EPO Board of Appeal invalidates standard-essential patent asserted by Nokia in four jurisdictions against OPPO and in at least two against Vivo

The disputes between Nokia and OPPO on the one hand and Nokia and Vivo on the other hand have been going on for some time with no resolution in sight. I noticed that an Indian appeals court ordered OPPO to make some interim payments, but that's not going to force anyone into a global license agreement. Never has, never will.

At the same time, Nokia and OPPO are challenging each other's patents, and I have a few updates about that.

1. Surprisingly, what appeared to be a minor amendment to the claims of one 5G patent that OPPO is asserting against Nokia was deemed a significant narrowing of the claim scope by the Mannheim Regional Court, resulting in a bench ruling of non-infringement that OPPO may appeal now.

   Thus far, Nokia has managed to defuse all of OPPO's countersuits in Germany, getting some stayed (because of preliminary opinions or decisions concerning the validity of the patents-in-suit) or dismissed. But there still are some cases pending, and as far as I can see, there is no OPPO v. Nokia case yet where all appeals have been exhausted.

2. Today I learned from the Mannheim Regional Court's spokesman that tomorrow's announcement of what could have been final judgments against OPPO and OnePlus has been canceled. The related proceedings involve EP2087626 on "additional modulation information signaling for high speed downlink packet access" and have been reopened in light of the revocation of that patent by the European Patent Office (EPO).

   It's a dramatic turn of events (or at least it would be dramatic if it wasn't just one of numerous lawsuits in the wider context). OPPO has snatched victory from the jaws of defeat. This is the chronology of events:

   Nokia already asserted EP'626 against Daimler. It was the first of Nokia's patents-in-suit against Daimler to be upheld by the EPO's Opposition Division. The NokiaNews website wrote in 2021 that "Nokia won the first battle in the dispute against Daimler" (though Nokia had previously won a couple of injunctions, this was the first validity decision in Nokia's favor).

   Yesterday, one of the EPO's Boards of Appeal heard OPPO's appeal--and at the end of the appellate hearing declared the patent invalid, just two days before the Mannheim court was going to issue an infringement ruling (presumably an injunction). Theoretically, decisions by a Board of Appeal can be appealed further to the Enlarged Board of Appeal, but only under narrow circumstances, and general guidance from the Enlarged Board of Appeal for future cases wouldn't resurrect EP'626.

   Nokia brought infringement actions over EP'626 against OPPO in Germany, the UK, and the Netherlands, and also sued over member of the same patent family in India and Indonesia (in Indonesia, Nokia's cases were dismissed on procedural grounds; Nokia also brought an Indonesian infringement action against Vivo over a member of that patent family). Nokia also sued Vivo over that patent in Germany.

   Therefore, the invalidation of EP'626 affects quite a number of Nokia enforcement actions. The ones in Germany, the UK, and the Netherlands have been resolved (short of another surprise turn of events). In jurisdictions like India, the EPO decision will serve as persuasive authority.

3. A couple more Nokia patents have been invalidated in China as the following SIPO documents show:

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Smartphone maker vivo exits German market after Nokia starts enforcement of standard-essential patent injunction

Six weeks ago, I reported on an official announcement made by Chinese smartphone maker Vivo concerning a patent ruling in Nokia's favor. Vivo said they had started preparations to suspend their sales and marketing activities in Germany in the event Nokia would enforce a standard-essential patent (SEP) injunction granted by the Manheim Regional Court.

Vivo's German website now indicates that they have indeed left the market (click on the image to enlarge):

The announcement reads as follows:

"At this point, vivo products are unfortunately unavailable in Germany.

"Accordingly, no product information is availableon our German website.

"Should you be using a vivo product, you can continue to rely on our customer service.

"You will also continue to receive software updates."

This is an unhelpful development. I doubt that Vivo will take a global license on Nokia's preferred terms only because of this enforcement activity: Vivo generates only a tiny portion of its worldwide sales in Germany. OPPO already left the German market last summer, also because of Nokia enforcing a Mannheim injunction and with a view to its competitiveness in price-sensitive markets in other world regions. Now that the legislative institutions of the European Union are about to begin their work on the proposed EU SEP Regulation (which has several major and numerous smaller shortcomings), some parties with a vested interest in the devaluation of SEPs will predictably seek to leverage the removal of multiple smartphone brands (OPPO, One Plus, vivo etc.) from the German market as they claim that the current SEP enforcement framework in Europe--particularly in Germany--warrants legislative intervention.

The proposed EU SEP Regulation would not help, at least not in its current form. It's an attempt to set global royalty rates through an EUIPO-led process, but a company like Vivo generates the bulk of its sales outside of Europe. China is in a better position to make FRAND determinations in those cases.

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Next smartphone maker preparing to exit Germany over Nokia patent injunction: China's Vivo makes official announcement while Nokia misses earnings estimates

Nothing is more inconducive to the reputation of the patent system--and here, specifically, Germany's standard-essential patent (SEP) enforcement regime--than a reduction of consumer choice. At a time when the European Commission is finalizing a legislative proposal on SEP/FRAND litigation that raises numerous (and partly structural) issues, I consider it rather unhelpful that another Chinese smartphone maker is preparing its exit from the German market in response to SEP injunctions. But I am committed to keeping you all informed of what's going on regardless of whether one camp or the other may try to gain political mileage out of the facts.

In August 2022, OPPO and its OnePlus affiliate left the German market in response to some German patent injunctions (primarily a Mannheim SEP injunction) that Nokia had obtained. OPPO still hasn't returned, apart from some smaller resellers importing tiny quantities of OPPO devices from neighboring countries. OPPO's exit from Germany drew significant media attention after Wirtschaftswoche ("business week") reported on that development.

History is about to repeat itself. Two weeks ago I reported on a Mannheim injunction that Nokia obtained over two patents from the same family (EP'103 and EP'562) against another high-volume smartphone maker from China, Vivo (which spells its own name in lower case: "vivo"). Juve Patent subsequently reported on that injunction as well as another one over a patent from a different family (EP'626). IAM also reported (paywalled).

When OPPO stopped selling devices in Germany, it had a visible presence in that market, but relative to its sales in other world regions, Europe's share was small. That applies to an even greater extent to Vivo, which is why I was wondering whether the next "DExit" (DE is the top-level domain for Germany) was going to happen. Sadly, the answer appears to be yes.

I've only just now become aware of a German-language statement that Vivo published on its website. Let me provide my own unofficial translation (in which I'll spell "vivo" the official way):

vivo on the ruling by the Mannheim Regional Court

Dusseldorf, April 11, 2023

vivo fully respects intellectual property and is committed to continual innovation through extensive research and development. In the last few years, vivo has entered into cross-licensing agreements with numerous leading companies. We have been negotiating a renewal of our cross-license with Nokia, but have thus far been unable to reach an agreement. We are firmly convinced that Nokia has yet to discharge its obligation to offer a license on "FRAND" (fair, reasonable, and non-discriminatory) terms.

We are disappointed to take note of the decision by the Mannheim Regional Court and have started preparations to suspend, if need be, the sales and marketing of the accused products through vivo Germany's official channels. We are preparing an appeal of the decision and will evaluate our other options. In the meantime we will continue the negotiations with Nokia in order to conclude the matter on the basis of "FRAND" terms.

Our plans for a long-term commitment to the German market remain unchanged. vivo will remain present in Germany, and our customers can rely on our support. Our business outside of Germany will not be impacted.

Nokia sent a statement to the media:

The Regional Court in Mannheim, Germany has ruled that Vivo is using Nokia’s patented technologies in its smartphones and is selling them illegally without a license. The Court also found that Nokia has acted fairly. We welcome the judgments which confirm, once again, the strength of Nokia’s patent portfolio, and call upon Vivo to accept its obligations and agree a license on fair terms.

So we are witnessing two companies accusing each other of not being willing to sign a license agreement on FRAND terms, which is precisely the situation Nokia is also facing with OPPO. The numbers are not known. Just like OPPO and Vivo typically work out license agreements without a need for litigation, Nokia will claim the same. For instance, earlier this year Nokia renewed a license agreement with Samsung.

However, the plot is thickening that the royalties Nokia is seeking from OPPO and vivo may be at a level with what is acceptable to companies whose devices sell, on average, at significantly higher prices in affluent (therefore, less price-sensitive) markets. For OPPO and vivo, it makes no sense to sacrifice their competitiveness in the lower-end segment and in certain world regions (Asia, Africa, Latin America) only to be "allowed" to develop their German business.

Put differently, I cannot imagine that both OPPO and Vivo would leave the German market just because they're unwilling licensees who don't want to pay reasonable royalties to patent holders. They've worked out deals with licensors who are known to understand the specific needs of such companies who must be cost-sensitive due to the competitive environment and limited disposable income of customers in their largest markets.

No one had done what OPPO was first to do: to exit the German market in response to the enforcement of SEP injunctions. It's been almost 22 months since Nokia's infringement litigation against OPPO started, and Germany is the only market in which Nokia has gained leverage. Now Vivo is leaving Germany as well.

Litigation is neither Nokia's problem nor will it be the solution. Let there be no doubt that Nokia's in-house and outside counsel are second to none. It's also a fact that Nokia has managed to identify some winning patents that it can enforce against multiple defendants in a row. For instance, EP'103 was used against Daimler, OPPO, and Vivo, and the Mannheim court ruled in Nokia's favor in each case.

But what for?

The three most basic questions to ask when a business considers a strategic choice are: "Is it real? Can we win it? Is it worth it?"

OPPO and Vivo are real. Nokia can win, and indeed has repeatedly won, injunctions in Germany. But is this the answer? Or shouldn't Nokia recognize that a company like Samsung is in a position to pay a far higher royalty per device than an OPPO or a Vivo?

On Thursday, CNBC reported that "Nokia shares sank 8% [...] as investors responded to its earnings report." The stock price didn't bounce back on Friday. Analysts had expected a quarterly profit of 523.4 million euros (according to a Refinitiv poll), down from the 583 million euros Nokia reported for the same period last year--but the result of 479 million euros fell short even of the analysts' expectations.

Nokia's net sales had actually grown by 10% to 5.86 billion euros, beating analyst estimates (5.72 billion). But profits took a hit "“due to regional mix and a lower contribution from Nokia Technologies partly related to a license option exercised in Q4 2022." Nokia Technologies' revenue source is licensing. If Nokia had accepted OPPO's and Vivo's counteroffers, it presumably would have beaten--not missed--the earnings estimates. And on top it would have avoided potential bad news that the world's richest smartphone maker, Apple, and its allies and astroturfers will leverage in their EU lobbying activities at this critical juncture.

I understand that Nokia doesn't want to devalue its patents, and far be it from me to suggest that. But the path to license agreements with OPPO and Vivo is not litigation, much less litigation in Germany, a market in which they'd definitely like to operate but can't afford to if it puts them at a disadvantage vis-à-vis low-cost competitors in other world regions.

Nokia's most important license agreement--the one with Apple--was last renewed in 2017 (at a time when Apple preferred to focus on the Qualcomm dispute), and the previous had expired at the end of 2016. If it was a seven-year agreement like Apple's recent license agreements with others, it would be up for renewal by the end of this year. A longer term than seven years would be almost unprecedented in this industry (though Apple once signed a ten-year agreement with HTC, but Apple was the net licensor in that case). Apple is known to argue that it should not a pay a cent more than even the makers of the cheapest phones. It has a "most favored nation" mentality. I understand Nokia's dilemma, but I can't see a winning strategy here against OPPO and Vivo. There is no way that those companies would pay Samsung-like royalties. The solution is to work out a deal with them that reflects those licensees' market realities, and to nevertheless expect someone like Apple to pay a lot more, for good reason.

In the meantime, FRAND determination proceedings brought by OPPO and Vivo are going forward in China, a market that Nokia cannot afford to just leave the way OPPO and Vivo can exit Germany. Also, OPPO and Vivo are countersuing Nokia, particularly in "injunction-happy" Germany. Case in point, the Munich I Regional Court wil hold an OPPO v. Nokia trial on Thursday (April 27) and held one a few days ago (April 20). Nokia may be able to fend off various such countersuits, but once OPPO or Vivo has an injunction and enforces it, the terms of an agreement may be less favorable to Nokia than if they worked out a negotiated solution now.

Just like patent licensing firm IPCom (which had acquired patents from Bosch, a company that used to make mobile devices until about 20 years ago) wasn't able to defeat Nokia despite years and years of litigation, Nokia may never be able to get OPPO and Vivo to accept the terms it has in mind. Some nuts are too tough to crack.

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Will another smartphone maker exit Germany? Mannheim court grants Nokia 4G patent injunction against Vivo, previously enjoined OPPO over same patent

A spokeswoman for the Mannheim Regional Court has just confirmed to me that the court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher, who is also going to serve on the Unified Patent Court) entered a patent judgment in favor of Nokia on Thursday (April 6) against Vivo (which prefers to spell its name in small caps: "vivo").

The patent-in-suit is EP2981103 on an "allocation of preamble sequences". The Mannheim court enjoined Daimler over the same 4G standard-essential patent (SEP) in 2020, and OPPO about a year ago.

Primarily because of that injunction (and its subsequent enforcement), OPPO withdrew from the German market and hasn't come back, though some resellers (such as T-Mobile) still had OPPO devices in stock for a limited time. That dispute is still pending after more than 21 months as Nokia has not been able to gain leverage in a key market for OPPO..

OPPO never had a huge market share in Germany, but for what I know, Vivo's is a lot smaller. Vivo is the high-volume Android device maker in China now (the largest local player in that market), and also sells high unit volumes in certain other markets. They're successful in Asia and even beyond, but not really big in Europe. That raises the question of what will happen now: will Vivo do what OPPO has already doneand just exit the German market, or will Vivo settle on Nokia's preferred terms in order to be free to grow its German business?

We should find out soon. Nokia is known to enforce such injunctions relentlessly. And a settlement would obviously be announced.

Just like in the dispute with OPPO, Nokia has yet to win anything in a market that matters more to Vivo than Germany does. For instance, Nokia recently lost in Indonesia. That fact makes it a possibility that Vivo, too, will rather leave Germany than be required to raise its prices on a global basis, including in very price-sensitive markets in which it would adversely affect Vivo's competitiveness.

As someone who frequently comments on competition issues, I would like the idea of a high-volume low-cost smartphone maker like Vivo acting as a key competitive constraint on other vendors. At the same time, I can see why a company that sells the largest part of its unit volume in price-sensitive markets has to keep its costs under control--including its IP licensing costs.

Vivo is countersuing Nokia in Germany, so it's conceivable that at some point Vivo could obtain one or more German patent decisions and have greater leverage over Nokia, which would likely find it much harder to comply with a German injunction.

I'll try to find out about the status of other Nokia v. Vivo and--potentially--Vivo v. Nokia cases.

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Nokia's string of Indonesian losses continues in Vivo dispute: Jakarta court declares patent infringement complaint inadmissible

In Indonesia, Nokia has now received approximately ten adverse decisions in a row. I say "approximately" because there is significant delay between a ruling and its publication.

Previously known: The Commercial Court of Central Jakarta dismissed five Nokia patent infringement lawsuits targeting smartphones made by OPPO and certain OPPO affiliates, and Indonesia's Supreme Court affirmed most if not all of those rulings.

New: As I reported last month, Nokia is suing high-volume Chinese smartphone maker Vivo in a handful of countries, one of which is Indonesia. In that post I mentioned case no. 31/Pdt.Sus-HKI/Paten/2022/PN Niaga Jkt.Pst., not knowing that only a few days prior to that post, the court had already dismissed it by declaring it inadmissible as this Google translation shows (click on the image to enlarge):

This devastating track record is an outlier for Nokia's world-class litigation department. It shows that there are major markets in which it is neither easy nor straightforward to gain leverage over implementers of cellular standards. But Indonesia is a key market for Nokia's disputes with OPPO and Vivo. OPPO left the German market, and Vivo has a smaller presence there than OPPO had when it exited. It is possible that either one of those disputes will ultimately be decided either by the Chongqing Intermediate People's Court (China), which will make global FRAND determinations, or by OPPO or Vivo winning a German injunction against Nokia's mobile base stations.

While we're on that subject, here's an update that I received yesterday from the Munich I Regional Court regarding those OPPO v. Nokia cases involving Huawei patents:

The case number for OPPO's assertion of EP3386131 on an "information transmission method and device" is 7 O 142/23. A first hearing will be held on June 15. Four weeks later--on July 13--the court will conduct a first hearing in case no. 7 O 141/23 over EP2863570 on a "method, user equipment, and base station evolved node for determining precoding matrix indicator".

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Nokia asserting patents against high-volume smartphone maker Vivo in five countries (China, India, Indonesia, Malaysia, Germany) but no resolution in sight

In the previous post, I reported on a half-dozen of Datang v. Samsung patent infringement lawsuits that are pending in China. I've also obtained information about some other wireless patent enforcement activity in China. This here is a follow-up on Nokia v. Vivo, which is overdue as it's been almost ten months since I last reported on that dispute:

• May 11, 2022: Nokia suing Vivo in two German courts over standard-essential patents--despite limited market presence--and Vivo countersuing in Dusseldorf

• March 22, 2022: Nokia's Asian patent enforcement campaign against Vivo also extending to Indonesia: CNN

China

Nokia filed a patent infringement lawsuit with the Jinan Intermediate People's Court in April 2022.

Vivo countersued Nokia in March 2022 in the Guangzhou Intellectual Property Court over one of its own patents.

Vivo furthermore (also in March 2022) asked the Chongqing First Intermedia People's Court for a FRAND determination. In Chongqing, a rate-setting case brought by OPPO against Nokia is already at an advanced stage. The findings made in that one could have a bearing on the later-filed Vivo case.

Not only Nokia is suing Vivo in China, but so is a Chinese company: ZTE (in Guangzhou and Xi'an).

According to Chinese reports, various decisions by China's patent office (SIPO) came down last week. Vivo is known to have challenged at least a dozen Nokia patents in China, and the result of the five revocation actions that have been adjudicated so far is that two Nokia patents were invalidated in their entirety, one was invalidated in part, and two were upheld. A ZTE patent challenged by Vivo (ZL201210363485.1) has also been declared partly invalid.

In the Chinese market, Vivo now sells more smartphones per year than any other Chinese company. That makes China a particularly important jurisdiction for any patent dispute with Vivo.

India

Delhi High Court records show that two Nokia v. Vivo patent infringement actions are pending there. I hope to find out the details beyond what I reported last year.

Indonesia

One of two Nokia v. Vivo cases pending before the Central Jakarta District Court was already known last year. There appears to be a second case (case no. 31/Pdt.Sus-HKI/Paten/2022/PN Niaga Jkt.Pst).

Malaysia

Nokia is asserting two standard-essential patents (MY-152424-A and MY-151522-A) in the High Court of Malaysia.

Germany

Last year I listed six German Nokia v. Vivo cases: three in Mannheim, two in Munich, and one in Dusseldorf. There was a hearing or trial of the two Munich cases on February 8. The Mannheim court held a Nokia v. Vivo trial on February 7 (case no. 2 O 36/22 over the SEP that won Nokia a Mannheim injunction against OPPO last year and case no. 2 O 65/22 over a patent from the same family). On March 14, a Mannheim trial in case no. 2 O 37/22 will be held.

While Vivo has also made some inroads into markets like Germany, there already is a precedent of a company leaving the German market after some patent injunctions: OPPO. For Vivo it would presumably make even less sense to remain on the German market.

I'll try to find out more about the next steps in Germany, particularly ruling dates.

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SHOCKING: Nokia patents, other lawsuits force OPPO, OnePlus out of German market--first smartphone maker in history to exit major market over patent enforcement

The history of phones has been linked to patents ever since Alexander Graham Bell patented the telephone in 1876. One of humanity's dreams materialized. Fast forward 146 years, and nothing short of a nightmare has come true: a very significant phone maker has actually exited--not merely threatened to exit--one of the largest markets in the world--Germany--as a result of patent assertions.

I became aware of this shortly after yesterday's post on two standard-essential patent (SEP) injunctions Nokia had just obtained against OPPO from the Munich I Regional Court. Previously, the Mannheim Regional Court had granted Nokia a non-SEP injunction in June as well as a a SEP injunction (over two patents from the same family) in July.

Nokia may win one or more additional injunctions on Tuesday. OPPO has its own countersuits pending, but those are taking longer.

While U.S. and UK courts would hear extensive testimony from expert witnesses in such cases, and German courts appoint their own experts in cases of far lesser significance (such as construction law disputes over only a few thousand euros), neither the Mannheim court nor the one in Munich appointed an economic expert to analyze whether the parties' positions were fair, reasonable, and non-discriminatory (FRAND). In all three SEP cases, the decisions were based on the judges' own determination that Nokia had discharged its FRAND licensing obligations and OPPO was an unwilling licensee.

I'm now going to report and comment on the situation in multiple parts:

1. Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

2. Hard evidence of OPPO and OnePlus having left the German market

3. Other patent assertions against OPPO in Germany

4. Why OPPO's calculus may simply make economic sense

5. Implications for Apple, Samsung, and Xiaomi

6. Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

7. Tactical implications for Nokia-OPPO licensing negotiations

8. German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

According to Canalys, OPPO's worldwide market share was 10% in the first quarter of 2022--slightly down from 11% year-on-year. And there's another 8% for Vivo, which is not an OPPO affiliate, but like OPPO belongs to BBK Electronics Corporation of Guangzhou, China, and is also being sued by Nokia in Germany. Vivo hasn't exited the German market (here's a German Vivo product page) as there is no injunction in place yet, but given that OPPO has made the determination that it was prudent to leave the German market and to reject Nokia's royalty demands, it seems likely that--faced with the enforcement of an injunction--Vivo, too, would independently reach that conclusion when running the numbers.

So, in the short term we're talking about the exit of smartphone brands accounting for more than 10% of the market (OPPO + OnePlus), and in the mid term we may be talking about more than 10% (OPPO + OnePlus + Vivo). Vivo has much less of a market presence in Germany than OPPO.

When phones accounting for 10% or more of unit sales in a large market--and an even higher percentage of the low- and mid-range segments--become unavailable, it cannot be denied that there is an impact on consumer choice and possibly even a very significant output restriction in these times of chipset shortages. That, of course, does not mean to blame patent holders or the patent system. I'm talking about the practical consequences of this. This is plainly massive.

Hard evidence of OPPO and OnePlus having left the German market

I had mentioned in several previous posts the possibility of OPPO determining that it was too costly to stay in the German market, and then I ran a Twitter search to see whether someone else had also reported on yesterday's Nokia v. OPPO injunctions #3 and #4. I found this tweet by OPPOblog's Dominik Lux and another one that pointed me to this Go2Android.de article. Yesterday, Caschys Blog also reported on this development.

I've also verified the situation myself. OPPO's German website contains the following note (click on the image to enlarge):

That note translates as follows:

"Currently, no product information is available on our website.

"Q: Can I continue to use OPPO products without limitation, receive support, and receive future updates?

"A: Yes, you continue to be able to use your OPPO products without limitation, receive support, and of course you will receive all future updates."

The removal of product information is key because German patent injunctions typically enjoin a defendant not only from making and selling the products that have been held to infringe, but also from advertising them.

As for the availability of future over-the-air (OTA) software updates, Nokia can't do anything about that unless and until it enforces a patent on a technique that is essential to Android. Cellular standards are implemented at the hardware level, not in Android itself. The WiFi non-SEP over which Nokia won its first German injunction against OPPO can be worked around, but even that one may be implemented at the chipset level.

The German OnePlus store delivers the following when one clicks on the "Phone" category (click on the image to enlarge or read the text below the image):

"Uh-oh! Nothing is found.

"Try searching with different filters."

Some OnePlus accessories are still available. They are not among the accused products (for now).

German injunctions are binding only on the defendants, not on third parties. Therefore, resellers still have OPPO and OnePlus products in stock--though it's unclear for how much longer that will be the case. The largest one of those resellers is Deutsche Telekom (T-Mobile), which carries five OPPO and six OnePlus products as you can see in the following screenshot (click on the image to enlarge):

In the part on tactical implications for the Nokia-OPPO licensing negotiations I'll discuss what the parties' options with a view to OPPO's resellers are.

Other patent assertions against OPPO in Germany

While Nokia is the only patent holder with a German injunction in force against OPPO and OnePlus at this stage, there are other patent cases pending against OPPO and OnePlus in German courts:

• In December, U.S.-based patent licensing firm InterDigital announced patent infringement complaints in Germany, the UK, and India.

• Another patent licensing firm from the U.S., VoiceAge EVS, is also suing OPPO in Germany. Just this week, OPPO achieved the (appealable) invalidation of one VoiceAge patent shortly after another Chinese smartphone maker--Xiaomi--had settled shortly before a pair of Munich injunctions would potentially have come down.

• There may be even more than meets the eye, as German lawsuits are not publicly listed. One has to contact the press offices of the courts in order to find out, and I haven't recently inquired about cases that other parties than Nokia, InterDigital, and VoiceAge EVS have filed against OPPO.

• Furthermore, it is impossible to find out from the outside what other patent holders may have threatened OPPO with patent assertions in Germany that could happen--or could have happened--in the near term.

Why OPPO's calculus may simply make economic sense

The totality of the injunctions that have come down, as well as other pending and threatened cases, faces OPPO with the choice of

• taking global portfolio licenses on the patent holders' offered terms, thereby reducing margins and/or (as a result of price increases) the company's competitiveness in the rest of the world, or

• forgoing potential profits in Germany, possibly even in the long run, in favor of maintaining the company's margins and competitiveness in the markets where it generates the bulk of its sales.

It's what chess players call a gambit. Economically, it's an "op cost" (opportunity cost) analysis of two alternative scenarios.

According to the BITKOM industry association (of which Nokia is a member, too), the annual sales volume of smartphones in Germany is approximately 20 million devices with an average price of approximately 550 euros (US$560). The median would be more interesting to know, as Apple with its sky-high prices is not representative of the rest of the market. It is a safe assumption that OPPO's average price--even with OnePlus included--is significantly lower. That would mean a quantity of roughly 2 million units, at an average price of maybe 400 euros (US$407). If we assume a margin of maybe 10%, that would mean annual profits of approximately 80 million (euros or U.S. dollars).

On Thursday, InterDigital discussed OPPO's global sales volume in a conference call with investors, and an estimate of 200 million units was mentioned (I knew that the number was well over 100 million units per year). That means OPPO generates maybe about 1% of its global sales in the German market.

If we now compare those 80 million euros/dollars in annual profits from Germany to the impact of paying elevated patent royalties on the other 200 million units, the simplest way to look at it is that even if OPPO expected to save only about 40 cents in patent royalties on a per-unit basis, it would make sense to just leave--and even in the long run, stay out of--the German market. The difference between Nokia's and OPPO's positions may be a lot greater than that--and then there are various other patent holders, including the ones already suing OPPO in Germany. In the total of all the patent holders seeking leverage in Germany now or later, the per-unit cost increase could amount to several euros/dollars.

If OPPO assumed that it can get a substantially better deal in a matter of weeks or months, then it would pay off big-time to forgo some German sales, especially during the slow summer season.

OPPO may never really lose 100% of its German sales. Resellers and even consumers may buy products in other European countries, such as Austria or Poland.

Obviously, the question is then whether Nokia will get leverage over OPPO--or OPPO over Nokia, as it's a two-way dispute--in other jurisdictions, as cases are pending in many countries. I'll talk more about the tactical options both parties have from here on out further below.

Implications for Apple, Samsung, and Xiaomi

For Apple and Samsung, and probably even for Xiaomi, the calculus would be rather different if faced with a similar situation.

Apple--which has yet to renew its Ericsson, Nokia, and InterDigital license agreements, two of which have expired and the last one of which is about to expire--has far higher profit margins than OPPO, and doesn't target similarly price-sensitive customer groups as OPPO does especially (but not only) in Asia.

For instance, Apple generates only 0.2% of its worldwide sales in Colombia, but the cost of not being able to sell its 5G iPhones and iPads there is already substantial compared to the license fees Ericsson is seeking. Exiting the German market wouldn't be an option for Apple.

Samsung (which also has to renew the core part of its Nokia license rather soon) and Xiaomi are somewhere between Apple and OPPO in terms of per-unit prices, profitability, and market shares in affluent vs. developing countries.

Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

OPPO's withdrawal from the German market is of an unprecedented scope and scale. So far there had only been

• sales bans that temporarily affected limited parts of a given smartphone maker's line-up,

• temporary removals of features, and

• cases in which companies publicly or privately said they were contemplating exiting a market as an alternative to caving to a patent holder's demands, but in none of those cases did it actually happen when push came to shove.

The most recent case of a temporary exit from the German market concerning some--not all-- of a smartphone maker's products became known six months ago and involved HMD. That was due to the enforcement of patent injunctions by VoiceAge EVS.

The previous incident resulted from Qualcomm's enforcement of a patent injunction against Apple. That one, too, affected only some products: the iPhone 7 and 8, which were already the low-end iPhones at that time. While Apple was temporarily unable to sell them directly in its Apple Stores or online, those devices remained widely available through resellers. The problem was solved by Apple incorporating Qualcomm--not Intel--chips into the iPhone 7 and 8 for the German market. Had Apple and Qualcomm not worked it out, the appeals court would have lifted the injunction anyway: that's precisely what it did at a time when it no longer mattered.

In early 2012, Motorola (while in the process of being acquired by Google) was enforcing a Mannheim SEP injunction against Apple. As a result, Apple was unable to sell the iPhone 3G, the iPhone 3GS, and the iPhone 4 (but not the iPhone 4S), and all 3G/UMTS-capable iPads in Germany. But what was really going on was that Apple iteratively offered Motorola better terms until the appeals court--the Karlsruhe Higher Regional Court--deemed Apple's offer reasonable enough to stay the enforcement of the injunction.

What lasted more than a year was the impact of Motorola's push notification patent injunction. Apple had to disable that feature until the appeals court lifted it in 2013.

IPCom enforced a patent injunction against HTC in Germany before that, and a motion for contempt-of-court sanctions was brought, but there was no market impact.

Last year, Apple's outside counsel told a UK judge that her client might exit the British market if the court set too high a global royalty rate, but ultimately agreed to accept the UK court's determination, and the related trial took place a couple of months ago. (By the way, FOSS Patents was referenced on multiple occasions during that trial.)

Experienced licensing negotiators have witnessed countless situations in which companies said that if they were going to lose a case in a given jurisdiction, they'd rather leave that market than settle on a worldwide basis. Generally, no one ever took such statements too seriously. But with OPPO in Germany it appears that a point has been reached where a significant player has determined that pulling out is preferable over backing down.

Tactical implications for Nokia-OPPO licensing negotiations

Nokia and OPPO can hardly know what the other side's intentions are:

• Given that the current situation is unprecedented, Nokia may assume that OPPO is bluffing and not going to stay out of the German market for too long after the slow summer is over and OPPO's products that are currently in its resellers' warehouses have been sold.

  But if Nokia miscalculates in this regard, and OPPO actually does pay the price of staying out of the German market (also with a view to other pending patent cases), then the point will come at which Nokia is the more vulnerable side in Germany. OPPO's own enforcement of true 5G patents is likely to lead to injunctions against Nokia's mobile base stations.

• It would be reasonable for OPPO to assume that Nokia will want to turn the page on that dispute and focus on bigger fish to fry: Apple and Samsung--companies that, unlike OPPO, could not afford to pull out of Germany only to avoid taking a patent license on Nokia's preferred terms.

  But there's another side to this. Nokia knows that whatever deal it reaches with OPPO will be referenced in potential disputes with Apple and Samsung as a comparable license agreement. Nokia can argue that OPPO's average selling price is far lower than Apple's, and significantly lower than Samsung's. But the headline royalty rate is going to be part of the discussion.

  And this works both ways: OPPO won't be interested in weakning its position vis-à-vis other SEP holders (such as InterDigital).

With a view to Nokia's potential future disputes (Apple, Samsung etc.), there's also an upside and a downside from continued litigation with OPPO:

• With favorable decisions like yesterday, Nokia grows its selection of "surefire" patents it can assert against the likes of Apple and Samsung.

• But there could also be setbacks and losses. For instance, OPPO--maybe not least because the Nokia dispute forced it out of the German market for now--didn't take a license from VoiceAge EVS (unlike Xiaomi, which didn't take its chances), and defeated one VoiceAge patent in the Federal Patent Court (whose decision is now going to be appealed).

• Another risk factor for Nokia is that the appeals courts--with the Munich Higher Regional Court being a huge question mark since the new judge presiding over its patent-specialized division has virtually no track record in patent infringement jurisprudence--could overturn some of those first-round wins for technical reasons and/or disagree with the lower courts on FRAND-related questions.

What's unclear is how big a part of OPPO's problem some other German lawsuits (InterDigital, VoiceAge EVS, and any potentially unknown or yet-to-be-filed ones) are. The aggregate of the bid-ask differences between OPPO and those other patent holders could be comparable to, or greater than, the one in the Nokia case. In that case, settling with Nokia would at best solve half the problem fro OPPO. However, against InterDigital and VoiceAge EVS, OPPO can't countersue as those companies aren't selling products in Germany: their revenue model is patent licensing.

Then there are all those other jurisdictions in which Nokia and OPPO are currently embroiled in litigation. Simultaneously with the German cases, Nokia brought complaints in London, Paris, and Barcelona. OPPO sought a declaratory judgment in the Netherlands, where Nokia responded with non-compulsory counterclaims. In China, OPPO is seeking a FRAND determination, and Nokia brought infringement claims. Nokia is suing in India and Indonesia. In the latter jurisdiction, OPPO has so far defended itself, though Nokia could refile. Nokia also sued in Russia, but withdrew there over the Ukrainian situation--but then brought cases in Sweden and Finland.

Nokia may be able to obtain injunctions in some other jurisdictions, but it remains to be seen what the courts in those countries will say about Nokia's and OPPO's FRAND compliance. Divergent decisions are possible.

There are also tactical decisions to be made by Nokia in Germany. It's possible that resellers like Deutsche Telekom and MediaMarkt will just buy OPPO products in other countries within the EU's single market, such as Austria or Poland. Nokia wouldn't want to sue the carriers as they are its network infrastructure customers. What Nokia could consider is a petition for border seizures by customs authorities (here's a German-language article (PDF) by the Bardehle Pagenberg firm on that topic).

We may not see an immediate settlement during the summer, but the closer we get to the Christmas Selling Season, the more likely it is that a deal will happen. Otherwise, OPPO would have nothing left to lose in Germany, but could at some point enforce injunctions against Nokia in Germany.

Should there be no settlement in the near term, we'd likely also see the parties file cases with the Unified Patent Court (UPC) in order to obtain EU-wide injunctions.

German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

It's been almost exactly a year since a German patent "reform" bill entered into force. While OPPO wasn't visible in the lobbying efforts related to that piece of legislation, companies like Apple, Google, Nvidia, Deutsche Telekom, SAP, and the German automotive industry had completely false hopes that a modified injunction statute (§ 139 of the German Patent Act) would lead to a departure from Germany's near-automatic injunction regime.

I've commented on that monumental lobbying failure on various occasions, such as earlier this year when two Dusseldorf judges made it clear that patent holders would continue to obtain injunctions in virtually every case where they prevail on the technical merits. More recently, there have been court rulings--also from Dusseldorf--that clarified that the situation was still the same as before. German judges have pointed out in their decisions as well as in public speeches that the language that got inserted into § 139 last year merely codifies the prior case law, under which a plaintiff either has to make stupid mistakes or seek a sales ban on, say, the printing of bank notes or a COVID vaccine in order to be denied an injunction. It's not even clear whether a proportionality defense could succeed in a single case in which a defendant wouldn't be entitled to a compulsory license anyway.

A few months ago, even ip2innovate, a lobbying front for the likes of Google, Nvidia, Daimler, and SAP--conceded in light of an injunction against car maker Ford that the legislative amendment hasn't really lived up to those companies' expectations. Well, I already predicted it in early 2000 right here on this blog. They just wouldn't believe me then. They now know that I was right with my predictions, and they were strategically on the wrong track.

OPPO's exit from the German market illustrates it again. Being exposed to German patent litigation is a vulnerability that some may prefer to avoid regardless of the opportunity costs from not serving such a large and otherwise lucrative market.

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European and German patent stats confirm China has taken lead over U.S. in digital communications patent filings: Huawei, Ericsson lead the pack; OPPO ahead of Nokia; Apple is nowhere

Yesterday, the German Patent & Trademark Office (Deutsches Patent- und Markenamt; DPMA) issued a press release on its 2021 annual report, and the headline translates as follows:

"China ever more innovative in digital technologies"

The German PTO highlighted that China has, for the first time, overtaken the United States in the field of digital communications technology patent applications as its numbers increased by 6.8% from 4,032 to 4,308, while the figure for the United States--home to the most aggressive proponents of the devaluation of standard-essential patents (SEPs)--went down by 2.4% from 4,218 to 4,115. Even if the U.S. figure had remained stable, China would have taken the lead.

While China's ascent to the top is indisputably impressive, it's arguably no less remarkable that Sweden--a relatively small country --is #4 on the list as it overtook Korea. Sweden's patent filings in this field went up by 3.6% (from 1,223 to 1,267--more than quarter of China's numbers!), while Korean patent applications declined by 5.8% from 1,249 to 1,176.

If we want to understand these dynamics, which are immensely important from an innovation policy perspective as well as with respect to pending SEP litigations (Ericsson v. Apple (Apple is countersuing only over non-SEPs), Nokia v. OPPO/OPPO v. Nokia), we need to take a look at the major players. The German PTO's annual report doesn't list particular filers, but fortunately the European Patent Office (EPO)--whose report equally attests to China's and Sweden's incredible achievements--provides a list of the top 10 filers in the field of digital communications (click on the image to enlarge):

Key takeaways and observations

• Despite Trump's trade war that the Biden Administration continues, Huawei is unstoppable--and the undisputed number one in the world. They have a corporate presentation coming up next week, and I plan to follow it over the livestream--it's a must-attend given that company's strength in wireless patents.

• The other Chinese companies among the top 10 filers in the field are OPPO (#5), which is in the top 5 and has surpassed Nokia (688 v. 658), with which it is embroiled in two-way litigation; ZTE (#7), which is increasingly interested in outbound licensing and has recently started enforcement actions and Vivo (#10), which is being sued by Nokia but also countersuing in Dusseldorf.

• Ericsson is #2, clearly ahead of Qualcomm in the third place and more than twice as strong as Nokia (#6). Sweden's strength in digital innovation is almost entirely attributable to Ericsson alone. One cannot respect innovation without applauding Ericsson's engineers.

• But what about Apple, against which Ericsson is enforcing SEPs? Nowhere on the list. Over the years they've acquired SEPs (such as from Nortel and Intel), but that's about it. It's been a few years since they acquired Intel's mobile chipset business, so I'd have expected them to play a more significant role already. But... they are nowhere to be seen.

  Apple is a luxury goods company making the closest thing you can find in the digital economy to a Veblen good. More than anything else, Apple brutally exploits its market power over everyone, with my primary concern being how it treats app developers. It squeezes suppliers and seeks to deprive employees of their rights to form unions (just yesterday, Microsoft announced a far more cooperative stance on unions).

  Policy makers in the U.S. and elsewhere must understand where Apple is coming from when it takes positions on patent policy and on mobile app stores. It seeks to substitute market power for foundational research. That formula, however, doesn't yield a consumer surplus. Nor are deceptive lobbying practices by Apple-funded organizations the answer.

  Apple won't change unless it has to. It's up to policy makers, competition regulators, and the courts of law to require Apple to compete on the merits, to fairly reward innovators, to open up iOS app distribution, and to invest not only in its expansion into ever more markets (it's like an insatiable octopus in that regard) but also in the digital communications technologies without which its gadgets wouldn't work in the first place.

  The United States has no one but itself--and above all, Apple's ability to perpetuate its market power and spawn monopoly after monopoly--to blame for having lost the lead in this field to China, and for trailing (relative to population size) a country like Sweden by a huge factor.

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Nokia suing Vivo in two German courts over standard-essential patents--despite limited market presence--and Vivo countersuing in Dusseldorf

[Erratum] Originally, the Dusseldorf case was listed as a Nokia v. Vivo case. It is, however, a countersuit by Vivo. [/Erratum ]

Market size is one of several factors attracting patentees to Germany. However, the direct economic impact of a patent injunction is a function of the revenues and profits a party is actually generating in the relevant geographic market. Conventional wisdom would, therefore, not really suggest that a patent holder should sue Vivo in Germany. The Chinese company is among the world's largest handset makers owing to its tremendous success in a number of Asian markets, but generates only about 1% of its worldwide sales in Europe--of which Germany is just one market, so unless Vivo's European presence is more or less confined to Germany, we're talking about a fraction of a percent of its global sales.

In March, Nokia's patent litigation campaign against Vivo became known. And indeed, the first jurisdictions in which some Nokia v. Vivo cases surfaced were India and Indonesia, with IAM reporting on a Chinese rate-setting action that Vivo had initiated.

But the three major German patent infringement courts have now informed me of a number of cases brought by Nokia against Vivo (Munich and Mannheim) and a countersuit by Vivo (Dusseldorf):

• Munich I Regional Court

  • Case no. 21 O 2816/22 over EP3396868 on a "method and apparatus for conveying antenna configuration information" (also being asserted against OPPO and OnePlus in Munich) (trial date: February 8, 2023)

  • Case no. 21 O 3172/22 over EP3457586 on a "method and apparatus for conveying antenna configuration information via masking" (granted in September 2021) (trial date: February 8, 2023)

• Mannheim Regional Court

  • Case no. 2 O 36/22 over EP2981103 on an "allocation of preamble sequences" (last week, the same panel of the Mannheim Regional Court--under Presiding Judge Dr. Holger Kircher--held a Nokia v. OPPO trial over this patent) (trial date: February 7, 2023)

  • Case no. 2 O 37/22 over EP2087626 on "additional modulation information signaling for high speed downlink packet access" (Nokia is also asserting this one against OPPO in Mannheim) (trial date: March 14, 2023)

  • Case no. 2 O 65/22 over EP3220562 on n "allocation of preamble sequences" (same patent family as EP'103, which was mentioned above; therefore, same trial date)

• Dusseldorf Regional Court

  • And a countersuit by Vivo against Nokia (presumably targeting its base stations):

    Case no. 4b O 25/22 over EP3618530 on a "resource mapping method for demodulation reference signal, base station and computer readable storage medium" (granted in October 2021) (trial date TBD)

The substantial overlap between these patent assertions and the ones against OPPO (and its affiliate OnePlus) may lead to cost-saving synergy effects on Nokia's side. Still, the scope and scale of the German part of Nokia's patent litigation campaign against Vivo is counterintuitive.

I'll try to find out if there are even more cases.

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Vivo takes license from Sisvel to cellular standard-essential patent portfolio (125 families, 1,800 assets) partly owned by Mitsubishi, Wilus

Sisvel just issued a press release announcing the signing of a "portfolio license agreement for 2G, 3G and 4G standard essential patents" with Chinese smartphone maker Vivo. This deal directly and indirectly involves multiple parties I've mentioned in recent posts, which is why it caught my interest.

"The patent portfolio licensed under this deal includes over 125 patent families (comprising over 1,800 individual patents) deemed essential to the [2G, 3G, 4G] cellular standards," says the announcement. Where do these patents hail from? Sisvel facilitated the agreement for the entire pool. The three current owners of the licensed patents are

• Japan's Mitsubishi Electric,

• Korea's Wilus (which recently also appointed Sisvel as licensing administrator of its WiFi 6 patent portfolio; the deal announced today is not WiFi-related though), and

• Sisvel, which has offices in multiple countries and is headquartered in Luxembourg. The patents Sisvel contributed to this deal were once acquired from

  • LG Electronics,

  • BlackBerry (Research In Motion),

  • Nokia,

  • Orange, and

  • Langbo.

While Vivo is now licensed to some former Nokia patents, it is defending against multi-jurisdictional patent infringement litigation brought by the Finnish company this year over the patents it currently owns. Little is known about that new dispute, though I'm trying to find out more.

It's going to be key for Vivo to convince courts in various countries of its constructive attitude toward licensing. It wants to be recognized as a willing licensee. The willingness analysis is obviously conducted on a deal-by-deal basis. For people like me watching SEP disputes from the outside, it is nevertheless instructive to keep an eye on secondary indicia of willingness. In that regard, I take note of the following quote from David Muus, Sisvel's mobile communication program manager:

"We came to this deal in a truly collaborative effort between Sisvel, Mitsubishi Electric, Wilus and Vivo, which is a testament to the parties’ capacity to build bridges. The Vivo team’s straightforward approach made working with Vivo a pleasure."

The other (also Chinese) device maker currently defending itself against Nokia is OPPO. By objective criteria, the Nokia-OPPO situation appears rather distinguishable from Nokia v. Daimler, Conversant v. Daimler, and Sisvel v. Haier. In light of Sisvel talking to positively about Vivo's "straightforward approach" and "collaborative" attitude, I wouldn't be surprised if the FRAND analysis between Vivo and Nokia also presented interesting questions that never came up in the aforementioned cases that were decided in 2020.

This is the second time in as many weeks that I point to a Sisvel endorsement of a Chinese smartphone maker's willingness to license SEPs. I quoted Sisvel president Mattia Fogliacco in a recent post involving Xiaomi.

Today's announcement claims that Sisvel has "now closed deals with companies that represent the overwhelming majority of the handset market around the globe." Vivo is one of the leading vendors by volume, mostly by virtue of its huge success in Asia though also making strides in Europe.

There may have been a time--roughly ten years ago--when Sisvel was deemed relatively litigious, but not so as we speak. Just last week I spoke with a German patent litigator who not long ago represented a party adverse to Sisvel (and also does a fair amount of work for patent licensing firms all the time). He told me he was impressed with Sisvel's president's very business-oriented approach. I can't name or narrowly define my source, but it was interesting to hear about that positive experience.

This Sisvel-Vivo deal fell into place without any infringement lawsuits having been brought, and it looks like Sisvel is generally effective at resolving licensing disputes out of court. At the moment there's only one high-profile enforcement effort by Sisvel that is ongoing, and that one involves the Ford Motor Company, which surprisingly still hasn't taken an Avanci pool license though many other automotive brands are licensed. I'm rather skeptical of the merits of Ford's Qualcomm-related patent exhaustion defense--and as I compare Sisvel's results as a dealmaker to the fact that it had to sue Ford, I also have my doubts concerning that automaker's take on FRAND.

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Nokia's Asian patent enforcement campaign against Vivo also extending to Indonesia: CNN

Nokia is currently suing two Chinese smartphone makers: OPPO (with a first Mannheim trial scheduled for next week) and Vivo. One key difference between the two is that OPPO also has a significant presence in Western Europe while Vivo's phone are sold in Asia for the most part. However, Vivo appears to have European aspirations as its sponsorship of UEFA's EURO soccer tournament shows.

On March 15, 2022, the Delhi High Court accepted (PDF) a couple of Nokia v. Vivo patent infringement actions. The next day the court noted (PDF) that one of the patents-in-suit is already being asserted in the same court against OPPO and reassigned it to the same judge (Ms. Justice Prathiba M. Singh). The overlapping patent-in-suit is Indian Patent No. 300066 (additional modulation information signaling for high speed downlink packet access; same patent family as EP2087626, which Nokia is asserting against OPPO in Mannheim).

Last week, IAM reported on a Chinese rate-setting case filed by Vivo against Nokia.

Also on Wednesday, CNN Indonesia reported on a case filed by Nokia against Vivo with the Central Jakatarta District Court over Indonesian Patent No. 000031184, which is from the same family as the aforementioned Indian Patent No. 300066 and European Patent EP2087626.

I'll try to find out more about this dispute as it unfolds. What's totally unclear so far is the history of licensing negotiations between the parties. This is the first high-profile patent assertion campaign against Vivo to my knowledge, suggesting that Vivo normally manages to work out license deals without any need for litigation.

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