Full text of the injunction Epic Games is seeking against Apple's App Store terms and policies

Earlier today I published the findings of fact and conclusions of law that Epic Games and Apple propose. Also, I had just read a few dozen pages when I already found something so outrageously misleading in Apple's filing that I just had to comment on it.

By now I've read both documents cursorily (to my own surprise, not feeling dizzy yet), and I've shared a number of observations and tidbits on Twitter. All in all, I'm favorably impressed--and not just because I am myself at loggerheads with Apple over its App Store terms and policies--by how compelling Epic's case is. I'd like to draw a comparison to the FTC's case against Qualcomm in 2019. The FTC's strength was all that testimony from smartphone and chipset makers--but the FTC's lawyers hardly elicited any major concessions from Qualcomm's current and former employees, all of whom stayed very much on message and denied everything but the absolutely undeniable. Relatively speaking, the most useful statements by Qualcomm executives that the FTC found were in a transcript of an IRS interview with Qualcomm. Epic's lawyers, however, have managed to get Apple players to confirm key facts. Also, from what I can see so far, Epic is in far better shape than the FTC was with respect to economic expert testimony.

It's a euphemism to label Apple's security and privacy arguments as "pretextual."

I have to read everything again more carefully and give it further consideration, but it also appears to me that some of Apple's defenses are attacks on strawmen. It appears that Apple expects to get a lot of mileage out of a two-sided market theory, but Epic is in a position to prevail even on that basis. Again, this is my preliminary assessment after quickly going over almost 700 pages...

The case won't be decided based on last night's filings, but after the trial. So it's too early to go into too much detail these days. There'll be plenty of time in May. What I thought was useful to share now, however, is the specific language of the ruling and injunctive relief Epic is seeking because it's impressive and shows what's really going to be at stake in May (it's not simply about Epic making more money, but truly about competition and innovation):

Claims Concerning iOS App Distribution

The Court has found in favor of Epic on the following claims:

• Epic Count 1: Sherman Act § 2: Unlawful Monopoly Maintenance in the iOS App Distribution Market

• Epic Count 2: Sherman Act § 2: Denial of Essential Facility in the iOS App Distribution Market

• Epic Count 3: Sherman Act § 1: Unreasonable Restraints on Trade in the iOS App Distribution Market

• Epic Count 7: California Cartwright Act: Unreasonable Restraints of Trade in the iOS App Distribution Market

• Epic Count 10: California Unfair Competition Law (with respect to iOS app distribution)

To remedy Epic’s injuries, the Court orders the following relief:

Apple is permanently enjoined from further violations of Section 1 and/or Section 2 of the Sherman Act, the Cartwright Act and/or the California Unfair Competition Law with respect to the iOS App Distribution Market and/or the App Store on the iOS platform;

Apple is permanently enjoined from restricting, prohibiting, impeding or deterring the distribution [footnote says: "Distribution includes both supply of apps by developers and acquisition of apps by consumers unless otherwise specified."] of iOS apps through a distribution channel other than the App Store, including by:

• Restricting, prohibiting, impeding or deterring users of iOS devices, through technical, contractual, financial, or other means, from downloading, executing, installing and/or updating iOS apps and app stores from a distribution channel other than the App Store;

• Enforcing contractual provisions, guidelines or policies, or imposing technical restrictions or financial penalties, that (i) restrict, prohibit, impede or deter the distribution of iOS apps through a distribution channel other than the App Store or (ii) have the effect of impeding or deterring competition among app distributors (including competition between third party app distributors and the App Store);

• Conditioning access of developers to iOS on the pricing of their apps or in-app content on other platforms;

• Conditioning access of developers to the App Store on the pricing of their apps or in-app content on other platforms and/or on the pricing of their iOS apps or in-app content available through other distribution channels;

• Conditioning distribution through the App Store on exclusivity or on an agreement by a developer not to distribute an iOS app through other means; and

• Retaliating or threatening to retaliate against any developer on the basis of the developer’s choice of iOS app distribution channel.

Apple is permanently enjoined from discriminating against or disadvantaging iOS app distribution through channels other than the App Store, including by:

• Denying iOS app stores access to iOS functionality that the App Store has access to, including iOS functionality that assists in or is required for the downloading, execution, installation, updating and removal of apps;

• Denying iOS apps that were downloaded through a distribution channel other than the App Store equivalent access to iOS functionality and/or features that iOS apps downloaded through the App Store have access to;

• Deterring users from downloading, executing, installing and/or updating iOS apps from or through an app distribution channel other than the App Store, including by imposing “warning” screens or other user obstructions or deterrents on iOS apps distributed through channels other than the App Store that are not present for apps distributed through the App Store.

To remedy Apple’s past misconduct and its anti-competitive effects in the iOS App Distribution Market and other relevant markets, and in order to restore competition in the iOS App Distribution Market, the Court orders the following time-limited relief, which shall be effective from the date of this Order for a period of three (3) years:

• Apple is enjoined from enforcing contractual provisions, guidelines or policies, or imposing technical restrictions, that restrict, prohibit, impede or deter distribution of iOS app stores through the App Store.

Nothing in this Order shall prohibit Apple from taking steps to prevent the distribution of malware.

Claims Concerning In-App Payment Processing

The Court has found in favor of Epic on the following claims:

• Epic Count 4: Sherman Act § 2: Unlawful Monopoly Maintenance in the iOS In- App Payment Solutions Market

• Epic Count 5: Sherman Act § 1: Unreasonable Restraints of Trade in the iOS In- App Payment Solutions Market

• Epic Count 6: Sherman Act § 1: Tying the App Store in the iOS App Distribution Market to In-App Purchase in the iOS In-App Payment Solutions Market

• Epic Count 8: California Cartwright Act: Unreasonable Restraints of Trade in the iOS In-App Payment Solutions Market

• Epic Count 9: California Cartwright Act: Tying the App Store in the iOS App Distribution Market to In-App Purchase in the iOS In-App Payment Solutions Market

• Epic Count 10: California Unfair Competition Law (with respect to iOS in-app payment processing)

To remedy Epic’s injuries, the Court orders the following relief:

Apple is permanently enjoined from further violations of Section 1 and/or Section 2 of the Sherman Act, the Cartwright Act and/or the California Unfair Competition Law with respect to the iOS In-App Payment Solutions Market;

Apple is permanently enjoined from restricting, prohibiting, impeding or deterring the use of in-app payment processors other than Apple’s In-App Purchase (“IAP”), including by:

• Rejecting iOS apps for distribution through the App Store or retaliating or threatening to retaliate against any developer of an iOS app on the basis of the developer’s or the app’s actual or intended integration of one or more non-IAP payment processors;

• Enforcing contractual provisions, guidelines or policies, or imposing technical restrictions or financial penalties, that (i) restrict, prohibit, impede or deter developers from integrating payment processors other than Apple’s IAP into their apps for processing in-app purchases of in-app content or (ii) have the effect of impeding or deterring competition among in-app payment processors;

Apple is permanently enjoined from discriminating against payment processors other than Apple’s IAP, iOS developers that use payment processors other than Apple’s IAP, or iOS apps or app stores that use payment processors other than Apple’s IAP, including by:

• Denying access to iOS apps or app stores that use payment processors other than Apple’s IAP, to the same iOS functionality and/or features that apps using exclusively Apple’s IAP for processing in-app purchases of in-app content have;

• Giving preferential treatment in search to iOS apps that exclusively use Apple’s IAP; and

  Apple is permanently enjoined from imposing a financial penalty or technical limitation on access to the iOS platform by iOS apps (including iOS app stores) that use payment processing solutions other than or in addition to Apple’s IAP.

            *      *      *      *      *

Nothing in this Order shall prohibit Apple from seeking a modification of the Court’s Order regarding the iOS In-App Payment Solutions Market on the basis of changed circumstances (i.e., Apple’s loss of monopoly power in the iOS App Distribution Market).

Anti-Circumvention

Apple is permanently enjoined from circumventing this Order by taking steps that violate the purpose, if not the terms, of this Order, including by imposing disincentives or providing incentives that are designed to, and have the effect of, making real competition in the iOS App Distribution Market and/or the iOS In-App Payment Solutions Market impracticable.

Anti-Retaliation

Apple is permanently enjoined from taking any retaliatory actions against Epic or any of its affiliates in connection with or based on Epic’s filing of this Action, the August 2020 enablement of a direct payment option in Fortnite, or the steps Epic took to enable that option (“Prior Epic Actions”). For the avoidance of doubt, prohibited retaliatory actions include conduct by Apple that denies Fortnite access to Apple’s App Store on the basis of such Prior Epic Actions.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

In its latest court filing, Apple gives the term "commission" a new meaning unsupported by dictionary definitions and commercial reality

Sooner than I would have thought when I publshed the latest Epic Games v. Apple filings (688 pages in total), I already feel an irresistible urge to comment on something because it is just intellectually dishonest.

There's nothing wrong per se with Apple comparing the iOS app distribution situation to the old days of software publishing: I, too, remember the "shrink-wrapped software" business. You can find some game credits from the mid to late 1990s that list me in sales & marketing and localization functions (Warcraft II: Tides of Darkness, Starcraft, Diablo). In 1996, I served on the board of the Software Publishers Association (SPA) Europe, and even though the World Wide Web existed at the time, we were all still selling software in boxes. Apple accurately notes that consumers "had to drive to the store, find it on the shelf, buy it in the shrink-wrapped box, and load it up onto their device." It's also plausible that, according to Apple pointing to his testimony, Epic CEO Tim Sweeney "found it difficult to sell games through traditional retail channels in the early 1990s." At the same time, I also dealt with publishers, distributors, and retailers. I had to negotiate discounts, cooperative advertising allowances, or grant early-payment discounts when payments would actually arrive only months later, making mockery of the term. It wasn't a land of milk and honey for sure (though at least you had multiple retailers and not just one per platform)--and Apple has every right to point that fact out.

But there's everything wrong with Apple's reality distortion field. Let's have this debate. Let's talk honestly about how software distribution changed over the course of time. But if we want to have an honest conversation, then we must face the facts, including those facts that don't support Apple's App Store feudalism.

Now I'm going to quote a paragraph that distorts a term in an outrageous way:

"150. When Epic agreed to distribute other developers' games around 1996, it collected a 60% commission—which Mr. Sweeney characterized as a fairly favorable royalty for developers. Sweeney TT. Most distributors at the time charged at least a 70% commission. Sweeney TT; Schmalensee TT." (emphases added)

By mislabeling distributor and retailer margins as "commissions," Apple seeks to distract from structural differences between shrinkwrapped software distribution and today's app stores.

Apple doesn't take any risk, nor does it do any warehousing. Distributor margins, however, involve the physical shipment of goods, and while some agreements with distributors and resellers allowed them to return some or all of the merchandise, some didn't. Even if the customer had the right to return goods, they still incurred significant logistical costs. None of that applies to downloads from a server.

The margin that a publisher or a distributor makes is anything but a "commission." A commission is when someone gets paid without taking a risk, without warehousing goods, without producing merchandise, without giving you shelf space, which (unlike the number of apps available for download from a server) is scarce. The Free Dictionary provides multiple dictionaries' definitions of the term "commission" and none of them is comparable to a publisher or reseller margin:

• "A fee or percentage allowed to a sales representative or an agent for services rendered." (American Heritage Dictionary)

• "the fee allotted to an agent for services rendered" (Collins English Dictionary)

• "a sum or percentage allowed to agents, sales representatives, etc., for their services." (Random House Kernerman Webster's College Dictionary)

Apple's App Store "commission" is largely just a tax. But it's not a margin because they don't buy from you and resell. They collect and pass certain revenues on to you.

For the many who don't even remember shrinkwrapped software publishing anymore, let me provide a quick overview. Back in the day, you could

• grant an IP license to a publisher who would make and sell the physical product, with you receiving a royalty like a book author from a book publisher;

• or you made the physical product and could

  1. sell it on an exclusive or non-exclusive basis to distributors (wholesalers) who would resell your product to retailers, who in turn would resell it to end users;

  2. sell products directly to retailers; or

  3. sell it directly (mail order).

  Of course, combinations and hybrids were possible as well.

For example, when my Blizzard Entertainment friends sold their first Warcraft title, the company that had just acquired them (Davidson & Associates, an educational software publisher) acted as their distributor in the U.S. market. So from Blizzard's point of view, it was model #1; from the vantage point of Davidson as a whole, it was #2. I don't remember whether they also offered Warcraft by mail order, but they might have.

In Europe, however, Davidson didn't have a distribution network or any other presence at the time. Blizzard's founders knew another games company, Interplay, which became their exclusive European partner. But it was a bad deal because Interplay merely paid Blizzard a royalty of a few bucks per unit. Interplay then made the physical products for Europe, and sold them to the channel (partly directly, partly through other distributors).

Before they launched Warcraft II, I came in. I was the first person to work for Davidson and Blizzard in Europe at the time, and I wasn't even a full-time employee, but a consultant. Blizzard's parent company thought the Interplay deal was suboptimal, and I agreed. They adopted my advice to just set up an Irish subsidiary for tax reasons, have the European versions of the product manufactured there, and to appoint exclusive distributors (in that case, importers) in each European country. We granted a 60% discount to our German distributor (Bomico). We had an alternative that would have taken only 55% (no alternatives to Apple's App Store, though). But we believed we were ultimately going to be more successful with Bomico, and we were indeed: Warcraft II became #1 in the German Media Control sell-through charts a few months before it became #1 in the United States.

We sold about 300,000 copies in Germany. When we launched in December 1995, Bomico had placed pre-orders amounting to an aggregate of 70,000 copies if I recall correctly. It was a major logistical effort. In order to make it in time for the Christmas Selling Season, we actually had to fly the first 20,000 or more copies on a chartered freight plane from Dublin to Frankfurt, while the remainder of the initial order volume was on its way by truck and ferry. So we had ship over land, sea and air--and what made Warcraft II different from its predecessor in terms of gameplay was that you had not only land units, but also sea and air units. A funny anecdote.

Nowadays, you don't need freight planes, trucks, ferries. You just upload your app to Apple using Xcode (Apple's development system) or, which is what my company did because we used Unity, we sent it to Apple from a Mac with a special uploader app provided by Apple. Apple doesn't need a warehouse: the cost of storing an app on a server amounts to almost nothing (cloud storage is really cheap, while computing time can get expensive, but if your app needs a backend, then you, the developer, have to operate it yourself on Amazon AWS or wherever).

Again, developers faced challenges in the 1990s. Retailers had significant market power, but at least they normally weren't monopolists. Even if a shop was "the only game in town" somewhere, there was nothing stopping a competing retail chain from opening an outlet across the street. With iOS, it's a whole new situation. There are not only drawbacks but also certain advantages. However, Apple didn't invent the distribution of software by download. In the late 1990s, others were doing that already, such as Beyond.com (which I visited in Sunnyvale in 1999--just a couple of miles from Apple's Cupertino HQ) and its acquirer, Digital River.

The net effect of a functioning market is that the gains of trade--and the gains from technological progress--are split fairly between the parties. That is not the case with mobile app stores, where developers are taxed and tyrannized.

Let's not compare apples to oranges--and let's not name apples oranges.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Epic Games and Apple file proposed findings of fact and conclusions of law: 688 pages in total

We're only three weeks and a half away from the kickoff of the Epic Games v. Apple App Store antitrust trial in Oakland (Northern District of California). The parties just filed their proposed findings of fact and conclusions of law around midnight Pacific Time. Knowing that many of my readers in many different time zones may be interested in taking a look at these documents, I'm making them available now. It will, of course, take me some time to digest and comment on them, and I can't even predict how many blog posts (whether just one follow-up post or a whole bunch) will be needed as it depends on how interesting the information I discover in those "books" turns out to be.

So, for now, just the document. Let's start with the plaintiff, Fortnite and Unreal Engine maker Epic Games (this post continues below the document):

21-04-08 Epic Games Propose... by Florian Mueller

Here comes Apple's filing, which is only slightly "shorter" than Epic'S (323 pages vs. 365):

21-04-07 Apple Proposed Fin... by Florian Mueller

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Nokia receives patent royalties from Lenovo under license deal settling multi-jurisdictional litigation without proving Nokia owns any actually-essential H.264 patents

Nokia just announced "that it has concluded a multi-year, multi-technology patent cross-license agreement with Lenovo. Under the agreement, Lenovo will make a net balancing payment to Nokia. The terms of the agreement remain confidential. The agreement resolves all pending patent litigation and other proceedings between the two parties, in all jurisdictions."

Lenovo defended itself pretty well against Nokia's patent infringement lawsuits in the U.S., Germany, and India, and brought a FRAND action in the Northern District of California. Nokia had some success in the Munich I Regional Court, but the appeals court stayed the enforcement of an injunction. Another Munich trial was scheduled for July. Last summer, Nokia filed a complaint with the United States International Trade Commission seeking an import ban, but a decision on that complaint would still have taken some more time.

Assuming that there was no clear and present danger of Lenovo being shut out of any market at least until the summer (after the next Munich trial), I venture to speculate that Lenovo agreed to a deal after Nokia lowered its royalty demands. That's the normal course of the licensing business: if the offensive party has a lot of leverage, it can dictate the terms; if it doesn't have a great deal of leverage, at least not immediately, it has to make the deal more attractive to the defensive party. And the more a patent holder depends on licensing income, the greater the pressure to reach an agreement. Nokia needed a deal, and Lenovo eliminated the risk of having to conclude an agreement against the backdrop of an imminent sales ban.

What Nokia hasn't achieved in the Lenovo dispute is to deliver evidence that it holds actually H.264-essential patents. But the portfolio license announced today goes way beyond video codecs.

As for forum selection, it appears likely that Nokia will continue to bet primarily on U.S. district courts, the ITC, the Munich I Regional Court, with other jurisdictions (such as India in this particular dispute) being given a try from time to time.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Supreme Court deems Google's use of Java APIs in Android fair use, thus no infringement--doesn't reach API copyrightability

Based on how the Google v. Oracle Supreme Court hearing went in October 2020, it appeared to be a given that the Java APIs in question were copyrightable, and the fair use debate was over whether the Federal Circuit had correctly ruled against Google or whether the San Francisco jury would have had to be afforded so much deference that a judgment as a matter of law wasn't warranted. In the former case, the case would have gone back to San Francisco for a remedies determination. In the latter case, the Federal Circuit would likely have remanded for a retrial, as Oracle was disadvantaged by the district court.

Surprisingly, the Supreme Court has just declared Google's copying of thousands of lines of declaring code to be fair use, thereby substantially weakening software copyright protection in the United States as there had not previously been a case involving such a substantial amount of undisputedly original and creative program code that someone else was allowed to incorporate into a competing product and distribute billions of times.

This decision was supported by six of the nine justices. Only Justices Thomas and Alito dissented (and noted that the majority didn't want to address copyrightability because it couldn't have reached its fair use conclusion thereafter). Justice Barrett was appointed after the hearing.

The per curiam focuses only on fair use. Copyrightability didn't have to be addressed as the case has been resolved in Google's favor, more than ten years after it was brought. Last July, I already expressed concern that the court might not say much about copyrightability. At the time, I wrote:

"If the Supreme Court answered the 'fair use' question in Google's favor on the basis of jury deference [it now actually did so on the merits], it might or might not discuss the standard for software copyrightability in detail. Whether the Federal Circuit's copyrightability holding would be affirmed explicitly or (by reaching "fair use") mostly implicitly, the copyrightability of API code would continue to be a reality in the United States."

Given that the justices were pretty much unanimously leaning toward copyrightability in October, it would be quite risky for anyone to consider API declaring code uncopyrightable. However, technically the Federal Circuit's copyrightability decision hasn't been affirmed either.

Contrary to what many others will say, today's decision is bad news for software developers. We do need certain fair use rights, sure. But overreaching fair use encourages infringement. The simplest way to put it is this: if someone created a platform and later turned around on developers, alleging copyright infringement by continuing to use some API code in the apps themselves, that would raise issues--and if developers didn't have an equitable defense anyway, they should at least have fair use rights. In Oracle v. Google, however, the issue was much more narrow: it was about a new platform using another platform's API code to compete--in fact, displace--the older one.

The syllabus says: "In reaching this result, the Court does not overturn or modify its earlier cases involving fair use." That sounds like the ruling is meant to be of only a narrow scope. But it doesn't change anything about this being a major departure from what the fair use standard used to be, especially with respect to software. It definitely stretches the envelope, weakening copyright as a vehicle for protecting software.

Copyright and patents are intellectual property regimes that were created in centuries before the advent of computer programs. Without digressing into details, software patents are among the most controversial categories of patents (second only to so-called "patents on life"). With copyright, there are plenty of issues as well. For example, it is commonly accepted that object code--and not only source code--is protected by copyright. But object code is technical, binary, machine-readable, not human-readable. It's a stretch to apply copyright protection to object code, but in the alternative one would have to come up with a software-specific sui generis IPR. It has been suggested that a sui generis right--somewhere between copyright and patents--is needed, though no such initiative has gained traction to date. I wouldn't rule out that it might happen in the future, but certainly not in the near term.

There are also external factors due to which copyright protection of software as well as software licenses that rely on copyright to mandate reciprocity, which is called copyleft (and also weakened by today's ruling) are less key today than they were, say, 20 or 30 years ago: cloud computing and platforms.

• When software actually gets distributed to end users, it's much easier to identify copyright infringements. And copyleft generally applies only to distribution. As long as software stays on a server, it may commit infringements that are never detected, and most copyleft licenses just don't apply.

• In the platform economy, might all too often makes right. That's why Epic Games is suing Apple (the trial is less than a month away). Apple's airtight control of iOS and of what gets installed on a billion users' devices doesn't depend on whether APIs are copyrightable or whether software is patentable. Some copyright protection is needed because otherwise someone could just steal iOS and build alternative iOS devices--but they don't even need to own the copyright in their APIs as long as the operating system allows only Apple's own App Store to install apps, which in turn are "curated" by Apple and only Apple. It's all about market power, and the only remedy against that one is antitrust--or antitrust-like laws such as the upcoming EU Digital Markets Act--as fair use wouldn't open the App Store.

  There's plenty of people out there now who are celebrating today's Supreme Court decision as promoting innovation, competition, and openness. In reality, the net effect will be the opposite. When Sun created Java, they allowed everyone to make and publish apps for it. Sun adopted a dual-licensing model under which you could either get Java under the GPL free software license or take a commercial license. Sun is history--it was acquired by Oracle. The next company contemplating the development of a comparable platform will look at what happened in Oracle v. Google. Against that background, it may either be discouraged from making the investment in the first place--or it may be encouraged to pursue an Apple-like platform business model ("walled garden") and create network effects through a non-open system with cloud components, an exclusive app store, and so forth. In other words, if you can't own software, you'll try to own (access to) users.

The case appeared dead in 2012 after the district judge held thousands of lines of program code uncopyrightable, and a few years later after a second jury agreed with Google on fair use. The appellate attorney they call the Defibrillator, Orrick Herrington Sutcliffe's Joshua Rosenkranz, twice managed to revive the case. Every time he won an appeal, Google appointed a new lead counsel. Ultimately, Goldstein &, Russell's Thomas Goldstein won the case for Google. (By the way, Mr. Rosenkranz is on Apple's team against Epic, so we may soon see him in action in a high-profile software platform case.)

Lawyers are not the reason Oracle lost this. Google's network of allies and supporters, including a number of organizations funded by Google, have for more than a decade been campaigning against Oracle's case. Oracle never managed to convince large parts of various relevant communities (which are mostly just vocal minorities) that what it was trying to achieve here would ultimately be good for developers. Certain justices indicated at the October hearing that they were aware of widespread concern over an Oracle victory being harmful to software development. That was just fear, uncertainty, and doubt (FUD). But it worked.

It may also have helped Google that the Supreme Court has had to overrule the Federal Circuit in a number of patent cases, so the Fed. Cir. may have a certain reputation of being exceedingly right holder-friendly. I've seen Federal Circuit decisions that really went too far. In this case, however, the Federal Circuit was absolutely right about (un)fair use.

[Update 1] I tweeted this remark concerning the term "user interface":

„User interface“ is apparently a term with an ever-expanding scope. Until I saw the passage attached to the tweet below, I used to think the Java APIs weren’t a UI. I know other cases where API and UI overlap, such as SQL queries or when I manually made SYS calls on a Commodore. https://t.co/OgbH27qkd1

— Florian Mueller (@FOSSpatents) April 5, 2021

[/Update 1]

[Update 2] Oracle issued the following statement attributable to Dorian Daley, Oracle's EVP and General Counsel:

"The Google platform just got bigger and market power greater — the barriers to entry higher and the ability to compete lower. They stole Java and spent a decade litigating as only a monopolist can. This behavior is exactly why regulatory authorities around the world and in the United States are examining Google's business practices."

[/Update 2]

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Pursuit or threat of antisuit injunction gives rise to strong presumption of implementer's unwillingness to take FRAND license: Munich I Regional Court

This is a follow-up to yesterday's post, which mentioned that Ericsson is peddling Munich case law on antisuit injunctions in a U.S. appeals court, but even more so to my March 10 post on the recent quadruple-antisuit injunction in InterDigital v. Xiaomi, a judgment in which the Landgericht München I (Munich I Regional Court) laid out a rather inclusive list of criteria entitling standard-essential patent (SEP) holders to A2SIs and A4SIs in Munich (for the AxSI notation, see an earlier post).

The part of the InterDigital v. Xiaomi decision that has the industry even more concerned than the wide availability of (even pre-emptive) A2SIs and A4SIs is a dictum by the Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann) according to which someone moving for an ASI or threatening to do so may effectively lose their FRAND defense in Munich. As I've reported in connection with other cases, German SEP case law took a negative turn last year with Sisvel v. Haier, which the Federal Court of Justice reinforced a few months later in Sisvel v. Haier II. At least in Munich and Mannheim (both patent litigation divisions in either case), the Huawei v. ZTE FRAND analysis is practically limited to the question of whether the implementer (i.e., the alleged infringer) is a willing licensee. Practically, that hurdle is presently insurmountable in Munich, and the only safe harbor in Mannheim is an Art. 315 offer, i.e., a binding offer to take a license on FRAND terms subject to judicial determination if the parties can't agree. Thankfully, the Karlsruhe Higher Regional Court's patent litigation division under Presiding Judge Andreas Voss ("Voß" in German) overruled the Mannheim court in that regard.

The second part of the Dusseldorf Regional Court's preliminary reference to the European Court of Justice in Nokia v. Daimler could restore the status quo ante, under which an implementer merely had to express a general willingness to take a license in order to obligate the SEP holder to make a FRAND-compliant offer (which in my view was the correct application of Huawei v. ZTE). There is no guarantee, however, that the second part will be reached in Nokia v. Daimler.

Let's assume that the characterization of licensees as "unwilling" will be the norm in Munich until either the CJEU or the Munich Higher Regional Court (which may very well restore the Art. 315 safe harbor) bring about change. And that's why the unwillingness part of the Huawei v. ZTE analysis will be immensely important at least in the near term. Here's a passage on the bearing the pursuit or threat of an antisuit injunction has on the (un)willingness analysis--first in German, then my unofficial translation:

"Wenn aber diese Patentbenutzer wirklich lizenzwillig sind, so werden sie sich weiterer, über die bereits begangenen und andauernden Benutzungshandlungen hinausgehenden rechtswidriger Eingriffe in die eigentumsähnlich geschützten Rechtspositionen der Patentinhaber enthalten. Oder anders ausgedrückt, ein Patentbenutzer, der einen Antrag auf Erlass einer ASI stellt oder dies androht, kann in der Regel nicht als hinreichend lizenzwillig im Sinne der Rechtsprechung des Gerichtshofs der Europäischen Union und des Bundesgerichtshofs (vgl. EuGH GRUR 2015, 764-Huawei v. ZTE; BGH GRUR 2020, 961 - FRAND-Einwand; Urteil vom 24.11.2020 - KRZ 35/17 - FRAND-Einwand II; z.B. LG München I GRUR-RS 2020, 22577; 21 O 13026/19 bei juris) angesehen werden. Mithin kann von dem Patentbenutzer auch gefordert werden, dass er nach Erhalt des Verletzungshinweises nicht nur seine qualifizierte Lizenzbereitschaft erklärt, sondern auch, dass er keine ASI beantragen wird."

Unofficial translation:

"But if implementers are truly willing licensees, they will refrain from further violations of the property-like rights of SEP holders beyond the committed and ongoing use [of the patented inventions]. Or, to put it differently, a patent infringer bringing or threatening with a motion for an ASI can generally not be considered a sufficiently willing licensee within the meaning of the jurisprudence of the Court of Justice of the European Unoin and the Federal Court of Justice (cf. Huawei v. ZTE, Sisvel v. Haier, and Sisvel v. Haier II; e.g., [citing to a Munich decision]. Therefore, one can expect the implementer not only to respond to the infringement notice by declaring a willingness to take a license, but also to refrain from seeking an ASI."

The wording doesn't make it 100% certain that the pursuit of, or a threat with, an ASI renders an implementer an unwilling licensee. The expression "in der Regel" (meaning "generally" or "normally") leaves room for exceptions. However, the ruling does not indicate under what circumstances the Munich court would make an exception. Unless the regional appeals court revives the Art. 315 safe harbor, it may be practically impossible to be deemed a willing licensee after moving for, or threatening with, an ASI.

While I totally understand the companies who are profoundly concerned about this situation, it's a logical consequence of the German zero-deference approach to antisuit injunctions vis-à-vis courts in countries that are not EU member states. Furthermore, it's consistent with the Munich court's strategy to create a Nash-like equilibrium in which parties would be discouraged from pursuing foreign ASIs against German patent injunctions in the first place. The judges in Munich seek to make it a losing strategy to try this at all. However, there is a risk of escalating contempt sanctions. We need to find another way out of the current mess. German courts aren't peacemakers in the antisuit context: they're part of the problem themselves by requiring implementers to take a global portfolio license (in order to avoid an injunction) as opposed to limiting their jurisdiction to German patents--and by offering pre-emptive A2SIs and A4SIs, which gives the Munich court a "unique (forum-)selling proposition" in marketing lingo, but may lead courts in other countries to look for new ways to protect their own jurisdiction.

The antisuit situation continues to spiral out of control on at least three continents, and I'll keep watching it. This blog has been commenting on antisuit injunctions since Judge Robart's Microsoft v. Motorola ASI (affirmed by the Ninth Circuit), which in my opinion is still the best SEP-related ASI ever.

Finally, I'd like to highlight an academic paper on antisuit injunctions that provides a useful overview of key decisions in different jurisdictions, and discusses some of the issues arising from the proliferation of that type enjoinder: The Use and Abuse of Anti-suit Injunctions in SEP Litigation: Is There a Way Forward? by Professor Damien Geradin and Dimitrios Katsifis.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

In response to Samsung's Federal Circuit appeal, Ericsson points to Munich anti-antisuit case law

On February 22, Samsung filed the opening brief in its Federal Circuit appeal of Ericsson's anti-antisuit injunction from the Eastern District of Texas. Yesterday, Ericsson responded (this post continues below the document):

21-04-02 Ericsson Response ... by Florian Mueller

Those 80 pages from Ericsson are probably just the tip of the iceberg. Come Friday, the Federal Circuit may very well be inundated with amicus curiae briefs in support of Ericsson's position, as there will be no shortage of U.S. companies and academics with an interest in maximizing the number of patent lawsuits brought in the U.S., including in the Eastern District of Texas, which has lately been eclipsed by the Western District.

I believe it makes more sense to go into detail when not only Ericsson's brief but also the anticipated slew of amicus briefs are on the table. But I wanted to be of service and make the document available immediately.

Just a couple of observations:

• Ericsson definitely likes the Munich case law on anti-antisuit injunctions:

  "Courts worldwide recognize the legitimacy of defensive injunctions against foreign efforts to restrict domestic relief. Appx1116; see, e.g., Nokia v. Continental, Oberlandesgericht München [Munich Higher Regional Court], Dec. 12, 2019, 6 U 5042/19 (Ger.), translation at 8 (Appx1858-1867) (granting anti-interference injunction 'as a defense against' interference with enforcement of German 'patent rights in Germany').

  "See also InterDigital Tech. Corp. v. Xiaomi Commc’ns Co., Landgericht München [Munich Regional Court I], Feb. 25, 2021, 7 O 14276/20 (Ger.), translation at 39 (Appx1868-1922) (confirming anti-interference injunction to ensure patentee is not 'deprived of his right[s]' to 'enforcement'); [...]"

  Unlike the U.S. framework for antisuit injunctions, however, German courts afford literally zero deference to courts outside the EU.

• Ericsson argues that Judge Gilstrap's misconception (believing that Samsung was seeking an ITC import ban against Ericsson over its own SEPs, when in reality those ITC complaints involved only non-SEPs on both sides) doesn't matter because Samsung could still do so and, in any event, "Samsung has attacked Ericsson 4G and 5G SEPs through IPRs in the U.S., see Samsung Elecs. Co. v. Telefonaktiebolaget LM Ericsson, IPR Nos. 2021-487, -447, -446, -486 (Jan. 29, 2021), -730 (Mar. 26, 2021)."

  Challenging the validity of another party's patents couldn't be much further from seeking an import ban over one's own patents...

  Less than 24 hours before Ericsson filed its response brief with the Federal Circuit, IAM (Intellectual Asset Management) wrote about "the extent of the assault Samsung has launched at the PTAB against Ericsson as the Korean company pursues a strategy that few can afford." Interestingly, the Unified Patents report IAM cites to notes that Samsung "is the most prolific PTAB filer (49 filings) and at the same time are the most targeted defendant in patent litigation (19 cases as first-named defendant)," while "Ericsson was the most attacked patent owner at the PTAB with 30 petitions filed against them." The passage I just quoted from Ericsson's response brief merely lists a handful of Samsung v. Ericsson IPR petitions targeting SEPs. This means that only about 10% of Samsung's IPR petitions in the first quarter relate to Ericsson SEPs, and only one in six IPR petitions against Ericsson was brought by Samsung over a SEP. All in all, Unified Patents lists 30 Samsung v. Ericsson IPR petitions, most of them relating to non-SEPs. This just a consequence of Ericsson, a notoriously aggressive enforcer, having elected to sue Samsung over a large number of patents.

  The "strategy that few can afford" (bringing many IPR petitions) presupposes a patent holder asserting many patents, which is also a "strategy that few can afford." It's also an indication of how far apart the parties' positions on a reasonable license fee must be: otherwise Ericsson wouldn't be suing so aggressively, and Samsung would consider it cheaper to accept Ericsson's terms than to litigate in multiple jurisdictions in parallel.

There would be a lot more to say about Ericsson's filing, but for the reason stated above (I predict an avalanche of amicus briefs on Friday), I'd like to leave it at that for now.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|