Two days ago I read with interest one of my two favorite Juve Patent articles to date, which is excellent courtroom reporting though I'd like to nuance its headline: "Munich Regional Court takes new approach to FRAND"
The article discusses a March 23 FRAND hearing conducted by the Munich I Regional Court's 21st Civil Chamber in the two-way standard-essential patent (SEP) dispute between Nokia and OPPO. The public part lasted only 30 minutes; then the courtroom was sealed. But what Presiding Judge Dr. Georg Werner explained at the outset of the hearing was remarkable. To the extent that Juve Patent interprets this as "redefin[ing] the court's [early 2020] FRAND guidelines" in light of the subsequent Sisvel v. Haier II decision by the Federal Court of Justice, I would agree. But far be it from me to characterize such adaptation as an about-face or sea change.
There are different reasons for which a judicial pendulum may appear to be swinging in a new direction:
new legislation (not so here: last year's German patent bill has had zero impact so far, and will likely never play a role in a SEP case)
new appellate case law (Sisvel v. Haier II was decided in late 2020)
judicial realization of a disbalance
new circumstances warranting a seemingly new approach
It is not uncommon for the last two factors to coincide: a new situation in a case may prove a catalyst and represent an opportunity for adjustment that was previously contemplated, but for which the time wasn't right.
In January, I wrote that "2022's most interesting patent enforcement" question would be the one of "how to raise a successful FRAND defense in Munich and Mannheim under Sisvel v. Haier" short of a § 315 (judicial royalty determination in case of continued disagreement) defense. I essentially looked at the last two of the factors stated above:
Vintage year 2021 and 2022 SEP cases in Munich and Mannheim will raise important new questions and have the potential to lead to more nuanced outcomes. That is so because cases that have been decided so far in the Sisvel v. Haier era--starting with the two Sisvel v. Haier cases themselves--presented fact patterns characterized either by implementers' reliance on a strictly sequential application of the ECJ's Huawei v. ZTE guidance or by defiance, ignorance, sometimes maybe terrible advice. Now we're going to see what happens when reasonably sophisticated defendants who benefit from realistic advice go out of their way to comply with German SEP case law during the entire course of negotiations. That wasn't the case before as far as I can tell.
The passage I just highlighted--during the entire course of negotiations--referred to Sisvel v. Haier II. The decision reaffirmed and reinforced Sisvel v. Haier I and had the same outcome (which Haier has no one to blame for but itself), but it also provided clarification in two important respects:
Not only does the implementer have an obligation to play a constructive role in terms of offers and explanations, but so does the patentee (just that Haier was deemed so utterly unreasonable that the FRANDliness of Sisvel's actions didn't even have to be reached).
Negotiations aren't static: it's a process, and either party has a duty to act constructively at all stages. Juve Patent summarizes one of Judge Dr. Werner's key points as follows: "[The parties] must [] demonstrate to the court that they are actively seeking a licence until the end of the oral hearing."
Sisvel v. Haier II was one of those decisions where a party--in that case, the defendant--lost but in which a standard was laid out under which others might fare better. Such decisions are nevertheless instructive. They can shape the law even for generations. They open doors, enabling others to enter the promised land while showing to the losing party "what might have been." As a matter of fact, two of the attorneys who according to Juve Patent are involved with Nokia v. OPPO wrote last year that Sisvel v. Haier II "is to be welcomed in its entirety" as much-needed clarification.
Some of the key facts in Nokia v. OPPO/OPPO v. Nokia are sealed. However, whatever little is publicly known at least makes it clear that OPPO is the opposite (pun intended) of Haier, and at least makes it a possibility that even a generally patentee-friendly court is having second thoughts about certain aspects of FRAND. I can see the following characteristics that may distinguish this dispute from high-profile German SEP cases of recent:
It is publicly known that the parties' previous license agreement was in force and effect for three years, and Nokia sued immediately upon expiration. It is not illegitimate to sue right away: Ericsson did the same against Apple (after the expiration of a seven-year agreement though). But when the previous license agreement was so young, why should it be so difficult to renew? Why would at least one of the parties--whichever one it may be--be reluctant to renew on materially the same terms?
To put those three years into perspective, it took Haier about four years just to make a counteroffer.
It is a two-way dispute. Past losers like Haier and Daimler were SEP have-nots. OPPO is not. It is regarded as one of the world's major 5G SEP holders. A 2019 Ericsson press release anounced an initial cross-license agreement.
The way courts in at least Germany and the UK apply Huawei v. ZTE is that a licensing offer is analyzed in light of common industry practice. Therefore, the courts say you must take a global portfolio license (possibly even a patent pool license in some cases) as opposed to licensing only a patent-in-suit. It is then a corollary to consider a cross-license the relevant commercial practice in a case like this. In that case, either party finds itself in a situation where the shoe is suddenly on the other foot.
Sometimes parties are consistent. For example, in the second Apple v. Samsung trial in the Northern District of California, Apple accused Samsung of asking for ridiculously low damages amounts for its own patents (all trial patents were non-SEPs, but a "reasonable royalty" damages theory is the next best thing to FRAND) in order to sandbag the jury's perspective on what Apple should be entitled to (and indeed Apple got only about 5% of what it asked for).
But there are also cases where parties apply dual standards, or where someone at least claims this to be the case: Ericsson and Apple accuse each other of asking too much for their own patents while offering too little for the other side's patents. The FRAND analysis becomes more complex when it's not only a two-way street in terms of both parties having to act constructively all the time but when you have a parallel two-way street where each party is coming from the other direction. Who's fair and what's fair in such a scenario?
Unless there are some new patent assertions that haven't surfaced, it looks like Nokia has yet to assert a single true 5G SEP. Many 5G SEPs could still be opposed before the EPO, as I noted in my commentary on OPPO's patents-in-suit (which are 5G patents).
If a court adjusts to a new fact pattern, it isn't necessarily deviating: stare decisis (which isn't even a binding principle in Germany, unlike in Common Law jurisdictions) doesn't mean to fail to distinguish.
I expect Munich and Mannheim (where a Nokia v. OPPO trial was originally scheduled for yesterday but postponed on short notice as one of the judges called in sick) to remain just as popular among SEP holders. I wouldn't discourage any patentee from suing there. If you get into trouble in one of those courts, who's going to help you then? Dusseldorf with its propensity to make ECJ referrals of FRAND issues and a recent decision against the Access Advance pool? The Hague, where reasonableness is considered in very holistic terms? London, where the judges will set a rate before you get to enforce an injunction? Maybe you have to fix the problem yourself and just behave differently. Then you'll get the leverage you're seeking over unwilling licensees, and there'll be no better place in the world than Munich or Mannheim.
I hope to find out more about what exactly makes the Nokia-OPPO-Nokia "round trip" a potential landmark dispute. Presiding Judge Dr. Holger Kircher of the Mannheim Regional Court's Second Civil Chamber delivers the rhetorically most brilliant summaries at the outset of each of his trials. When the Nokia v. OPPO trial that got postponed this week finally takes place, his introductory remarks may shed some light on what is quite so special about this one.
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