Race to the bottom continues in standard-essential patent enforcement: Dusseldorf court hits new low by holding refusal of pool license against implementer

Access to injunctive relief is the primary reason for which 50% of the respondents to a survey published by IAM consider it the most attractive jurisdiction in the world to bring patent infringement complaints (I pointed to that story in my previous post, in which I also discussed the state of affairs in the German patent reform process, which may have hit an impasse shortly before the end of the legislative term).

The three major German patent litigation venues--from north to south--are Dusseldorf, Mannheim, and Munich. The 4b Civil Chamber of the Dusseldorf Regional Court (Presiding Judge: Dr. Daniel Voss ("Voß" in German)) has now handed down its decisions in three parallel standard-essential patent (SEP) infringement cases. There's a lot in there that will likely appeal to SEP holders to a greater extent than anything else that has come out of that court in several years.

The decision hasn't been published yet, but this summary by two Bardehle Pagenberg attorneys is highly informative. It explains how the Dusseldorf court's 4b Civil Chamber applies the guidance the Federal Court of Justice provided in its two Sisvel v. Haier rulings. The major German patent litigation venues used to interpret the ECJ's Huawei v. ZTE

The part I'd like to comment on here is that the court deemed the defendant an unwilling licensee because, inter alia, it declined to take a license to an entire patent pool covering the standard in question and instead insisted on a bilateral licensing offer. The court reportedly believes that an implementer's willingness to take a license is belied by the refusal of a pool license unless the implementer can make a showing that, in a simplified and only slightly exaggerated form, the terms of the pool license in question would more or less force it out of business. The standard is indeed so exacting that a defendant would have to demonstrate very serious competitive harm.

This is part of the willingness analysis, and in the post-Sisvel v. Haier world, the FRAND compliance of the SEP holder's royalty demands is typically not reached anymore: the result is typically that the implementer is an unwilling licensee and, therefore, unable to prevail on a FRAND defense. Injunctions can't possibly be much more automatic.

The 4b Civil Chamber denied a motion to stay the case pending the decision of the European Court of Justice on a preliminary reference from another division of the Dusseldorf court in Nokia v. Daimler. It remains to be seen whether the Dusseldorf Higher Regional Court--to which these decisions can be appealed--will uphold this "pool pressure" and whether there will be similar FRAND rulings in Mannheim and Munich. The relevant question comes up only when a SEP can be licensed through a pool and the SEP holder declines to enter into bilateral licensing negotiations. Sharp apparently took a similar position at some stage of its dispute with Daimler, pointing to an Avanci licensing offer as opposed to making its own.

With two charts I'd like to show how German FRAND case law has spiraled out of control since Huawei v. ZTE, an ECJ decision that actually appeared and was presumably intended to strike a balance between the German Orange-Book-Standard SEP injunction case law and a European Commission press release that was interpreted by some (though not by all) as shielding implementers from SEP injunctions for as long as they'd declare themselves willing to negotiate.

Prior to Huawei v. ZTE, at least the Mannheim Regional Court required implementers only to license the particular SEP-in-suit and only with respect to the German market. I still believe that is most reasonable, given that one simply cannot know whether the other declared-essential patents are actually valid and infringed. While I understand that SEP holders complain about "holdout" tactics by implementers, disputes sooner or later reach the point at which the parties have enough guidance from the courts to work out a portfolio license.

After Huawei v. ZTE, a SEP holder prevailing on a single patent in just one jurisdiction (Germany) can demand that the implementer take a global portfolio license (all patents belonging to that company and declared essential to the standard in question). The following chart shows the discrepancy between the extent to which the SEP holder has actually proven the infringement of valid and truly essential patents on the one hand and the scope of the license on the other hand (click on the image to enlarge):

The filled red rectangle represents one patent: it's the intersection of a patent family with a single country. The much larger rectangular frame encompasses this patent holder's SEP portfolio.

There could be any number of rows and columns, and in practice those matrices aren't perfect rectangles as some patents may be registered in more jurisdictions than others, or the applications may be granted in one place but rejected in another. In this context, it's just about the discrepancy between the infringement established and the license imposed.

With the new Dusseldorf "pool pressure" standard, that discrepancy goes through the roof (click on the image to enlarge):

Each of the connected rectangles represents one company's portfolio. In the chart, the pool would consist of the portfolios of nine companies, and they would be equally large. In reality, there are obviously huge differences.

Still, the chart does not show the worst case for the aforementioned discrepancy. Imagine what would happen if the "pool pressure" standard coerced a car maker into an Avanci license. Avanci has about three dozen contributors, and covers many times more patents than shown in the above chart...

Can't wait to see this one reversed.

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Patent injunction reform may not happen in Germany as Federal Parliament nears end of legislative term: only two more plenary weeks left

"For patent plaintiffs, Germany is the world's top jurisdiction, exclusive IAM survey finds"--that's beyond reasonable doubt. It's equally beyond reasonable doubt that this is not going to change anytime soon.

I've been skeptical of the German patent injunction reform effort for quite some time. There was a silver lining last September, but it lasted only a few weeks. The first plenary debate in the Bundestag (Federal Parliament) was a sweeping victory for those opposing reform, and a parliamentary hearing confirmed that pro-reform lobbying efforts had failed miserably.

The pro-reform camp didn't even do its homework. German automotive companies and their allies thought they could persuade politicians with anecdotal evidence, such as the Broadcom v. Audi dispute. If you have only one case like that to show, politicians won't be persuaded, as it could be an outlier and in a single case all sorts of things can happen, including mistakes by parties, counsel, or judges. I find that story representative of the problem and symptomatic of the injunction (and injunction gap) problem in Germany, but how could the actual decision-makers reach that conclusion? I've attended hundreds of patent trials and hearings over the last 10 years, so I know what happens, and I also know how one could produce hard evidence--and numbers and lists as opposed to anecdotes. The pro-reform forces don't. They also failed to build the kind of support from academics that would have borne weight with political decision-makers.

It would have taken professional, competent, and strategically clever efforts to be in a position to win. And it would have taken a budget about ten to twenty times larger than what those pro-reform companies and organizations had available between all of them. They brought butter knives to a gunfight (a quote from a document that surfaced in the recent Epic Games v. Apple trial). At least one Big Tech company (that wasn't as controversial when the process started as it is by now) approached German policy makers and legislators directly instead of figuring out a way to mobilize more German companies and contribute funding and expertise to their efforts.

There were people dabbling in patent policy because it was a welcome distraction from their everyday routine in the office. The French word "amateur" (like its Latin root) means that people do something because they love to do it--as opposed to being really good at it. "Amateurish" is a pretty good description of what they did for the most part, and if they had done nothing at all, could they have achieved less?

That is now the question. It's now literally about whether there'll be a useless "reform" undeserving of that label (though there will always be someone trying to give it a spin)--or simply nothing at all.

Time is ticking away. The Federal Parliament's calendar has only two more weeks marked with a magenta stripe before the September elections: the week of June 7, and the one of June 21. At the time I am writing this (weekend), there is a packed agenda on the Bundestag website for the week of June 7, and patent reform is not on that list.

Theoretically, things can change on ultra-short notice. They could hold a committee vote on one day and the plenary vote on the next. But in order to be able to do that, they need a political agreement between the government coalition parties (Chancellor Merkel's Christian Democratic Union, its Bavarian sister party named Christian Social Union, and the Social Democratic Party). Then they can work out the details with help from the Federal Ministry of Justice, which has an IP policy department.

Like all legislatures around the globe, the Bundestag has had to deal with a number of issues since last year that wouldn't have arisen if not for the pandemic. As a result, there are now numerous legislative projects and other policy issues competing for one of the coveted slots during the final voting week of the term.

This means the opponents to meaningful reform have won either way. There isn't enough time left for anything major. So the three options are now the following ones, and we'll know soon which one of the three materializes:

1. The most likely outcome is still that they pass something into law that also touches on injunctions, for the sake of having something to show in that area, no matter how useless it will be.

2. The second-most likely outcome is that they enact a reform without the most controversial part (injunctions) and possibly also without the second-most difficult one (stays; here the idea is just to demand faster preliminary opinions from the Federal Patent Court, and it's not going to work the way some people imagine and may even lead to fewer stays and weaker invalidity contentions). There's a lot of totally non-controversial stuff in there that is of an editorial nature. They might just adopt the bill so that the job is 99% done in quantitative terms, even if that's only 1% in qualitative terms.

3. The least likely possibility is that the entire package gets postponed into the next term.

As none of the three possibilities leads to a solution, the discussion will continue. In the first scenario, the pro-reform movement will find it politically most challenging to get another reform effort started. It would take a lot of time presumably. And effort. And money. And the strategy would have to be way better than last time.

It's unpredictable right now what particular multi-party coalition will be in power in Germany after the September elections. Polls are volatile. With every single party from the far right to the far left opposing meaningful injunction reform, it won't be easier. But the reason it went wrong during this legislative term (which is already certain as the only thing that won't happen in June is a reform that actually moves the needle) is simply that those who wanted reform were C-L-U-E-L-E-S-S, but thought they knew how to win. Actually, I suspect one or more of them even wanted to sabotage the effort. Then, it's easy for the saboteurs to fool the amateurs.

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Friday for Fortnite

No, I don't want to gloat, but it's mind-boggling what happened yesterday in that Oakland courtroom at the end of the main part (they're done apart from closing arguments on Monday) of the Epic Games v. Apple App Store antitrust trial. It's fair to say that at this point the question is most likely about remedies. Epic is on the winning track with respect to liability as Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California laid bare the bankruptcy of Apple's defenses. Being an App Store complainant myself (though I tried what I could to work things out), that's what I had hoped, but the hurdle was and remains high.

After my final pretrial post and Twitter thread, I didn't comment on the trial itself or on the issues in it. I just noted some suspicious Twitter activity.

I dialed in only for opening statements (followed by Epic Games CEO Tim Sweeney's testimony, which was almost inaudible) and for Apple CEO Tim Cook's testimony yesterday. In between, I just read other people's tweets (mostly not even in real time), particularly the ones by Protocol's Nick Statt (here's his report on how the judge "saved her best for last") and The Verge's Adi Robertson (here's his article, which contains a partial transcript of how Judge YGR grilled Tim Cook), but also others.

After the first couple of days, I was profoundly worried. The judge had tough questions for Epic, and some of the answers might have been tactically suboptimal. The inflection point in the early phase of the trial was the testimony of Lori Wright, a Microsoft Xbox exec. As far as I could see on Twitter, it was just perfect and definitely eye-opening.

I've been watching Apple's highest-profile cases over these past 10+ years, and seriously, I've never seen Apple that desperate. The way Apple is trying to shoot down Mrs. Wright's testimony (by a "motion for adverse credibility finding") is not the Apple so many people--for good reason--admire. Initially, Apple argued that she had a financial incentive. They were basically suggesting that Microsoft makes a lot of money with Fortnite on the Xbox, so it would testify in Epic's favor. That's like insinuating that Epic would pull Fortnite from the Xbox (as if it was going to remove the product from platform after platform) if Microsoft didn't testify to its liking. That's bad enough. But what's worse is that in the most recent filing, made a couple of days ago, Apple suddenly suggests the opposite, describing Epic as a "stalking horse" and "proxy plaintiff" for Microsoft.

Sorry, Apple: if Epic is in Microsoft's pocket, then Microsoft can't be in Epic's. If you descend into wild QAnon-style conspiracy theories, without a scintilla of evidence, then at least be consistent and don't contradict yourselves. Otherwise the judge is simply going to see that you want Microsoft's testimony stricken (because the truth hurts) and will stop at nothing to get your way.

It also doesn't make sense to stress that Epic called as many witnesses from Microsoft as from its own organization (five each). Epic is far smaller. You could probably get 90% of the information from Tim Sweeney alone. Microsoft is huge, and different people have knowledge in different areas.

There was another strange episode just yesterday: all of a sudden, Apple's counsel wanted to discuss an article with Tim Cook that just appeared while he was on the witness stand. Snap founder Evan Spiegel said they gladly pay Apple the 30% because they wouldn't exist without Apple. Well, Snapchat wouldn't exist without the Internet, or without telephone lines, or microprocessors, or without the founder's parents, and so forth. If everyone collected 30%, Snapchat would not exist. I strongly suspect that Apple saw things weren't going well for them. The longer the trial lasted, the worse it apparently got. So they tried a Hail Mary, which went nowhere (objection sustained: hearsay).

This, too, is not the Apple so many of us admire.

Cravath's Gary Bornstein, who represented Apple together with Katherine Forrest (she delivered the opening statement), actually asked Tim Cook whether he knew how many developers had testified for Apple during the trial. Mr. Cook didn't. Then Mr. Bornstein asked him whether he'd be surprised to know that the exact number was zero...

Those Cravath lawyers have been doing a phenomenal job for Epic, but undoubtedly the highlight of the trial was the roughly ten minutes during which Judge YGR took Tim Cook to task. She has it all figured out what I've known for years: Apple competes for end users, but not for developers. In a guest article published by the Korea Times a couple of months ago, I likened our situation to medieval feudalism or 19th-century Russia.

Getting back to the first trial week, its second half actually went better for Epic than some observers realized. Not only did Judge Gonzalez Rogers identify some inconsistencies and a certain degree of arbitrariness in Apple's app review decisions but she also made a remark on how competition spurs innovation, which in turn improves security. Here's a tweet about that from MLex reporter Michael Acton, whose tweets I also read on many trial days:

Very interesting from #EpicvApple judge, talking @Apple App Store security standards.

One problem with limiting competition is you don't get innovation - at least it's a possible outcome. So one concern is that if you're not allowing parties to compete, things won't improve...

— Michael Acton (@MActon93) May 7, 2021

The Associated Press simply got it wrong when it wrote after the first week that Epic needed heavier artillery. Epic wasn't on the winning track yet, but for sure on the right track, as I told some people at that stage.

Epic's lawyers kept building their case. At different points, the judge brought up the question of potential remedies. She doesn't want to overshoot. As a complainant whose problem with Apple relates to its inherently-subjective Objectionable Content guideline, I don't see how the problem could be solved without third-party app stores like the Epic Games Store. The 30% could be undercut and undermined in other ways. But for developers to regain some essential freedoms we had in the past, when the primary platform was Windows followed by the Mac and Linux, it takes more than an "anti-anti-steering" order, though it was another key moment when Judge YGR indicated she wasn't going to buy Apple's American Express analogy (that case was about an anti-steering provision).

The Senate Antitrust Subcommittee hearing and the European Commission's Statement of Objections (based on Spotify's App Store complaint) shortly before the trial didn't make things easier for Apple. It set the stage for what happened. Also, you don't want a Senate subcommittee in which there is total bipartisan consensus (apart from ideological nuances) and DG COMP to be at the heart of your conspiracy theories.

The current App Store situation is as unsustainable as it is legally and politically indefensible. Competition is needed, and competition is coming. I guess Fortnite will be back on the App Store in a few months' time, though the Epic Games Store is the more strategic topic not only in my opinion. The judge said she'd try hard to hand down her decision by mid-August.

There's no point in Apple-bashing. I've just called them out on their conspiracy theories (and didn't even talk about how different Apple witnesses denied knowledge of facts most observers would have expected them to know). If anything warrants an adverse credibility finding, it's the contradiction between "Epic pays Microsoft" and "Epic is Microsoft's puppet." Tim Sweeney is personally very committed to this cause. I've read many of his tweets since last summer, and saw a couple of interviews. According to reporters he was in the courtroom on all trial days. He obviously had to answer the question of whether he'd have taken a side-letter deal in the affirmative: you can't allege antitrust harm for yourself because you want to bring about change for others (simply put, Epic is not the FTC or the DOJ, who can sue on behalf of everyone). Epic's Project Liberty benefits developers large and small.

Apple holds the keys to the kingdom in its hands. If it makes the right decisions, it can become one of the most popular companies in the world among developers, if not even the most popular one.

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Extraterritorial overreach in SEP enforcement: slide deck used in my presentation today (DG GROW webinar on standard-essential patent enforcement)

Last week I already wrote about today's European Commission webinar on standard-essential patent (SEP) enforcement. My immediate follow-up is to publish my slide deck (this post continues below the document):

21-05-19 Florian Mueller Sl... by Florian Mueller

While some speakers focused more narrowly on antisuit (and anti-antisuit) injunctions, the first part of my presentation put antisuit injunctions into the wider context of extraterritorial overreach. Patents are national rights, as Judge Edger Brinkman (The Hague) noted in his welcome speech today--but FRAND license determinations are often global. Looking at it from the angle of the practical effects, three types of extraterritorial overreach compromise another country's (or multiple other countries') jurisdiction over that jurisdiction's (or those jurisdictions') patents:

• an antisuit injunction precludes a party from enforcing patents in another jurisdiction;

• a court ordering parties to enter into a global license agreement may deprive the patent holder of the right to enforce those patents in a given other jurisdiction; and

• if a court coerces an implementer into a global license agreement (on terms set by the court or demanded by the SEP holder but effectively blessed by the court) under the threat of (the enforcement of) an injunction (i.e., sales ban).

Each of these scenarios obligates a party to do something it might not want to do voluntarily, and in each case that party will have to comply or a court will impose contempt sanctions. So the net effect as well as the nature of the leverage is materially the same in each of the three cases. The UK Supreme Court's Unwired Planet approach has already failed, as my fifth slide shows that there's been a flurry of antisuit injunction activity since that decision came down last summer.

How could we get out of this? I've asked that question before. Intergovernmental agreements are not going to happen anytime soon. Standard-setting organizations are in no better position to reach a consensus. The solution I propose can be implemented by any country seeking to preserve its jurisdiction over its patents. It can be implemented unilaterally. It's to decline to recognize in a given jurisdiction a license agreement imposed on a party by a foreign court (regardless of which of the three above-mentioned types of coercion it may be). If a SEP holder didn't want to be bound to a UK determination of the value of the German part of the portfolio, German courts could allow the enforcement of those patents, for the purpose of obtaining incremental payments up to a FRAND level. Conversely, if a UK court sets a royalty rate that is too high with respect to a major market like, for instance, China, the Chinese company might go to its local courts and seek a partial refund.

Courts could still force someone into a global license agreement, but effectively the courts in other jurisdictions would be in a position to correct those findings. A portfolio may not be all that strong in a given jurisdiction. Or the local rates may simply be lower.

In the Q&A chat, a valid question came up: what if a court tried to torpedo those further proceedings by means of an antisuit injunction? While that could theoretically happen, it would be a clearer "comity" (respect for other countries) issue than the antisuit and anti-antisuit escalation we're seeing. If, for example, a UK court did not allow a party to have a foreign court make adjustments with respect to that country's patents, it could not claim to just be seeking to defend its own jurisdiction.

Interestingly, Presiding Judge Dr. Matthias Zigann of the Seventh Civil Chamber of the Munich&I Regional Court referred to my views in his presentation on the same panel. Judge Dr. Zigann, if I didn't misinterpret him, appeared to agree in principle that it's a problem if courts in one country set royalty rates for foreign patents.

There will be a lot more debate over this topic. Some participants in the discussion focus on the issues facing only one side. For example, if someone is sympathetic to SEP holders, the focus will be on holdout and antisuit injunctions are described as pure evil (regardless of the fact that some jurisdictions such as the United States actually give a lot of thought to this and grant antisuit injunctions only judiciously, further to a multifactorial analysis). Conversely, some others are just concerned about the possibility of a court forcing them to take a license on terms that other jurisdictions would clearly consider supra-FRAND. My proposal, however, can benefit SEP holders as well as implementers.

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Fortress-funded VLSI Technology fighting to defend $2.175 billion jury verdict over semiconductor patents: post-trial motions

The two VLSI Technology v. Intel patent infringement cases that have been put before juries in the Western District of Texas this year have had two extreme outcomes: after a record verdict over $2.175 billion in March that shocked the technology industry, two other VLSI patents were found not to be infringed in April. A third trial between the two entities is coming up soon.

In either case, the losing party has the right to appeal. Many observers have noted that exorbitant jury verdicts are rarely upheld: they're typically adjusted or overturned. But there is no guarantee, and Intel leaves no stone unturned to attack VLSI's March 2021 win. On April 22, almost simultaneously with the jury verdict in the second case, Intel brought a total of four post-trial motions.

One of the four motions is specific to the '759 patent, for the infringement of which the jury awarded $675 million (a little less than third of the total amount). I've uploaded Intel's related Rule 52 motion and VLSI's opposition to Scribd.

Any single one of the other three motions could singlehandedly reduce Intel's near-term liability vis-à-vis VLSI to zero:

• A comprehensive motion for judgment as a matter of law (JMOL) argues that no reasonable jury could find the two patents-in-suit infringed, or the '759 patent valid, and even if any patent had been both valid and infringed, the damages amount would be zero, arguing that VLSI failed to present a damages theory that would support the jury verdict and waived the right to damages based on any other theory. VLSI obviously opposes this JMOL motion.

• A Rule 52 motion by Intel is based on an unclean-hands theory. That document is heavily redacted, but it appears the arguments are largely structural, describing VLSI financier "Fortress's enforcement strategy [as] itself inequitable" and alleging "unconscionable tactics to enhance VLSI's ability to enforce the patents-in-suit." Those allegations aim not only at Fortress/VLSI but also at NXP, which used to own those patents for some time. VLSI opposes this motion saying that it dod not engage in any particularly "egregious misconduct."

  Intel is not alone to criticize Fortress over its patent monetization strategies: first alone, and then together with Apple, Intel brought an antitrust action in the Northern District of California. Currently, Fortress is seeking the dismissal of the (substantially narrowed) second amended complaint.

  In one of its filings, VLSI argues that Intel's licensing strategies can be accurately described as "hold-out" (though VLSI denies it even said so during the trial). So there are accusations flying both ways.

• With a particular focus on (in)admissible evidence relating to VLSI's damages claims, Intel is also asking Judge Alan Albright to vacate the verdict and order a new trial. VLSI is pretty willing to go to court against Intel again, above all in the Western District of Texas, but wants to do so only over other patents, and obviously opposes a retrial in the $2.175 billion case.

  While post-trial motions of this kind are generally more of an effort to preserve the record for an appeal (and that appeal is going to become one of the most interesting ones in patent litigation history), the part about admissible evidence is interesting even before the trial court has rendered a final (though appealable) judgment. That's because Judge Albright didn't admit "evidence of big payouts Intel has made to settle other litigation" last time (April trial), as Law.com's Scott Graham reported. Law.com also noted that "Intel said it had been careful not to open the door to such evidence this time around." VLSI's opposition brief to this motion for a retrial indeed argues that Intel itself, by talking about what was usually paid for semiconductor patent licenses, justified VLSI's reference (in a rebuttal and not in its initial presentation) to settlements of other cases.

  Even if Intel might have been more careful at the second trial to keep the door closed to such evidence, I could still easily imagine the Federal Circuit setting aside the verdict in the first case simply because those other licenses weren't relevant, meaning that they might have confused the jury to an extent that outweighted any probative value.

  If Judge Albright granted a new trial, just like one of his colleagues in the Eastern District recently did, he would eliminate the risk of being overturned. He, too, will know that the $2.175 billion amount is unlikely to stand anyway.

  VLSI argues that the jury was free to pick any amount between the two parties' positions, and that no one knows whether jurors really had those other (unrelated) license agreements in mind when they decided on the amount. But that likely won't be the standard that the Federal Circuit is going to apply.

This case is still worth watching, and may remain for some time.

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Next week's European Commission webinar on SEP enforcement: speakers include USPTO official (and yours truly, too)

On Wednesday (May 19, 2021), the fifth webinar of the European Commission's popular series on standard-essential patent (SEP) topics will be held. Its title is "Enforcement of Standard-Essential Patents - current bottlenecks and possible solutions." In a previous post I mentioned I was going to be among the speakers.

Meanwhile, the EC's Directorate-General for the Internal Market (DG GROW) has published the agenda. After Judge Edgar Brinkman's (The Hague) welcome speech, Mary Critharis, the Chief Policy Offier and Director for International Affairs of the United States Patent & Trademark Office originally planned to deliver a keynote address. [Update] A few hours after this post originally went live, the Commission updated the agenda, and it now lists Patent Attorney Christian Hannon in Mrs. Critharis's place. He works for her. [/Update] I'm sure many of you will be as interested as I am in listening to Mr. Hannon's speech. After a recent decision by the DOJ to downgrade an implementer-hostile policy statement by Trump's antitrust chief, many want to find out about the Biden Administration's stance on SEP enforcement. IP policy in general, and SEP policy in particular, is shaped by multiple U.S. government agencies, among them the USPTO, of course.

An interesting fact about Mrs. Critharis's biography is that she "first joined the USPTO as a patent examiner in 1992" (and worked in that position for about eight years). Many (if not most) of the people who talk about SEP policy know very little about the technical side. It's obviously not a requirement to have read and understood at least one SEP before talking about valuation, injunctive relief etc., but a former patent examiner like Mrs. Critharis obviously knows what's actually found in those patent documents. [Update] And so does Mr. Hannon, who will appear on the USPTO's behalf. [/Update]

The first panel will focus on hold-up and hold-out. Ericsson's director of IPR policy Patrick Hofkens and Kather Augenstein (the firm that just represented Ericsson against Samsung in Germany) managing partner Miriam Kiefer will lkely disagree to at least some extent with the IP chiefs of Cisco (Dan Lang) and Continental (Roman Bonn). I do not know what positions on SEP licensing negotiations CMS attorney Aleksandra Kuznicka-Cholewa is likely to take.

Thereafter, at 4:15 PM Brussels time (10:15 AM EDT, 7:15 AM PDT), the second panel discussion will address "anti-(anti)suit injunctions."

I'm proud to be on this panel with Judge Dr. Matthias Zigann (Presiding Judge of the Seventh Civil Chamber of the Munich I Regional Court), Arnold & Ruess's Cordula Schumacher (Nokia's lead counsel against Daimler; we disagree on certain SEP-related questions, but I think she's great at what she does), and King & Wood Malleson partner Xu Jing from Beijing.

I'll put antisuit injunctions into the wider context of extraterritoriality issues in SEP enforcement and will propose a solution that any jurisdiction could implement unilaterally--and which would be perfectly symmetrical, meaning that it protects SEP holders and implementers alike against coercive action in foreign jurisdictions. As I'll take a rather broad perspective, I'll get to make the first presentation on that panel.

The third will discuss international arbitration and mediation. Lord Justice Arnold (England & Wales Court of Appeal) and Judge Sam Granata of the Court of Appeal in Antwerp (Belgium) will be joined by Cleary Gottlieb's Maurits Dolmans (who also spoke at my 2019 Brussels conference), WIPO deputy director Ignacio de Castro, and David Perkins, an independent arbitrator and mediator.

A high-ranking DG GROW official, Kamil Kiljanski (Acting Director GROW C), will bookend the webinar with his closing remarks at 5:50 PM Brussels time (11:50 AM EDT, 8:50 AM PDT).

You can register here.

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Did Epic Games CEO Tim Sweeney get trolled from Apple Park during App Store antitrust trial? Suspicious Twitter activity detected.

As I announced last Saturday, I'm not going to comment publicly on App Store antitrust matters during the ongoing Epic Games v. Apple trial (also, see my "final pretrial Twitter thread"). I'm not like those New Year's resolutioners starting to smoke again a week later. This post is not about the trial itself or the antitrust matters involved, but about suspicious social media activity of the astroturfing kind.

It's publicly discoverable that Epic Games founder and CEO Tim Sweeney and I follow each other on Twitter, and sometimes retweet or like each other's tweets. Other than that, I don't know him and I'm 100% independent from Epic. I have my own app store issues.

In recent weeks there's been quite some suspicious activity on Twitter. I was not the only one to notice various recently-created or mostly inactive Twitter accounts (no or few followers, hardly any tweets) that chimed in on App Store antitrust discussions with typical Apple talking points. To be clear, there are legit "fanbois" and there may also be cases in which, for example, an open standards fanatic ignores web app shortcomings (like Richard Stallman's attitude that Free Software may lack functionality or perform suboptimally as long as it's ideologically correct). But when there are accounts coming out of nowhere with talking points that independent software makers would never ever agree with, there's an obvious explanation for that phenomenon. It doesn't necessarily mean coordination, nor is it likely to be organic.

Last afternoon by Pacific Time, something happened on Twitter that raises the question of whether Apple sets up some people--including "real" (even verified) accounts--to undermine Epic's credibility. Here's a screenshot (click on the image to enlarge; further commentary below):

The photo, taken from the lawn inside Apple Park, was posted at 4:55 PM Pacific Time, and the color of the sky as well as the length of the shadows cast by the trees suggest that the picture had been taken at just about that time of day. The previous tweet ("Shot, chaser.") had gone out only about an hour earlier, and juxtaposted two documents. The one on the left is a Tim Sweeney email from the trial record, talking about the problem of competitors placing ads above the organic search results when potential customers search for a particular product. The image on the right shows a tweet by an Epic competitor highlighting that Fortnite Battle Royale appeared above the organic Google search results for "Apex Legends."

The Apex Legends tweet was a reply to a tweet by journalist Tom Warren, who showed Tim Sweeney's email complaining about the keyword search issue.

This accusation of hypocrisy is not even new. Last August it already came up on Twitter, and Tim Sweeney's reply included the saying: "Don't hate the players, hate the game."

This Twitter user, Sebastiaan de With, is one of of the makers of Halide, an iPhone camera app. In a Medium blog post, he mentions that he is "an ex-Apple designer and photographer."

I can't help but suspect that he did that tweet to do Apple a favor, and there is a possibility that he tweeted against Epic while he was visiting Apple Park. At a minimum, he's tight with Apple.

What he intended to be a "gotcha" at Epic's expense now calls into question his Apple friends' social media strategy during the ongoing trial.

Given his focus, his career, and his acquaintances, how likely is it that he just happened to tweet about that keyword search issue and shortly thereafter posted a photo from inside Apple Park, compared to the possibility of Apple employees having asked him for it? You be the judge...

Mr. de With's co-founder is also in the Twitter tank for Apple in App Store antitrust terms. There's a pattern.

I normally don't highlight such observations and always try to be fair. It's a fact that I've been accused of being an Apple shill. People whom I suspected to be Qualcomm employees even created a "Mlorian Fueller" parody account with an Apple logo as a picture during the 2019 FTC v. Qualcomm trial, and alleged that all of my opinions were paid for by Apple, though I was actually taking positions that the court heard from pretty much every device or chipset maker who testified at that trial.

While we're on the subject of credibility, the only organization at the moment that definitely represents developer interests is the Coalition for App Fairness. I'm not a member, I have no relationship whatsoever with them, but based on what they say and looking at who's involved, there can--at least at this stage--be no doubt about the CAF's legitimacy. Unfortunately, there are a couple of other organizations pretending to represent app developers, but in reality they're lobbying fronts for large corporations:

• ACT | The App Association says it "enjoys the support of top companies in the mobile economy." The first logo that webpage shows (near the bottom of the page I linked to) is Apple's. Fortunately, Microsoft is also involved, so I hope ACT won't be able to file amicus curiae briefs in support of Apple against Epic.

• The Developers Alliance (previously known as "Application Developers Alliance") is effectively a Google front. Many years ago, I liked some of the positions they took. But now that it's about app store terms and policies, they're clearly an anti-developer organization. They support Google all the way, for what I know are largely funded by Google, and in the EU they even lobby against provisions in the Digital Markets Act that would benefit developers.

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Ericsson to receive patent royalties from Samsung again after settlement of global dispute

This morning, Ericsson announced a settlement and new multi-year patent license agreement with Samsung. This was actually the first major 5G patent dispute, and after filings in multiple jurisdictions it could have reached Apple-Samsung proportions. But the parties put this behind them.

The previous cross-license agreement had expired four months ago. As a result, Ericsson's licensing revenues temporarily took a hit, and today's press release notes that they "continue to be affected by several factors, mainly expired patent license agreements pending renewal, geopolitical impact on the handset market, technology shift from 4G to 5G, and possible currency effects going forward." The "geopolitical" part must relate to Huawei.

Ericsson's IP chief Christina Petersson is quoted as saying that "[t]his important deal confirms the value of [Ericsson's] patent portfolio and further illustrates Ericsson's commitment to FRAND principles." This suggests that the net payments Ericsson receives under the agreement are substantial. Publicly traded companies must be cautious about forward-looking statements, but Ericsson does express confidence in "growing its IPR revenues long term, thereby further maximizing the value of the overall patent portfolio."

What I've heard from industry players is that there's far more respect for Ericsson's R&D activities than for Nokia's. Some people say that Nokia is more about opportunistic patenting around standardization, while Ericsson does invest heavily in "real" R&D.

As a result of this settlement, all pending litigation is withdrawn, which also includes an anti-antisuit matter before the Federal Circuit that would have been heard in about a month from today. But it's just a matter of time until the Federal Circuit gets to hear an antisuit case.

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CJEU sets August deadline for observations from European Commission, EU member states and parties on standard-essential patent licensing questions in Nokia v. Daimler

In November 2020, the Dusseldorf Regional Court decided to refer to the Luxembourg-based Court of Justice of the European Union (CJEU) two sets of legal questions: one about the component-level licensing of standard-essential patents (SEPs) and another about the application of the Huawei v. ZTE SEP injunction framework. Nokia brought an interlocutory appeal, which was going nowhwere and ultimately withdrawn.

Another procedural milestone was reached on April 29. The CJEU provided translations of the preliminary reference to the European Commission, other EU institutions, the EU member states, the three non-EU member states of the European Economic Area (Iceland, Liechtenstein, Norway), and the parties and intervenors so they can file observations.

Under the court's procedural rules, the parties normally have two months plus an automatic 10-day extension "on account of distance" (which appears a bit anachronistic in the Digital Age, as it would almost be enough for service by stagecoach). Currently, due to the COVID-19 pandemic, there's an additional automatic extension by one month. All in all, this means the filings will be due on August 8 (a Sunday, so this may practically mean August 9).

Unlike in the United States, where a diversity of stakeholders may file amicus curiae briefs, the CJEU will accept submissions only from the types of entities listed further above. Therefore, companies who are not parties to or intervenors to this case must persuade governments to file observations supporting their positions.

Preliminary references by national courts must first be translated into the EU's official languages before the court can formally request observations. In November, I provided a heavily streamlined translation of the questions the Dusseldorf court submitted. I feel for the CJEU's translators, who couldn't just take those liberties. To give you an idea, there's one grammatical sense in the official English translation that spans 13 lines in printed form, "thanks" to an abundance of qualifiers and relative clauses.

Notwithstanding the practical advantages of my streamlined version, let me provide you with the CJEU's canonical translation . You can still read my translation first so you know upfront what they're trying to get to.

I'll follow up soon with further commentary and analysis (in future posts).

[OFFICIAL TRANSLATION]

A. Is there an obligation to license suppliers on a priority basis?

1. Can an undertaking at a downstream stage in the economic process rely on the plea of abuse of a dominant position within the meaning of Article 102 TFEU to dismiss a patent infringement action for a prohibitive injunction brought by the proprietor of a patent essential to a standard established by a standardisation body (‘SEP’) who has irrevocably undertaken to that body to grant a licence to any third party on FRAND terms, where the standard for which the patent at issue is essential, or parts thereof, are already implemented in an upstream product procured by the defendant in the patent infringement action, whose suppliers which are willing to obtain a licence are refused, by the patent proprietor, their own unrestricted licence for all [Or. 4] types of use relevant under patent law on FRAND terms in respect of products implementing the standard?

   (a) Is this the case in particular if it is customary practice in the relevant industry of the final product distributor for the intellectual property right situation in respect of the patents used by the supplier part to be clarified by way of licensing through the suppliers?

   (b) Is there licensing priority for suppliers at every stage of the supply chain or only for the supplier immediately upstream of the distributor of the final product at the end of the value chain? Do customary trading practices also play a decisive role in that regard?

2. Does the prohibition of abuse under antitrust law require that the supplier be granted its own, unrestricted licence for all types of use relevant under patent law on FRAND terms for products implementing the standard in the sense that the end distributors (and, where relevant, the upstream customers) in turn no longer require their own, separate licence from the SEP holder in order to avoid patent infringement in the case of use of the supplier part concerned in accordance with its intended purpose?

3. If Question 1 is answered in the affirmative [This is an ERROR in the official translation! It should be "in the negative" like in my translation]: Does Article 102 TFEU lay down specific qualitative, quantitative and/or other requirements for the criteria according to which the proprietor of a standard-essential patent decides the potential patent infringers at different levels of the same production and value chain against which it is to bring an action for a prohibitory injunction?

More precise clarification of the requirements established by the decision of the Court of Justice in the Huawei v ZTE case (judgment of 16 July 2015, C-170/13):

1. Irrespective of the fact that the [Or. 5] obligations to act (notice of infringement, licensing request, FRAND licence offer; licence offer to the supplier to be licensed on a priority basis) to be reciprocally complied with by the SEP holder and the SEP user must be discharged prior to any litigation, is it possible for obligations to act not fulfilled prior to any litigation to be discharged subsequently in the course of court proceedings in a manner that preserves the rights of the party concerned?

2. Can a meaningful licensing request by the patent user be assumed only if, on the basis of a comprehensive assessment of all the circumstances surrounding the matter, it is clearly and unequivocally apparent that the SEP user is willing and prepared to enter into a licensing agreement with the SEP holder on FRAND terms, irrespective of what form such FRAND terms (which, in the absence of a licence offer drawn up at that time, are not at all foreseeable yet) may take?

   (a) Is it generally the case that an infringer that remains silent on a notice of infringement for several months thereby indicates that it is not interested in obtaining a licence, such that – despite the existence of a licence request expressed orally – there is no such request, with the consequence that the SEP holder’s action for a prohibitory injunction must be allowed?

   (b) Can a lack of a licence request be inferred from licence terms presented by the SEP user by way of a counter-offer, with the result that the action for a prohibitory injunction brought by the SEP holder is subsequently allowed without first assessing whether the SEP holder’s own licence offer (which preceded the SEP user’s counter-offer) complies with FRAND terms in the first place?

   Is such an inference precluded in any event if the licence terms of the counter-offer from which a lack of a licence request is to be inferred are terms in respect of which it is neither manifestly apparent nor established at the highest judicial level that they are incompatible with FRAND terms? [Or. 6]

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Apple raised its effective App Store commission rate in certain geographic markets to (respectively) 31.4%, 32.1%, and 35.25% in September

After this post, I'll (have to) take a break from blogging about App Store antitrust matters for a few weeks or maybe even months, as I'll explain further below. Before I do that, I'm going to share several thoughts and pieces of information in this post. You can click on any of the links below to go straight to the part you're most interested in:

1. Effective App Store commission ("App Store tax") rate peaks at 35.25% (plus annual developer program fee plus Search Ads) -- a relative increase by 17.5%

2. IP-related issues surrounding web apps

3. Recent United States Senate hearing: mixed blessing for Epic's case

4. Statement of Objections from the European Commission's Directorate-General for Competition (DG COMP) in the investigation instigated by Spotify

5. Taking a break from commenting on app store antitrust cases

 

1. Effective App Store commission ("App Store tax") rate peaks at 35.25% (plus annual developer program fee plus Search Ads) -- a relative increase by 17.5%

In its proposed findings of fact and conclusions of law, Epic Games debunks Apple's claim that it has not been able to increase (or even maintain) its App Store commission rate due to competitive constraints (though in reality any reductions were motivated by antitrust-related reasons):

"92. Moreover, contrary to its claims, Apple has repeatedly increased prices after developers and consumers were locked in, including by requiring use of Apple’s IAP to process payments for in-app digital content (2009); requiring IAP for subscriptions (2011); and charging developers for search ads (2016). (Findings of Fact ¶¶ 23, 123.)"

The ability to increase prices without losing market share is characteristic of a monopolist. Sometimes, monopolies are identifiable just on that basis. In those cases where a monopolist could have increased prices, but did not do so, a SSNIP test is performed by economists on a hypothetical basis (such as by conducting a survey): Small but Significant Non-transitory Increase in Price. Generally, "small but significant" means 5%-10%, and plaintiffs often argue that they can establish even greater market power than what it takes to command a 10% increase.

Epic's examples all make sense. It's true that Apple extended the scope of applicability of the 30% commission (the Small Business Program just came recently for antitrust reasons and has nothing to do with market dynamics whatsoever) to other types of payments, as the testimony in this case confirms. Search Ads are indeed another indirect price increase, as many app developers pay for the discoverability of their apps on the App Store by promoting their apps above the organic search results that may favor a competitor--which in turn often forces the affected competitor to place Search Ads only to maintain the top spot.

But Epic's list of de facto price increases is not even exhaustive. (Can't blame them as they need to focus and Apple's sophisticated tactics raise so many issues.)

The FT's Tim Bradshaw highlighted another problem in September:

Apple is making App Store developers swallow the controversial new digital services taxes in the UK and France, per email to iOS devs today. Despite most headlines describing them as a tax on “Big Tech”, it’s the little guys that end up paying. pic.twitter.com/jWQJ0VFsX4

— Tim Bradshaw (@tim) September 1, 2020

At around the same time, other people commented on it as well, and one website had to backtrack because they made it sound like Apple passed 100% of those digital services taxes on to developers. There should have been much more outrage, and in some jurisdictions developers could even have brought complaints over this particular issue. But it went almost unnoticed, probably because too few people--if any--thought it through in every detail.

Once one has thought it through, it's crystal clear: many (if not most or even all) third-party developers end up having to pay digital services taxes ("DST") only because of Apple's tying (of the payment system to the App Store as the only access route to iOS users), and wouldn't owe those taxes otherwise.

In Turkey, DST is 7.5%; in France and Italy, 3%; and in the UK, 2%. More countries will follow. In fact, President Biden is open to a global agreement on DST.

Apple treats DST like VAT (Value Added Tax) or sales tax (which is simply the same when it comes to a business-to-consumer transaction), which belongs to neither Apple nor developers, and subtracts both VAT and DST from what customers pay before splitting the income with developers. It appears that most people haven't figured out yet why that is inappropriate, unfair, and indicative of Apple's market power:

• VAT is a concept that's about 100 years old, while DST wasn't even foreseeable when the original App Store terms were set in 2008.

• VAT is charged on broadly defined product and service categories (such as having one rate for food, another for non-food), while DST relates to narrowly defined types of services, such as app stores and online advertising. Typically, DST does not apply to games, so even Epic's Fortnite would not be affected if they could just use a payment service of their choosing for in-app purchases.

• The thresholds for DST are extremely high, while countries exempt companies from VAT only if their sales are below negligible de minimis thresholds. The whole idea of DST is to tax only large and rich digital gatekeepers, which is why lawmakers always "gerrymander" the thresholds. DST typically comes with a global and a domestic threshold, and applies only to those who meet both, with "local heroes" typically failing to meet the global one.

• While both VAT and DST are charged as a percentage of sales, VAT is a consumption tax and DST is meant to be a tax on (huge) profits.

• Therefore, VAT is meant to be ultimately paid by consumers (as an indirect tax), while DST should be paid by "GAFA" (Google, Apple, Facebook, Amazon).

Australia is a special case: it applies VAT (called "Goods and Services Tax" (GST) down under) to digital services (not just specific types of marketplaces), with a threshold of A$75,000. There are probably some developers who do not benefit from Apple's Small Business Program (worldwide revenues in excess of 1 million), but wouldn't have to charge VAT in Australia.

The situation in Turkey is different from that in France, Italy, and the UK because Apple raised consumer prices accordingly. But that doesn't mean the effective commission rate didn't increase as well--and just delivers additional proof of Apple's market power over consumers even in a market with a low iOS market share compared to Android.

If we focus--for simplicity's sake--just on the four DST jurisdictions I've already mentioned (with a combined population of roughly a quarter billion people), and on the period before Apple's Small Business Program, this means Apple raised its App Store tax to 35.25% in Turkey (30% + (70% times 7.5%)), a relative increase of 17.5% (way above the SSNIP range); to 32.1% in France and Italy (relative increase: 7%, about the middle of the typical SSNIP range); and 31.5% in the UK (relative increase: 4.67%, pretty close to the lower end of the SSNIP range.

Apple makes things look "equitable" by deducting DST, then splitting the remainder. But there are three arguments against it, any single one of which is reason enough for Apple to internalize 100% of DST:

1. Contractual: DST wasn't foreseeable when Apple set its original App Store terms (i.e., at a time when Apple claims it didn't have market power).

2. Policy (legislative intent): Lawmakers wanted "GAFA" companies to internalize those taxes. For example, the UK government says:

   "The measure is expected to have an impact on a small number of large multinational groups by bringing into scope of Digital Services Tax the proportion of their revenue that is derived from UK users of social media, search engines or online marketplaces." (emphases added)

   Could lawmakers have worded their DST laws more clearly to achieve that effect? Well, even if they had done a better job, companies with market power would always find a way to offload that tax burden onto those who are dependent on them, or on consumers (as Apple did in Turkey), so even the best DST law wouldn't work without effective competition enforcement.

3. Liability: The simplest and therefore strongest point is that even Epic wouldn't pay DST on Fortnite revenues in a jurisdiction that applies it to marketplaces such as app stores if not for the mandatory honor to use Apple's payment system.

The extent to which a given developer is impacted by that de facto commission hike varies greatly. Developers who generate all or almost all of their sales in non-DST jurisdictions are not affected for the time being, though DST is getting adopted in ever more places. On the other end of the spectrum there are companies that generate all or almost all of their IAP revenues in a country like Turkey or the UK, be it because the functionality and/or content of their apps is of interest only to customers in those target markets or because they just happened to get more traction there.

To sum it up, the effective App Store tax that a developer pays on a particular IAP transaction is the percentage of ex-VAT (and ex-sales-tax) proceeds from users that the developer would additionally keep if it could charge end users directly. Apple clearly has the power to increase that rate to developers' detriment.

2. IP issues surrounding web apps

In a recent post I mentioned one of Apple's least convincing claims, which is that native IOS apps (the ones you download from the App Store) face competition from an alternative called web apps (or sometimes "progressive web apps").

While Apple's defenses against Epic are partly based on Apple wanting to be free to commercialize its intellectual property rights (in a transparent attempt to match the FTC v. Qualcomm pattern), the suggestion that developers could offer web apps instead of native apps shows that Apple has very little respect for developers' IP. Epic's proposed findings of fact and conclusions of law explain various shortcomings of web apps. I'd just like to add a couple of IP-related ones, and a commercial one, that I couldn't find in the publicly accessible part of the record:

• Web apps are like "open source" software: you get highly human-readable code in a scripting language. Obfuscation would be theoretically possible, but practically one couldn't afford it because it would reduce the performance and bloat the file size. Web apps already start slowly because they need to be downloaded every time they're used, and if obfuscation icnreases the file size, it takes even longer.

  In theory, anything can be reverse-engineered. In practice, native apps are hugely more time-consuming to reverse-engineer.

  The IP issue facing developers is that if you essentially publish your source code, others can easily infringe your copyright, and you give up your trade secrets. The protection of software source code by trade secret was actually the only IP protection prior to the extension of copyright law to software (and software patents came even later).

• There's also a defensive problem: source code is easily inspected, so web apps make it easy for "patent trolls" to identify targets for their infringement allegations (whether or not those would have merit).

• The non-IP issue I wanted to raise is that--at least when I checked a few months ago--major ad networks don't support in-app advertising on a WebGL/HTML5 basis. One can display ads outside of a window in which a WebGL app runs, but that causes other problems. Also, developers can partner with web game aggregators/portals that provide APIs and sell the ad space, but then a game must be published on those third-party sites and we're no longer talking about a web app with an icon on the home screen.

3. Recent United States Senate hearing: mixed blessing for Epic's case

Last week, the Subcomittee for Competition Policy, Antitrust, and Consumer Rights of the United States Senate held a hearing on app store competition issues. There was strong bipartisan support for combating the abuse of mobile app store monopolies. From the far left (by Senate standards) to the far right (again, by Senate standards), senators are sympathetic to developers' concerns.

Apple didn't like it at all that the hearing was going to take place so close in time to the Epic Games v. Apple trial, but ultimately provided a witness.

In some ways, maybe even in many ways, that hearing was really great for Epic's purposes. But there is a potential downside:

Senator Amy Klobuchar (D-Minn.) seeks not only to overhaul U.S. antitrust law in general but also to enact some app-specific legislation, and her position is that current U.S. antitrust law (in the combination of the statutes and how the courts interpret them) is too weak to address this issue. Epic's partners in the Coalition for App Fairness, particularly Spotify, strongly agreed with her. Sen. Klobuchar had previously lamented the state of affairs of U.S. antitrust case law in Justice Amy Coney Barrett's confirmation hearing.

Spotify's written testimony (PDF) also calls on lawmakers to "enact targeted prohibitions that will stop abusive conduct by app stores." This is a typical case of conflicting goals: you obviously can't ask for new legislation and praise existing legislation as being suitable-to-task.

It would have been preferable for the app developers who testified on that occasion to state clearly that they believe Epic is going to win its case against Apple, but any litigation comes with risks and new legislation might provide a faster solution, especially with respect to Google (Epic's case against Google is trailing far behind the Apple case). Some of what was said by the #1 antitrust expert in the Senate as well as by certain witnesses could be interpreted as expressing doubts concerning Epic's chances in court against the major mobile app store operators.

It's a typical defense not only in antitrust cases to say that a plaintiff should "direct to Congress" certain complaints or concerns. Sometimes courts say so in their written opinions. There is a risk here that the judiciary will effectively refer Epic to the Capitol.

4. Statement of Objections from the European Commission's Directorate-General for Competition (DG COMP) in the investigation instigated by Spotify

It's great news that the European Commission's DG COMP yesterday announced its Statement of Objections (SO) against Apple's App Store rules for music streaming providers, further to a complaint brought by Spotify. While the scope of that particular investigation and the market definition used in that case are relatively narrow, there can be no doubt about the Commission's--and particularly Executive Vice President Margrethe Vestager's--determination to address app store issues beyond just music streaming.

The timing of that announcement added insult to injury: precisely the work day before the start of the Epic Games v. Apple trial. It's like a pretrial amicus curiae brief.

I recommend this analysis on the Platform Law Blog. Dimitrios Katsifis of Geradin Partners explains the progress this represents as well as its limitations, and encourages additional action by national competition authorities.

While Mr. Katisfis makes strong points, I actually think it is a smart strategy by the Commission to tackle the app store problem step by step, cracking one nut at a time and gradually expanding the scope of the case law. Piecemeal tactics and progressive approaches have worked in similar contexts (such as the enforcement of the GPL free and open source software license).

5. Taking a break from commenting on app store antitrust cases

Originally I intended to follow the Epic Games v. Apple bench trial by telephone (I got the dial-in number for journalists). If the day had 34 hours, not 24, I'd still do it. But it's difficult for me to set my priorities for this month with all that's going on.

I don't want to write too much about my own complaints against Apple and Google, but suffice it to say that there is a competition enforcement agency that originally gave me six weeks to reply to Apple's response to my complaint, and in order to be able to obtain relevant data from some recent filings, I requested (and was thankfully granted) a two-week extension until May 10. At the same time, there are some things going on with respect to standard-essential patents that require my attention in the coming weeks.

The Epic v. Apple trial would be fascinating to follow in some ways, but ultimately the decision will be made by the Supreme Court, which is almost certain to hear the case (and if not, then by the Ninth Circuit, but not by the trial court).

Judge Yvonne Gonzalez Rogers said at a recent pretrial conference that there won't be any surprises: the parties have already told the court what they believe their strongest legal arguments and facts are. Now it's about whether they can deliver proof.

If Epic wins, which I hope it will though I'm not going to make a prediction at this stage, it will help the developer community at large. I really feel that Epic's sacrifice for this cause would deserve a lot more credit, but that's another story.

The hurdle is very, very high (see the section on the Senate hearing). Epic made a rather ambitious jurisdictional choice. If I were in their shoes, I'd have sued in Europe, especially the largest European market (Germany), where Google's market share is so high that market definition can be won very easily--and both statutory and case law are far more favorable. But Epic wanted to go straight for the grand prize. They are trying to succeed on Broadway or in Hollywood on the first attempt. Should Apple be let off the hook in the U.S., it won't mean that Epic was wrong nor is it likely that one could blame Epic's second-to-none lawyers. One would have to attribute it to what Sen. Klobuchar said at Justice Barrett's confirmation hearing about the U.S. theoretically having broad antitrust statutes that the courts apply very narrowly.

Epic has the stronger arguments. Apple has little more than pretext to offer, and its relatively strongest point is that other digital app stores also charge 30%, though the reduction from 30% to 12% of the commission charged by the Microsoft Store shows that competition works wonders. Apple is going to basically equate the iPhone to the Xbox, despite several fundamental differences in usage patterns and the availability of other computing devices (where there is an Xbox, there is also a number of other gadgets, but sometimes an iPhone is the only device people carry with them). Apple will, as I mentioned further above, try to match the Qualcomm pattern (not their words, but basically saying: "we're just commercializing our IP and should be free to do so as we see fit"), and to benefit from the Supreme Court's American Express decision on two-sided markets. All of that is transparent based on the proposed findings of fact and conclusions of law.

I can't imagine any developer out there wouldn't want Epic to win. I believe they can prevail, even under U.S. antitrust law as it stands. But if Epic lost, it would be a huge mistake to consider Epic Games v. Apple to be the heart of the resistance against app store abuse. Arguably, Spotify is currently in the pole position, as the SO will almost certainly result in a Commission decision, which Apple will then appeal to the CJEU.

There'll be plenty of press coverage for you to get the key "soundbites" from that trial. I'll look at this at a later stage, possibly only when the district court hands down its judgment. My positions on this topic haven't changed, nor would they.

[Update on May 3] The start of my final pretrial Twitter thread (and likely my last Twitter commentary on the issue for about a month):

(1) For the reasons I explained in my latest post, I have to focus on my own #AppStore issue and other priorities and obligations, so to my dismay can't follow the #EpicGames v. #Apple trial in real time because it's huge. This is likely my final thread on the topic for a month.

— Florian Mueller (@FOSSpatents) May 3, 2021

[/Update]

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