BREAKING NEWS: Federal Cartel Office of Germany asks regional courts to refer component-level standard-essential patent licensing questions to CJEU, disagrees with Nokia

BREAKING NEWS

One of the most well-respected competition enforcement agencies in the world, the German Bundeskartellamt (Federal Cartel Office), has dealt a major blow to Nokia's abusive standard-essential patent assertion campaign against Daimler and, by extension, Daimler's global suppliers. As a result, the Mannheim Regional Court has already postponed the ruling it was slated to announce tomorrow (June 23) to August 4, 2020.

On June 18, Joerg Nothdurft, one of the highest-ranking officials of the Federal Cartel Office, sent a 24-page fax to the Mannheim and Munich courts, outlining the antitrust agency's perspective on the question of component-level licensing. In what is comparable to a Statement of Interest by the DOJ in U.S. cases or an amicus curiae brief, the Federal Cartel Office moves to stay Nokia's SEP infringement cases against Daimler and to refer multiple outcome-determinative legal questions to the Court of Justice of the EU (CJEU) in Luxembourg.

The letter notes that two of Daimler's suppliers--Continental and Valeo--drew the office's attention to certain issues.

The Federal Cartel Office proposes to request the CJEU to opine on a set of specific legal questions:

1. The first question is whether it constitutes an abuse of a dominant position under EU competition law to pursue injunctive relief against an end-product maker while refusing to fully license its suppliers.

2. The second question relates to whether a SEP holder is "entirely free" to choose the target of an infringement action regardless of its position in the supply chain.

3. The third question outlines specific cases in which the Federal Cartel Office is inclined to believe that suppliers are entitled to a license.

4. The fourth and final question raises the issue of whether SEP holders are free to offer a license only to a particular level of the supply chain.

The Federal Cartel Office notes that the European Commission's Directory-General for Competition (DG COMP) has not yet decided whether to open formal investigations, but that its failure to do so does not suggest that Nokia's course of action is in compliance with EU antitrust law.

I interpret the Mannheim Regional Court's postponement of tomorrow's decision on very short notice as a sign that the court originally intended to order a Germany-wide sales ban, but is now forced to give this further thought. I cannot imagine that Judge Dr. Kircher is still going to enjoin Daimler. And if he did so, his injunction would be stayed by the appeals court in no time.

This development is the worst news ever for Nokia and its partners-in-crime (mostly the Avanci gang) in the automotive patent wars. Nokia's and its trolls' (as well as Sharp's) infringement campaign is going to grind to a halt now. The Court of Justice of the EU will decide. DG COMP may or may not launch formal investigations now, but in the event of a referral of those legal questions to Luxembourg, the Commission would most likely await the outcome before taking specific action against Nokia. I suspect that the Federal Cartel Office filed its amicus curiae brief with DG COMP's unofficial blessings.

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Dusseldorf Regional Court reinforces position on access to standard-essential patent injunctions: analysis starts with SEP holder's licensing offer

On Monday, the press office of the Landgericht Düsseldorf (Dusseldorf Regional Court) issued a press release on six Conversant v. Huawei and ZTE cases scheduled to go to trial tomorrow (Thursday, June 18, 2020). Of note, the court that adjudicates more patent infringement cases than any other European court (though most smartphone cases, including cases over cellular connectivity in cars, go to the rocket dockets in Mannheim and Munich) reiterates its position on the availability ofcinjunctions over standard-essential patents:

"Nach der Rechtsprechung des EuGH darf ein Unterlassungsanspruch aus einem standardessentiellen Patent, für das eine FRAND-Erklärung abgegeben wurde, nur geltend gemacht[] werden, wenn der Patentinhaber dem lizenzwilligen Benutzer zuvor eine Lizenz zu fairen, angemessenen und nicht diskriminierenden Bedingungen (FRAND) angeboten hatte."

My unofficial translation:

"According to CJEU case law [i.e., Huawei v. ZTE], injunctive relief over a FRAND-pledged standard-essential patent may only be sought if the patentee previously offered to the willing licensee a license on fair, reasonable, and non-discriminatory (FRAND) terms."

The above sentence reaffirms that the starting point of the FRAND analysis will be what the SEP holder demanded. Should the SEP holder have failed to discharge its FRAND duties, no injunction will issue.

The three leading German patent litigation venues continue to approach and adjudge this legal question inconsistently:

• The Dusseldorf court is internally consistent, and in my opinion properly interprets what the CJEU said.

• The Munich I Regional Court takes the contrary position.

• Mannheim is internally divided--but a court divided can stand, at least in a non-Common Law jurisdiction like Germany. The Mannheim Regional Court's Seventh Civil Chamber (Presiding Judge: Dr. Peter Tochtermann) is still aligned with Dusseldorf, while the same court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher), which used to be in the mainstream, has recently decided to turn south in this regard, though there is still a glimmer of hope for Daimler in a pending Nokia case (scheduled to be decided next week) based on an adjustment made by that judiciary panel.

The legal test is extremely important, but let's not forget that a lot depends on how a test is applied. If the analysis begins with the SEP holder's offer, but even the most egregious of royalty demands are deemed to be FRAND-compliant, it won't really help. Conversely, if a court approaches a case like the Mannheim Regional Court's Second Civil Chamber in Nokia v. Daimler, but doesn't set the bar unreasonably high for the implementer of the standard, then the outcome may still be pro-competitive. That's why next week's Mannheim ruling will be a particularly interesting one to analyze.

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Without transparency in patent ownership, the Avanci pool borders on a scam operation that harms the IoT industry

Avanci isn't the first patent pool to employ a great deal of spin-doctoring, but its homepage is particularly "rich." Take the "Enabling the IoT" headline (that's one of the pages in its "Marketplace" section): baseband chipset makers undoubtedly enable the IoT, as do makers of connectivity modules that contain such chips and additional components, but Avanci refuses to grant them exhaustive patent licenses--which is an impediment (rather than conducive) to the further development and widespread adoption of IoT technologies

No less absurd is the claim that Avanci's pricing (leaving the question of component-level licensing aside for a moment) is fair, reasonable, and non-discriminatory (FRAND). Those of us following the Nokia v. Daimler litigation series know that Nokia makes a clearly supra-FRAND royalty demand (several times what Nokia gets per smartphone) and argues that it gets a similar amount as its share of Avanci's royalty income.

By far the most insane claim on Avanci's website is, however, the part where they talk about the "goal of bringing [...] transparency and predictability to the [licensing] process." Give me a break. On that whole damn website there's no such thing as a list of the patents you can license through Avanci. Nor do they publish their licensing terms. By contrast, there are patent pools such as this one (MPEG LA's AVC/H.264 pool) that do both: they publish their license agreements (including the fees), and they provide a patent list. The length of such a list is no excuse: they could upload a PDF that contains them all and/or provide access via a database query interface. Avanci's claim to be transparent is, sadly, an insult to human intelligence. That website is the epitome of intransparency. It couldn't realistically be any less informative.

Abusers like Avanci (and its worst members in that regard) give patent pools a bad name. I'd like to highlight two new academic papers in this context. First, Orrick Herrington &, Sutcliffe's John J. "Jay" Jurata and Emily Luken discuss the desirable and (in an increasing number of cases) undesirable effects of standard-essential patent pools in Glory Days: Do the Anticompetitive Risks of Standards-Essential Patent Pools Outweigh Their Procompetitive Benefits? That paper flags some very relevant concerns.

Second, with respect to the specific issue of transparency, three University of Bordeaux researchers just published a paper on Non-practicing entities and transparency in patent ownership in Europe that was funded by a lobbying group whose largest member, Google, neither practiced nor promoted transparency in patent ownership in the early to mid 2010s. They even made threats based on patents they claimed to hold but declined to disclose. Then, Google is nowadays also a member of the Fair Standards Alliance, though its then-subsidiary Motorola Mobility was one of a very few companies ever to be held liable for FRAND abuse (by the United States District Court for the Western District of Washington, affirmed by the Ninth Circuit). In a world in which we usually see the opposite trend (with ever more companies resorting to aggressive patent monetization after losing out in the marketplace), such defectors from the dark side are a welcome exception.

The paper on (the lack of) transparency raises the issue of patents being transferred in the middle of licensing negotiations without notice to a licensee. That's a serious issue, and one that Avanci badly needs to address.

If you negotiate an Avanci license today and sign a contract tomorrow, you may find yourself on the receiving end of litigation involving patents that you thought were part of your Avanci package until you found out that those patents were transferred without you having any way of knowing.

Some of Avanci's most important contributors engage in the ignominious practice of "privateering" (letting trolls assert parts of their portfolios on their behalf, with so-called patent "transfer" agreements often just reducing the patent assertion entity to a service provider and agency while the original patent holder is the main beneficiary in commercial terms).

So far, the victims of privateering were mostly smartphone makers like Apple. But while we're on the subject of the Internet of Things that Avanci falsely pretends to promote, it's worth noting that the IoT sector is increasingly impacted by privateering-style patent infringement suits.

Panasonic--an Avanci contributor--gave a bunch of LTE-related SEPs to a troll named Swirlate IP, which has brought five U.S. patent infringement complaints against the IoT industry over former Panasonic patents that the industry at large might have been led to believe were part of the Avanci pool:

• in the Northern District of Illinois against Continental Automotive Systems over an LTE/3G Network Access Device,

• in the same district against Livongo Health over a glucose monitoring product,

• in the District of Colorado against Badger Meter over a water meter reader with LTE connectivity,

• in the Northern District of Texas against Corning Optical Communications over a high-performance mujltiaccess 3G/LTE small cell for scalable indoor and venue developments with self-organizing networks (SON) capability, and

• in the District of Delaware against ResMed over a non-invasive medical ventilation product.

A second Panasonic privateer, Nitetek, is suing ChargePoint in the Northern District of California.

Avanci offers a license to a portfolio of portfolios, but how many of those patents are "phantom patents" that have in reality already been assigned to trolls, which effectively results in double-dipping?

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Sharp's blunt swords: two patents-in-suit against Daimler likely invalid, infringement cases got stayed

Last summer, five Sharp v. Daimler patent infringement cases (two of which were filed in Mannheim, the other three in Munich) became known through a filing in a U.S. Continental v. Avanci case. When the Munich I Regional Corut scheduled a couple of first hearings, I provided an update in September. Now it's time for a catch-up, as a couple of cases have been stayed and the other three are going to trial soon:

• In its first-filed case against Daimler, Sharp is asserting EP2154903 on a "mobile communication system, base station device, and mobile station device" in Mannheim (case no. 2 O 46/19; complaint filed on 12 April 2019). As per a May 26, 2020 decision, that case has been stayed pending the resolution of a nullity action the infringement court deemed meritorious.

• In the second Mannheim case (over EP2129181 on a "mobile communication system, base station apparatus and mobile station apparatus"; case no. 2 O 87/19), Sharp had no reasonable alternative to a stipulation to stay. Otherwise the case would have gone to trial later this month.

  So the current score is "two down, three to go."

• The first Sharp v. Daimler Munich trial has been scheduled for July 23, 2020 (Seventh Civil Chamber; Presiding Judge: Dr. Matthias Zigann). The patent-in-suit is EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method," and the case no. is 7 O 8818/19. The complaint was brought on June 28, 2019.

  On the same day, the same court will also hold an additional trial in a Nokia v. Daimler case.

• A couple more Sharp v. Daimler cases will be tried in Munich on November 3, 2020 and the following day (case no. 21 O 8609/19 over EP2854324 on a "communication system and mobile station apparatus" and case no. 21 O 9918/19 over EP2312896 on a "base station device, mobile station device and corresponding communication methods using carrier aggregation").

Sharp is a contributor to the abusive Avanci patent pool that makes supra-FRAND royalty demands and declines to license component makers. It's more of a gang than a pool, and its level of coverage (of the cellular SEP landscape) is far lower than Avanci likes to pretend, as I'll discuss in another post very soon.

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Neonode provided key prior art against Apple's slide-to-unlock patent and is now suing Apple in Texas over swipe-to-open and QuickPath swipe typing features in latest iPhones

The Neonode N1m smartphone didn't get much traction in the marketplace (with only a tiny number of units being sold in Sweden at the time), but it predated Apple's slide-to-unlock patent application, which is why it served as a key prior art reference in various disputes between Apple and Android device makers Samsung and Motorola Mobility. In a nutshell, the problem plaguing Apple's slide-to-unlock patent was that Apple itself had not invented slide to unlock per se, but merely the visual presentation ("slide-to-unlock image").

The Federal Court of Justice of Germany (the highest court to hear patent infringement and validity cases in that country) determined that the Neonode N1m rendered Apple's slide-to-unlock patent non-novel. Prior to the five judges on that panel, ten other European judges had reached more or less the same conclusion.

Neonode had filed for some patents of its own, and a U.S. legal entity brought a patent infringement complaint against Apple yesterday in the Western District of Texas (this post continues below the document):

20-06-08 Neonode v. Apple C... by Florian Mueller on Scribd

The patents-in-suit are

• U.S. Patent No. 8,095,879 on a "user interface for mobile handheld computer unit" and

• U.S. Patent No. 8,812,993 on a "user interface" (how descriptive!).

Neonode's complaint is pretty detailed. It summarizes the instances in Apple's previous U.S. litigations against Android device makers in which Neonode's prior art came up. It mentions that Apple declined to conclude a deal with Neonode involving the patents. And it details how the swipe-to-open and swipe typing (QuickPath) features in the latest iPhones (X and 11) and iPads allegedly infringe those patents.

Apple presumably had its reasons to reject Neonode's demands. Let's see how this infringement case unfolds. But after seeing the Neonode prior art mentioned in various Apple-Android disputes over the years, this is an ironic blast from the past.

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Huawei, Samsung top list of companies with 5G-essential patents in Amplified/GreyB study--Huawei, Qualcomm have highest essentiality ratios

Today's IAM Sunday Supplement drew my attention to a June 2, 2020 article IAM summarized today as follows: "Essentiality analysis finds that so far just 26% of declared 5G SEP grants are core to the standard and claims Huawei, LG and Samsung lead the way." That article notes, among other things, that "[t]he researchers judged 34% of the Huawei patents they analysed to be ‘core’ patents – by far the best hit rate among the top six players." What is meant here by "hit rate" is the percentage of declared-essential 5G patents of a given company that actually come across as essential even upon closer look (click on the image to enlarge; this post continues below the image):

In a May 25 press release, Amplified (an analytics/AI firm) and GreyB (a company that provides patent-related services) announced their collaboration and claimed to have created the "best-in-class report on 5G SEPs." That appears boastful, but having looked at the preliminary report (PDF) more closely, there's no denying that the two companies went an extra mile:

As opposed to conventional studies that just employ statistical methods and data-mining algorithms to connect dots between different data sets (such as essentiality declarations and patent databases), Amplified's partner in this research project, GreyB, conducted a "manual" essentiality analysis of at least one patent for each of the thousands of declared-5G-essential patent families with at least one "live" (granted and not revoked or abandoned) patent. The report makes it clear that GreyB cannot and does not claim to have conducted a legal review: it's ultimately up to the courts to decide. And as I know in my capacity as a litigation watcher, patents are synonymous with legal uncertainty. There are very high reversal rates for claim constructions, infringement findings, and (in)validity determinations on appeal.

GreyB appears to have considerable expertise in the technical analysis of patents, so it's a reasonable assumption that the degree of accuracy with which they assessed the likelihood of a declared-essential patent being truly standard-essential is pretty much the same across the portfolios of all patent holders. In other words, there's no reason whatsoever to assume a bias for or against any particular company. I'm sure they deemed far more patents essential than the courts of law would. The estimated essentiality rate of 26% of all declared-essential patents (by all patent holders) is far higher than the percentage of SEP infringement cases in which the patentees prevail. A large part of the discrepancy may simply be attributable to the fact that the Amplified/GreyB study presumed all those patents to be valid as granted, which flies in the face of what I know from the litigation front.

Only two of the top six 5G SEP holders have an essentiality rate of or above 30%: Huawei towers above the rest with its 34% rate, followed by Qualcomm with 30%. LG performs poorest at 19%, and Ericsson second-poorest at 22%. As for Qualcomm's strong showing, that company has a reputation for instructing its patent attorneys to fight for an extremely broad claim scope, which is helpful in an infringement or (as here) essentiality context, but backfires when facing validity challenges. As for Huawei, I just remember that in their dispute with ZTE, they won one Mannheim case and the merits part of one of their two Dusseldorf cases (otherwise the court wouldn't even have referred Huawei v. ZTE to the Court of Justice of the EU). So their hit rate was also quite high in court (4G patents at the time). Qualcomm very rarely goes to court, and in their dispute with Apple they went to extreme lengths to avoid any judicial decisions on the merits of any of their SEPs. That's why Qualcomm's patents are untested, and Qualcomm's behavior in the Apple case didn't exude confidence to put it mildly.

Anyway, assuming for the sake of the argument that the findings are representative, I'd lke to show you the full version of the chart of which I previously showed only the headline and the bottom part. The column chart I omitted before has three columns per company: their declared-essential 5G patent families (gray); the analyzed patent families (yellow; they only looked at patent families with at least one granted member); and the red column (always the lowest for each company) is the subset of analyzed patent families that actually appeared valid when GreyB conducted its technical analyis. The order in which the patent holders appear is based on the top 6 ranking of patents per company that appeared essential in the analysis, and then the rest ("Others") is shown as an aggregate of dozens of other SEP holders (click on the image to enlarge; this post continues below the image):

The Amplified/GreyB study also contains a ring-shaped chart that shows the distribution of declared-essential 5G patents that passed the plausiblity test (click on the image to enlarge; this post continues below the image):

One takeaway from this is that three Asian companies lead the ranking of patents that passed GreyB's essentiality-related plausibility test: Huawei, Samsung, and LG. Another interesting fact is that Huawei alone holds almost as many actually-essential 5G patents as Nokia and Ericsson combined, though various people who are close to those Nordic companies have previously criticized other studies, suggesting or implying that the major Asian players owed their lead to a high rate of overdeclarations. The Amplified/GreyB study, however, can't easily be dismissed. The best is the enemy of the good, and for the time being--possibly even for a long time to come--that Amplified/GreyB study is the best of its kind. They will update it from time to time.

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Nokia-fed Avanci-aligned patent troll Conversant asserting two patents against Tesla in Mannheim: same patents in use against Daimler in Munich

It already became known in late April that Conversant Wireless, a patent troll that obtained patents from Nokia a while ago and contributes to the abusive Avanci patent pool, is suing Tesla in the Western District of Texas as well as in Mannheim, Germany. Meanwhile the Mannheim Regional Court's press office has thankfully been able to provide me with details on the two German Conversant v. Tesla cases:

• The patent-in-suit in case no. 2 O 27/20 is EP2934050 on an "apparatus and method for providing a connection."

• The patent-in-suit in case no. 2 O 57/20 is EP3300421 on a "slow mac-e for autonomous transmission in high speed uplink packet access (hsupa) along with service specific transmission time control."

Those two patents are among the ones Conversant is asserting agaist Daimler in Munich.

The two German Conversant v. Tesla cases are going to be adjudicated by the Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher). From a FRAND perspective, the assignment of those cases to that particular division of the court is unfavorable to Tesla, given that the Second Civil Chamber--though it made a key adjustment--interprets the Court of Justice of the EU's Huawei v. ZTE ruling to the effect that an implementer's FRAND counteroffer is analyzed first, irrespectively of the fact that it (chrono)logically comes second and is merely meant to ensure a defendant won't employ unreasonable delaying tactics.

Another Avanci-aligned patent troll, Sisvel, recently stepped up its patent assertion campaign against Tesla.

The steady stream of new standard-essential patent (SEP) assertions against car makers is the result of regulatory authorites such as the European Commission having been indecisive regarding SEP abuse in an automotive context for too long. It's high time something happened in Brussels and/or elsewhere. And it still might.

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