This is my third post on Thursday's Nokia v. Daimler patent infringement trial in Munich. I've previously commented on Nokia's intentional misinterpretation of the Court of Justice of the EU's Huawei v. ZTE ruling and reported on the fact that this blog's publication of leaked information from secretive mediation talks between Nokia and the automotive industry gave rise to a peripheral controversy in court.
Toward the end, counsel for Nokia mentioned that Daimler asked for security to the amount of 4.5 billion euros (that's more than 4.9 billion U.S. dollars) in the event Nokia would seek to enforce a hypothetical injunction while an appeal would be pending. The likelihood of an injunction depends primarily on whether the court will adopt Nokia's utterly unreasonable misreading of CJEU case law. If the court does side with Nokia on this one, I don't have the slightest doubt that the appeals court would reverse (and probably faster than it usually does). Another question is whether the case will be stayed as an earlier wireless data communication standard (GSM-based EDGE) apparently came with exactly the selection strategy Nokia later claimed to have invented in connection with 3G/UMTS.
In both contexts, all I heard in court was one party's argument. Daimler presented its invalidity theory, which appeared to be a pretty strong case of non-novelty, but Nokia, despite Daimler asking them to respond, was evasive. And when Nokia argued that security to the amount of € 4.5 billion wasn't needed because Daimler could continue to source telematics control units (TCUs) from Samsung subsidiary Harman, and furthermore because Daimler could just deactivate 3G/UMTS support (leaving them with 2G/GSM and 4G/LTE), the court terminated the hearing without allowing counsel for Daimler (or the intervenors) to respond.
As counsel for Nokia explained, they are not asking for an injunction that would force Daimler to hold its manufacturing. Their prayer for injunctive relief is specific to German sales, and limited to Daimler cars that come with TCUs from certain suppliers (most likely, the direct suppliers among the intervenors in this action, who are Continental, Bosch, TomTom, Valeo subsidiary Peiker, and BURY), with Samsung subsidiary Harman being explicitly excluded for the time being, though Nokia does reserve the right to bring a new complaint targeting Daimler cars equipped with Harman TCUs.
What Nokia didn't specify is an amount that they would consider reasonable. The purpose of such security is only to ensure Daimler can still enforce a hypothetical future wrongful-enforcement damages award even if Nokia went bankrupt in the meantime. What Daimler will actually get may differ greatly from the amount of the security. Technically, Nokia could choose between either posting a bond or making a deposit. I guess they would have to make a deposit for an amount this large. A bond would be costly, and with Nokia's business being in decline, it's unclear whether any bank would vouch for Nokia to the tune of billions of euros without Nokia actually making a deposit with the same bank (in which case Nokia might as well put the money in a German court's bank account, which wouldn't charge fees).
Nokia's argument that enforcement damages would be mitigated by Daimler disabling 3G isn't convincing. There are some mobile telephone networks in Germany that still rely on 3G in wide swaths of the country (such as Telefónica's O2 service). Also, I don't know whether any carrier would certify a 4G end-user device (such as a connected car) without being backwards-compatible to 3G. That might leave Daimler with 2G.
As for Harman's ability to just supply enough TCUs, I don't know to what extent Harman itself can do it, or whether the powerful Samsung group as a whole could enable Harman to do so.
There's no reason to assume Nokia will ever license Harman, except under antitrust pressure (such as from the European Commission, or as per a court order). So this looks like a peacemeal resolution strategy: by means of a carve-out for Daimler cars with Harman TCUs, Nokia tries to make it easier for the court to grant an injunction (in the middle of the German patent reform debate, where the proportionality of injunctive relief is the #1 topic of debate), and probably hopes that the European Commission won't take decisive action before an injunction comes down. When Samsung was pursuing injunctive relief against Apple almost a decade ago, the Commission at some point put so much pressure on Samsung that all injunction requests over SEPs were withdrawn EU-wide. The Commission's hesitance to strike down on Nokia's clear abuse of EU antitrust law is already making the agency look very bad. Its dual standards are already more than obvious. But at the point where Nokia would enforce a SEP injunction agianst Daimler, enabled only by Nokia's refusal to license Daimler's suppliers, the Commission would either be exposed as the Western world's least credible and least independent competition authority--or it would have to call Nokia off, as it once did in the Samsung case.
If Nokia brought a follow-on complaint targeting Daimler cars with Harman TCUs, the Munich court could adjudicate that one pretty quickly. I'm not sure they would even hold their usual two hearings in that case. However, they couldn't resolve it faster than the appeals court would most likely overturn the original decision.
While it's easy to see how Nokia hopes its tailored injunction strategy may persuade the court to just go ahead and grant an injunction, and dissuade the Commission from intervening, it's harder to tell from the outside what Nokia really intends to achieve here.
It wouldn't make sense for Nokia to obtain an injunction against Daimler cars incorporating TCUs from half a dozen suppliers as long as Daimler has other sources. A follow-on complaint would be a given. And at that point (though I don't think Nokia could formally win a second case before the appeals court tosses a hypothetical first win), Nokia would likely have to make a multi-billion euro deposit. Last summer its cash reserves amounted to approximately 7 billion euros, but it's another question how comfortable Nokia's shareholders would be with half or more of that amount being deposited in a German court's bank account.
Nokia would need a German injunction that bites and lasts. A tailored injunction might just be an annoyance to Daimler without forcing a settlement. And even an injunction that can't be worked around logistically would matter only if it was more than ephemeral.
With its current strategy, Nokia is jeopardizing the reputation of the Munich I Regional Court (by asking it to misinterpret Huawei v. ZTE in an outrageous way) and of the European Commission, whose call for mediation suggested that it is a purely political organization as opposed to a regulator that truly cares about safeguarding competition. The grand prize Nokia is hoping for is a settlement with Daimler, and I don't see that happening anytime soon. This could become Nokia's Vietnam. On Tuesday, the Mannheim Regional Court will most likely hold a Nokia patent non-infringed. Nokia's SEP portfolio is largely untested in litigation. If the patents-in-suit I've seen so far are Nokia's strongest weapons, then they are in serious trouble. At the end of the Daimler dispute, Nokia's SEP portfolio might be totally devalued, and we're just about a couple of years away from the next round of renewals of Nokia license deals in the smartphone industry, where I predict they're going to get far less money than last time.
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