FOSS Patents

A few months ago, IoT module maker Telit consummated the acquisition of the cellular IoT products unit of French industrial conglomerate Thales. As a result of the transaction, Telit inherited the antitrust dispute Thales had started in 2021, accusing the Avanci patent pool firm and one of its licensors--Nokia--of violating EU antitrust law by declining to grant exhaustive component-level licenses covering cellular standard-essential patents (SEPs).

From the beginning I had--and expressed--my doubts about the prospects of that complaint, just like I never believed in Continental's U.S. litigation against Avanci, Nokia, and others, a case that indeed went nowhere. At some point a Thales v. Avanci & Nokia trial was scheduled for September 2022, but it didn't take place. There were delays, and with what is known now it's fairly possible that Thales knew Telit--which was in the process of acquiring that business unit--wasn't really interested in pursuing that litigation.

I noticed the withdrawal of the three related U.S. discovery motions earlier this month. Thales was seeking discovery (for use in the Munich proceedings) of Avanci (Northern District of Texas), Ericsson (Eastern District of Texas), and InterDigital (District of Delaware). For instance, on May 4 Thales gave notice that the Delaware action was "dismissed without prejudice, with each party to bear own costs, attorney’s fees, and expenses." The other dismissals were also without prejudice, and there is generally no indication of an agreement having been worked out between the parties along the lines of a license agreement. If anything, there was probably just a procedural agreement to terminate the litigation.

Yesterday afternoon the Munich I Regional Court was able to confirm to me that Thales (Telit) withdrew its antitrust complaint on May 4, 2023. The case was pending before the court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner).

While Continental was primarily seeking injunctive relief (and is still suing Nokia in Delaware state court, though nothing important has happened there so far), Thales brought a complaint for damages, which was unusual. Whatever the strategy may have been, the net effect is that those automotive supplier lawsuits over component-level SEP licensing are just a waste of resources.

The automotive sector has stepped up its lobbying efforts, which is reflected by the European Commission's proposed SEP Regulation. That bill does not require SEPs to be licensed at a specific level of the supply chain, but the EUIPO may in the end encourage component-level licensing through its recommendations further to the regulation. It is too early to tell whether that will happen, as the legislative proposal is likely to undergo lots of changes in the further process. Given that car-level licensing demonstrably works (by now most car makers have an Avanci license), the case for governmental intervention, even if merely in the form of an official recommendation, is increasingly hard to make. The failure of those lawsuits brought by Conti and Thales also doesn't suggest that there's an actual problem to be solved.

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.

IAM just hosted the last one of its IAM Connect 2022 panels. It was chaired by Paul Lin, Xiaomi's long-time head of IP who founded Eagle Forest LLC, an IP-specialized consulting firm. The panelists were Huawei's Head of IP Alan Fan, Qualcomm's Senior VP and General Manager (for the licensing division named QTL) John Han, and InterDigital's chief licensing officer Eeva Hakoranta.

It was a great panel that easily met and arguably exceeded expectations, which were obviously high given the background of the panelists. I've seen webinars with several times more listeners that weren't even half as good.

The focus was on what were the key developments in IP licensing in the telecommunications sector this year, and what may be the key trends and issues in 2023. Huawei and Qualcomm agreed that renewing existing licenses in the smartphone market and upgrading them to 5G is less likely to require enforcement action than when some implementers took licenses for the first time.

To a greater extent than envisioned, the debate was about the licensing level, where the three companies agreed that

• one can license chipset and module makers (Huawei explicitly said so; Qualcomm said so with respect to IoT modules; and InterDigital did not appear to disagree), but

• an alleged obligation to extend component-level licenses (Qualcomm and InterDigital dispute that there is such a duty under the ETSI FRAND pledge, while Huawei doesn't rule it out) must not be a vehicle for bringing down standard-essential patent (SEP) royalties under a smallest salable patent-practicing unit (SSPPU) valuation approach.

Huawei's Chief IP Officer Alan Fan made an argument about consistent pricing across the supply chain that is not only in the interest of licensors but equally of licensees: the ND (non-discrimination) part of FRAND. It is true that a device maker A with a supplier X could be at a competitive disadvantage if its competitor B benefited from a lower royalty rate because of a deal between a given patent holder and its supplier Y.

It is a legitimate objective in its own right to oppose price erosion, but with the ND-part-of-FRAND argument, one simply stands on higher ground and takes a position that is in the public interest.

Qualcomm's John Han very much emphasized use-based pricing. Mr. Han rejected an SSPPU royalty base and stressed a key distinction:

Price differentiation isn't price discrimination.

More than three years ago I organized a Brussels conference on component-level licensing (I haven't organized a conference ever since and have no intentions of doing so, though that one was clearly a success as I'm sure any participant--including officials from four directorates-general of the European Commission--could confirm). At that conference, an economist with otherwise very implementer-friendly positions also acknowledged that use-based pricing is economically reasonable. There was, however, a little bit of a misunderstanding because he called "price discrimination" what Qualcomm's panelist today sought to distinguish from "price differentiation." Semantics matters here because one is a potential antitrust violation while the other is the very opposite: it is recognized, not only but especially in the EU, that applying the same price to different transactions may constitute discrimination.

The three companies from which today's panelists hailed have distinct business models. InterDigital is, as Mrs. Hakoranta acknowledges, a research firm that generates the entirety of its revenues from licensing; Qualcomm has a licensing arm (Mr. Han's division) as well as a chipset business; and when the moderator said that it would have been nice to hear the views of an implementer, Huawei's Mr. Fan was quick to point out in no uncertain terms that Huawei is a major implementer and large-scale licensee. Mr. Fan jokingly said that if Mr. Lin wanted him to talk about the topic from a licensee's perspective, he'd be happy to do so anytime.

Huawei's mix of licensor and licensee interests gives that company a very balanced perspective. They need licenses for their own products, but they also know what it feels like when a patent holder faces hold-out tactics by an unwilling licensee. Case in point, tomorrow morning the Munich I Regional Court's Seventh Civil Chamber--which until recently was chaired by Presiding Judge Dr. Matthias Zigann, who has since been promoted to the appeals court--will hold a Huawei v. AVM FRAND hearing. AVM is a German WiFi router maker and competes with Netgear, a U.S. company against which Huawei has already obtained a default judgment in Germany.

Shortly after Huawei's landmark patent cross-license agreement with OPPO was announced last week, it also became known that Huawei recently renewed its license agreement with Samsung, which is now a 5G license. A few years ago, Huawei and Samsung settled litigation and signed a 4G license agreement. This time around, no litigation proved necessary.

Interestingly, it has now been discovered that Samsung transferred certain U.S. patents to Huawei.

Mr. Fan's statements today were balanced and principled. InterDigital's positions are also very consistent, though their license deals are obviously one-way streets.

Qualcomm made a number of good points. However, one need not "buy" Qualcomm's distinction of smartphone patent licensing (where they license only at the end-product level) from other categories where Qualcomm is prepared to license module makers. What makes sense for Qualcomm to do--and I'm not taking a position here on whether it raises antitrust concerns--is unique to that company with its particular business model and competitive strategy. While Qualcomm does at this point prefer to license four major IoT module makers over dealing directly with myriad small device makers, Qualcomm stressed again today that licensing at the component level is a voluntary choice. What if Qualcomm decides to compete aggressively in the narrowband IoT chipset market? There is no guarantee that they will still license module makers.

For now, however, Qualcomm has those four IoT module makers under license, and Mr. Han specifically mentioned Quectel.

Mr. Fan explained from Huawei's perspective that apart from FRAND considerations, it is simply efficient for a patent holder to license a company that knocks at its doors requesting a license. At the same time he made it clear that a licensing offer that does not allow audits could not be considered FRAND because some control is needed to avoid double-dipping.

The overall growth of 5G (now more than half of all cellular gadgets) and component-level licensing were not the only topics of discussion. Another topic that the panelists touched on was whether there could be a smartphone patent pool. By coincidence, Sisvel had announced a 5G multimode pool for consumer electronics devices (smartphones etc.) earlier today. Qualcomm essentially argued that there are only a few major handset makers, and if a company already has a bilateral relationship with a handset maker (and given that they hold SEPs of their own and like to cross-license, plus they like to license implementation patents that I believe Mr. Han meant to imply aren't implemented at the chipset level anyway), it will now just negotiate a renewal that upgrades that license to 5G. In my opinion, that does not apply to those cellular SEP holders who do rely on pools in order to reduce transaction costs--such as the ones that have joined and may in the near future join Sisvel's 5G MM licensing program.

My takeaway is that in 2023 we're going to see a diversity of approaches to the licensing level (with Huawei being extremely flexible and Qualcomm making different choices depending on industry segment characteristics); and the kinds of companies who were represented on the panel will license bilaterally, while others will benefit from their participation in pools.

When we talk about cellular standard-essential patents (SEPs) and how to license them to the automotive industry, it bears remembering that car makers generate rapidly increasing levels of revenues from connectivity itself (annual fees, after the first few years, for continued access) and premium features that would be unthinkable without connectivity. Here's a very recent headline that I found on Manufacturing.net (click on the image to enlarge):

1,200ドル/yr. for faster acceleration is just the latest example of this trend. In the summer, BMW already had to respond to criticism over charging 18ドル/mth. for heated seats.

In light of the gold mine that connectivity is for the automotive industry, one would think that SEP royalties in the low double-digits per car are a total non-issue. Not so. While Continental finally gave up on a meritless U.S. "antitrust" lawsuit in October, frustrated critics of the Avanci patent pool sent a letter to the Assistant Attorney General in charge of the Antitrust Division of the United States Department of Justice, Jonathan Kanter. They asked him to revisit and somehow nuance or downgrade his predecessor Makan Delrahim's July 2020 Business Review Letter that identified no competition concerns over Avanci's envisioned 5G patent pool.

AAG Kanter presumably has some more pressing issues on his to-do list. By far the best way to help the U.S. automotive industry through antitrust enforcement would be to prevent an "autocalypse": Apple and Google--who may indirectly have a hand in that anti-Avanci letter--are trying to take control over future automotive revenue streams (which I call "digital carjacking"). Senator Elizabeth Warren (D-Mass.) wrote a letter to AAG Kanter as well as FTC Chair Lina Khan about it.

But those advocating SEP devaluation are begging for attention: on Tuesday, Bloomberg Law published an opinion piece by the two principal authors of the anti-Avanci letter, Professor Michael Carrier and the Public Interest Patent Law Institute's Executive Director Alex Moss: Protect the Supply Chain From Patent Trolls Before It’s Too Late

If non-practicing entities are the paramount concern, the authors should actually welcome patent pools that have a diversity of licensors (not just Avanci, but generally speaking). For instance, Avanci has at least one important member of the--allegedly imperiled--automotive supply chain among its licensors: LG Electronics. If Avanci can bring the likes of LG, Qualcomm, Nokia, and Erisson together with licensing firms (some of which conduct their own research & development while others enable innovators to transfer assets and the related monetization risk to them), the compromise that results from it will be better for implementers than having to deal with individual NPEs.

It's a safe assumption that the few SEP holders who are not among the 50+ contributors to Avanci's 4G pool include NPEs that ask for a lot more money (relative to portfolio size) than Avanci.

Avanci is just an option. An optional one-stop shop. Car makers can take an Avanci license; they can also seek bilateral licenses if they believe the benefits of doing so outweigh the incremental transactional costs. Automotive suppliers, too, can seek licenses, including exhaustive component-level SEP licenses. One of the key reasons why the DOJ issued its Avanci BRL in the first place was that participants are not restricted from anything. Avanci members have, in fact, granted exhaustive component-level licenses to automotive suppliers.

IP Watchdog was first to report on a November 30 letter by "[t]wenty-five former judges, government officials, legal academics, and economists [...] in support of the DOJ’s 2020 business review letter." Here's the actual document:

November 30, 2022 letter to Assistant Attorney General Jonathan Kanter

The letter was authored by Professors Adam Mossoff (a frequent witness on Capitol Hill) and Jonathan Barnett. The signatories include former judges and government officials:

• Alden Abbott (Former General Counsel, Federal Trade Commission)

• Ronald A. Cass (Former Vice-Chairman and Commissioner, United States International Trade Commission)

• Judge Douglas H. Ginsburg (Senior Circuit Judge and Former Chief Judge, United States Court of Appeals for the District of Columbia Circuit)

• Damon C. Matteo (Former Chairperson, Patent Public Advisory Committee, United States Patent & Trademark Office)

• Judge Paul Michel (Chief Judge (Retired), United States Court of Appeals for the Federal Circuit)

• Judge Kathleen M. O’Malley (Circuit Judge (Retired), United States Court of Appeals for the Federal Circuit)

The key message is that the 2020 Avanci BRL got it right, and there is no compelling reason to break with the tradition of BRLs relating to patent pools:

"Any reconsideration of the 2020 business review letter, as proposed in the October 17 letter, would give rise to significant uncertainty concerning the Antitrust Division’s commitment to the aforementioned sequence of business review letters that have been issued concerning other patent pools in the information technology industry, as well as the larger group of patent pools that did not specifically seek guidance through the business review letter process but relied on the legal template that had been set forth in those previously issued letters."

Case in point, a business review letter gave patent holders the necessary confidence, back in 1997, to start MPEG LA. Earlier today I commented on a shameful lawsuit by a small minority of licensors trying to renege on their commitments to MPEG LA's HEVC patent pool. That one poses a threat to the legal certainty and transactional efficiencies that pools can provide, but so does the October 17 letter urging the DOJ to revisit the Avanci BRL. Patent pools are under attack from both sides: a small minority of unreasonable licensors as well as implementers and those beholden to them.

Yesterday's letter is highly instructive, and if you have a professional interest in this topic, I recommend you to read it. The actual letter spans little over 10 pages. The rest is the list of signatories and an appendix that lists academic papers.

One of the most important lessons that many automakers learned this year is that it's smarter to take licenses on reasonable terms from patent pools than to waste money on infringement litigation. It's easier said than done to refuse pool licenses: if licensing is inevitable, a one-stop shop likely provides transactional efficiencies and serves to obviate litigation. Now, cellular standards are far from the only kind of patented technology that modern vehicles incorporate.

Electric vehicles (EVs) are a fast-growing market, and involve even more patented techniques than conventional cars. Elon Musk made his famous All Our Patent Are Belong To You pledge in 2014. The EV industry has come a long way since, and the need for transactional efficiencies in patent licensing has definitely increased.

Last week, patent pool administrator MPEG LA made an announcement (PDF) regarding its EV Charging License. Given this blog's frequent reporting and commentary on automotive patent licensing, I wanted to share some thoughts and observations on that pool.

MPEG LA's website explains that this pool relates to "technologies underlying worldwide standards for conductive AC and DC charging, connection, communication and safety used in equipment that provides electric charging in and to electric vehicles. Standards used in China, Europe, India, Japan and the US are included." In Europe, the Combined Charging System (CCS) is a particularly widespread standard. Other well-known standards are Japan's CHAdeMO.

Ten days ago, Tesla announced that it would now open its North American Charging Standard (NACS) "to the world." Tesla would like to see "charging network operators and vehicle manufacturers to put the Tesla charging connector and charge port [...] on their equipment and vehicles," touting the advantages it offers according to Tesla. As CNN explains, Tesla has previously "offered to allow other companies to use various Tesla-patented technology, but doing so meant companies had to abide by Tesla’s 'Patent Pledge.'" Whether or not one welcomes Tesla's initiative, there can be no doubt that EV charging is red hot--and it's closely related to topics this blog has covered before.

MPEG LA's EV Charging patent pool has the following licensors (and is encouraging more patent holders to join):

• General Electric (more specifically: GE Hybrid Technologies, LLC)

• Mitsubishi Heavy Industries, Ltd. ("MHI"), which is part of the Mitsubishi Group

• Robert Bosch GmbH ("Bosch")

• Siemens AG

• Sun Patent Trust

It's not hard to imagine that those entities hold relevant patents. There is no lack of transparency: the patent list is available on the web, as is a list of the standards, and a cross-reference chart (PDF) that maps "illustrative essential claims" to specific sections of EV charging standards. As far as I can tell, this field is like codecs in the sense that any given patent may read on more than one standard because they all use a certain set of common or at least similar techniques.

Some of the essential patents cover charging in a narrow (strictly electrical) sense, such as certain safety mechanisms, while others read on the protocols for communication between an EV and a charging station, such as High-Level Communications (HLC).

MPEG LA's EV Charging Patent Portfolio License has now been fine-tuned "to make the License more effective in addressing the market’s needs now and in the future," the press release says. At least two aspects of "EV Charging 2.0" (that's what I call it, not a name used by MPEG LA) should make this offer more palatable to the automotive industry:

• Normally, patent pools can extend licenses only at the car level. There are reasons for that, and there's no point in blaming pool administrators: it's the licensors' choice. This pool, however, is also prepared to license tier 1 (i.e., direct) suppliers, and we're not talking about "have-made rights" but freedom to operate in the sense that suppliers can sell their components (licensed on a per-unit basis) to any number of OEMs.

  Automakers like to deflect royalty demands to their suppliers, but if their suppliers don't have access to a license, the car makers get sued. MPEG LA's EV Charging pool in its current form affords the automotive industry a degree of flexibility that I haven't seen from any other patent pool.

• There are important differences between the types of chargers used on residential property versus the ones for commercial use. Interestingly, the EV Charging pool doesn't distinguish based on field-of-use restrictions. Instead, it's all about functionality: for example, commercial users will typically place higher demands on the data communication between vehicles and charging stations (not least with a view to charging in a financial sense). With MPEG LA's royalty rate being based on the licensed functionality, those who use a subset of the available functionality in a commercial setting will pay less than those who make more extensive use of the covered standards.

From time to time, I discover interesting pools that can promote licensing and help to minimize litigation. About two weeks ago, I discussed Sisvel's narrowband IoT patent pool, with which MPEG LA's EV Charging pool has in common that those pools are not just about collecting royalties on ubiquitous technologies but very much about spurring adoption.

EV charging is an interesting topic. I admit that I always DC-charge my car at home because I don't use it more than once or twice a day and it's best for the battery, but when I'm on the road, I obviously charge with AC.

The world needs more electric vehicles and more charging stations. MPEG LA's EV Charging pool has enormous potential. It is in the interest of both licensors and licensees to make it work. Some companies are patent holders and major implementers at the same time (which, by the way, also applies to many of the companies that made some MPEG LA codec pools, such as the AVC/H.264 pool, very popular). Patent-owning implementers should be particularly interested in the pool approach to EV charging patents (and in influencing developments through active participation).

For automotive patent pools, 2022 is the most eventful year so far. And there's more than a month left...

While the automotive industry has by now overwhelmingly adopted the Avanci patent licensing model, some clean-up on the litigation front is still needed.

In the summer, the United States Court of Appeals for the Fifth Circuit denied Continental's second petition for a rehearing en banc of its "antitrust" case against the Avanci patent pool and some of its key licensors (Nokia, Sharp, Optis). Conti had until Halloween to file a petition for writ of certiorari with the Supreme Court of the United States, and I actually thought they would, given that they had been impervious to reason throughout that multi-year litigation that never went anywhere.

Surprise, surprise: a partial cure has been found for Continental's procedural incontinence. Whatever pill the tire maker has taken, by now nothing has surfaced along the lines of a cert petition, so Conti v. Avanci et al. is a case that has ceased to be. It may have cost tens of millions of dollars to get there--and for Conti to get nothing.

I have a theory as to what the magic pill was: Conti's outside counsel would presumably still have wanted to give it a try, and Conti's in-house counsel, too--but at least they knew they would have needed a critical mass of support from amici curiae. There would basically have been two pools from which to enlist amici: automotive industry players (but it would have seemed strange if companies like Ford, just a few months after taking the Avanci license, had signed anti-Avanci amicus briefs) and the Apple-led movement pursuing the devaluation of standard-essential patents (SEPs), particularly through the proposal of a Smallest Salable Patent-Practicing Unit (SSPPU) royalty base. Apple is very experienced in litigation and presumably recognized--and I'm sure never had to read this blog to figure out (though my commentary may indeed have helped some other potential amici)--that Conti's case was going nowhere. The Fifth Circuit had designated the opinion as non-precedential. Since the original filing in the Northern District of California in 2019, no judge ever believed that Conti had a case. From the Supreme Court's perspective, it would have been easy to see that even if the top U.S. court--in a purely hypothetical scenario--had reversed the Fifth Circuit, the case would just have been a waste of court and party resources anyway.

So there came a point when Conti had to call it quits. I took a critical perspective on that case from the beginning as those who already read my commentary on Conti v. Avanci back in 2019 may well remember. But Conti's in-house counsel relied on bad advice instead of listening to people like me. I'm not a habitual naysayer in the antitrust context. For instance, I'm very optimistic that Epic Games will win at least a partial reversal and remand in the Ninth Circuit on "November Fortnite." But Conti should never have brought that case in the first place, or at least they should have given up after the Ninth Circuit's FTC v. Qualcomm ruling.

Conti and the organizations it would have wanted to support the cert petition that was never filed are still trying some other things.

At yesterday's Munich Auto IP conference, a Conti exec misleadingly claimed that Avanci's licensors had to bring 51 lawsuits against car makers, but Qualcomm's Fabian Gonnell was quick to correct him by pointing out that there were only six disputes (I should add that three of them were extremely short-lived), but in Germany each patent assertion is filed as a separate case (or gets severed by the courts).

There is one other Conti case over automotive patent licensing that is still pending, and while Avanci is not a party to that one, Nokia still has to defend itself. In early 2021, Conti brought a complaint in the Delaware Chancery Court (the same court that would presumably have ordered Elon Musk to consummate the Twitter acquisition if he hadn't given up getting out of that deal):

21-01-25 Continental v. Nok... by Florian Mueller

The issues in that case partly even mirror some of the claims in what used to be the case against Avanci et al., and the remaining issues were closely related. It's all about making sure Conti's telematics control units (TCUs) would be covered by a Nokia patent license, be it an old Nokia-Qualcomm license (a theory that appears next to implausible) or a new license that Conti would want the court to force Nokia to extend.

I found out that the parties had oral argument concerning Nokia's motions to dismiss, and a U.S. subsidiary of the German Continental Group continues to push for their claims to move forward in the Delaware Chancery Court at this time. I'm confident that the state court will draw its conclusions from the now-definitive failure of Conti's federal claims.

There's more. A group of academics and former government officials sent a letter to U.S. antitrust chief Jonathan Kanter, urging the Assistant Attorney General to modify, nuance, or downgrade his predecessor's Business Review Letter regarding Avanci's future 5G patent pool. That is something Conti would like to see happen (as would Apple), though it would come too late for its federal lawsuit anyway. Also, there's an obscure Thales v. Avanci & Nokia case pending in the Munich I Regional Court. The court told me that the original hearing date had been vacated and on October 11, a spokeswoman for the court said that no new hearing date had been scheduled. I'm sure that case will be thrown out, even if only after wasting some more time and money.

I am flattered by the fact that both sides of the automotive standard-essential patent (SEP) licensing debate--those with a preference for licensing at the end-product level as well as those blaming Avanci and some of its licensors for not extending component-level licenses--point decision-makers to my writings. About ten months ago, Avanci licensor Acer sued Volkswagen and pointed to a couple of FOSS Patents on so-called licensing negotiation groups. And on Monday, "28 former government enforcement officials, professors, and public interest advocates" wrote a letter to U.S. Antitrust Assistant Attorney General Jonathan Kanter, asking him to revoke or downgrade his predecessor's July 2020 Avanci Business Review Letter" (PDF) that contains references to four FOSS Patents posts (footnotes 9, 16, and 17).

This is appreciated, but it doesn't make me look at the document through rose-tinted glasses. There are clear errors in that letter, and even if one agreed with some or all of the authors' policy positions, their approach is wrong in two fundamental ways:

1. That they see a problem is no reason to blame a part of the solution for not solving all of the world's problems.

2. If one thinks it through, the root cause of everything they criticize is unrelated to U.S. antitrust law and actually just a problem with Germany's patent law, including its automatic injunction regime and the "injunction gap." Therefore, instead of writing to AAG Kanter, they should have directed their grievances to Dr. Marco Buschmann, Germany's Federal Minister of Justice.

My policy concern is that this misguided pool-bashing can do damage to the entire patent pool universe. Indeed, MPEG LA, which is actually a competitor of Avanci and especially its sister company (Marconi) filed an amicus curiae brief (PDF) with the Fifth Circuit in a Continental v. Avanci case in support of Avanci because it sought to protect the ability of patent pools to operate. What we're talking about here is not just Avanci and MPEG LA, but so many others, such as Sisvel and Via. What has me profoundly worried is that the signatories of the letter to the DOJ's Antitrust Division seek to mischaracterize as antitrust issues two principles without which patent pools simply cannot function:

1. No pool can offer licenses beyond the scope for which there is a consensus among its licensors. Yes, that is the narrowest common denominator--like many things in life, like it or not. No, it's not an antitrust issue so long as those licensors who are prepared to grant licenses beyond the scope of the pool remain unrestricted in their ability to accomodate such other licensing requests.

2. No pool that is set up--like all the pools I know--as a licensing agent (as opposed to an entity that would acquire patents, i.e., be assigned all rights to those patents, which some pool administrators do in addition to acting as a licensing agent) has standing in an infringement action. Only its licensors can bring suit. Now, if you have dozens of licensors, you would inevitably get free-riding (that some wait for others to take enforcement action against unwilling licensees)--possibly to the extent that no one would do anything--unless there is some reimbursement mechanism for scenarios in which a defendant settles not just through a bilateral license but takes the pool license. It's a matter of fairness--also vis-à-vis honest licensees who would otherwise be at a disadvantage as they compete with infringing competitors.

The letter does not argue that patent pools should never be allowed to have a limited scope (field-of-use restrictions; here, vehicle-level licenses to car makers) or shouldn't reimburse contributors for taking the risks and shouldering the overall burden of suing infringers. Furthermore, it does not (as it cannot) allege that Avanci's contracts with licensors preclude them from granting bilateral component-level licenses to automotive suppliers like Continental.

So what are they really complaining about?

What's already clear from the headline of the Public Interest Patent Law Institute's related press release (The DOJ Should Review Avanci’s Patent Pool and Revoke its License to Troll) is that they don't like non-practicing entities (NPEs). However, the fact that Avanci's contributors include a mix of operating companies (such as LG, which is in fact a major automotive supplier) and NPEs is not an antitrust issue. The business of NPEs is legal. As the Business Review Letter and Avanci's related request show, Avanci as a licensing agent does not discriminate against any category of licensors. Whether they could discriminate is a question we don't have to think about: they've chosen not to do it, which is legal--and I don't know any patent pool that doesn't allow NPEs to join.

The letter says Avanci's reimbursement policy--which obviously makes reimbursement subject to someone taking a pool license, as it wouldn't work any other way, and without reimbursement pools would be defenseless against patent hold-out by infringers--leads to the same effect as "pool licensors collectively agree[ing] not to license outside the pool." But that makes no sense because those are two different categories of licensees. Take IP Bridge v. Ford: if Avanci's 4G pool works largely like the 5G pool for which the DOJ issued the BRL, IP Bridge got reimbursed when Ford settled. But Ford couldn't have taken a component-level license because it doesn't make such components. And if IP Bridge had wanted to collect royalties from Ford's suppliers, it would have sued a company like Continental (which was merely an intervenor supporting Ford).

Some Avanci licensors have indeed--after joining Avanci--extended component-level licenses, even Conversant Wireless, which is one of the NPEs the letter particularly criticizes for their business model. Some others are known for their policy of licensing end products: Qualcomm, Nokia, Ericsson, to name but the most famous ones. But they've had that position for a long time, even long before Avanci was founded. It is one of the glaring weaknesses of all that criticism of Avanci that no one can point to a single patent holder who would have extended component-level licenses before, but--because of Avanci--changed that policy. Not even one.

The letter labels as "collusive litigation" certain past situations in which car makers were sued by multiple Avanci licensors in parallel (it is mostly in that context that FOSS Patents gets referenced, as there is no other online resources that tracks automotive SEP litigation so closely). But that's just the inevitable consequence of unlicensed use of patents. For example, Apple is currently being sued by Ericsson (in multiple countries), Optis (after a UK trial, a judgment is in the works), numerous other NPEs (one of which is Clear Crystal Codec), and was on the verge of being sued by InterDigital.

I, frankly, doubt that it would even be illegal for multiple patent holders to coordinate litigation. Whenever MPEG LA announces infringement actions (which they usually bring in Dusseldorf), there are patents from different MPEG LA licensors that get asserted against a single defendant. And it's not unheard of that companies facing infringement lawsuits over the same patent(s) engage in some coordination: they form joint defense groups or compare notes. A group boycott would raise competition concerns; discussing prior art would not.

The "collusive litigation" part culminates in a nonsensical but-for scenario:

"Absent the Avanci pool, members would be competing for licensees [...]"

That is an insult to human intelligence because, as the BRL stated and the letter to AAG Kanter doesn't dispute, SEPs reading on the same standard are by definition complementary: they do not "compete." For competition to take place, you need a substitutive potential. Where you do have competition between patent licensors is when there are alternative technologies: for example, if there are alternative ways of cooling down a seat and different patent holders (or pools) offer patents that solve the problem in different ways. But Nokia isn't "competing" with Ericsson, or InterDigital with Qualcomm. They may compete for engineers and for investors, but never for licensees. Nokia can't go to an implementer and say: "Our patent license costs less than Qualcomm's, so take it!" Undercutting wouldn't work because in the end, the implementer will need to license both Nokia's and Qualcomm's patents--and those of dozens of other SEP holders.

The first accusation in the letter recalls that the BRL did not rule out the risk that "non-infringing manufacturers" could be forced to "settle and take a [...] license." The letter claims that "this is exactly what has happened." But the facts that the letter point to do not support that claim at all. There were no "non-infringing manufacturers" that took a license, just numerous car makers who took a license without litigation--and where litigation was brought and reached the point of a judgment, the automakers lost--most recently Ford. Someone who loses an infringement case cannot be honestly described as a "non-infringing manufacturer[]."

Closely related is the point that infringement litigation fails to "promote the removal of invalid patents from the pool." According to the letter, which then points to IP Bridge v. Ford, "litigation does not lead to validity determinations when licensors seek injunctions, as Avanci’s members have done." The BRL, they say, "does not consider that injunctions before validity determinations force companies to take their products off the market—and risk going out of business—long before any invalidity (or infringement) determinations are made."

By the way, it is simply wrong that they claim Avanci's licensors sought "preliminary" injunctions: those injunctions were permanent ones, after a full trial. Also, they claim litigation was brought in "Frankfurt"--they might have meant Mannheim, but that is a different city and in a different state, about one hour away.

They may not have researched those cases thoroughly enough, but it is clear that they have a problem with how patent enforcement works in Germany. That's why I said further above that they should have written to Germany's Minister of Justice.

It all boils down to four characteristics of German patent law that those Avanci critics don't savor because of the commercial realities they create on a daily basis, with or without Avanci:

1. German courts routinely enjoin patent infringers as opposed to applying an eBay-like standard. The new proportionality defense is meaningless.

2. At least the courts in Dusseldorf (where most codec cases used to be filed in the past) and Munich (as in IP Bridge v. Ford) typically tell a SEP implementer that they must take a global pool license as opposed to just a bilateral license. Ford couldn't have solved the problem by just taking a license from IP Bridge, but that's because the Munich court held that Ford violated its FRAND obligations by not making a counteroffer to the Avanci license that IP Bridge pointed to. FOSS Patents was first to publish, translate, and explain that judgment.

3. At least the courts in Mannheim and Munich consistently rejected defenses by car makers based on the theory that their suppliers were allegedly willing licensees. The courts essentially say that patent holders have the choice against which level of the supply chain to bring their cases.

4. Finally, there's the "injunction gap": there is no full invalidity defense in a German patent infringement action--just an assessment of the likelihood of success on the merits of a parallel (and slower) nullity proceeding in the Federal Patent Court, based on which assessment the infringement case may or may not be stayed. That indeed leads to invalid patents often surviving just because the infringer comes under settlement pressure before a final validity determination. The German legislature was lobbied about this, and earlier this year a legislative amendment relating to the injunction gap took effect, but as I explained, it's not going to be truly useful and may even be counterproductive.

There is nothing that even the powerful United States Department of Justice can do about how the courts in Germany interpret and apply the laws. This leads us to a very important question: Is a pool like Avanci (or MPEG LA, for that matter) part of the problem or part of the solution?

It is perfectly reasonable to disagree with the four above-mentioned features (or bugs, if you dread them) of German patent law. But the DOJ can't change them, and Avanci isn't responsible for them. So if we talk about a realistic But-For World, we have to do so against the background of what the courts in Germany--with Munich being the primary hotspot--would do with or without Avanci:

• Those patent holders--including the NPEs whose business model some people don't like--would still exist.

• Some patent holders (including major operating companies like Qualcomm, Nokia, and Ericsson) would not grant component-level licenses anyway.

• Car makers would still be implementing those standards (particularly 4G and now 5G).

• SEP holders wouldn't condone infringement forever. They would sue. There would be more litigation, not less, but regardless of how many cases would be brought, there would be a very significant number. And car makers would often settle after (or in anticipation of) injunctions.

• As I explained further above, it's preposterous to suggest that SEP holders would be "competing" with each other. Each and every SEP holder would want each and every car to be licensed, and a license to, say, Nokia's patents doesn't mean you don't need to take a license to Acer's patents. A license to patent A is never a defense to an infringement allegation concerning patent B.

In the end, Avanci gets blamed for not convincing companies with a longstanding policy of licensing at the end-product level to change their positions, and for providing a one-stop shop that is optional because licensees could always seek (and sometimes indeed secure) bilateral licenses from any or all of Avanci's licensors. If a court of law tells them they're not entitled to a bilateral license because the pool license is acceptable, that's not an antitrust problem, and when it happens in Germany (as it does), it's nothing the U.S. government is responsible for.

The only realistic But-For World is one in which transaction costs are higher, and license fees would certainly not be lower.

The shortcomings of that letter don't end here. Let me show you a really disingenuous passage. They argue that Avanci's rate increase from 15ドル to 20ドル per car (for a 4G license), which was announced well in advance of taking effect and only applied to new licensees, was unjustified for the following reasons:

"There has been no change to the decades-old standards to which Avanci’s license pertains that could justify any fee increase, let alone such a significant one. The only change has been to the number of vehicle manufacturers that have taken Avanci licenses, many of whom did so to avoid preliminary injunctions, both potential and actual."

Nowhere do they acknowledge that the old rate had been in effect for about five years (which was when BMW accepted it); that it won't apply to existing licensees; that there has been and continues to be inflation; that there's nothing wrong with incentivizing compliance and early sign-ups; and above all, that Avanci's pool has grown massively. For instance, the addition of LG alone would have been sufficient to justify the rate increase (which, again, didn't even impact existing licensees).

What's the agenda here? What's likely to happen next?

Let's start with the signatories. Some of them--such as Professor Herbert Hovenkamp--are definitely independent; they may have been disinformed by some others. But some have an agenda, and I believe that agenda extends beyond the automotive sector. The Public Interest Patent Law Institute has previously collaborated with Big Tech astroturfers: they filed an amicus curiae brief together with the so-called Computer & Communications Industry Association (CCIA), which is actually a Cash & Carry Industry Association, and another signatory organization was ACT | The App(le Association. All three of those organizations--PIPLI, CCIA, and ACT--are among the backers of the "Save Our Standards" campaign, which engages in deceptive lobbying and campaigning (they sponsored an "interview" with a small app developer who claimed to have problems with SEP licensing though it never had to license a SEP, much less in the project they described in that interview, which was an app they developed for a state government that is immune to patent law).

The signatories include at least one professor who routinely submits pro-Big Tech amicus briefs on patent law issues, and co-authored a paper with an ACT astroturfer.

That letter to AAG Kanter was probably just the opening salvo, and who knows how much lobbying has taken place behind the scenes already. Also, the timing is interesting because we're approaching the deadline for Continental to file a cert petition after losing its Avanci lawsuit in district court and in the Fifth Circuit.

The letter fails to propose how to address that criticism and still enable patent pools to operate successfully and provide the transactional efficiencies that are their raison d'être. If they want to change German patent law, they should go to Berlin, not Washington.

Certain companies and their lobbying fronts are pushing the U.S. Federal Communications Commission (FCC) to support those organizations' efforts to devalue standard-essential patents (SEPs). The most vocal one of them is automotive supplier Continental (see Conti's latest filing, dated July 29), but Apple and its astroturfers (see this July 2021 filing (PDF)) are also involved.

The specific context has docket no. OET 19-138 and relates to the use of the 5.850-5.925 GHz spectrum block for Cellular-V2X (C-V2X) purposes. Put differently, Conti, Apple, and their friends are trying to hijack a spectrum regulation process for their gain, and their pretext--the suggestion that ruthless SEP holders would otherwise threaten the viability of the standard--is simply made up. The SEP holder with the most clout in U.S. politics, Qualcomm, opposes that initiative.

Let's go for a quick, virtual walk around Washington, D.C., and "visit" the various agencies of the Executive Branch that are actually in charge of SEP policy and/or the related enforcement:

• The Antitrust Division (ATR) of the United States Department of Justice (DOJ), the United States Patent & Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) have recently withdrawn a SEP policy statement. At the same time they declined to agree on a new one or reinstate an Obama-era position that was favored by implementers like Apple.

  The fact that those three agencies determined it was better to let the market and--to the extent necessary--courts sort SEP things out strongly counsels against the FCC taking a position on the most controversial of SEP-related questions, which is the proper licensing level and royalty base.

• The Federal Trade Commission (FTC) challenged Qualcomm's licensing-centric business model, but lost the appeal and ultimately gave up. The bottom line was that patent holders like Qualcomm enjoy wide latitude in defining and implementing their business models, and it's very hard to obligate them to do business with a third party on the latter's preferred terms. While other circuits, such as the D.C. Circuit, could theoretically reach different conclusions than the Ninth Circuit, the FTC v. Qualcomm outcome, too, should dissuade the FCC from taking steps that would invite legal challenges. A solid Supreme Court majority is absolutely not in favor of federal agencies overstepping their mandate.

• Then there's also the United States International Trade Commission (USITC, or just ITC), which can order import bans if patent rights are infringed (and provided that it's not against the public interest, which is, however, a narrow exception).

It's not a question of whether the FCC is important. No one would doubt that. It's just that too many cooks in the SEP policy kitchen are not a good idea. On its face, Conti's (and its allies') argument is that the FCC should just exercise its regulatory authority in connection with the reservation of spectrum for one specific standard. But the issues, particularly access to exhaustive component-level SEP licenses, have far wider ramifications.

Now, Conti points the FCC to the fact that it mandated FRAND licensing of SEPs in the context of ATSC Conti at least once misspells ATSC as "ATCS" and there are other typos in its recent submissions to the FCC, of which "AUtomotvie" is the most striking one. But compared to last year's Epic Games v. Apple judgment (271 typos and similar mistakes; an average of more than 1.5 per page) that's not too bad.

With respect to ATSC 1.0, the FCC didn't decree that component makers had to be licensed. The agency merely reminded SEP holders of their FRAND licensing obligation without narrowing the meaning of FRAND, which is what Conti and its allies are seeking here. Spectrum regulation isn't FRAND interpretation.

The FCC should not buy those unsubstantiated allegations of widespread problems in SEP licensing. Well over half of the automotive industry (based on car sales volumes) has already taken the Avanci 4G patent pool license. The two exits from the wireless component market that Conti mentions are not even anecdotal evidence: the car industry is affected by a chipset shortage, not by an insufficient number of actual and potential suppliers.

Conti is telling the FCC what the Fifth Circuit rejected (even twice): the notion that Conti is being harmed by the fact that SEP holders prefer to license Conti's customers over licensing Conti itself. The only harm Conti is really suffering here is entirely self-inflicted and amounts to the legal fees it keeps wasting in its crusade against SEP holders.

The United States Court of Appeals for the Fifth Circuit has done everything it possibly could to make automotive supplier Continental realize that its "antitrust" complaint against the Avanci patent pool and some of its licensors (Nokia, Sharp, Optis) is not going to be revived. The court didn't even formally deny Conti's motion for an extension of time to file another petition for rehearing en banc. The deadline was yesterday. Conti's counsel--instead of giving up a strategically lost position--worked over a long weekend (Monday was Independence Day) and filed its second petition for rehearing in the same case, even at risk of being sanctioned for abuse of procedure.

So here's the new petition, on which I'll share a couple of observations further below:

https://www.documentcloud.org/documents/22080066-22-07-05-continentals-renewed-petition-for-rehearing-en-banc

The fundamental problem is still the same: Conti is wasting the judges' time as it won't win regardless of the "issues" the tireless, tiresome tire company purports to raise. While the panel didn't explicitly affirm the district court's holding that Conti lacked antitrust standing, it didn't reverse that part either. A lack of standing could also have been the basis--or part of the reason--for concluding that Conti had failed to state claims. All that the revised panel opinion said that was that "Continental failed to state claims under Sections 1 and 2 of the Sherman Act"--as opposed to saying there's no Article III standing (which is not specific to antitrust but broader) like in the first version. It's not definitively clear whether the district court was affirmed all the way or only with respect to the final part of its analysis. Therefore, Conti's interpretation is not necessarily right, and Conti would have to show in a hypothetical continuation of the process that it had antitrust standing.

Even the lack of Article III standing (the panel's original holding) could come up again, though it's less likely, given that the panel itself withdrew its original decision. At least antitrust standing continues to be a serious issue not addressed by Conti's petition. With a view to antitrust standing it's also important to keep in mind that Conti is simply not the right plaintiff.

The panel opinion 2.0 merely affirms the district court without further analysis, so the district court's decision (almost two years old by now) is all that Conti can attack. Just like after the first panel opinion, what Conti does is to take particular statements out of context--so they look really broad--and to suggest that if those statements were reversed or narrowed, Conti would all of a sudden have a case. Not so. For instance, Conti's petition ignores footnote 15 of the district court's judgment. The context is that Conti says the relevant patent holders defrauded the standard-setting process by making FRAND promises they never intended to keep in the first place, thereby excluding other technologies belonging to right holders who would have complied with FRAND. The district court found that a Section 2 monopolization claim requires an allegation of harm to the competitive process itself, not just to competitors. The district court indeed held that even if some other companies' technologies had not been included in the standard, that would not be anticompetitive unless the competitive process itself was harmed (which is simply settled antitrust law). But it also expressed doubts in a footnote about whether Conti--even if one applied a different legal standard or assumed that Conti had shown harm to the competitive process--had even made a sufficient pleading as to the exclusion of competitors:

"The Court is also skeptical that such exclusion has been properly alleged. Plaintiff only includes conclusory allegations that alternatives were presented and rejected by the SSOs for the 3G and 4G standards and that if there were no alternatives to a given technology, the SSOs would have been obligated to abandon those parts of the standard. [...]. There is no indication of what these potential alternatives were, that they were alternatives to any of Defendants’ SEPs, or that they were excluded because of Defendants’ allegedly fraudulent FRAND declarations. Even if the SSOs had known that the Licensor Defendants did not intend to comply with their FRAND obligations, the SSOs may nevertheless have adopted the Licensor Defendants’ SEPs and chosen to insure compliance based on the Licensor Defendants’ contractually binding FRAND commitments, which are enforceable regardless of any alleged deception by the Licensor Defendants."

So Conti's Section 2 claim is defective in more than one way. Conti makes it sound like the district court is fine with just any deception of an SSO, but in reality, the district court just explained that it takes more than Conti's pleadings to make it an antitrust issue. One major issue with the alleged "fraud" is that it's not about a violation of SSO rules (such as failing to disclose an essential patent): the accusation is that patent holders like Nokia never intended to comply with FRAND when they made a FRAND promise. That notion is absurd.

Conti points to three recent cases in which the Fifth Circuit granted rehearing en banc of unpublished decisions. Still, the fact that the decision was designated as unpublished and non-precedential makes it most likely that the petition will be rejected. Last time the court asked the defendants for a reply; that may not even happen this time around.

Conti's Section 1 argument is that despite the Avanci patent pool agreement explicitly allowing contributors to grant bilateral licenses (to car makers, suppliers, anybody), licenses at the component level were not "fully" and "realistically" available to Conti--and they blame Avanci for it. The petition misrepresents the situation: it's not just that the Avanci agreement doesn't preclude patent holders from engaging in bilateral licensing, but Avanci licensors have granted bilateral licenses on various occasions. Nokia granted one to Daimler last year, and shortly thereafter announced that a second (unnamed) car maker had taken a direct license, too. Sharp and Conversant granted component-level licenses to Huawei.

Those real-world bilateral licenses belie, inter alia, the following passage from Conti's renewed petition:

"Moreover, a provision in the Avanci agreement that merely pays lip service to the possibility of individual licenses cannot defeat a § 1 claim if the provision has no practical effect."

The fact that patent pools can increase efficiency in licensing doesn't make them or their contributors antitrust offenders. There may very well be patent holders who tell a licensee that they prefer to license their patents through the Avanci pool. But that doesn't amount to a conspiracy any more than some car makers' decision to conclude a pool license rather than negotiate with (and potentially face litigation from) approximately 50 different patent holders. Licensors and licensees alike just want to reduce transaction costs.

The most likely next step is that the Fifth Circuit will reject this petition (the worst-case scenario for Conti being that the court will additionally impose sanctions for abuse of procedure). It's pretty clear that Conti is hell-bent to exhaust all appeals, so we'll probably see them file a cert petition with the Supreme Court in a matter of months...

The reasonable and rational thing for automotive supplier Continental to do now would be to recognize that its meritless "antitrust" action against Avanci and some of its licensors (Nokia, Sharp, Optis) is--and always has been--an error. Conti has not convinced, and never will convince, a U.S. judge that it has standing and actionable claims under the Sherman Act. It's over (as the Fifth Circuit issued a revised panel opinion that throws out the case, just on a different, more case-specific basis). The sooner Conti comes to its senses, the better.

This here is a brief follow-up to a Thursday post, Continental and its counsel risk abuse-of-procedure sanctions from weary Fifth Circuit if they file another petition for rehearing. As I mentioned, the court gave flatly denied Conti's request for a 30-day extension to file another petition for rehearing en banc--and as I explained, the Fifth Circuit's published rules make it very clear that the number one problem of abuse of procedure faced by the court are all those en banc petitions, given that the fewest cases (less than 1%) are heard by the full court (and of the few that do make it there, a large percentage get there because of a judge, not a party, making the proposal). Conti and/or its counsel may get sanctioned, and in the present case there really would be a basis for that, as a decision designated as unpublished and non-precedential can hardly satisfy the criteria for a rehearing. Moreover, even if one disagreed with the district court and at least one of the panel judges (Circuit Judge Ho) on the question of antitrust standing for lack of injury, it is fair to say, at a minimum, that Conti cannot point to a pressing problem such as on the infringement litigation front.

The denial of Conti's motion for an extension of time was already a clear sign that the appeals court has had enough of this. Unfazed, Conti just brought another motion for an extension: as counsel for Avanci and its codefendants had told Conti's counsel they wouldn't oppose a 14-day extension, Conti thought the Fifth Circuit might grant a new motion.

But there's just radio silence from the court.

The judges left for a long weekend, right after which (as Monday is Independence Day) there is the statutory deadline for a rehearing petition. Unless there was just a logistical reason and the court informed Conti by telephone that the two-week extension would be granted (whic hI doubt), this leaves Conti and its lawyers with only two choices:

1. Act like grown-ups, enjoy the weekend, and give up a strategically lost position. If all else fails, find a good psychotherapist to help you overcome the trauma.

   Or:

2. Go into crunch mode and produce another rehearing petition, which won't have any effect other than, potentially, sanctions and the embarrassment that goes with them.

There are strong reasons in favor of the first option. One of them is that former Chief Judge Stewart, who denied the first motion for an extension, doesn't have reading-comprehension problems, unlike Conti, which didn't even observe the court's clear instructions when filing its first rehearing petition (they had to refile in order to add some missing--but mandatory--elements). Judge Stewart saw that Avanci and its co-defendants wouldn't have opposed a 14-day extension. He could have granted a 14-day extension right away had he been so inclined.

Conti must know when it is not wanted. This here is such a case. The court is already treating Conti as a nuisance. Can't blame the judges, really.

Automotive supplier Continental's unreasonableness is getting worse by the day.

I started the headline of yesterday's Continental v. Avanci et al. post by describing Conti as impervious to reason. Meanwhile, Circuit Judge Stewart--a member of the panel that has already twice determined that Conti has no case--has denied Conti's motion for a 30-day extension for its second petition for rehearing. The court announced that the mandate would issue on July 13. So what did Conti do? They brought a new unopposed motion seeking a 14-day extension. The previous motion had already said that Avanci and its co-defendants (Nokia, Sharp, Optis) wouldn't oppose a two-week extension.

While Judge Stewart's order ("[Conti's] opposed motion for an extension of 30 days, or, to and including August 4, 2022, to file its petition for rehearing/petition for rehearing en banc is DENIED.") didn't specifically address the possibility of a 14-day extension, Conti should finally see the writing on the wall: the appeals court is tired of the tire maker.

It's worth recalling that Conti didn't even manage to file its original petition for rehearing in accordance with the Fifth Circuit's published rules. Some elements, such as a statement of facts, were missing, and Conti had to refile.

People at Conti have to pull the plug on this. While Conti apparently didn't care to read the Fifth Circuit Rules (PDF) before filing the first (and failed) petition, I have taken a look at those rules. What I found shows that Conti and its counsel are taking a risk. They should accept the panel decision 2.0 as the final resolution of the case by the Fifth Circuit. Otherwise they may be sanctioned for manifest abuse of procedure:

"35.1 Caution. Counsel are reminded that in every case the duty of counsel is fully discharged without filing a petition for rehearing en banc unless the case meets the rigid standards of FED. R. APP. P. 35(a). As is noted in FED. R. APP. P. 35, en banc hearing or rehearing is not favored. Among the reasons is that each request for en banc consideration must be studied by every active judge of the court and is a serious call on limited judicial resources. Counsel have a duty to the court commensurate with that owed their clients to read with attention and observe with restraint the standards of FED. R. APP. P. 35(b)(1). The court takes the view that, given the extraordinary nature of petitions for en banc consideration, it is fully justified in imposing sanctions on its own initiative under, inter alia, FED. R. APP. P. 38 and 28 U.S.C. § 1927, upon the person who signed the petitions, the represented party, or both, for manifest abuse of the procedure." (original in italics; emphases added)

Let's start with "the rigid standards" of Fed. R. App. P. 35(a), which envisions only two circumstances under which an en banc may be appropriate:

1. en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or

2. the proceeding involves a question of exceptional importance.

If Conti and its counsel know that their petition doesn't meet at least one of those criteria, they have to refrain from bringing yet another rehearing petition lest they be potentially sanctioned.

The first criterion cannot possibly be fulfilled: an unpublished and non-precedential decision is inherently not capable of endangering the uniformity of the Fifth Circuit's decisions. Also, the panel opinion 2.0 is limited to only the Sherman Act Section 1 and 2 claims, i.e., couldn't be more narrowly case-specific at this stage.

Whatever Conti may say in its petition can't reasonably meet the second criterion either. Yes, to those Conti guys and their counsel the case may be of exceptional importance. But at this stage we're talking about an unpublished and non-precedential decision, which weighs against its importance--and a narrow decision on the specific defects of Conti's complaint. Furthermore, while the panel withdrew its holdings on Article III standing and didn't take a position on the district court's conclusion that Conti lacked antitrust standing, this here is still a case of no injury. Conti is not being sued over cellular standard-essential patents by any Avanci licensors (Avanci itself couldn't sue for lack of owning those patents). Conti is not being sued by a customer for indemnification. There is simply no harm that Conti has established, other than that it was denied a license it never really needed.

In light of all of that, this case falls far short of the exceptional and important case that warrants a rehearing en banc. Conti is not going to get that rehearing. There's no realistic upside, but a potential downside of being sanctioned.

If Conti and/or its lawyers signing the petition get sanctioned, they can't blame the Fifth Circuit for not having made it clear beforehand that this could happen. Here's another passage from the Fifth Circuit Rules:

"THE MOST ABUSED PREROGATIVE - PETITIONS FOR REHEARING EN BANC ARE THE MOST ABUSED PREROGATIVE OF APPELLATE ADVOCATES IN THE FIFTH CIRCUIT. FEWER THAN 1% OF THE CASES DECIDED BY THE COURT ON THE MERITS ARE REHEARD EN BANC; AND FREQUENTLY THOSE REHEARINGS GRANTED RESULT FROM A REQUEST FOR EN BANC RECONSIDERATION BY A JUDGE OF THE COURT RATHER THAN A PETITION BY THE PARTIES." (emphasis in original)

"The most abused prerogative"--for which we may now see one of the clearest cases ever of a manifest abuse of procedure. Conti and its counsel must finally understand that the Fifth Circuit also has other appeals, motions, and petitions to decide. It's utterly unreasonable and disrespectful for Conti to seek the attention of every active judge--all 26 of whom are listed on the appeals court's website--for a second time.

The tireless, tiresome tire maker is still in a state of denial and filed a motion yesterday with the United States Court of Appeals for the Fifth Circuit for a 30-day extension of time to file its second petition for rehearing en banc (full-court review) of the dismissal of Continental v. Avanci et al.. A week earlier, a three-judge panel had reached the same conclusion as in February--that Conti's case shouldn't go forward--just on a narrower and non-precedential basis.

A litigant's right to exhaust all appeals is a cornerstone of the rule of law. But that does not always make it reasonable to appeal. I remember a case in which Samsung appealed an order to the Federal Circuit--it was about Apple collecting hundreds of millions in patent infringement damages--and Judge Koh (now on the Ninth Circuit) called the appeal "frivolous." She was outraged.

I'm not outraged by Continental's latest procedural move because I'm merely watching its "antitrust case" against the Avanci patent pool firm and some of its licensors (Nokia, Sharp, Optis). I'm just convinced that this is a Dead Lawsuit Walking. Even if Conti could establish standing (in the absence of injury), bring actionable Sherman Act claims, and proceed with discovery, these are still the facts:

• No Avanci licensor has sued Conti over cellular standard-essential patents (SEPs).

• Avanci itself can't sue anyone over SEPs because the patents belong to its licensors.

• Avanci's licensors remain free to sign bilateral license deals with automakers or their suppliers, as several of them are known to have (and only a minority of patent license deals are ever announced).

What could Conti realistically show in a hypothetical trial a few years down the road? A fishing expedition won't help because there simply are Avanci licensors who have consistently declined to license component makers, and who did so long before Avanci was even an idea. Any patent pool or joint licensing program can only offer to the market what the actual patent holders can agree on. It's a consensus-building process, and with respect to the licensing level in the supply chain, the outcome is then the lowest common denominator.

The evidence would show that car makers in the U.S. and in large parts of Europe have come to accept that they must take licenses at the end-product level. Component-level licensing isn't dead--Huawei (which is not an Avanci licensor at this stage) just granted such a license to IoT chipmaker Nordic Semiconductor--but no one can deprive patent holders of their right to demand that a license be taken by the maker of the end product.

Conti now intends to file yet another petition for rehearing en banc, even though no one--including its various amici pursuing the devaluation, and seeking to complicate the enforcement, of SEPs--can argue anymore that an important issue is at stake. The panel took control over the case again by treating Conti's previous petition for rehearing en banc as a petition for rehearing by the same panel,a and without a hearing per se issued a new version of the decision, which is designated unpublished and non-precedential. Also, the decision was made on the most case-specific basis possible: no Sherman Act claims. I think the panel should simply have affirmed the district court's decision all the way (by additionally holding that Conti lacked antitrust standing), and the panel didn't overrule the district court either. At any rate, last week's decision was as narrow as it could be, and as non-influential as possible (because it's now an unpublished and non-precedential opinion, i.e., it was just meant to put that case to rest).

Not only is Conti's forthcoming petition unreasonable under those circumstances but so is the request for a 30-day extension (this post continues below the document):

https://www.documentcloud.org/documents/22074061-22-06-28-conti-m4eot-next-petition4rehearing

As the petition acknowledges, Avanci, Nokia et al. "do not oppose a 14-day extension, [but] they do oppose a 30-day extension." They won't file an opposition brief because--I assume--they feel this case is enough of a waste of time for the Fifth Circuit already. Last time, Conti got that extension already, and that was OK. But now the situation is different: the panel opinion 2.0 doesn't address the substance of the case at all. It merely affirms the district court--unanimously--with respect to the dismissal of Conti's Sherman Act Section 1 and 2 claims. So there's nothing new for Conti to digest. The district court judgment came down almost two years ago--and they've had to appeal that part of the decision all along. It doesn't make sense.

The fact that the defendants oppose the extension Conti is seeking speaks volumes. In the vast majority of cases, it's actually the plaintiffs who want their complaint to be adjudicated as swiftly as possible. Here, the defendants apparently consider the case a meritless distraction (can't blame them, really) and want this annoyance to end sooner rather than later.