or the 2013 statement (if they're defending against infringement complaints), but both have been withdrawn, so they are just history, not current policy.

  So who has won this battle and who has lost? SEP holders like Qualcomm lost the 2019 statement, which favored those seeking SEP injunctions. But companies like Apple, which are trying to devalue SEPs, lost the opportunity to have the U.S. federal government adopt a position in their favor now that Democrats are in power: neither will the Biden Administration adopt a statement along the lines of the 2021 draft policy nor has it reinstated the 2013 statement. Implementers are better off today than they were under the Trump Administration, but net licensors are in a way better position now than they were in the Obama years.

  Looking at it from a global perspective, the picture looks even better for net licensors. Apple and its allies were very much hoping to make some headway on SEPs after Donald Trump was voted out of office. They wanted the U.S. to send out a strong signal, to serve as a beacon (from their perspective) for other jurisdictions, and they were looking for something that would help them persuade judges in the U.S. and abroad to take implementer-friendlier positions. What implementers achieved falls far short of what they needed. The glass is, very clearly, more than half-full for net licensors. Even the Biden Administration wasn't going to advance the cause of devaluing SEPs--so why should the EU?

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FTC chair Lina Khan tells ITC 'exclusionary relief is [...] against the public interest where a court has been asked to resolve FRAND terms and can make the SEP holder whole': Philips v. Thales et al.

It's hard to think of a standard-essential patent (SEP) holder I trust less to be fair than Philips. Before Philips settled with Xiaomi, there were clear signs of Philips just seeking leverage from injunctions and trying to prevent Xiaomi's licensing negotiators from knowing the terms of comparable license agreements. There also appear to be interesting issues in the multijurisdictional dispute between Philips and French industrial giant Thales, and this week the Chair of the Federal Trade Commission, Lina Khan, filed a public-interest statement in the investigation of Philips's complaint against Thales and several other defendants. She was joined by Commissioner Rebecca Kelly Slaughter (like her, a Democrat--and that party now has a 3-2 majority of the votes as the Senate confirmed Álvaro Bedoya).

SEPs have so far not really been a priority topic for Ms. Khan (nor for Jonathan Kanter's Antitrust Division of the DOJ). Also, it's important to note that the statement in ITC investigation no. 337-TA-1240 is not based in antitrust law per se: the two commissioners make it clear that they are not claiming to have identified a violation of the federal antitrust laws (Sherman Act, FTC Act). There's also a disclaimer regarding the specific issues in the case. But the bottom line is that they urge the ITC, a U.S. trade agency with the quasijudicial power to order import bans against infringing products, to seriously consider whether monetary relief would be sufficient to make SEP holders (in this case, Philips) whole. Administrative Law Judge David P. Shaw recommended an import ban, though he also recommended that it "be delayed by 12 months" in order to "mitigate its effects on third parties" by giving the respondents sufficient time not only to develop workaround products but also to have them (re-)certified. A 12-month workaround period is unusually ong by ITC standards, but if any truly essential patent was at issue, it couldn't be worked around even in 12 months.

All of this is, of course, subject to whether the decision made by the Commission, the ITC's top-decision making body, results in a finding of a violation at all.

Assuming that the ITC's final determination comes down to an infringement finding and an import ban is ordered (with or without a grace period), there'll be a Presidential review. And at that stage the FTC's input could make a decisive impact. U.S. presidents typically delegate the authority to veto ITC import bans to the U.S. Trade Representative.

Just yesterday, IPWatchdog published an opinion piece by former two-term ITC chair Deanna Tanner Okun warning against weakening the ITC's Sec. 337 remedy (import bans) with respect to SEPs. That article expresses concern over the new SEP policy statement that is in the making. But I'm sure Mrs. Tanner Okun isn't happy about the two FTC commissioners' public-interest statement in the Philips case either.

Finally, let me show you the document (for the first time I'm using DocumentCloud to publish a document here, as I continue to have issues with Scribd):

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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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#FAIL: Tesla, Toyota, Honda file WRONG amicus brief as auto industry, Apploturfers urge Fifth Circuit to resuscitate Continental's 'antitrust' case against Avanci, Nokia, others

Before I forget, let me remind you of next week's Frankfurt Auto IP conference where various of the players mentioned below will be present, some of them even as keynoters and panelists.

Oh my. Tesla, Toyota, and Honda wanted--but failed miserably--to submit an amicus curiae ("friend of the court") brief in support of Continental's petition for rehearing en banc (full-court review) of a panel decision not to revive Conti's self-described 'antitrust' action against the Avanci patent pool and some of its licensors, most notably Nokia. The deadline was a couple of hours ago (midnight Central Time).

The problem is that instead of filing a Tesla-Toyota-Honda brief, they actually attached to their motion a brief that was separately submitted by French industrial conglomerate Thales (this post continues below the document):

22-04-20 Tesla Honda Toyota... by Florian Mueller

The first seven pages of the PDF are Tesla, Toyota, and Honda's motion for leave to file an amicus brief. And then, starting on page 8, there's a "Brief of amicus curiae Thales in support of Plaintiff-Appellant's petition for rehearing en banc" (which Thales filed in its own name, too). Conti itself also misfiled because it failed to comply with the Fifth Circuit's rules (for example, it forgot to provide a statement of facts).

Not only is it uncertain whether the Fifth Circuit will mercifully allow Tesla and its allies to correct their oversight, but there is a serious issue here that cannot be undone:

This misfiling exposes that what was meant to look like broadbased support for Conti is nothing but a coordinated ploy at worst, or an echo chamber at best. The amicus briefs submitted in support of Conti's petition--which would be duplicative enough even without Tesla and its Japanese friends inadvertently having refiled Thales's brief--can be traced back to orchestration by the automotive industry on the one hand and organizations funded by Apple (to advocate the devaluation of standard-essential patents (SEPs)) on the other hand.

Auto + Apploturfers. That's quite an unholy alliance. By "Apploturfers" (Apple astroturfers) I mean essentially the same bunch of Apple-bankrolled organizations that launched the Save Our Standards campaign (they couldn't come up with a more alarmist name, could they?). I recently exposed SOS's highly deceptive advocacy: they sponsored an "interview" with one of their member companies that untruthfully claimed to be a small app developer having issues with SEP owners, when in reality that company never implemented a standard itself, thus never had to license a SEP!

This has become absurd. They keep making themselves ridiculous. And it's not just because of misfilings and astroturfings. The real issue relates to the substance of this (or lack thereof).

Conti's petition and the amicus briefs filed in its support urge the Fifth Circuit to rearrange deck chairs on the Titanic. All that brouhaha about the alleged need for automotive suppliers like Conti to secure exhaustive component-level patent licenses aside, the Fifth Circuit--one of the nation's busiest appeals courts--would just be wasting its time on a rehearing because Conti's complaint is ripe for dismissal on multiple grounds.

The case has had problems from the start. Judge Lucy Koh in the Northern District of California (now, thankfully, on the Ninth Circuit) denied an antisuit injunction and disposed of that case by dumping it on the Northern District of Texas. There, a very experienced judge--Chief United States District Judge Barbara Lynn--dismissed it for two reasons, any single one of which is sufficient in its own right: lack of antitrust standing, and no Sherman Act claims (neither Section 1 nor 2). Conti apparently didn't fully believe in its appeal as it started a parallel and partly duplicative action in Delaware (Chancery Court). After the Fifth Circuit's panel decision, the complaint is even "deader" than before. As I explained, the panel majority held that Conti didn't even have basic Article III standing to begin with. The single judge in the minority joined the majority for what was a unanimous dismissal, but clarified in a footnote that he'd have simply upheld Judge Lynn's decision.

This means that for Conti even to be allowed to conduct discovery, the judges who have previously looked at the matter would have to be overruled in three ways:

1. Article III standing

2. antitrust standing

3. actionable claims under Sherman Act 1 and/or 2

Even if all of that happened (which would frankly amount to a long shot), does anyone seriously believe that Conti could ultimately win this? That a court would ultimately find that Avanci is responsible for most SEP holders declining to grant a certain type of license to component makers, when the key players among them already had that policy long before Avanci was created and--which makes Conti's case completely meritless--Avanci's contracts don't in any way restrict its licensors' ability to extend such licenses? In fact, some Avanci licensors (Sharp, Conversant) have demonstrably granted exhaustive component-level SEP licenses.

Conti is desperately trying to explain with a conspiracy theory what can be adequately explained with long-standing industry practice.

The en banc petition and the amicus briefs place the emphasis on how certain FRAND licensing pledges should be interpreted for all sorts of reasons. But that's the wrong focus.

I've been watching and criticizing this dumpster fire of an "antitrust" case for almost three years. Conti had some contract law claims based on those FRAND declarations. Judge Lynn declined to entertain them after the federal antitrust claims had died. The 5th Cir. panel's casual remark about Microsoft being a member of the relevant standard-setting organizations (SSOs) in its landmark FRAND case against Motorola and about Broadcom being a Qualcomm competitor in another historically important case doesn't change the fact that Conti failed to establish antitrust, not contract law, standing.

If Conti wants to make a contract-law argument, it can do so in that case it brought in Delaware (and which hasn't been a particularly productive effort either, at least so far).

But where's the antitrust injury? How come none of the five judges who have dealt with the case so far--all five of them being really distinguished federal judges--found Avanci's licensing terms quite as outrageous as Conti and its auto-and-Apple amici claim?

There won't be any such harm until some Avanci licensors prevent Conti from supplying its component to its car-maker customers. But they all leave Conti alone. If they ever were to sue Conti, Conti could raise all sorts of defenses. If Conti's customers are licensed (as some of them like Daimler and Volkswagen are), or can elect to take a license, the whole argument comes down to a conclusory allegation that car makers end up paying more--for the same patents used in the same end product--than component makers. Not only is that (as I said) conclusory, but it wouldn't mean Conti gets treated worse than other suppliers, so if anyone had a problem here, it would be the car makers, and patent law provides ways to defend oneself against excessive royalty demands. If amici like Tesla want to pay less, they have every opportunity in their own cases to dispute the reasonableness of certain royalty rates.

Conti has always just talked about indemnification claims in the abstract. It still can't point to a case where a car maker actually had Conti pick up SEP license fees.

The question of whether Conti lacks Article III standing or "only" antitrust (Sherman Act) standing is really academic. Even whether Conti has any kind of standing is not going to make a difference. The petition and all those amicus briefs fail to convince me that Conti could ever win. On one basis or another, that complaint belongs on the federal judiciary's dustbin.

Automotive suppliers are not even consistent when it comes to their stated desire to secure component-level licenses. Case in point, Thales--which is pursuing its own ill-conceived case against Avanci (in Munich)--points in its amicus brief to its litigation with Philips, which is an Avanci licensor. That dispute is not specific to connected vehicles. And that dispute actually shows that Philips wants Thales to take a license, just that Thales isn't prepared to pay what Philips demands.

The Fifth Circuit panel was pragmatic, and that's what I strive to be, too. Avanci has signed up dozens of SEP holders and has licensed dozens of automotive brands. I was skeptical a few years ago, but in the end you can't argue with success. It works. Has the world descended into chaos as a result of this? The automotive industry has its problems. It has to deal with the transition from combustion engines to electromobility, and with a chip supply shortage. SEP licensing is a non-issue for car makers. Some of them just don't like to pay.

At least one of those amicus briefs stresses the enormous economic importance of 5G. And the Save Our Standards brief (ACT | The App(le) Association, CCIA, and HTIA) states how many patents the members of one of those organizations own. When it comes to 5G patents, Avanci has most of the major contributors--with Huawei and Samsung being the only heavyweights missing from the list (for now)--on board. Those who seek to bring down SEP royalty rates and facilitate hold-out by unwilling licensees may very well be innovative in other fields and own a lot of patents. But their contribution to 5G is either next to nil (automotive industry) or very limited (Apple mostly just acquired such patents from the likes of Intel and Nortel) compared to what those Avanci licensors like Ericsson, Qualcomm, Nokia, and that rising star named OPPO--have brought and continue to bring to the standard-setting table.

If the Fifth Circuit figures out that those amicus briefs are just a campaign that doesn't make Conti's case any more meritorious, then it's possible that the court won't even have to hold a vote.

While this is also unrelated to the merits, I did want to mention something in closing. The Alliance for Automotive Innovation, which claims that its members make 98% of all cars sold in the United States, and the German VDA (Association of the Automotive Industry) submitted a brief that lists one of this blog's recent articles in its Table of Authorities. Below you can find a screenshot of that passage followed by the actual document.

22-04-20 VDA AllianceAutoIn... by Florian Mueller

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European Commission endorses car-level licensing and enforcement of standard-essential patents in answer to Member of European Parliament: unhelpful to Thales, Conti etc.

When Members of the European Parliament (MEPs) ask the European Commission (EC) written questions, they're entitled to an answer, but rarely are those replies meaningful. They tend to be abstract and evasive. If not for one rather interesting aspect that I'll highlight in a moment, the same could be said about EU trade chief and EC EVP Valdis Dombrovskis's answer to questions regarding competitive distortions caused by unwilling SEP licensees among non-European car makers. I commented on the most interesting one of MEP Alfred Sant's three questions about automotive standard-essential patent licensing last month.

The former prime minister of Malta had raised an objective concern--with companies like Volkswagen, Daimler, and BMW being Avanci 4G licensees while Japanese car makers (to name just one major industrial country) are notably absent from the list of licensee. Furthermore, two European SEP holders are key players in cellular standards. Different studies arrive at divergent results on market share, which is why Ericsson's IP chief took to LinkedIn this week. Given the EU's economic interest on both the licensor and--from a level-playing-field point of view--licensee side, a more substantive and action-oriented response would have been warranted. But the EC's modus operandi with respect to parliamentary questions has always been like that, which doesn't mean that such questions don't raise awareness for issues (even though it may appear like those questions are more or less ignored).

That said, the EC's answer to MEP Sant's questions does contain a pretty clear statement on a key issue in automotive SEP licensing:

"Through the Commission’s competition enforcement and the subsequent Huawei vs ZTE judgment by the Court of Justice of the European Union, the EU has established a system that mandates a number of procedural steps aimed at avoiding abuses and, provided that those steps are complied with, ensures that any holder of EU SEPs can get injunctions before national courts in the EU against any implementer of the SEPs, including car manufacturers, that are unwilling to take a licence on fair, reasonable and non-discriminatory terms." (emphases added)

So, the solution that the EC proposes is for SEP holders to sue infringing car makers in the courts of EU member states.

The EC's draft horizontal guidelines (PDF) recite the language in Huawei v. ZTE according to which SEPs must be licensed "to [all] third parties" (or "to any third party"). That, however, is not a rejection of the "access to all" argument according to which it's sufficient to license car makers. Also, those horizontal guidelines only have a bearing on future decisions by standard-setting organizations as opposed to existing standards.

Much to the contrary, the EC's answer to MEP Sant shows that SEP holders are free to enforce patents against infringing car makers, which under Huawei v. ZTE means they can use the leverage they get from patent injunctions to require car makers to license those patents.

The EC wanted to deflect the MEP's call for a more proactive approach to trade policy with a view to unwilling licensees in the automotive industry by recommending private enforcement. Intuitively, the level of the supply chain at which the EC suggests such private enforcement is the end-product level: the car. Not the telematics control unit (TCU), network access device (NAD), or baseband chipset.

The EC's proposal for how to tackle the problem of unwilling licensees in the automotive sector is similarly results-focused as the rationale behind the Continental v. Avanci decision by the United States Court of Appeals for the Fifth Circuit, which affirmed the lower court's result--the dismissal of Conti's case--and even identified an additional reason. Conti has until one week from today for filing its petition for a rehearing. That petition is a given, as Conti requested (and obtained) an extension for it. The EC's answer to MEP Alfred Sant doesn't directly relate to the question of Article III standing in the United States, but the EC appears to be on the same page as the Fifth Circuit on the question of whether access to all is a pragmatic solution.

Another automotive supplier, Thales, is suing Avanci and Nokia in Munich, where a trial has been scheduled for September 2022. The Munich I Regional Court's position on licensing in the supply chain has been clear and consistent. That's one of the reasons for which I don't expect Thales to achieve anything. The EC's response to MEP Sant just shows once again that even the EU's executive branch of government doesn't take issue with the licensing practices (Avanci) and enforcement strategies (Nokia) Thales is challenging. Based on the EC's interpretation of Huawei v. ZTE, Thales has no case.

There are--and always will be--license deals at the component level. But most of the time, car makers will have to take a license at the end-product level lest they be enjoined. Based on its answers to MEP Sant, the Commission clearly has no problem with SEP holders seeking and enforcing injunctions against unlicensed car makers in the courts of any EU member state. Otherwise the EC would have suggested enforcement against upstream suppliers.

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Hold-up or hold-out? Philips, Thales accuse each other of abusive tactics in standard-essential patent dispute before Federal Circuit, ITC, courts in Delaware and Paris

It almost appears to be a ritual in standard-essential patent (SEP) disputes that the patent holder faults the implementer for hold-out while the accusation flying in the other direction is hold-up. They can't both be right at the same time. On a case-by-case basis, I try to deduce from publicly available information which of the two is more likely in its right to blame the other side, also factoring in what I've previously learned about certain parties' behavior.

When Thales and Philips are the parties, I frankly have reservations concerning either one. Thales is pursuing an ill-conceived antitrust case in Munich over automotive SEP licensing. You can't blame a patent pool for offering a certain license but not another as long as it doesn't contractually prevent its licensors from entering into whatever bilateral license they wish to grant. As for Philips, I've clearly seen a pattern of hold-up from that organization in more than one context, and its positions on patent enforcement always seem oblivious to the fact that even Philips is still making products (though it's lost market share in some product categories and exited other segments, such as mobile phones).

The two companies are now entangled in an interesting cross-jurisdictional web of partly interdependent SEP cases:

• Philips is seeking an exclusion order (import ban) from the ITC, with ALJ David Shaw's final initial determination due tomorrow, April 1. "Final" isn't "final-final": the truly final ITC determination is made by the Commission, the trade agency's top decision-making body, and even that one is appealable to the Federal Circuit.

  Thales--along with its Gemalto and Cinterion subsidiaries--is not the only respondent to that ITC complaint, which also targeted (back in December 2020) Thales's competitors Telit, Quectel, CalAmp, Xirgo, and Laird.

  The accused Thales products appear to be identity/security components used in various products, even including airplanes, and implement cellular standards, especially 3G and 4G.

• There's a case in the United States District Court of Delaware where apparently both Thales and Philips agreed that the court should set a global FRAND rate for a license agreement between them. Thales says Philips should just let the Delaware court do its job instead of seeking leverage from the ITC in orer to unilaterally impose its preferred terms on Thales.

• The Delaware court denied a Thales motion for a U.S.-internal antisuit injunction (an instrument of which some United States Senators are, or pretend to be, blissfully ignorant) that would bar Philips from enforcing a U.S. import ban. But Thales appealed that decision. The preliminary-injunction appeal has been fully briefed and will be heard in the coming months.

  It's just laughable that ACT | The App(le) Association filed an amicus curiae brief in support of the appeal--as if small app developers cared about a U.S. import ban on telecommunications modules incorporated into airplanes and similar products. And three other Thales amici--Honda, Continental, and u-blox--first failed to file mandatory paper copies of their brief and then even their paper vesion was out of compliance with the appeals court's rules. But those stories don't mean that the appeal itself doesn't raise interesting questions. I haven't formed an opinion on the merits yet as I just downloaded the documents from the Federal Circuit docket this morning.

• Either party would be interested in arbitration, but they disagree on the parameters, with Thales insisting on its rights under the ECJ's Huawei v. ZTE case law to challenge the essentiality and validity of Philips's declared-essential patents.

• Meanwhile, Thales has become the third party--following in the footsteps of TCL and Xiaomi--to name the European Telecommunications Standards Institute (ETSI) as a co-defendant in a FRAND antitrust case primarily targeting Philips. Philips filed the original complaint with the Tribunal juidiciare de Paris and an ex parte motion for the seizure of documents from a French Philips patent licensing executive (Sophie Pasquier), along with (obviously unofficial) English translations, with the ITC in late December, arguing that this was an attack on the U.S. case (as the seized documents also include communication between Philips and its U.S. outside counsel in the Thales dispute) with the help of a foreign court--and which Philip characterizes as typical of a party engaging in hold-out.

  For now, Thales is seeking €13.5 million from Philips--an antitrust damages claim based on U.S. litigation expenses. But the amount will go up should Philips actually obtain and enforce an ITC import ban. Thales criticizes ETSI for not having sanctioned Philips for its alleged FRAND breaches, and is seeking nominal damages (€1) from the standard-setting organization.

  I haven't formed an opinion on the merits of the French case either, for the same reason that I have yet to fully understand the parties' arguments in the Federal Circuit.

For now, let me just show you Philips's 272-page filing with the ITC that includes documents from the French case and English translations thereof:

21-12-23 Philips Motion to ... by Florian Mueller

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Thales case against Avanci and Nokia to go to trial in Munich on September 21: outcome will likely mirror Continental v. Avanci (5th Cir.)

In October I found a discovery request by French industrial conglomerate Thales against patent licensing firm InterDigital, which pointed me to a Thales v. Avanci and Nokia antitrust complaint filed with the 37th Civil Chamber of the Munich I Regional Court. I later also spotted a discovery request by Thales against Ericsson in the Eastern District of Texas.

The case is all about claiming that SEP holders, including the Avanci pool (which does not actually hold patents of its own, but facilitates a pool license), violate EU antitrust law by declining to extend exhaustive component-level licenses to automotive suppliers. The Munich court had actually taken an unequivocal position on that question in the Nokia v. Daimler cases.

Thales filed the complaint with the court's antitrust-specialized 37th Civil Chamber, but it was reassigned to the patent-specialized 21st Civil Chamber. When the reassignment happened, Judge Tobias Pichlmaier was the 21st Civil Chamber's Presiding Judge. By now he's at the helm of the 37th Civil Chamber, so it's like he and that case were going in opposite directions and crossed paths somewhere in the middle. Judge Pichlmaier's successor as the 21st Civil Chamber's Presiding Judge is Judge Dr. Georg Werner.

Theoretically, Judge Pichlmaier could even sit on the 21st Civil Chamber by designation (in that case, as a side judge, which would diminish his authority) when this case is heard, but he may not find it all that interesting. We'll see.

I've since tried to find out about when the case would go to trial. Last week the Munich court still couldn't confirm anything. When the court can't confirm the pendency of a case or a trial date so many months into the proceedings, the answer is usually an issue with service of process, which in turn may have to do with delays of deposits to made by non-EU plaintiffs (with a view to the potential future recovery of legal fees). With Thales being based in the EU, the latter cannot be the reason, so it's a mystery why it's taking so long. But that case as a whole is peculiar to be honest.

So I asked around. A Nokia spokesperson confirmed they have been served. The case is slated for trial on September 21, 2022 at 1 PM.

The reason I was checking on the status of that Thales case again is that last week's Fifth Circuit opinion in Continental v. Avanci addressed the fundamental question of whether there's any issue, much less an antitrust issue, with some SEP holders deciding to license end-product makers, i.e., car makers. The Fifth Circuit held that Conti had no standing, thus didn't even have to reach the question of antitrust standing, let alone the actual antitrust claims. The United States District Court for the Northern District of Texas had already decided the case against Conti for lack of antitrust standing and for the deficiencies of its Sherman Act theories.

Thales needs to seriously think about whether its Munich case is worth pursuing at all. It's a strategically lost position that doesn't get stronger by different entities raising the same issues against (at least in part) the same defendants in different jurisdictions--actually, in this case even in a jurisdiction (Munich) that has spoken out on the subject.

Some automotive companies are defiant. I've also seen a statement by Conti according to which they vow to fight on--but do they seriously believe they're going to make an impact anytime soon? I sure don't.

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French industrial conglomerate Thales suing Avanci and Nokia in Munich over alleged antitrust violations by refusing to grant component-level patent licenses

Just like my previous post (on a newly-discovered IP Bridge v. Ford Motor Company case pending in Munich), this post relates to automotive standard-essential patent (SEP) licensing issues.

The Nokia v. Daimler dispute lasted almost two years, and only toward the very end did French industrial giant Thales intervene. Thales makes network access devices (NADs), which other companies then incorporate into their telematics control units (TCUs). Thales is a tier 2 supplier by automotive supply-chain terminology, and its customers are tier 1 (i.e., direct) suppliers.

A couple of weeks ago, OffshoreAlert listed a U.S. discovery request that Thales made from InterDigital in order to use the information so obtained in an antitrust litigation in Munich against the Avanci patent pool and Nokia. InterDigital is an Avanci licensor (as are Nokia and roughly three dozen other companies).

I've looked at the German complaint and expect it to go nowhere. I won't elaborate on any details today, but I did want to publish a couple of documents and share a few high-level observations. First, the memorandum of law in support of the U.S. discovery request (this post continues below the document):

21-09-30 Memorandum of Law ... by Florian Mueller

A copy of the Munich antitrust complaint was attached to the U.S. discovery request (this post continues below the document):

21-07-01 Thales v. Nokia &a... by Florian Mueller

Thales filed that lawsuit with the Munich I Regional Court's 37th Civil Chamber, which hears antitrust cases. However, the case has since been reassigned to the same court's 21st Civil Chamber (Presiding Judge: Tobias Pichlmaier), which specializes in patents. The court's patent judges are already intimately familiar with automotive supply-chain licensing by virtue of having heard and decided a number of other automotive cases, including but not limited to Nokia v. Daimler. Not only would it have been grossly inefficient to have a different division of the court familiarize itself with the issues but there would also have been a clear and present danger of inconsistent decisions between the court's different divisions. Also, one of the members of the 21st Civil Chamber--Judge Dr. Anne-Kristin Fricke--is a former antitrust judge.

Thales is not seeking a license but asks for a finding that it is entitled to antitrust damages, the exact amount of which would be quantified at a later stage. Given that Thales is not praying for injunctive relief, the case is a lot less urgent than virtually all patent infringement cases filed with the same court.

Finally, here's the English translation of the complaint that Thales provided to the U.S. court:

21-07-01 (en Translation) T... by Florian Mueller

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The French Connection: Thales is third industrial giant from France to intervene in Nokia v. Daimler standard-essential patent dispute

The Dusseldorf Regional Court's preliminary reference to the European Court of Justice asks the top EU court to opine on certain questions of antitrust law with respect to the availability of standard-essential patent (SEP) licenses to component makers. Daimler argues that Nokia actually owes its suppliers an exhaustive license that would, by extension, cover the Mercedes maker.

In late 2018, Daimler filed with the European Commission's Directorate-General for Competition (DG COMP) a complaint over Nokia's refusal to license its suppliers. About two years ago, Nokia started a patent infringement litigation campaign against Daimler that has so far failed to give the former handset maker decisive leverage.

Daimler notified its tier 1 (direct) suppliers of those cases and the possibility of indemnification claims. Certain suppliers such as Peiker, a German subsidiary of a French company named Valeo, intervened (in support of defendant Daimler) early on. Last year it became known that even French automotive company Renault is technically a supplier to Daimler, by virtue of making a car for Daimler under a cooperation agreement. Renault may not have intervened in all Nokia v. Daimler cases, but in at least a couple of Munich lawsuits.

By now, Valeo and Renault are no longer the only two French companies to have skin in the Nokia v. Daimler game: I've recently found out that Thales, a French industrial giant with 80,000 employees, finally elected to intervene in the Dusseldorf case that gave rise to the ECJ referral. Almost two years after the filing of the complaint, Thales apparently didn't want to miss this opportunity to try to influence the proceedings in Europe's highest court.

Thales is not a direct supplier to Daimler, but a tier 2 supplier (one degree removed) through its customer TomTom. Similarly, Huawei is a tier 2 supplier through such telematics control unit (TCU) makers as Continental and Harman (a Samsung subsidiary).

With a belated filing on February 20, 2021, Thales--represented by Simmons & Simmons antitrust attorney Dr. Jens Steger--attempted to persuade the Dusseldorf court to refer a set of alternative or additional questions to Luxembourg. As far as I can see, the Dusseldorf court shows no signs of being inclined to do so. It will stick to its original set of questions.

In addition to unilateral-conduct issues under Art. 102 TFEU, Thales sought to raise a couple of cartel questions (Art. 101 TFEU):

• In one of its proposed questions, Thales points out that the FRAND licensing pledge companies like Nokia made to ETSI was key to the European Commission's approval of "the ETSI agreements"--and on that basis suggests that Nokia violates Art. 101 by refusing to license component makers.

• In another question Thales takes aim at an Avanci contract clause according to which that patent pool reimburses its members' SEP enforcement costs. Thales calls into question that a pool covering more than 60% of the patents essential to a given standard. Apart from the fact that this percentage is merely based on Avanci's own estimates (which are inconsistent with various independent studies), collective ownership percentages of SEPs aren't relevant from a competition law point of view as even a single truly essential patent confers market power upon its holder.

While it's important never to forget that what makes SEPs so powerful is horizontal cooperation, which would raise serious cartel issues without a FRAND licensing obligation, I welcome the fact that the focus will remain on unilateral conduct (monopoly abuse) questions. After all, that's what makes this preliminary reference a seamless continuation of Huawei v. ZTE with a special focus on component-level licensing. Thales aspired to make creative contributions to the process, but the new theories it espouses aren't quite so compelling as to warrant a modification of the referral order, much less at this procedural stage.

Where Thales does, however, still have every opportunity to make a positive impact is by lobbying the French government--which will have the opportunity to submit written observations (comparable to an amicus curiae brief, except that the ECJ doesn't allow private non-parties to make submissions). Thales could also lobby the French EU commissioner, Thierry Breton, who has so far been more sympathetic to Nokia and Ericsson's patent monetization interests than the concerns of the automotive and wider IoT industry over SEP abuse. As internal market commissioner, Mr. Breton has responsibility for the European economy at large (and European consumers), but that doesn't mean he has to act forever as if he were Finland's permanent representative (ambassador) to the European Union. Europe has far more to gain from component-level SEP licensing: its strong automotive sector is reason enough all by itself, and its growth potential in IoT makes it an even smarter choice for the future.

Thales declined to sign Nokia's non-disclosure agreement, and I applaud them for that. However, the need to withhold certain confidential business information from them may slow down its lawyers' access to the record. Unfortunately, German litigation procedures are antiquated, so Thales can't just be provided with access to digital documents. Instead, the court has to provide the original paper documents, and the formal referral to the ECJ can take place only after Thales has had its opportunity to make copies or scans.

Subsequently to the formal referral, the CJEU can start the translation process. The deadline for the written observations to be filed by the European Commission and the governments of the EU member states (to the extent they do so) will be a couple months later--in the late summer, presumably.

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