Fourth patent injunction against Daimler in 11 weeks as Munich I Regional Court sides with Nokia in 3G SEP infringement case

There's no Happy Halloween for Daimler and its counsel, and the reason is not even COVID.

The notorious patentee-friendliness of certain German courts is regrettable, and an increasing burden on the country's economy. But let there be no doubt about the fact that the patent litigation firm of Arnold & Ruess has done some first-rate work for Nokia against Daimler. Today the team led by Cordula Schumacher and Dr. Arno Risse ("Riße" in German) obtained its second injunction against Daimler as the Munich I Regional Court held the Mercedes maker to infringe German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets" (case no. 21 O 3891/19). The 21st Civil Chamber of the Munich court (Presiding Judge: Tobias Pichlmaier) had not indicated an inclination at the late-July trial.

On August 18, 2020, the Mannheim Regional Court found for Nokia in another standard-essential patent (SEP) infringement case against Daimler; that injunction hasn't been enforced and possibly never will be.

Several other Nokia v. Daimler cases have been put on hold over doubts concerning the validity of the patents-in-suit. Should any of those patents survive without being narrowed out of the scope of the specifications of the relevant cellular standard, they'll do even better.

Meanwhile, I'm wondering when Quinn Emanuel will get tired of losing. In the 11-week period between the aforementioned defeat in Mannheim and today's Munich ruling in Nokia's favor, Daimler and QE also lost two other cases as the Munich I Regional Court's 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) granted Sharp an injunction against Daimler (which triggered a settlement, see 1, 2), as did the 21st Civil Chamber in a Conversant v. Daimler case just one week ago. That's four German SEP injunctions over the course of only two months and a half.

Daimler and QE could take comfort in the fact, however, that computer maker Lenovo also lost in Munich (against Nokia, but over a codec--not wireless--patent) on the first day of the month.

Three high-profile SEP injunctions (Nokia v. Lenovo, Conversant v. Daimler, and now Nokia v. Daimler) clearly make Munich by far the most attractive venue for plaintiffs, and the court is damn proud of that fact (as I noted in my report on the presentation of the results of a survey, I don't think the "evaluation" of the court's performance does the judges justice because their technical and legal competence is not an issue--only their pro-patentee application of the law is).

Just like in the Conversant case, but with far higher stakes (and so much more time and money having been spent on the Nokia dispute), Daimler now needs the appeals court to stay the enforcement of this injunction. The prerequisite collateral (for enforcement during the appellate proceedings) of little over $20 million is easily affordable to Nokia while the actual damage to Daimler would be in the billions of dollars per year. And as I noted in the Conversant context, Daimler could be roughly six weeks closer to a decision by the Munich appeals court that might set the record straight at least on the proper security amount, if not also on the application of the CJEU's Huawei v. ZTE case law, if not for Daimler's inexplicable decision to settle with Sharp in the summer.

This is now a race against the clock. We're only 13 days away from a highly likely referral of key component-level SEP licensing questions to the CJEU. The Dusseldorf Regional Court will announce its decision on November 12, and I'm extremely optimistic about what's going to happen there. But that referral doesn't automatically trigger a stay of all other cases. It may, however, bear substantial weight with the Munich Higher Regional Court. Additionally or alternatively, it would also help Daimler if the Munich appeals court simply set a reasonable security amount (i.e., in the billions of euros).

Almost two years ago, Daimler filed an EU antitrust complaint against Nokia that hasn't gone anywhere. Nokia has been able to count on support from the EU's internal market commissioner Thierry Breton even to the extent that he would spout total nonsense. But Daimler is apparently such an old-fashioned, poorly-run company that they don't even know how to press an antitrust case in Brussels. I've seen antitrust amateurs who are better at this game than them, any day of the week.

Daimler is also one of the three companies responsible for the most stupid strategic misstep in the ongoing German patent reform process, so they'll have no one to blame but their own incompetence for the German patent injunction problem probably not getting solved anytime soon. In that context, one of their key competitors, BMW, made the mistake of joining them. That's another very old company that appears unfit for the Digital Economy. There are days when I feel very un-German. Today is definitely one of them. I don't think anyone can help certain companies. They're losers and they don't even realize to what extent that is their own fault.

If I find anything in the court's written decision, which will be handed down early next week, that sets this case apart from the Conversant case, I'll write about it. But the outcome suggests the issues were just the same, except that Nokia, unlike Conversant (and previously Sharp), hasn't granted an exhaustive component-level SEP license to Huawei.

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The lemmings of patent injunction reform: Microsoft, BMW, Deutsche Telekom joined ip2innovate during German reform process

Political decision-making processes tend to be so complex that it's often very difficult to identify a clear causation between what went wrong and why. In connection with Germany's patent reform, which has been carefully crafted by the country's government to change almost nothing at all (see my initial reaction to yesterday's official legislative proposal), one can infer from publicly-accessible documents that the Brussels-based ip2innovate lobby group (Google, Daimler, SAP etc.) committed the colossal blunder that most likely condemns the reform effort to fail. "Be careful what you wish for." IP2I advocated the term "Einzelfall" that is now the central term that will render the reform ineffectual because the government's official legislative rationale clearly defines it as "hardly ever happens." Now the losers are trapped in a no-through one-way street as they can't lobby against their own proposal. They dug their own reform's grave.

Germany's leading information & communications technology news site, Heise online, quotes my analysis in an article on yesterday's legislative proposal, including my criticism of IP2I's lack of strategic sophistication. For what I know, however, chip makers Nvidia and Intel, while they're longstanding IP2I members, can't be blamed for the "Einzelfall" crap.

Were IP2I only a fringe group of the patent reform movement, the others could still combat that "Einzelfall" term effectively. But birds of a feather flock together, and lemmings famously follow other lemmings. With the sole exception of Volkswagen (the whole group including subsidiaries like Audi and Porsche), IP2I's membership directory lists practically every large German organization that demands injunction reform.

Over the course of this year, the misguided IP policy groups of three large organizations--two of them among Germany's largest corporations--joined IP2I:

• Microsoft,

• BMW, and

• Deutsche Telekom.

Deutsche Telekom's IP department habitually hurts the company's interests. They even contributed their cellular standard-essential patents (SEPs) to the abusive Avanci pool. They might have found it convenient, and maybe they thought it was "cool" to join some large patent holders in a pool, but Avanci is all about driving up licensing costs, which runs counter to Deutsche Telekom's interests. Also, Deutsche Telekom is still the only company known to have made a huge royalty payment to patent troll IPCom. They could have avoided it by simply insulating their then-outgoing CEO from the potential fallout from IPCom's patent assertions against him. Instead, they paid hundreds of millions of dollars at a time when Nokia and HTC were actually defending themselves very successfully against that same patent portfolio. Deutsche Telekom also has a reputation for having caved to other patent holders in situations in which many others wouldn't have done so.

As I already noted yesterday, Deutsche Telekom might benefit to some degree from the fact that the reform bill makes harm to third parties a factor. In Dusseldorf that might help; in Munich and even in Mannheim, it most likely won't. Those courts will tell them to take a license. If patent holders seek injunctions that threaten to shut down Deutsche Telekom's network, it's just a means to an end. The end is a costly license deal; leverage from an injunction is the means. So those patent holders will make a licensing offer, and the courts will then tell Deutsche Telekom that the harm they suffer isn't irreparable: they don't have to switch off their network infrastructure as they can take a license. I already explained based on the January draft bill how this would work.

The world's top three smartphone makers--Apple, Samsung, and Huawei--are notably absent from IP2I's membership directory. They have to defend themselves against German patent infringement complaints all the time. In order for them to be in a better position, the hurdle for a useful injunction reform statute would be considerably higher than for Deutsche Telekom (which can at least argue that third parties depend on access to its network) and German car makers, which have substantial manufacturing operations that would be susceptible to a German injunction. Again, I believe even Deutsche Telekom and those automotive companies will ultimately just be coerced into taking licenses on unreasonable terms. But at least they have far more of a hardship argument than foreign companies that export their smartphones and similar devices to Germany.

As foreign companies with limited head counts in Germany, those three would have found it difficult to make much of an impact. If Huawei had joined, it could even have been counterproductive, considering that those opposing reform (such as Nokia) would presumably have tried to politicize the debate.

Whether Apple and Samsung should have done more, in quantitative as well as qualitative terms, is a question those companies will answer for themselves when this reform process is over. Where the process stands today, the most likely outcome is that they'll just spend more money on proportionality arguments (lawyers, experts) but those suing them will have basically the same leverage in negotiations as today. There's an asymmetry here: patent trolls, or companies that practically behave like trolls by suing companies they're not competing with, only stand something to gain, and nothing to lose. They typically wield portfolios, not individual patents, and they can sue in three or more different German venues as they need leverage in only one of them.

This is frustrating to watch. It must be far more frustrating for companies to find themselves on the receiving end of those lawsuits. I warned many of them a year ago, and earlier this year. I told them what was going wrong, and how they'd have had to fix it. There was some hope last month because the previous draft looked like the government had made concessions on the statute and simply hadn't updated the legislative rationale yet. Now that the legislative rationale suggests it's easier to spot a pink elephant in your garden than a German patent case in which an injunction would be denied over proportionality considerations, and with most reform advocates being bound to IP2I's misguided March 2020 submission proposing "Einzelfall," it's extremely hard to imagine a turnaround.

Besides IP2I, there's only one other major industry group pushing for reform, and that's the VDA (German automotive industry association). They have members such as Bosch that prevent them from taking really strong positions, and they lack IP policy expertise at the staff level. So it would be a surprise if they could solve the problem IP2I has created.

I'm quite sure I'll point to yesterday's posts as well as this one many times in the coming years whenever some high-profile German patent injunctions come down or the possibility of such injunctions forces companies into license agreements. I'll be looking out for that pink elephant, and maybe I'll spot one once every while, but I won't blame the judges for what is the only reasonable interpretation of this statute in light of the official commentary: you normally don't even have to conduct a full-blown proportionality analysis because defendants will fail to distinguish their situation from that of any other defendant who has the choice of simply taking a license.

Before the Bundestag (Federal Parliament) formally receives the bill, the Bundesrat (Federal Council) will analyze the proposal and make an official statement that is going to influence the parliamentary process. Chances are that the Federal Council will either say that even this reform proposal goes too far or that it's acceptable but will warn against seriously restricting access to patent injunctions. Some conservative politicians in the Federal Parliament will almost certainly prevent any impactful reform from being passed into law, and time is on their side as the end of the legislative term is approaching (and COVID complicates everything).

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Qualcomm's next home run: Ninth Circuit denies FTC's petition for rehearing of antitrust case

See, I told you so. NOT. I have a high hit rate (including with respect to both the FTC v. Qualcomm district court decision and the appellate opinion), but I must admit I wasn't on the money in the en banc context. Given the high profile of the FTC v. Qualcomm antitrust case, I was actually optimistic that the Federal Trade Commission's petition for a rehearing en banc would succeed (while I expressed skepticism regarding the prospects of a better outcome for the FTC). It was obvious that the three-judge panel or a majority thereof was going to stand by its ruling, but I thought some other circuit judges would be interested in rehearing the matter. This morning the Ninth Circuit denied the FTC's petition (which had drawn some support from amici curiae, even including Tesla), and it gave it short shrift as no judge even wanted to hold a vote on whether or not to conduct a rehearing en banc (this post continues below the document):

20-10-28 9th Cir. Denial of... by Florian Mueller

Now the FTC will have to decide whether to file a petition for writ of certiorari (request for Supreme Court review). It's quite possible that the FTC's 3-2 majority in favor of the petition for a Ninth Circuit rehearing (consisting of the Republican chairman and the two Democratic commissioners) would also authorize a cert petition. But six of the nine justices are conservatives, three of whom were nominated by President Trump, and they would see that the Trump Administration backed Qualcomm in this dispute. They would likely also take note of the fact that two of the three judges on the Ninth Circuit panel were conservatives (and the third was a relatively conservative-leaning Democrat). But the Supreme Court also has a history of fixing issues with the patent system, particularly with the overleveraging of patents and the patentee overcompensation it leads to. That is not a partisan question, though antitrust law often is. I remember Senator Klobuchar (D-Minn.) lamenting the Supreme Court's restrictive application of the Sherman Act in a statement she made at Justice Barrett's confirmation hearing.

Relatively speaking, I'd have had more hope for the FTC with respect to a Ninth Circuit en banc. But I was too bullish then, so who knows, I may just be too bearish now.

The next major patent-related antitrust case that could reach the Ninth Circuit--and possibly even the Supreme Court--in the near term is Apple & Intel v. Fortress Investment et al.. I blogged about Apple and Intel's opposition to Fortress's second motion to dismiss earlier today and mentioned that FTC v. Qualcomm affects that one. In that particular context, it's definitely bad news for Apple that, for now at least, the panel opinion in FTC v. Qualcomm is controlling Ninth Circuit law. But in Epic Games v. Apple, it may actually help the iPhone maker. That's how it goes.

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Apple and Intel defend their amended complaint against Fortress patent troll conglomerate, announce further allegations of FRAND abuse

With respect to its App Store terms and policies, Apple is now arguably the most prominent antitrust defendant in the tech universe. Simultaneously, Apple is pressing antitrust charges--through private litigation--particularly in connection with abusive patent-leveraging practices. While the issues are very distinct, having the shoe on one foot today and on another foot tomorrow requires Apple, which is represented by different law firms (Wilmer Hale against Softbank-owned Fortress Investment, Gibson Dunn and Orrick against Epic Games and various class action plaintiffs), to espouse a more flexible approach to antitrust enforcement in one context than in the other. Case in point, a Ninth Circuit panel's wholesale acquittal of Qualcomm took a more restrictive and limiting perspective on how to apply the antitrust laws (particularly--but not only--in connection with patents), and the panel opinion contained legal statements that Apple can and does cite to as it defends itself against Epic, but complicate matters in its joint case with Intel against Softbank's Fortress.

In the summer, San Francisco-based Judge Edward M. Chen of the United States District Court for the Northern District of California granted Fortress's first motion to dismiss Apple and Intel's complaint, but also allowed the plaintiffs to amend the complaint. The absolute low of the Trump Administration's involvement with patent policy was when the Department of Justice intervened on behalf of that foreign-owned patent troll group that has been bringing many dozens of vexatious lawsuits against not only Apple, but also others, notably Google. That was the very opposite of "Make America Great Again." It was anti-American, and unfortunately the matter doesn't have the prerequisite high profile that lawmakers would have raised questions (plus, there are some Democrats on Capitol Hill who are beholden to the world's patent trolls, such as "Looney Coons").

Apple and Intel amended their complaint, and Fortress--not unexpectedly--brought a renewed motion to dismiss, on which the court will probably decide in December. Fortress alleged that Apple and Intel had failed to cure the deficiencies identified by the court in its order to dismiss without prejudice.

Last night, Apple and Intel filed their opposition to Fortress's second motion to dismiss (this post continues below the document):

20-10-27 Apple-Intel Opposi... by Florian Mueller

The #1 question here is market definition--which is just as essential to antitrust law as claim construction is to patent law. Fortress claims Apple and Intel's amended complaint still lacks the prequisite specificity, and the DOJ had also focused very much on that one earlier this year. But Apple and Intel point to how much more detailed their amended complaint is (it's 77 pages longer than the original complaint), and that it's now not just about an "Electronics Patents Market" but about 13 patent markets. And what will likely benefit Apple and Intel in this regard is that Judge Chen's order on the first motion to dismiss had states that the law doesn't require an absolutely clear-cut market definition in cases where there are very specific allegations of anticompetitive effects. "Rough countours" of a market have been deemed sufficient in such cases.

If the amended complaint survives, Apple and Intel wish to amend it as one Fortress subsidiary, VoiceAge EVS, sued Apple just after the filing of the amended complaint (no coincidence if you ask me) over five LTE patents. Apple and Intel say that the related patent transfer was made in an effort to circumvent FRAND licensing obligations.

Apple & Intel v. Fortress is not only about standard-essential patents (SEPs). Most of Fortress's lawsuits are about non-SEPs. But when Apple joined Intel (which had previously brought a complaint, but withdrew it in order to refile together with Apple), SEP-related allegations became part of the case. In that context, the Ninth Circuit's FTC v. Qualcomm panel opinion is particularly unhelpful, but the issues in the Fortress case aren't exactly the same. For instance, never did the FTC (or Apple) allege that Qualcomm sought to evade FRAND obligations by means of patent transfers.

Two organizations have filed amicus curiae briefs in support of Apple and Intel's opposition to the motion to dismiss: the Fair Standards Alliance (FSA) and ACT | The App Association. Apple and Intel are members of the FSA, and corporate sponsors of ACT. ACT claims to have thousands of smaller companies as members, though it's another question how strongly involved and committed those "members" really are, given that many years ago a professor and former White House technology policy adviser (under Clinton) told me he just filled out a web form and was accepted--no payment or anything. Also, for a long time ACT used to promote the interests of patent holders, not those of implementers. By contrast, the FSA has several dozen corporate members, of different sizes but all of them significant and some of them among the world's largest tech companies (such as Microsoft and Google). The FSA has been very consistent about SEP policy. Fortress didn't want the FSA to file an amicus brief, at least not without getting to review it beforehand, but the FSA has now filed a motion for leave and I guess the court will grant it (the document below contains both the motion for leave to file and the actual amicus brief):

20-10-27 FSA Amicus Curiae ... by Florian Mueller

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Google, SAP, Daimler (ip2innovate) botched patent injunction statute: "Singularity Killed the Reform"

If you noticed the allusion to a band name in the headline, you might have grown up in the 80s, in which case you may also remember the famous line "I pity the fool." Otherwise you might know the proverb "curiosity killed the cat". Whatever, those opposing German patent injunction reform are now on the winning track as I explained in my previous post, and in the losing camp, three companies are particularly responsible for a monumental f..kup:

Google, SAP, and Daimler.

Volkswagen deserves credit for having started the push for patent injunction reform in Germany. The three companies listed above will go down in history as the main culprits unless there's a second reversal of fortune. I'd like things to work out, but I increasingly doubt it. The anti-reform movement is just too sophisticated for a pathetic bunch of amateurs.

The documents that prove what went wrong and who's to blame are all public. So let me explain, but again, I'd like nothing more than to be proven to have been too pessimistic. Until the last moment I'll hope that the broken German patent litigation system will be fixed.

So, here's the chronology of events:

In January, the Federal Ministry of Justice and Consumer Protection published a first draft reform bill that Germany's leading patent litigators said was going to change nothing, or at least wasn't going to have significant impact. It then gave stakeholders until mid March to submit comments.

A lobby group named ip2innovate, which is based in Brussels and mostly focuses on EU patent policy, made a submission (PDF, in German) that I largely agreed with, though I expressed concerns about their statutory proposal. Back then I commented on dozens of statements, so I didn't go into detail.

Here's a screenshot of the worst blunder in this whole reform debate (click on the image to enlarge; this post continues below the image):

The first sentence of their proposed amendment to the patent injunction statute is this (in German):

"1Der Anspruch nach Absatz 1 ist ausgeschlossen, soweit die Inanspruchnahme im Einzelfall unverhältnismäßig ist." (emphasis added)

This means that injunctive relief shall be unavailable to the extent that its enforcement would be disproportionate "im Einzelfall." What does "im Einzelfall" mean? That's the problem. The term can be understood in two ways, neither of which reflects favorably on those who proposed it:

• non-judgmental interpretation: "in the individual case to be decided"

• with a quantitative connotation: "only in rare/outlier cases"

It was an utter stupidity at any rate to use a term that simply isn't a well-defined legal term. I can't remember ever having seen a German statute that contained the word. Therefore, the first thing courts will turn to when trying to make sense of the term is, besides the context, what the legislative rationale (the official commentary provided along with the law) says. I'll get to those two determinants--context and legislative rationale--in a moment.

Anyway, if the plan is to inject a new term into the law that wasn't there before, a lobby group (unless someone inside the group seeks to sabotage the effort or people don't know what they're talking about) would at least pick a term that has framing value. You'd want to use a term that has a connotation that suits your agenda. The last thing you'd want to do is shoot yourself in the foot like ip2innovate did.

Even in a neutral context and without the risk of a legislative rationale ascribing a particular meaning to the term, "Einzelfall" was the equivalent of an own goal in certain sports, or unforced error in others. That's because the non-judgmental interpretation would not be as persuasive a proposal as the quantitative one. Let's face it: the law is always used to decide individual cases. It's the single most fundamental principle of statutory interpretation (which some of the people working for ip2i's members may have learned about a loooong time ago, maybe too long) that if a term can be given one meaning that makes sense and one that doesn't, you pick the former, not the latter. Interpretation 101. With "individual case" being nonsensical, no judge could be blamed for interpreting "Einzelfall" in the sense of "rare outlier, or singularity." One could debate just how rare. But there could be no reasonable argument over whether at least some degree of rarity is implied.

To be clear, I'm not "Monday-morning-quarterbacking" here. I actually made a hands-down superior statutory proposal that I sent to a variety of companies (some of which were and are ip2i members) and select academics in January. When the German reform process is over, I'll publish it. Or maybe before. We'll see. Dozens of witnesses can confirm I shared it with numerous industry players in January 2020. So I don't just pretend to know better with the benefit of 2020 hindsight. I already did back then. And among the proposals that were officially submitted, I supported the one by the Max Planck Institute, which didn't contain any crap like "Einzelfall" either.

Now, fast forward to early September, when the ministry finally published its second draft. It already incorporated the term "Einzelfall"--and did so in connection with a reference to "besonderen Umständen." That term, just like "Einzelfall", can be interpreted in two ways:

• non-judgmental interpretation: "specific" = "under the given circumstances"

• with a qualitative connotation: "special" = "only under extraordinary circumstances"

Here, again, the non-judgmental interpretation would be devoid of any meaning as any case is decided based on its facts. And then, when you have in the very same, narrow context the combination of two terms (grammatically related to each other in the statute) that can be interpreted judgmentally or non-judgmentally, with the judgmental interpretation making sense while the other doesn't, you'd really need the legislative rationale to support a non-judgmental interpretation--or a mildly judgmental one, meaning that it would suffice for the circumstances to be somewhat special and that injunctive relief wouldn't be abolished entirely, or in a vast majority of cases.

When ip2i submitted its feedback to last month's draft (PDF, in German), it complained that "besondere" (special/specific) was "redundant" in the context of "Einzelfall". They started to realize they had botched this by proposing a term that renders the whole reform statute pointless--even without "besondere Umstände" (though even more so in that context, which basically doubles the problem).

Too late. When you're trapped, you're trapped. The proposal that the executive government adopted today (which still doesn't pass it into law, but that's what the executive officially submits to the legislature) contains the same problematic passage, has made two other terms in the statute less favorable to the interests of defendants, and the draft legislative rationale has deteriorated sharply.

On page 64 of the early September draft ("Referentenentwurf"), the ministry wrote:

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen Fallkonstellationen in Betracht kommen."

This means:

"A permanent denial of an injunction due to a disproportionate burden on the infringer will, however, only be part of the consideration in a very few case patterns."

At the time, I was being optimistic and assumed that the rationale had not been updated yet. But today's version leaves no more room for such wishful thinking:

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen besonders gelagerten extremen Fallkonstellationen in Betracht kommen. Sie setzt voraus, dass unbilligen Härten für den Unterlassungsschuldner nicht durch eine Umstellungs- und Aufbrauchfrist hinreichend Rechnung getragen werden kann." (emphasis added to highlight what was inserted in October)

Here's my translation:

"A permanent denial of an injunction due to disproportionate hardship on the infringer will, however, be part of the consideration only in a very few, specially-structured, extreme case patterns. It would be a requirement that inequitable hardship on the infringer could not be sufficiently addressed through a workaround and use-up period." (emphasis added to highlight what was inserted in October)

This is like the postmortem of an abysmal failure. With this official commentary, the bill would provide a dictionary to the courts:

• "Einzelfall" = "very rare, extreme case" ("singularity")

• "besonderen Umständen" = "there must be something out of the ordinary about the circumstances, the circumstances must stand out in a structural sense"

This means the courts will rarely even have to take a closer look at proportionality arguments--unless, as I'll say now for the last time, the pro-reform camp manages to turn this around.

The more realistic assumption is that there won't be any truly helpful developments. If any of the people representing their companies had to report to me, I'd want to know who proposed or supported "Einzelfall" and who opposed it, as that would tell me whether or not I could trust those people to vigorously defend their companies' interests.

The largest U.S. company among ip2i's longstanding members (Microsoft just joined recently) is Google. The search and Android company's European in-house patent litigator, Ralf Uhrich, may actually even benefit from this mess. While he manages Google's patent cases in other European jurisdictions as well, he is admitted to practice in Germany, and may very well return to private practice, such as to Quinn Emanuel, where he left as an associate. In Germany, becoming in-house counsel is typically a one-way street and not considered an upgrade. But Google is an American company, and the relationship between Google and QE is special. As a future QE attorney, Mr. Uhrich would be much less busy if Germany actually reformed its patent injunction regime. Near-automatic patent injunctions are a boon for German patent litigators.

Ip2i's largest European member is SAP. SAP actually hasn't been sued over patents in Germany in a long time (at least that was the case last time I checked). If SAP really had a problem with German patent injunctions, they'd presumably have entrusted someone more senior than Ina Kock, an in-house patent prosecution counsel, with this reform project. While SAP is a great employer in some other fields, it's a rather unpopular one among German patent attorneys. The company is HQ'd in the middle of nowhere, and patent attorneys at other major tech companies working in Munich (Europe's patent capital) make at least 50% more because they have more opportunities. Her background is patent prosecution, not litigation, and unlike in-house patent counsel of companies that regularly get sued, she hasn't even had the opportunity to really figure out how things actually work in German courts. Then, participating in ip2i conf calls may spice up her professional life, as she'd otherwise just be spending eight hours a day to get software patents granted in contravention of a subject-matter exclusion under the European Patent Convention. I guess that's far more important than achieving a positive outcome.

This was just come color that may explain why ip2i has performed so poorly. But I still hope they're going to get this reform effort on track, alongside some other organizations such as the German automotive association (VDA).

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German government officially adopts patent reform proposal, says new injunction statute shouldn't have much impact

One step up and two steps back.

Early last month I cheered a "spectacular turnaround" in the German patent reform process as the Federal Ministry of Justice and Consumer Protection had made substantial changes to its proposal for a new patent injunction statute as compared to its first draft, which was published in January and amounted to a non-reform proposal. And a few weeks ago I reported on Germany's most prominent (though not most powerful) patent judge's interpretation of the reform statute. Today, Chancellor Merkel's cabinet adopted a slightly revised version of the statute (PDF, in German), which will now be reviewed and commented on by the Federal Council (the legislative body that consists of the governments of the country's federal states, though the Bundesrat's role will realistically just be consultative in nature in this case, while the actual decision will be in the hands of the Federal Parliament, the Bundestag). It remains to be seen what text the legislature will ultimately adopt--if any, given that the end of the term is approaching fast.

The injunction statute (§ 139 of the Patent Act) would be amended by adding the following sentences:

"Der Anspruch ist ausgeschlossen, soweit die Inanspruchnahme aufgrund der besonderen Umstände des Einzelfalls für den Verletzer oder Dritte zu einer unverhältnismäßigen, durch das Ausschließlichkeitsrecht nicht gerechtfertigten Härte führen würde. In diesem Fall kann der Verletzte einen Ausgleich in Geld verlangen, soweit dies angemessen erscheint. Der Schadensersatzanspruch nach Absatz 2 bleibt hiervon unberührt."

I would translate it as follows:

"The claim [to injunctive relief] is excluded to the extent that, under the special circumstances of an individual case, its enforcement would result in disproportionate hardship on the infringer or third parties beyond what is justified by the exclusionary right. In this case, the patentee can seek monetary compensation to the extent this appears reasonable. The damages claim pursuant to para. 2 remains unaffected."

The editorial changes over the early-September version come down to two terms: while the previous draft referred to compliance with an injunction, the new one mentions enforcement; and "Nachteil" (negative impact, harm) has been replaced with "Härte" (hardship). Actually, I already translated "Nachteil" as "hardship" last month because, in practice, that would simply be the meaning of the term in this context. So the term has formally been narrowed, but wouldn't have been applied broadly at any rate: a minor inconvenience wouldn't have had any bearing.

The difference between "enforcement" and "compliance" does, however, make a practical difference. It suggests more strongly that courts should primarily tailor the injunction (such as by granting a transitional period for workarounds), and that is precisely what the official reasons provided by the government for this legislative measure encourage (approximately in the middle of page 63):

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen besonders gelagerten extremen Fallkonstellationen in Betracht kommen. Sie setzt voraus, dass unbilligen Härten für den Unterlassungsschuldner nicht durch eine Umstellungs- und Aufbrauchfrist hinreichend Rechnung getragen werden kann." (emphasis added)

Here's my translation:

"A permanent denial of an injunction due to disproportionate hardship on the infringer will, however, be part of the consideration only in a very few, specially-structured, extreme case patterns. It would be a requirement that inequitable hardship on the infringer could not be sufficiently addressed through a workaround and use-up period." (emphasis added)

The document also indicates that most of the time, proportionality wouldn't even have to be analyzed. And the burden of proof is entirely on the defendant. With respect to the defendant's own hardship, that onus would be a surmountable hurdle, but there's no discovery--much less third-party discovery--in Germany.

Unless the pro-reform forces persuade the ruling coalition parties' groups in the Federal Parliament (which will be an uphill battle with respect to the center-right CDU/CSU), this reform threatens to be "too little, too late."

I didn't consider the goverment's draft commentary a major issue last month, simply because it seemed like they had revised the statute but not had the time yet to update the official rationale. But now they've had enough time, and what they're proposing is a really disappointing combination of an official commentary that basically says "we don't want to change much, this is just about outliers, like some one-in-a-million kinds of exceptions" with a statute that suggests (more strongly than the early-September draft) to tailor the injunction rather than to deny one.

Only telecommunications service providers like Deutsche Telekom and Vodafone might benefit from this reform to a significant extent. They have a strong argument about harm to third parties, though the courts will likely tell them that they should meet a patentee's license fee demands, period.

The problem is that German courts are adamant about near-automatic injunctions. It's not that the judges there would welcome a potential opening to deny injunctive relief because it would allow them to do a better job. Much to the contrary, they're obsessed with "forum selling" and view near-automatic injunctions as their jurisdiction's unique selling proposition--a competitive advantage over other jurisdictions (advantage for the courts, and for lawyers, but not for the economy or for society) they're not going to dilute if they can avoid it.

Since the reform process started, German patent case law has further deterioriated. It was very bad before, but they've managed to make it even worse.

The most recent trend is that patent trolls and other plaintiffs can enforce their injunctions during an appeal without even having to provide any non-negligible collateral (see the final part of this week's post on Conversant v. Daimler; the same would apply to other cases such as Sharp v. Daimler and Nokia v. Lenovo).

As a patent holder I'd simply sue in Mannheim and Munich rather than Dusseldorf (where Judge Kuehnen has appellate jurisdiction over many cases). Should the current bill be enacted without major improvements, you could set your watches by the Mannheim and Munich judges continuing to grant near-automatic injunctions by pointing to the legislative rationale saying clearly that injunctions should typically issue. And their answer to workaround and use-up periods will be that those periods must be very short given that patents have a limited term. In a recent Mannheim case, the patent-in-suit was going to be in force for seven more years, but the limited remaining term was considered a reason to turn a blind eye to an antitrust defense.

Given how the German patent judiciary works, it would take something more forceful to bring about major change. The current proposal would create an opportunity for law firms to charge their clients for a lot of additional time spent on proportionality arguments. But the leverage that patent holders will have in negotiations would be roughly the same as before--provided they bypass Dusseldorf to be on the safe side. The statute would be suboptimal, but a huge improvement over the January draft, if--and that "if" is the largest part of the problem--the legislative rationale didn't continue to endorse the Federal Court of Justice's case law. And the patent-specialized division of that court is to German patent law what the Central Committee of the Communist Party was to the Soviet Union in the decades prior to Gorbachev's reforms.

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Munich I Regional Court's official presentation of results of "evaluation" of local patent rules puts court's pro-patentee partiality on full display

One year ago, the Landgericht München I (Munich I Regional Court) celebrated the tenth anniversary of its Patent Local Rules ("Münchner Verfahren"). On that occasion, the court announced an "evaluation" study by the Max Planck Institute in order to find out how practitioners view the court's performance. Last week, the court officially presented the results in a videoconference. As of today, access to the recording (which the court originally made available to the public via YouTube) has been restricted.

Maybe someone decided to hide the presentation because the results are all too embarrassing--and even I, as a critic of the court's exceedingly patentee-friendly decisions, disagree in some ways.

The court has even stated its pro-patentee bias in writing. The December 2016 version of a four-page document outlining its Patent Local Rules (in German) states the following (my translation):

"The objective is to provide patentees, in a fair and transparent proceeding, swift and effective protection of their rights."

In other words, they view patent holders as their "customers" and seek to satisfy them. And they're shooting for speed at the expensive of getting things right:

"Written reports by court-appointed experts or stays [pending a parallel validity determination] shall be ordered only in very exceptional cases."

By way of comparison, German courts appoint experts in far simpler cases with small amounts in dispute. For instance, if you sue a painting company because you're dissatisfied with the quality of their work, a German court will most likely see a need to ask a court-appointed expert witness to furnish a report. Then you and the defendant can ask multiple rounds of written questions. The costs of the court-appointed expert (charging by the hour) may very well exceed the actual amount in dispute. In virtually every other field of civil law, that's the way it works.

But in patent cases, which involve far more complex technical questions and have huge economic implications, German judges rarely appoint experts. Does it make sense? No. It simply stinks. It's an agenda-driven system, and the administration of justice is nowhere near the top of the list.

To be fair, the practice of adjudicating cases without hearing expert witnesses is not unique to the Munich court. In Dusseldorf and Mannheim, it's just the same. Nevertheless, the court's own outline of its patent litigation procedures is shockingly forthright.

The latest absurdity is that a patentee enforcing an injunction during the appellate proceedings just has to make a deposit of a few million dollars to do what would amount to a multi-billion dollar damage to a car maker such as Daimler, with the court arguing that the defendant should simply take a license (which would, however, end the case).

Back to that "evaluation" study of the Munich court's performance in patent cases. The responses to the Max Planck Institute's survey suggest that Munich has shortcomings with respect to the quality of its legal work and its technical understanding, where Dusseldorf and Mannheim are rated more highly, but that Munich is still a popular venue because it's a rocket docket and very plaintiff-friendly.

But should the study be taken seriously at all? Not really. There were only 65 respondents, and there is no indication of any effort having been made to ensure this small sample is statistically representative. Based on where the respondents said they filed their offensive cases over the past five years, it's at least a possibility that practitioners with a strong preference for Dusseldorf were particularly active--and seized this opportunity to make Munich look bad by comparison with their home court. It's also possible that many lawyers' understandable frustration with the ever more plaintiff-friendly approach of the Munich court--especially (but not only) when it comes to standard-essential patents--informed their ratings of the judges' competence in their field.

I believe that this "study" (if one wants to use that term at all for a survey with only 65 non-representative repondents) underrates the Munich judges. In terms of technical competence, the Mannheim judges are clearly the best with respect to wireless patents. In other fields of technology, there may not be much of a gap. What I've heard from legal practitioners doesn't suggest that the Dusseldorf judges have a better grasp of technical matters than their Munich-based colleagues.

The part about last week's presentation that worries me the most is that the court's president (chief judge), Dr. Andrea Schmidt, appeared quite proud of the fact that plaintiffs like to sue in Munich--and less concerned about, for instance, defendant's procedural rights. For example, it's simply the law in Germany that a party must be granted leave to file a post-trial brief if its adversary made a belated filing (anything that isn't filed at least a week prior to trial is considered out of time). The Munich court blames defendants for stalling if they exercise that right only because a plaintiff purposely filed its final pre-trial brief very late. Lawyers actually owe it to their clients to exercise such a procedural right. But in Munich, defendants to patent infringement complaints are second-class citizens to an even greater extent than in other German venues.

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Huawei and patent troll Conversant settle patent dispute, automotive downstream stands to benefit from component-level agreement

On Friday, the Landgericht München I (Munich I Regional Court) entered a final (though appealable) judgment in a Conversant v. Daimler standard-essential patent (SEP) infringement case in which Conversant was asserting a former Nokia patent (or, to be precise, a derivative of a former Nokia patent). I've meanwhile obtained a copy of the ruling, and its final part (Section H) reveals that a settlement between Huawei--an indirect Daimler supplier--and the Nokia-fed patent troll has been reached.

The written decision says that on October 21, 2020 (just two days prior to the ruling date), defendant Daimler and intervenor Huawei (referred to as "intervenor no. 8") brought parallel motions asking the court to postpone the decision by two weeks in light of an agreement between Huawei and Conversant. The court denied these motions because Daimler's and Huawei's representations didn't go into sufficient legal detail, and because the settlement agreement comes with conditions precedent that weren't specified (Daimler, in fact, requested the court to ensure that the agreement would enter the record). Furthermore, the court notes that just one day prior to that motion, Huawei had filed a pleading according to which it denied having received a licensing offer from Conversant.

In most if not all German SEP cases against Daimler, Huawei intervened in its capacity as a tier 2 (indirect) supplier. Huawei makes network access devices (NADs), or connectivity modules, which some of Daimler's tier 1 (= direct) suppliers such as Continental and Samsung subsidiary Harman incorporate into the telematics control units (TCUs) they sell to the Mercedes maker. Effectively, cellular SEPs are implemented by the baseband chip (tier 3), so if a tier 3 or tier 2 supplier is licensed, so are the tier 1 supplier (TCU maker) and, by ultimate extension, Daimler.

In July, court filings in several Sharp v. Daimler cases pending before the Mannheim and Munich courts revealed a component-level SEP license deal between Huawei and Sharp. At a trial later that month it turned out that this agreement, through patent exhaustion, resolved approximatly 86% of what was at stake between Sharp and Daimler, thereby greatly reducing the impact of the injunction the Munich court handed down last month. To my dismay, Daimler didn't pursue its appeal, a decision that will cost far more in the long run than it would have cost to at least let the appeals court adjudicate Daimler's motion for an enforcement stay. We'll see in the weeks ahead whether Daimler will settle with Conversant as well--or do the right thing and fight on.

It appears that Huawei's deal with Conversant is structurally similar to the agreement with Sharp. Otherwise there wouldn't have been any basis for requesting a postponement of the decision. Therefore, this agreement is further validation of the concept of exhaustive component-level SEP licensing, and undermines the Avanci pool's end-product-only licensing policy. Conversant is another Avanci member that has now entered into a direct SEP license agreement, bypassing the pool.

Qualcomm is lobbying the European Commission--the #1 enemy of Europe's automotive industry in the SEP licensing context--and the German federal government (which could accidentally become an enemy of its automotive industry in this context as a result of some decision makers' cluelessness) with a proposal to grant licenses, on terms that would not allow those suppliers to be economically viable anyway, at the TCU (tier 1) level. But with every deal like Sharp-Huawei and Conversant-Huawei, it becomes clearer that higher levels of the supply chain must be considered as well, and may even represent the point of maximum licensing efficiency.

I'd like to share more information from the Conversant v. Daimler judgment. For only a relatively small and old portfolio, Conversant wanted 75 cents (US) per car. In my trial report I had written €0.75, but the ruling says US$0.75. Daimler's counteroffer amounted to $0.01 per connected vehicle implementing 4G/LTE, and fractions therefore for vehicles implementing only 3G, only 2G, or only emergency calls.

In Section G (right before the part that addresses the requests to postpone the ruling date), the court discusses how it arrived at the insanely low security amount of 5 million euros. Conversant can enforce the injunction during the appellate proceedings by making a deposit or posting a bond. The amount is meant to guarantee that Daimler can be made whole should Conversant ultimately lose the case, in which event Daimler would be entitled to recovery of wrongful-enforcement damages. One doesn't have to be an automotive industry expert to see that the damage of blocking Daimler's German sales (which could even impact many exports from Germany to other countries) would exceed that amount by a factor of not 10 or 100, but roughly 1,000. The ruling notes that Daimler built well over a million cars in Germany in 2018, and a similar volume would be impacted now. That's why the Mannheim court required collateral to the tune of €7 billion in a Nokia v. Daimler case.

The Munich court bases its collateral determination--as it has recently done on various occasions, apparently also including a Nokia v. Lenovo case--on Daimler's duty to mitigate damages. In a nutshell, the court's "theory" (in quotes because it makes mockery of the word) is that Daimler doesn't have to halt production and sales--it could take a license. That, however, would moot the case, thereby depriving Daimler of its right to appeal and defeating the very purpose of collateral for enforcement during an appeal. It's utterly nonsensical.

That approach to security amounts should be reviewed by the appeals court as soon as possible. It already might have been corrected if Daimler hadn't settled with Sharp.

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Presiding judge of patent-specialized panel of Dusseldorf appeals court expressed bias against Asian defendants

For quite some time, the German patent judiciary has had a reputation of being plaintiff-friendly, but this year the system has simply gone off the deep end in terms of highly problematic decisions, all the way up to the Federal Court of Justice, which hit a new low with its Sisvel v. Haier ruling. Those courts should faithfully apply the law, but more than anything else they are simply agenda-driven.

It's beyond ridiculous that some German patent infringement judges tell their government--which may adopt a patent reform bill this month, which would then be submitted to the legislature--that plaintiffs flock to Germany because of the quality of the German patent judiciary. That is actually an insultant to human intelligence: common sense says that patent holders will simply sue where they expect to get leverage. They'd rather win on a clearly erroneous basis (especially if the appeals courts are typically too hesitant to stay enforcement before the defendant is forced to settle) than lose on a legally correct basis. Germany just offers the unique combination of

• a large market (i.e., an injunction has a substantial effect on revenue production),

• a draconian injunction regime,

• a "bifurcation" system that enables patentees to get leverage by asserting patents that shouldn't have been granted in the first place, and

• a swift process from complaint to decision.

If you transplanted those German patent courts to a small market, such as Switzerland, they'd lose most of their "business" (all other things being equal). And if those judges had the intellectual honesty to rely to a reasonable extent on technical expert witnesses (like their counterparts in various other jurisdictions) as opposed to claiming they can resolve pretty much everything (except validity, as they prefer not to stay their cases over validity doubts) as a matter of law, those courts could no longer claim to be "rocket dockets."

It's undeniable that the huge number of cases those judges get to decide (about two in three European patent infringement actions are brought in Germany) enables them to build extensive experience. But the broken system--with the future Unified Patent Court promising more lucrative and more prestigious posts---incentivizes bad decisions in favor of plaintiffs ("forum selling") over well-reasoned decisions. What's going on right now is a race to the bottom between certain courts that come up with ever more troubling and far-fetched theories only to please patent holders.

With all that's going wrong there, this post is part of a continuing effort to to expose and discuss certain issues. Some of this may help policy makers to better understand the extent of the problem of a patent judiciary that pursues its own interests in attracting infringement cases at the expense of the economy and to the detriment of innovation. The makers of the world's most innovative products dread the German patent judiciary that offers itself as a tool to patent trolls looking for extortionate leverage.

Those judges are the opposite of protectionists. They enjoin local companies just like foreign defendants. No qualms ever. But at least one German patent judge--and a relatively powerful one--appears to harbor prejudice against Asian defendants.

On January 16, 2020, Judge Ulrike Voss ("Voß" in German), who presides over one of the two patent-specialized senates (panels) of the Oberlandesgericht Düsseldorf (Dusseldorf Higher Regional Court, a regional appeals court) gave a speech at Munich's Ludwig Maximilian University on access to injunctive relief under the current legal framework and after the enactment of a hypothetical patent reform bill. She took some questions from the audience, and when everyone was walking out (the university hosted a reception outside the lecture hall, she was approached by a BMW in-house patent counsel and engaged in a short conversation with him. As the two were talking, other people were standing behind her or passing by. The conversation was, like her speech, about Germany's near-automatic injunction regime and potential reform, and she asked BMW to understand why the situation was the way it is:

"I hear you, but we have to deal with unrepentant infringers where injunctions are absolutely necessary. I don't want to... but, let me just say they are frequently from Asia."

I do know that some of Judge Ulrike Voss's decisions in recent years have been controversial, such as a case in which she identified an "infringement" even when there was no evidence in the record with respect to at least one critical claim limitation. What I don't know is whether she's systematically disadvantaged Asian defendants throughout her career. But what she told that BMW employee, with bystanders and passers-by hearing her say so (she spoke somewhat quietly, but it was audible), calls her impartiality into question.

The Dusseldorf appeals court has another patent-specialized senate (which in fact had been around for much longer than the new one to which Judge Voss was assigned). Its presiding judge is Dr. Thomas Kuehnen ("Kühnen" in German), author of the leading reference work on German patent infringement litigation. While I generally consider him to be far too patentee-friendly as well, he has adjusted his positions on standard-essential patents (SEPs) in recent years, which is a positively surprising development but of limited help as long as the Federal Court of Justice favors patent trolls like Sisvel over defendants (whether from Asia or elsewhere)...

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Epic Games ignores Apple's property rights and technical contributions as it reinforces motion for judgment on pleadings against counterclaims

Before I talk about Epic Games' latest filing in the antitrust dispute with Apple in the Northern District of California, here's a follow-up to what I posted one month ago when I wrote that the political clout of the newly-founded Coalition for App Fairness (Epic Games, Spotify, the Tinder company, and others) would depend on its ability to attract more members. This week, the CAF announced the addition of 20 members, and claimed that more than 400 other app developers have applied for membership. The names of the would-be members awaiting approval of their request to join aren't known, so I can't tell how credible and significant they are.

There are at least a couple of shady ones among those who have been allowed to join. It appears that Prepear's real issue with Apple is a trademark dispute, and I think Apple made a reasonable and responsible decision when it disallowed Eristica's "challenge" system as such challenges can indeed be quite dangerous.

But at least the majority of the CAF's members appear legit. Should this group continue to grow at a similar pace, it may at some point be in a position to claim that there's widespread disagreement with Apple's App Store and Google's Google Play business terms. A few dozen companies can't claim to speak for those who make millions of apps--but Apple will have to keep an eye on the CAF's momentum going forward because at some point it could become an influential organization and lend credence to Epic's and Spotify's narrative.

Now, on to Epic's latest court filing (this post continues below the document):

20-10-23 Epic Games' Re... by Florian Mueller

In order to eliminate the risk of punitive damages, Epic seeks to limit the dispute with Apple to an antitrust case if Epic wins and a contract dispute in case Epic's antitrust claims don't succeed. For that purpose, Epic brought a motion for judgment on the pleadings (somewhere between a motion to dismiss and a motion for summary judgment) against Apple's non-contract counterclaims, which Apple opposes. Late on Friday, Epic filed the above reply brief in support of that motion.

Philosophically, Epic Games v. Apple is in no small part about the relative value of the contribution each party makes to, for instance, Fortnite's commercial success on iOS. While it's obvious that there wouldn't be a Fortnite on iOS without Epic or without Apple, either party's counsel is now trying to convince the court that their respective client is the more important contributor. And that leads them to paint a self-centric picture.

Last month I agreed with famous and vocal iOS app developer Marco Arment that Apple shouldn't reduce to its 30% commission the value that we developers (my next title is slightly delayed, but we'll apply for TestFlight beta distribution in a matter of days) add to iOS. But the introductory part of Epic's latest filing makes a very one-sided statement: "Consumers who choose to make in-app purchases in Fortnite pay for Epic's creativity,innovation and effort—to enjoy an experience that Epic has designed." The fact of the matter is that Epic is standing on the shoulders of giants; Fortnite does not exist in a vacuum; and without the mobile revolution (which the iPhone sparked), app developers would today have fewer viable platform options.

The question of what actually belongs to Apple is relevant to certain counterclaims Apple brought against Epic. Apple wants to hold Epic responsible for having defrauded its app reviewers by sneaking a prohibited alternative payment system past the review process, and Epic argues that Apple isn't entitled to anything other than what Epic owes on a contractual basis. Apple, however, argues that only because it's protected itself against fraudulent acts through contractual provisions doesn't mean it doesn't have claims against Epic under tort law. Epic acknowledges that a breach and a tort can co-exist, but insists that the tortious act must be "independently wrongful." And that is, in my opinion, ultimately a question of whether one takes Epic's perspective, which is that they have every right to provide apps to iOS users and it's just Apple that restricts this right by uniterally imposing contract terms, or whether one primarily views Apple's App Store and the iOS platform as Apple's property, giving Apple the right to decide which apps become available via the App Store (and, therefore, to review those apps).

The "property" question is even more central to Apple's "conversion" claim (the civil law equivalent of theft). Epic argues that it's not theft to take money from Fortnite users on iOS, as opposed to "stealing cash from a vault in Apple Park, or raiding Apple's bank account."

My feeling is that the part about defrauding the app review process is not ripe for decision at this point; some of what Epic says may be valid, but not sufficient to defeat the counterclaims at this early stage. Conversion, which requires a possessory interest, may be ripe for judgment.

As for the question of whether Epic's offering an alternative payment mechanism (which Epic did in order "to illustrate that competition could exist on iOS, and that consumers would welcome and benefit from it") constitutes interference with Apple's customer relationships, Epic points to a passage in Apple's agreement with end users (Apple Media Services Terms and Conditions) that says "Apple acts as an agent for App Providers in providing the App Store and is not a party to the sales contract or user agreement between you and the App Provider." On that basis, Epic describes itself as the "principal" in the relationship with end users, and Apple as an "agent" at best and "an outright non-party" at worst. However, iOS users have a relationship with Apple that goes beyond Fortnite.

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Conversant wins Germany-wide standard-essential patent injunction against Daimler in Munich: third court loss for Daimler in as many months

Today the 21st Civil Chamber of the Landgericht München I (Munich I Regional Court) granted Conversant Wireless, a notorious standard-essential patent (SEP) troll, a Germany-wide injunction against Daimler over EP2934050 on an "apparatus and method for providing a connection" (a divisional of a patent Nokia once gave to Conversant).

While Daimler will presumably appeal, the injunction is immediately enforceable--absent an enforcement stay that the appeals court might order--if Conversant posts a bond or makes a deposit of a negligible amount. The Munich court bases the amount of the prequisite collateral not on the economic damage resulting from enforcement, but on the SEP holder's royalty demand. In a parallel case, Nokia is now enforcing a SEP injunction on that basis against computer maker Lenovo.

In the EP'050 case, Daimler had conceded essentiality, but disputed the validity of the patent-in-suit. Let me refer you to my report on the September 23 trial. Daimler's FRAND defense was futile because the Munich court turns the CJEU's Huawei v. ZTE on its head by focusing on the implementer's counteroffer and typically never reaching the SEP holder's licensing offer, apart from a less than cursory look. And the court believes that this follows from the Federal Court of Justice's recent Sisvel v. Haier decision, which dealt (among other things) with the question of whether an implementer was a willing licensee.

This is already the third German SEP injunction against the Mercedes maker in as many months:

• On August 18, the Mannheim Regional Court granted Nokia a Germany-wide injunction against Daimler. However, Nokia would have had to provide security to the tune of €7 billion, which it couldn't afford, and at any rate, the injunction isn't being enforced because the appeals court (the Karlsruhe Higher Regional Court) wasn't going to let that happen while weighing Daimler's motion for an enforcement stay.

  By the way, Nokia might also win a Munich injunction--then practically without a requirement to provide security--against Daimler in a week from today.

• On September 10, the Munich I Regional Court's Seventh Civil Chamber granted Sharp an injunction against Daimler, and determined only a negligible security amount. Daimler appealed and requested an enforcement stay, but caved and took a license from Sharp. That decision will cost Daimler dearly. And it already has a negative effect on the Conversant dispute: had Daimler actually pursued its appeal and its motion for an enforcement stay, the Munich appeals court would already have had an opportunity to correct the lower court's Huawei v. ZTE misapplication and its approach to setting the amount of the collateral required for immediate enforcement. Those legal questions are now the same in the Conversant case, so the appeals court could have addressed those questions roughly six weeks earlier (October 23 vs. September 10)...

One of the key legal issues here is the right of component makers to a SEP license on FRAND terms. With the Dusseldorf Regional Court still being very likely (irrespectively of a Qualcomm initiative) to refer a set of component-level licensing questions to the Court of Justice of the EU on November 12, the Munich appeals court might be reluctant to let Conversant enforce its injunction against Daimler on a basis that the top EU court might later find to contravene EU competition law.

The fact that Conversant has now joined Nokia and Sharp in obtaining a Germany-wide Mercedes sales ban may have policy makers in Berlin concerned. The Federal Cabinet has patent reform on its agenda for next week. I haven't seen the draft injunction statute of the proposal they're probably going to adopt. So far, SEP injunctions weren't really the focus, but the pro-reform camp should raise the rapidly deteriorating situation on the SEP front with the Federal Parliament and try to have the bill amended so that proportionality considerations would apply to SEP cases on top of the antitrust-based FRAND defense.

In closing I'd just like to note that today's decision is yet another disgrace for the European Commission, which is totally responsible for what is going wrong in the automotive patent wars because of its regional protectionism favoring Nokia and Ericsson over Europe's automotive industry.

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Qualcomm proposes non-solution to automotive component-level patent licensing conflict: only courts can provide much-needed clarity now

For a long time, Qualcomm had kept a surprisingly low profile in the automotive patent wars. But it was always active behind the scenes. The San Diego-based chipmaker is a member of some of the same lobbying groups as Nokia and Ericsson. And more recently, Qualcomm has been lobbying the European Commission and the German government directly in order to garner support for an automotive standard-essential patent (SEP) licensing proposal that must be rejected all the way.

The exact political dynamics aren't clear, but it is disconcerting that Germany's Federal Ministry for Economic Affairs and Energy will host a closed-door workshop on November 17 to discuss Qualcomm's proposed memorandum of understanding (MOU). There is a possibility that the German government is simply doing a favor to the epitome of incompetence in the SEP policy context--EU internal market commissioner Thierry Breton, who wasn't his country's first choice for the job and recently made himself totally ridiculous by repeating himself like a broken record that European companies' leadership in 5G "is a fact" (when even the only report that ever said so has been corrected in that regard). It might also have helped Qualcomm that the ministry is advised by a (non-cellular) SEP troll--Fraunhofer--in the patent policy context. In any event, Germany's automotive industry is no match for Qualcomm when it comes to IP-related lobbying.

There are several structural issues with Qualcomm's proposed MOU. I'll just highlight the three that I consider to be the most fundamental flaws:

• Just like Nokia's recent and comparably deficient proposal, Qualcomm's proposed MOU would extend licenses only to tier 1 suppliers (which sell telematics control units (TCUs) to car makers), not to tier 2 (network access device, or connectivity module) and tier 3 (baseband chipset) suppliers. But the higher up you go, the more likely those companies are to hold cellular SEPs that enable them to cross-license with the likes of Qualcomm and Nokia.

• Another Qualcomm-Nokia parallel is that the proposed MOU wants an entire car to be the royalty base, as opposed to the smallest salable patent-practicing unit (SSPPU). That means Qualcomm and Nokia seek to overcharge. And it's economically prohibitive to TCU makers, given that those TCUs sell at not much more than what, for instance, the abusive Avanci pool tries to charge car makers for its patents (up to 4G and not even including 5G, which will be several times more expensive).

• Qualcomm is also attempting to derive non-monetary value from the MOU by having companies support its own self-serving (mis)interpretation of ETSI's FRAND policy (giving SEP holders the choice at what level of a supply chain they grant a license). Qualcomm would likely leverage that in its efforts to get the IEEE to revise its SEP policy.

Also, some of the leading 5G SEP holders are actually tier 2/3 automotive suppliers and therefore unlikely to be willing to accede to the MOU. That's just another reason for why this is a non-solution.

Qualcomm's initiative started earlier this year as far as I've been able to find out. At this point, however, part of the agenda appears to be that Qualcomm--just like Nokia--would like to dissuade the Dusseldorf Regional Court from referring to the top EU court a set of key legal questions concerning component-level access to SEP licenses. But Qualcomm's proposed MOU doesn't obviate the need to have questions clarified on which even some German courts (Mannheim/Munich and Dusseldorf) agree. The referral, which is still expected to happen on November 12, would resolve the question with respect to all levels of the supply chain. If anything, the fact that Qualcomm and Nokia are now trying to somehow distinguish tier 1 from tiers 2 and 3 underscores the need for judicial clarification.

My advice to the German automotive industry would be to decline to participate in the November 17 event as Qualcomm's proposed MOU is simply not a constructive contribution to the debate. Qualcomm has opposed component-level licensing for a long time because it's "humongously more lucrative" (as Qualcomm once told the IRS) to license only end-product makers.

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