The Dusseldorf Regional Court's preliminary reference to the European Court of Justice asks the top EU court to opine on certain questions of antitrust law with respect to the availability of standard-essential patent (SEP) licenses to component makers. Daimler argues that Nokia actually owes its suppliers an exhaustive license that would, by extension, cover the Mercedes maker.
In late 2018, Daimler filed with the European Commission's Directorate-General for Competition (DG COMP) a complaint over Nokia's refusal to license its suppliers. About two years ago, Nokia started a patent infringement litigation campaign against Daimler that has so far failed to give the former handset maker decisive leverage.
Daimler notified its tier 1 (direct) suppliers of those cases and the possibility of indemnification claims. Certain suppliers such as Peiker, a German subsidiary of a French company named Valeo, intervened (in support of defendant Daimler) early on. Last year it became known that even French automotive company Renault is technically a supplier to Daimler, by virtue of making a car for Daimler under a cooperation agreement. Renault may not have intervened in all Nokia v. Daimler cases, but in at least a couple of Munich lawsuits.
By now, Valeo and Renault are no longer the only two French companies to have skin in the Nokia v. Daimler game: I've recently found out that Thales, a French industrial giant with 80,000 employees, finally elected to intervene in the Dusseldorf case that gave rise to the ECJ referral. Almost two years after the filing of the complaint, Thales apparently didn't want to miss this opportunity to try to influence the proceedings in Europe's highest court.
Thales is not a direct supplier to Daimler, but a tier 2 supplier (one degree removed) through its customer TomTom. Similarly, Huawei is a tier 2 supplier through such telematics control unit (TCU) makers as Continental and Harman (a Samsung subsidiary).
With a belated filing on February 20, 2021, Thales--represented by Simmons & Simmons antitrust attorney Dr. Jens Steger--attempted to persuade the Dusseldorf court to refer a set of alternative or additional questions to Luxembourg. As far as I can see, the Dusseldorf court shows no signs of being inclined to do so. It will stick to its original set of questions.
In addition to unilateral-conduct issues under Art. 102 TFEU, Thales sought to raise a couple of cartel questions (Art. 101 TFEU):
In one of its proposed questions, Thales points out that the FRAND licensing pledge companies like Nokia made to ETSI was key to the European Commission's approval of "the ETSI agreements"--and on that basis suggests that Nokia violates Art. 101 by refusing to license component makers.
In another question Thales takes aim at an Avanci contract clause according to which that patent pool reimburses its members' SEP enforcement costs. Thales calls into question that a pool covering more than 60% of the patents essential to a given standard. Apart from the fact that this percentage is merely based on Avanci's own estimates (which are inconsistent with various independent studies), collective ownership percentages of SEPs aren't relevant from a competition law point of view as even a single truly essential patent confers market power upon its holder.
While it's important never to forget that what makes SEPs so powerful is horizontal cooperation, which would raise serious cartel issues without a FRAND licensing obligation, I welcome the fact that the focus will remain on unilateral conduct (monopoly abuse) questions. After all, that's what makes this preliminary reference a seamless continuation of Huawei v. ZTE with a special focus on component-level licensing. Thales aspired to make creative contributions to the process, but the new theories it espouses aren't quite so compelling as to warrant a modification of the referral order, much less at this procedural stage.
Where Thales does, however, still have every opportunity to make a positive impact is by lobbying the French government--which will have the opportunity to submit written observations (comparable to an amicus curiae brief, except that the ECJ doesn't allow private non-parties to make submissions). Thales could also lobby the French EU commissioner, Thierry Breton, who has so far been more sympathetic to Nokia and Ericsson's patent monetization interests than the concerns of the automotive and wider IoT industry over SEP abuse. As internal market commissioner, Mr. Breton has responsibility for the European economy at large (and European consumers), but that doesn't mean he has to act forever as if he were Finland's permanent representative (ambassador) to the European Union. Europe has far more to gain from component-level SEP licensing: its strong automotive sector is reason enough all by itself, and its growth potential in IoT makes it an even smarter choice for the future.
Thales declined to sign Nokia's non-disclosure agreement, and I applaud them for that. However, the need to withhold certain confidential business information from them may slow down its lawyers' access to the record. Unfortunately, German litigation procedures are antiquated, so Thales can't just be provided with access to digital documents. Instead, the court has to provide the original paper documents, and the formal referral to the ECJ can take place only after Thales has had its opportunity to make copies or scans.
Subsequently to the formal referral, the CJEU can start the translation process. The deadline for the written observations to be filed by the European Commission and the governments of the EU member states (to the extent they do so) will be a couple months later--in the late summer, presumably.
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