Which part of 'external' does a @reckless journalist fail to understand? Disinformation about Epic Games v. Apple injunction doesn't stop

I wouldn't have thought that after yesterday's post (FOSS Patents was right while others were wrong on scope of Epic Games v. Apple injunction as court order denying stay clarifies: NO IAP ALTERNATIVES ALLOWED, period) it would be necessary to do a follow-up to debunk the "button bull" that just doesn't go away because of one man who keeps digging himself an ever bigger hole.

Tech news website The Verge prides itself on setting a high journalistic standard with respect to "background" conversations with tech companies. I do credit them for mostly very good and in-depth coverage of app store antitrust matters. However, there comes a point when someone who claims to stand on higher moral ground just has to acknowledge he made a mistake, even at the risk of some people potentially considering it an unforgivably stupid mistake that might have led app developers to waste hours and hours of development time on code that Apple won't have to approve. The Verge's Nilay Patel prefers to raise false hopes in iOS app developers over the only honest way to deal with the situation he alone created: a mea culpa admission.

Here's a screenshot of a two-tweet thread in which the man takes a position that is squarely at odds with what the Epic v. Apple judge wrote (click on the image to enlarge; this post continues below the image):

Let that sink in: he "do[es]n't think the court order prohibits [an IAP alternative that pops up in a WebView control] at all." Oh my...

I already quoted the relevant passage from this week's clarification by the court in my previous post, but let me now quote one part again with the emphasis on two occurrences of the word "external" in short sequence:

"The [Apple] Developer Agreement prohibits third party in-app purchasing systems other than Apple's IAP. The Court did not enjoin that provision but rather enjoined the prohibition to communicate external alternatives and to allow links to those external sites."

Nilay Patel's proposed approach would simply read out the word "external" from the court's clarifying statement by suggesting that developers could bring up a WebView control--meaning a browser rectangle within an app using the same browser engine as Apple's Safari browser--and automatically fill in the user's account data (such as a user ID). A control (i.e., user interface element) within an app is, however, not external.

Which part of "external" does the man not (want to) understand?

The IAP rule that the court explicitly declined to enjoin never distinguished between technical implementation strategies, meaning whether you use a WebView control or some other type of control (as long as it's the same app). Not only in theory but even in practice, one can build a whole app as just a WebView that brings up a webpage. It's like you wrap an app around the web page. The productivity app I am currently working on will in its first test version work that way.

I said test version because Apple would reject a pure WebView app for publication. Reportedly, developers have received rejection notices saying things like "We found that the experience your app provides is not sufficiently different from a web browsing experience, as it would be by incorporating native iOS functionality." The related app review guideline is 4.2 Minimum Functionality, which says among other things: "Your app should include features, content, and UI that elevate it beyond a repackaged website." But that doesn't mean that whatever a WebKit view (WebKit is the engine used by Safari and others) displays is all of a sudden "external." Apple's concern is just that there's no added value if all an app does is bring up a webpage.

Nilay Patel's tweet is wrong for another--independent--reason. As I've explained on earlier occasions, Apple could still collect a revenue cut using its gatekeeper power and claiming intellectual property rights. Developers could try to challenge the reasonableness of those terms, but that would be a whole new case.

Nilay Patel's argument has a fundamental flaw: the legal standard that Apple needs to comply with is not whether someone like @reckless could let their imagination run wild. The standard for contempt of court is such that Apple would have to rely on a wholly unreasonable interpretation of the court order. So, if developers adopted Nilay Patel's advice and submitted an app like that, Apple could reject it because a WebView inside an app is not "external" (the word he conveniently ignores). It's a user interface element of the same app. A contempt motion against Apple would fail miserably because Apple's position would be reasonable, regardless of whether someone might consider another perspective reasonable as well (or even more reasonable than Apple's).

The fact that Nilay Patel talks about whether the court order "prohibits" a certain implementation strategy for IAP alternatives is symptomatic of the bankruptcy of his argument. I'd like to give him the benefit of the doubt that Twitter-style brevity makes it hard to be 100% legally precise. But I can't because he clearly refuses to apply the correct legal standard. The court does not prohibit anything that developers do. The injunction relates to Apple, and Apple will be fine to reject app submissions as long as it doesn't interpret the injunction in ways that unreasonably disadvantage developers.

App developers need to be aware of all of that. Otherwise they're just going to waste their time and annoy Apple, and neither the district court nor the Ninth Circuit will hold Apple in contempt for rejecting what Nilay Patel suggests as a viable approach.

Let me also comment on the second tweet shown above, which is his speculation about what Apple's counsel meant when telling the court that the implementation of the court order would involve a significant engineering effort. He took that part out of context. The context is that Apple's counsel said his client wouldn't just strike an enjoined passage from its rules but would replace it with a new rule, and that new rule would involve a significant implementation effort. For example, if that new rule involved an obligation to pay Apple a commission, Apple might have to implement some kind of reporting system for payments made outside the app but for the purchase of digital goods to be consumed within the app. Whatever Apple's counsel meant, the word "external" is clear, WebView is indisputably not external, but even if one wanted to start an argument, Apple would win it because it would take a defensible position and that's all it needs so it won't be fined for contempt of court.

Suggesting otherwise is the height of irresponsibility.

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FOSS Patents was right while others were wrong on scope of Epic Games v. Apple injunction as court order denying stay clarifies: NO IAP ALTERNATIVES ALLOWED, period

See I told ya so. Under the Epic v. Apple injunction as it stands, Apple still does not have to tolerate alternatives to its own In-App Purchasing (IAP) system. What some others told you--which was the opposite--did not age well. I don't even blame The Verge's Nilay Patel and others as much for having been wrong initially as I criticize them now for not having recognized their error after I pointed it out. The original problem was that they just didn't care to read the relevant parts of the underlying judgment, which is amateurish but can happen, and that they failed to see the implausibility of their interpretation, as Epic's "hotfix" that gave rise to last year's court filings would have been allowed under that reading of the injunction. We all make mistakes, but there's what I find irresponsible: by refusing to backtrack and apologize, they were being bull-headed at best and cynical at worst--cynical in the sense of reiterating a clear legal error that could lead others to make costly mistakes (developing program code that Apple was sure to reject), only to avoid that a wider audience would become aware of some people's failure to digest a court order.

Here's the most important passage from Judge Yvonne Gonzalez Rogers's order denying Apple's motion to stay the Epic Games v. Apple Unfair Competition Law (UCL) injunction:

"With respect to the alleged need for clarification because, anecdotally, some developers may not understand the scope of the injunction, the parties themselves have not indicated any confusion. The [Apple] Developer Agreement prohibits third party in-app purchasing systems other than Apple's IAP. The Court did not enjoin that provision but rather enjoined the prohibition to communicate external alternatives and to allow links to those external sites. Apple still maintains the convenience of IAP and, if it can compete on pricing, developers may opt to capitalize on that convenience, including any reassure that Apple provides to consumers that it may provide a safer or better choice. The fact remains: it should be their choice. Consumer information, transparency, and consumer choice is in the interest of the public." (emphases added)

You can forget the button bull you heard from others.

Here are links to what this blog previously said about the question of whether the word "button" in the stricken passage from Apple's app review guidelines opened the door to IAP alternatives:

• No, the Epic v. Apple injunction absolutely positively DOESN'T allow developer to incorporate 'buttons' for alternative IN-APP payment mechanisms

• App developers must know that any alleged ambiguity in the Epic Games v. Apple injunction favors Apple, not them: there won't be IAP alternatives, not even in WebView

Also, I predicted that Judge YGR was going to uphold her injunction. She obviously wasn't going to say "oh sorry, I made a mistake when I thought I'd award Epic a consolation prize based on California UCL." On October 29, I tweeted the following:

This is the most likely scenario for #Apple's motion to stay #EpicvApple injunction:
- District court will deny, *but* will clarify that the injunction is narrow in scope. That will put that debate to rest.
- Apple will try again and the appeals court will grant. #appstore

— Florian Mueller (@FOSSpatents) October 29, 2021

Of course, the jury is still out on the second part--or, more precisely, the Ninth Circuit motions panel has not even begun its deliberations yet as Apple firstly need to file its motion (which I expect to happen shortly). But the first one of the two bullet points has already been vindicated by the district judge.

Let me tell my fellow developers (I've just begun working on a new app--a productivity app this time around and will say more next year) one more thing:

There is no such thing a free lunch under the Epic v. Apple injunction.

I followed the motion hearing (about eight hours ago) via Zoom. Arguing on Apple's behalf and sparring with Gary Bornstein from Cravath (both did great work), Gibson Dunn's Mark Perry explained that whatever passage Apple is obligated to delete from its Developer Agreement would be replaced with new rules. He specifically said those rules would be designed to protect all sorts of consumer, developer, and obviously also Apple's interests as a platform operator. Those rules would take time to develop and to implement, and I understood Mr. Perry as Apple clearly intending (in this scenario) to put technical measures in place as well. I surmise this will have very much to do with ways in which Apple ensures it gets paid. That's Apple's focus in the whole app review context--the rest is not only pretext, but in no small part it actually is.

Let me translate that to plain English in terms of what it would mean should the injunction ever actually get enforced:

• The "realistic best-case scenario" for developers is that Apple will collect its usual commission (possibly with a minor deduction, such as 2%) on revenues generated by means of such external links. There is nothing in the court order barring Apple from doing so. Much to the contrary, the judgment recognized Apple's right to seek compensation for its IP.

  I've recently explained that in light of Oracle v. Google and almost two decades of work related to patents, I can't see how Apple would get anything close to a 30% royalty through IP enforcement per se (i.e., infringement litigation), but it can simply use its gatekeeper power. The question then comes down to the distinction between "to use [its gatekeeper power to collect IP royalties]" and "to abuse." The to-be-or-not-to-be question in unilateral-conduct cases. But it would take a whole new case in which someone like Epic would have to argue that Apple demands too much.

• The worst-case scenario for developers, however, would place developers like Epic in an even worse position on the bottom line than if the injunction had never come down. Two months ago I already discussed the possibility of Apple disalllowing cross-walled and cross-purchases. In that case, the Epic v. Apple injunction would allow outbound links (including links in the form of a button, but still just external links) to information on alternatives. But any purchases of digital goods (such as Fortnite V-Bucks) made outside an iOS app would no longer be available for consumption in the iOS app. This means that, for instance, Epic would be free to point users to a web game (and Fortnite is obviously not going to be viable as an OpenGL/WebGL game on an iPhone), an Android app, a Windows game, or a console game. Users could make purchases there, possibly at lower prices--but they couldn't use the stuff in the native iOS app that told them about those alternatives.

  While the original Epic Games v. Apple judgment mentioned that Apple allows cross-wallet and cross-purchases, there is no court order that tells Apple it must continue to do so. Much to the contrary, the court took note of the fact that some other platform makers don't allow this. And Judge YGR has been consistent in declining (whether one agrees or not is another question) to subject Apple to stricter rules than would apply to Sony, for instance.

  The order denying Apple's motion for a stay doesn't change that (nor could it). It again talks about alternatives and about customers' right to know about the existence of those alternatives. It does not address where the purchased digital goods would actually be consumed.

  Apple may have other (particularly political) reasons not to play a hardball "What the court giveth, Apple taketh, and Apple taketh even more" type of game by disallowing cross-wallet and cross-purchase now (outside the context that is subject to a Japanese settlement on e-readers). But from a purely legal perspective, Apple would have that option, and I wouldn't blame Apple for at least giving it serious thought. It would not make Apple a contemnor of the court order in my opinion. I wouldn't like it from a developer's perspective, but I would support that course of action as an antitrust commentator because it would be legit.

While on the subject of Apple's tactical options and choices, let me come full circle back to "the alleged need for clarification" (a quote from the first sentence of the passage quoted above).

Apple had two fundamentally different options for how to interpret the injunction in its motion for a stay (and the reply brief in support of that motion). Apple could have taken the position that the narrow scope of the injunction had been clear all along. That would have meant to optimize for a hypothetical contempt proceeding--instead, Apple chose to place a strategic bet on obviating the need for such contempt proceedings in the first place. In order to avoid facing any contempt motion, Apple needs to get the injunction stayed and then prevail on appeal. With that strategic priority in mind, Apple determined that what would serve it best was to make the strongest possible case for irreparable harm (to Apple from enforcement). A narrow injunction doesn't hurt as much as one that someone may blow out of proportion.

And this takes me back to my mid-September tweet: by purposely blowing the potential scope of the injunction wording out of proportion (though Apple itself noted that the judgment specifically focused on "information" and pointed out that Epic espoused an interpretation in public that would even have legalized its August 2020 "hotfix"), Apple effectively forced the district judge to clarify the narrow scope. She could have done so at the hearing, but didn't. She could have theoretically avoided it in the order, as she could have denied Apple's motion anyway by just saying she was right. But that order is basically her opposition brief to Apple's forthcoming motion for a stay that will be filed with the Ninth Circuit. She wants the appeals court to uphold her injunction, and the last thing she would have wanted is for the appeals court to say that her injunction was worded in a way that could not be reconciled with the underlying judgment in any way--and to then not only grant a stay but also to (later) overrule the UCL part of her decision.

Apple's strategy played out. The trial court has now made it clear that the injunction has a narrow scope. Even if Apple did not win a stay (though I think it will and--when I don't wear my developer's hat--is reasonably entitled to get the stay), Apple would still have the tactical options outlined above: collect an IP royalty (enforced with its immeasurable gatekeeper power) and/or disallow cross-wallet and cross-purchase.

I still want Apple to have less power over my fellow developers and me, but it gets us nowhere to misinterpret what the courts say. All that "button bull" was a tempest in a teapot. I don't comment on the App Store case too often here, as there's so much going on with respect to the intersection of patent law and antitrust enforcement (such as that crazy Deutsche Telekom v. IPCom case I blogged about yesterday), but when I do chime in, I make a good-faith effort to get the facts and the law right. I don't shy away from disagreeing with Apple, even harshly at times, but the objective is constructive criticism based on rational and thorough analysis.

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Deutsche Telekom dishonors patent license agreement with IPCom eight years on: spurious antitrust case goes to trial in Mannheim on 23rd

With respect to patent licensing firm IPCom, Deutsche Telekom has a propensity to do things that make observers shake their heads in disbelief.

I still remember overhearing a conversation at the Mannheim courthouse on June 21, 2013. That Friday, the court held a Motorola v. Apple FRAND rate-setting trial that drew huge interest from the German patent litigation community. During a break, lawyers involved with Nokia's and HTC's defenses against IPCom just couldn't fathom the WHY and the WHEN of the Deutsche Telekom-IPCom settlement that was announced earlier that week. At that juncture, there was no injunction looming large--there wasn't even one on the horizon. By settling for sheer convenience, Deutsche Telekom unnecessarily complicated things for Nokia and HTC by giving IPCom substantial new resources and a comparable license agreement with a view to the ND in FRAND.

The amount was described by Reuters sources as being in the "low to medium triple-digit" million euro range. What I heard at the time was roughly 200 million euros. Later there was speculation that Deutsche Telekom's then-outgoing CEO had simply instructed the patent department to settle the dispute, period, just so he wouldn't have to negotiate a hold-harmless clause for that case as part of his exit package.

Fast forward by eight years, and Deutsche Telekom wants all of that money back. With interest on top. A total of about 300 million euros.

The legal basis? An-ti-trust. Sorry, but . . . WTF?

This move is more bewildering than the decision to settle was in mid-2013. The notion that someone could take a license--presumably just in order to simplify the departure of a CEO--and later turn around and claw back all the royalties just flies in the face of all I know about the intersection of intellectual property and competition law. Deutsche Telekom even seeks to turn the entire deal into a nicely profitable investment by seeking interest way in excess of market rates during the relevant period.

Even without access to the complaint itself, I'm pretty sure antitrust law just doesn't have scope for Deutsche Telekom's cloud-cuckoo-land claims. The Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) will have to hear the matter in two weeks from today, but that's because German civil procedure doesn't provide such instruments as a motion to dismiss for failure to state a claim.

This may very well be the most meritless patent-related antitrust case ever to have been brought in Germany, yet Deutsche Telekom's course of action raises serious policy concerns.

Licensing is the most common way to settle patent infringement disputes. I have consistently advocated a balanced approach to SEP enforcement: defendants must have rights. But when a license agreement is reached, that is supposed to be the end of the story. That's the whole point of a settlement.

Deutsche Telekom appears to be bullying, driven by buyer's remorse and using its gigantic resources to put pressure on a small company. Even if the magenta-colored carrier just came close to prevailing on a fraction of its claim, it would shake the foundations of patent licensing with profound implications for the entire innovation economy.

Normally, the term "unwilling licensee" means in a SEP context that a party should be enjoined because it isn't seeking a license on FRAND terms in good faith. Deutsche Telekom now shows that one may be a willing licensee for many years only to turn around later.

It's hard to imagine that the contract in question has a loophole that allows for such a refund with interest. The agreement was undoubtedly drafted and signed by people who knew exactly what they were doing. That makes it all the more worrying that Deutsche Telekom is now attempting to get its money back.

Deutsche Telekom portrays itself a purely defensive player of the patent game, but it has a reputation for bullying. Its suppliers always have to fear getting a call that gives them an ultimatum to take a license to some third-party patents (St. Lawrence is an example) lest they lose the magenta giant's business. Might makes right? Maybe in the telecommunications market, but presumably not in the Mannheim court.

It's highly doubtful that this here benefits Deutsche Telekom on the bottom line. They may seek retribution against IPCom for suing Sprint (which effectively got acquired by Deutsche Telekom/T-Mobile) in the Eastern District of Texas. But Deutsche Telekom has to deal with so many patent holders all the time--and they aren't all non-practicing entities, by the way. All patentees want their licensees to honor their license agreements. Not only doesn't Deutsche Telekom's IPCom "antitrust" case make sense in its own right but why would a company risk losing the trust of all its current and future licensors?

This conduct gives private antitrust enforcement a bad name.

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In Nokia v. OPPO jurisdictional decision, UK court affords limited deference to Chinese determination of global patent portfolio licensing terms

In a decision that came down yesterday, Judge Hacon of the England and Wales High Court (EWHC) denied OPPO's request to stay the UK proceedings regarding Nokia's assertions of a couple of standard-essential patents pending the resolution of a Chinese case in which OPPO is seeking a global portfolio license from Nokia. After Nokia brought its infringement cases against OPPO in multiple jurisdictions, OPPO raised various FRAND issues with the No. 1 Intermediate People's Court of Chongqing Municipality of the People's Republic of China, with the ultimate objective of obtaining a global portfolio license on terms to be set by the Chongqing court.

At first sight, the outcome is simply consistent with the UK Supreme Court's jurisdictional decisions in Unwired Planet v. Huawei/Conversant v. ZTE: the UK judiciary has no qualms about setting global portfolio rates and forcing implementers, under the threat of allowing the enforcement of patent injunctions, to take worldwide licenses on terms set in the UK. But Nokia v. OPPO is not just a rehash of Unwired, and while the High Court lets the infringement case (and any potential FRAND determination resulting from it) go ahead, OPPO has raised issues that distinguish the case from the Unwired situation, including but not limited to

• the fact that the UK is no longer bound to the Huawei v. ZTE case law by the European Court of Justice, and

• the jurisdictional clarification provided by China's top court in OPPO v. Sharp.

It would be interesting to see OPPO appeal Judge Hacon's decision, as it would provide the higher courts in the UK with an opportunity to adjust their SEP case law. Yesterday's Nokia v. OPPO jurisdictional judgment acknowledges that the current situation leaves a lot to be desired:

"116. The current unevolved framework for the settlement of a global licence between owners of SEPs and implementers is plainly not satisfactory. It is not a recipe for commercial chaos as the defendants would have it, but it does encourage expensive parallel litigation in several jurisdictions and more uncertainty than is necessary. I doubt that it can be sustained in the long term. As the Supreme Court indicated, one potential solution would be the establishment of an internationally recognised tribunal to which patentees and implementers must refer their disputes. But until that or an alternative mechanism for settling global licences is internationally agreed, national courts must deal with circumstances as they are." (emphasis added)

Judge Hacon then basically goes on to say that patentees will try to have global licensing terms determined in a jurisdiction where they expect to get the highest royalty rates (race to the top), while implementers will naturally prefer lower rates (race to the bottom). "A race to the top would not be an attractive prospect for the telecommunications industry as a whole, or for any other industry," Judge Hacon notes. But he also holds that "a race to the bottom is no more attractive than a race to the top."

Enthusiasm is something else.

While concluding that OPPO had not convinced him of the need to stay Nokia's UK case, Judge Hacon steered clear of China-bashing. In fact, he "fully endorse[d]" the parties' agreement that "the Chongqing Court, if and when it rules on royalty rates, will do so justly" and that "the rates will therefore be FRAND." This recognition that substantial justice (that's the standard here) will be done in China is of quite some significance, such as in connection with the questions raised by the EU at the WTO level.

I see a couple of issues here that, at least potentially, come down to the tail wagging the dog:

1. Paragraph 63 notes that "[o]ver 50% of sales of the devices proposed to be licensed are in China, compared to less than 0.5% in the UK." That is a factor of more than 100--even more extreme than in Unwired. UK politicians are looking at the possibility of SEP-specific legislation, and some members of parliament as well as government officials may not consider it a good use of UK resources (and British taxpayers' money) to provide the service of global FRAND determinations even when the UK portion of a dispute is so tiny.

2. The trickier tail-or-dog question is whether it makes sense to determine a global royalty rate when the infringement allegations at issue are specific to UK patents (or, most of the time, the UK parts of patents granted by the EPO).

   In quantitative terms, it definitely is another case of the tail wagging the dog: the FRAND part is way bigger in economic terms and more complex than the technical merits of a single patent assertion. But the UK courts' logic is that patentees must remain free to enforce their UK patent rights--and when those patents are SEPs, then the enforcement of an injunction depends on FRAND considerations, which the UK courts so far consider to be all about global portfolio licensing terms.

   The combination of single-country infringement decisions and worldwide rate-setting is not without contradiction. In Conversant v. ZTE, the UK Supreme Court noted that Chinese patents asserted in a global dispute may even be from different patent families than the relevant UK patents, "give rise to wholly different technical issues from the issues which would arise on the essentiality of the UK patents," and different prior art may apply. Based on those differences, the UK courts do not wish to restrict a patentee's ability to bring UK infringement cases--but those differences actually cut both ways and also counsel against setting the rates for Chinese patents in the UK.

How can SEP holders efficiently enforce their rights so they get compensated for the use of their global portfolios while not depriving implementers of their defenses? The Nokia v. OPPO decision is most likely not the last word--not even in that particular dispute. And while Nokia has so far avoided a stay of its UK SEP actions against OPPO, it continues to face OPPO's Chinese FRAND claims.

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At IAM Auto IP conference, calls for patent licensing meet exhortations to hold out: more automotive SEP litigation may just be inevitable

The automotive industry is facing a learning curve with respect to standard-essential patent (SEP) licensing. Given what I heard at yesterday's IAM Auto IP Europe conference in Munich, I see partial progress--such as Avanci's announcement of 4G patent license agreements with three more automotive brands--while some automotive industry players appear to be learning too slowly for their own good. As a result, we're going to see more litigation, such as the cases recently brought by Intellectual Ventures (not an Avanci licensor) over a mix of three SEPs and even more non-SEPs.

In my previous post I reported on a Qualcomm executive's perspective on the illegality of licensing negotiation groups. In this post I'll discuss some of the other things that were said.

The IAM conference took place in the aftermath of two strategic defeats for automotive holdouts:

• Daimler had wasted millions and millions of euros as it ultimately took a car-level SEP license from Nokia anyway. Last year, Daimler was slapped with four German SEP injunctions over the course of less than three months. It settled two of those disputes rather quickly, and finally caved to Nokia.

  After the Daimler-Nokia settlement I researched the state of affairs in that dispute, and found out that Daimler was losing to a far greater extent than it initially appeared. The stage was set for two or three more Nokia injunctions, and one of the two that were already in place was going to become enforceable without collateral in a matter of months. Daimler's last hope would then have been a so-called § 315 offer: a declaration of one's willingness to take a license on terms that, if need be, can be adjusted by a court of law. Whether that defense would have succeeded is another question, as Daimler's overall conduct was typical of an unwilling licensee, and it's very hard to imagine that a § 315 royalty determination would have resulted in any lower rate than Nokia's share of the Avanci pool license. There just is no comparable in automotive SEP licensing that would be more likely to be recognized by the courts. So even if the § 315 defense had dissuaded the appeals court from allowing the enforcement of an injunction, Daimler would have lost.

  Nokia probably managed its litigation costs more intelligently, and in any event, Nokia's benefit from having demonstrated its preparedness to enforce patents against car makers will lead to deals with companies who'd rather not lose in court. In retrospect, Daimler was the perfect target for Nokia because the dispute even ended up hardening some of Nokia's patents, which will help Nokia in other industries, above all in disputes with smartphone makers. By contrast, Daimler is not going to get better deals from other patent holders after its poor results in litigation so far.

• Automotive companies lobbied very hard for a reform of Germany's patent injunction statute, but all levels of the judiciary have already made it clear that the availability of patent injunctions has not been compromised on the bottom line.

In this environment, the "licensing > litigation" inequation should be a no-brainer. Licensing executives from companies such as Avanci and Philips did make a compelling case. Avanci Sr. VP Laurie Fitzgerald explained that Avanci doesn't prevent its licensors from direct agreements with automotive licensees. It's an offer, a one-stop solution for access to dozens of SEP portfolios, but it's optional. It already works for some. But some others display defiance even after Nokia v. Daimler.

Automotive supplier Continental is still fighting the war that Daimler has already lost. Sitting next to Conti's IP chief Roman Bonn, U.S. trial lawyer Ed Haug said that it always depends on someone's business goals, but generally he'd not advise clients to litigate SEP matters in the United States. But that is what Conti is still trying, with the Fifth Circuit recently having heard its appeal of Continental v. Avanci (with Conti on the losing track) and a somewhat duplicative case against Nokia pending in Delaware. It's probably too late for Mr. Bonn to heed Mr. Haug's advice. Conti will likely continue to throw good money after bad.

Mr. Bonn also sounded like a visitor from a parallel universe when he was discussing the recent amendment of the German Patent Act. He suggested that automotive defendants would benefit from it, but Meissner Bolte's Philipp Rastemborski, a German patent litigator, set the record straight and explained that Germany would remain just as attractive a jurisdiction to patentees as before.

In my view, Mr. Bonn and some others don't make the proper distinction between whether a statute applies to a case pattern and whether it actually makes a difference. The revised patent injunction statute doesn't come with a carve-out for SEPs, so defendants are not precluded from raising a proportionality defense in a SEP case. However, an unwilling licensee will simply be told to take a license as neither the defendant nor any third parties will be harmed then.

More recently, Continental also appears to be obsessed with China. Mr. Bonn expressed the view that the recently-updated Chinese Patent Law was going to be applied in ways that favor Chinese companies. And like in a recent German media interview, he used Huawei for a bogeyman, saying that Huawei (and ZTE) would place greater emphasis now on revenue generation from patent licenses. I'd just like to note that Huawei is not new to outbound patent licensing. Ten years ago, in the famous EU Huawei v. ZTE, they were already a plaintiff. Now, by the standards of the automotive industry a decade may just be like a year (or less) in tech...

Matthias Schneider, who is in charge of patent licensing at almost-wholly-owned Volkswagen subsidiary Audi, used to praise "the beauty of the Avanci model" on earlier occasions. This time around, however, he made it clear that he was just expressing his own views and not necessarily those of his company, though in reality he appeared to be his master's voice, parroting Volkswagen's talking points.

The most insightful thing he said was that currently some cars cannot be made because of a shortage in supply affecting a $1 chip, and that fact had more of an impact on the automotive ecosystem than a $15 (that's Avanci's 4G rate) or $20 patent royalty, whether levied on a $10K or $80K car.

Two of Mr. Schneider's statements left me speechless though:

• He questioned the value of the Avanci license because it wouldn't "solve [his] problem": there are SEP holders outside the Avanci pool. "Why should I take an Avanci license for $15?", he asked. That's an argument I had never heard in the automotive context. There's no legal or other obligation that pools are only allowed to exist if they offer 100% coverage of a standard. Mr. Schneider would like some sort of insurance policy, but I just don't think anyone can hold Avanci responsible for what others do (or choose not to do) outside that pool any more than one could complain to Audi about a warranty issue with a Tesla. The question is whether the $15 deal streamlines the licensing process and obviates litigation--and whether the Volkswagen Group (including its Audi subsidiary) likes it or not, the case law in various major jurisdictions favors SEP holders as different speakers (other than Conti's Mr. Bonn) explained yesterday.

• Mr. Schneider still believes companies can get better deals by means of holdout. He likened patent licensing to a pick-up sticks game: the first one to move loses; if you wait longer, it gets cheaper, he said.

  Even though he disclaimed speaking for his company, this was an "intelligent infringement" argument in favor of being an unwilling licensee. One may question the wisdom of going on the record with that kind of statement.

  That attitude neither helps to avoid litigation nor are policy makers going to be inclined to support holdout. A conference like yesterday's IAM Auto IP Europe isn't a dealmaking or peace-making event. But it is a chance for constructive discussions, and neither Conti nor Audi made it sound like amicable solutions were in sight. There will be more deals, but SEP holders will have to take car makers to court again and again and again.

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Qualcomm executive: 'everyone involved [in automotive patent licensing negotiation groups] should go to jail' for cartel law violation

Just to avoid any misunderstanding, I must clarify that Qualcomm Senior VP Fabian Gonnell didn't demand the immediate incarceration of automotive industry executives seeking an exemption from cartel law for the purpose of operating standard-essential patent (SEP) licensing negotiation groups (LNGs). Speaking at yesterday's IAM Auto IP Conference in Munich, Mr. Gonnell was saying that "there is nothing innovative" about LNGs, as the proposal comes down to what's been known--and deemed illegal--for over a century as a buyers' cartel if the net effect was collective hold out. If--in the alternative--LNGs didn't impede bilateral license agreements, they wouldn't make any impact. Therefore, LNGs should remain illegal, and should some fail to abide by the law as it stands, "everyone involved should go to jail."

This blog doesn't always agree with Qualcomm. Prior to that conference, the last time I saw Mr. Gonnell was when he testified at the FTC v. Qualcomm trial in San Jose, and I disagreed with much of it. But on the subject of LNGs I believe one cannot reasonably disagree that they are, and should remain, illegal. I'm not talking about a couple of small IoT startups joining forces to negotiate a SEP license, but about large corporations (with all the resources to engage in good-faith licensing negotiations) orchestrating collective holdout.

In a recent speech, EU competition chief Margrethe Vestager outlined her plans and priorities for a new era of cartel enforcement. While automotive LNGs weren't explicitly mentioned, they share some of the key characteristics of cartel problems Mrs. Vestager touched on. In my post on the commissioner's speech you can also find links to my three July 2021 posts on LNGs. If I had to sum up those three posts in one sentence, I would not just point to Mr. Gonnell's "everyone involved should go to jail" remark.

LNGs were mentioned on a few different occasions during yesterday's conference, though I got the impression that the idea has already lost steam. If the proposal to legalize LNGs had momentum, there would have been a dedicated panel on the subject. But as long as some--such as Volkswagen, whose outside counsel on LNGs was in the audience--continue to lobby regulatory authorities about it, others--such as Qualcomm--will voice their fundamental concerns.

"Defensive patent aggregator" RPX touted its model, and would apparently like to organize automotive LNGs if it could, but what the RPX speaker said was rather vague, unclear, and not really thrilling.

Nokia patent licensing director Teemu Soininen is clearly not a fan of LNGs either, though he didn't go rhetorically as far in their condemnation as Qualcomm. Mr. Soininen came across as the typical "nice guy next door" with whom willing licensees can work out a deal, and who wants to get along with everybody. He mentioned that after years of discussing patent licensing with automotive companies, he's now on friendly terms with many of them and it's good to see those people again at conferences like IAM Auto IP. Still, Nokia's position is that car makers should take a license either through Avanci (which announced three new licensees--Jaguar, Land Rover, Aston Martin--at the conference) or bilateral agreements, such as the one Nokia announced in late July with an unnamed company.

In my next post I'll discuss some of the other things that were said yesterday. The automotive industry got a reality check in multiple ways, one of which was that anyone pushing for LNGs has now been told very clearly that it wouldn't make sense for regulators to allow in the 21st century what was already illegal in the 19th century.

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Avanci patent pool signs up Jaguar, Land Rover, Aston Martin: 4G SEP licenses without prior litigation

Just an ultrashort post while I'm attending the IAM Auto IP Conference: Avanci Senior VP Laurie Fitzgerald mentioned new standard-essential patent license agreements in her panel presentation with Jaguar, Land Rover, and Aston Martin. She said those agreements had been concluded last week. I haven't been able to find any media coverage of those deals yet, so I thought I should share the information in time for today's email notifications, which most of my subscribers will receive in a couple of hours.

According to the Avanci executive, the pool has now licensed 24 million connected vehicles. The number was previously at 18 million in my recollection. Given that 70 million cars are sold every year, that means there still are a lot of unlicensed car makers out there.

No SEP enforcement actions against Jaguar, Land Rover, and Aston Martin by Avanci licensors were known. Theoretically, cases can take a while to surface in certain jurisdictions, but for now there's an overwhelming probability of those license deals having been struck without a need for litigation.

I will comment more on this conference tomorrow. There have been some interesting discussions.

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