Three months after tire maker Continental gave up on its meritless federal lawsuit against Avanci and some of its licensors, particularly Nokia, its Delaware case under state contract law largely survived Nokia's motion to dismiss. I've had the chance to read the decision and would like to share only a few high-level observations here.
Conti was lucky that the case got reassigned to the Delaware Chancery Court's Vice Chancellor (= judge) Nathan A. Cook. According to his bio on the court's website, Mr. Cook's entire professional life has revolved around that particular state court. He clerked for a vice chancellor of that court, and then "was the managing partner of Block & Leviton LLP’s Delaware office, where he focused his practice on litigation before the Court of Chancery" before being sworn in as a judge last summer. There is no indication (neither in his bio nor in his order on Nokia's motion to dismiss) that he has the slightest experience with patent law, and someone who dedicates his entire career to this particular court was obviously hard to persuade of jurisdictional arguments for dismissal.
Here's a passage that clearly reflects a lack of sophistication and, especially, of restraint:
"Nokia has argued at various points that the relief Continental seeks as part of its FRAND Claims is something no federal or state court has ever granted. [The footnote quotes Nokia more specifically: 'Continental is asking this Court to do something that no United States court, no U.S. Federal court, no U.S. state court, has ever done without the consent of all the parties, namely set a global FRAND rate.'; 'Courts have recognized they should not attempt to impose global license terms absent mutual consent in the context of FRAND disputes.'] However, the basic premise of this argument—namely that Continental seeks extraordinary relief—is contradicted by Nokia’s prior litigation against Qualcomm, where Nokia sought comparable relief. Given Nokia's own conduct, its argument is not compelling."
That state judge should have asked himself whether all those federal judges--who frequently deal with patent law and previously declined to set global FRAND rates for standard-essential patent (SEP) portfolios over the objection of one party--may simply have been right. Instead, he points to "Nokia's own conduct" of roughly 15 years ago. But whatever Nokia sought from Qualcomm in a Delaware Chancery Court case a decade and a half ago was just a litigant's wish as opposed to a final judicial decision.
This is a really important question at the motion-to-dimiss stage. I can see why some other parts of Conti's complaint survived by virtue of the legal standard. But the question of whether the state court can order Nokia to grant Conti a worldwide license is one that can be answered--in the negative--at the motion-to-dimiss stage.
The order does not offer any substance with respect to whether a U.S. (state) court can simply order a party to grant someone else a global portfolio license including non-U.S. patents. Nothing. Nada. All that the judge tells us is that because Nokia once sought such relief, "its argument is not compelling."
If at the end of the proceeding before him Mr. Cook does actually tell Nokia to grant Conti a global portfolio license, that ruling will be appealed to Delaware's Supreme Court. The state's highest court will presumably be more interested than Mr. Cook in understanding why no other U.S. court has done what Continental is demanding here. There'll be a panel of judges, not just one. And there'll be amicus curiae briefs, possibly even from the U.S. government. It's very hard to imagine that the Delaware Supreme Court would not understand the serious implications of extraterritorial overreach.
I remember a conference in Munich a few years ago where Judge James Robart of the United States District Court for the Western District of Washington--who shaped U.S. FRAND case law in a couple of important respects--said very clearly that U.S. courts don't do this against the will of one party, and he mentioned that U.S. courts have even declined to adjudicate foreign patents in some cases where both parties asked for it.
That Continental v. Nokia case in Delaware involves a license agreement between Qualcomm and Nokia that has since expired (which means Conti can no longer enforce it), and it is somewhat related to the Nokia-Daimler dispute that got settled almost two years ago.
Between the lines it seems that Mr. Cook is somewhat sympathetic to Conti, which brought its case in the Chancery Court and always wanted to keep it there, while Nokia sought its removal to federal court.
The order says Conti "submitted a sworn declaration committing to accept the terms of any license adjudicated by [the Chancery Court]." I agree that this means Conti is not merely requesting an advisory opinion. But it still doesn't justify judicial overreach with respect to foreign patents.
Another part of the decision that I find really odd is that he disagrees with Nokia's argument that "end user" (a term in that meanwhile-expired Nokia-Qualcomm agreement) unambiguously means drivers that operate automobiles as opposed to car makers that incorporate Conti's telematics control units (TCUs) into their products. Nokia pointed to federal court rulings that had to resolve similar questions concerning the very same term, but it appears that only some Chancery Court precedent would have impressed Mr. Cook. All those federal courts are--from his perspective--not really important, so he came up with excuses for not relying on those decisions and instead looked to dictionaries. He found that some dictionaries "define 'end user' as the ultimate consumer or user of a product," but others as "a person or organization that uses something rather than one that makes or sells it."
It is a total non sequitur to me that Mr. Cook says "the second definition would tend to align with Continental’s asserted meaning." Give me a break. How is Daimler "a person or organization that uses something rather than one that makes or sells it"?
At least parts of Mr. Cook's decision are deeply flawed. But Nokia may be able to get Conti's complaint--or at least its most important parts--thrown out by summary judgment, which will be an opportunity for Mr. Cook to correct some of the mistakes in his order on the motion to dismiss, just that Conti will in the meantime be able to conduct discovery, which is a waste of resources.
