FOSS Patents

A certain June 11, 2021 press release by industry body ip2innovate didn't age well:

"'German patent law has finally arrived in the 21st century. We welcome the fact that the Bundestag has passed a balanced reform' said Ludwig von Reiche, chair of the German group within European trade group, IP2Innovate.

"The reforms adopted during an overnight session of the Bundestag this morning will for the first time enable courts to apply the principle of proportionality in cases where injunctive relief would represent a disproportionate hardship to the alleged infringer or third parties as well as to substitute compensatory payments for injunctive relief, instead of courts automatically handing out injunctions.

"'After consulting widely with science, industry and the judiciary, a change in the law is now being implemented that for the first time takes into account the complexity of modern products in the digital age,' says Mr von Reiche."

Mr. von Reiche and his allies may have to await another century before actual change kicks in. The supposedly game-changing injunction statute has been in force and effect for more than two years without having made an impact in a single defendant's favor.

The press release I just quoted from was issued right after the German parliament's vote. Subsequently, the Federal Council (which has co-legislative powers but would have needed a supermajority to influence the outcome of this process) decided not to object; the Federal President signed the bill into law; and on August 17, 2021 the modified patent statute was published in the Federal Law Gazette (click on an image to enlarge):

I have consistently explained why the statutory language was not going to make a difference. It turns out that I was right and some others were wrong. They were too optimistic and they way overestimated their abilities.

Out of an abundance of caution, I asked many people about a week ago whether anyone was aware of a single German patent case in which the new Art. 139 language made a difference. Silence.

Incredibly, that June 2021 press release by ip2innovate even argued that other EU member states should follow suit:

"Unfortunately, like Germany so far, many other EU countries also fail to respect the proportionality principle.

"IP2Innovate and its members will keep a close eye on the implementation of the reforms and will continue to push for a modern and balanced patent system across Europe which respects the proportionality requirement."

If IP Europe has indeed "[kept] a close eye on the implementation" of that statute, then no one can come up with any excuses anymore. Not after two years. To people who know how things work, including Germany's best patent litigators, it was already clear two years ago. And not long after the new law entered into force, judges explained at different conferences that nothing was going to change in the end.

By now, all eyes are obviously on the Unified Patent Court. But patent holders still have access to German national courts as the UPC continues to be optional on a patent-by-patent basis.

While the lobbying failure of the anti-injunction movement is beyond reasonable doubt, a different aspect of the reform bill actually has moved the needle in defendants' favor, and it appears to me that patent holders seeking to enforce their rights in Germany have yet to adjust to that new reality. The Federal Patent Court is not absolutely required to hand down its non-binding preliminary opinions within six months of the filing of a nullity suit, and it could meet that target simply by outlining the issues in the case without giving a thumbs up or thumbs down. But what happens now in most cases is that a negative preliminary opinion is provided, which massively complicates enforcement.

German patent injunctions are every bit as near-automatic as they always used to be, and those who thought otherwise should be ashamed of their incompetence--but their second priority was to close the injunction gap (i.e., enforcement of an injunction prior to an actual validity determination), and the situation has indeed changed in that regard.

The validity-related statutory change took effect in May 2022, and after more than a year, it's clear that plaintiffs trying to get leverage in Germany must act more forcefully or they're not going to get their way.

Conventional wisdom would say that a license deal is preferable over litigation; that short-lived disputes are preferable over protracted ones; and that it's better to prevail on only a small selection of patents than to come across as very aggressive by asserting, say, 10 or more patents at the same time.

That conventional wisdom no longer applies in a situation in which the Federal Patent Court declares patent after patent invalid on a preliminary basis. In the past, suing over 3 or 4 patents was normally enough. For instance, when Microsoft and Motorola were suing each other in Germany over a decade ago, they started with just a few patents each. Same with Apple-Motorola. Samsung initially sued Apple over three standard-essential patents (and lost all three cases).

There are two things that plaintiffs must do differently or their German enforcement campaign are going to fail for lack of critical mass:

1. Assert more patents. If you have a reasonably large portfolio, I don't think it makes sense to assert fewer than 7 or 8, and I would recommend 10-12 patents-in-suit at the start. You just have to factor in that the Federal Patent Court will render negative opinions on the vast majority of them. If you only sue over a few patents, there's a high risk of none of those cases giving you near-term leverage. Legal fees for a quick and successful campaign over 10 patents will be less than for a protracted one over a smaller number. And in the latter case you'll get license fees while in the former your effort may just be a waste.

2. Harden your portfolio. Engage in patent Darwinism. Nokia has lost quite a number of patents in recent years, but they've also managed to identify a few killer patents that they can assert against defendant after defendant after defendant until they expire. It can be frustrating to have to litigate against a party over the course of more than two years (such as Nokia v. Daimler, and now also Nokia v. OPPO). But if you assert many patents, even some of those patents that the Federal Patent Court prematurely deems potentially invalid may survive, even if in a modified form. You then have some proven winners in your portfolio that you can leverage again and again--and that will, in fact, help you get more license deals because potential defendants will know what's going to happen if patent A is asserted in Munich or patent B in Mannheim.

Fortune favors the brave. And the bold.

This is a follow-up to my recent commentary on IP Europe's call for a do-over of the proposed EU standard-essential patent (SEP) regulation. There really is an evidentiary issue because a proposal with potentially far-reaching consequences (throughout and beyond the European Union) can only be justified by and with reasonably hard evidence. There's always going to be someone who disputes that the evidence is strong enough--that's politics. But in this case I think there can be no reasonable doubt about a failure of proof.

While the proposal talks a lot about transparency, it is ultimately about the circumstances and parameters that will--or will not--result in patent injunctions if a SEP holder and an implementer cannot agree. In the vast majority of cases, litigation isn't necessary, and that fact is often overlooked. In the minority of cases where SEPs are actually enforced in court, the central question is almost always just whether an injunction will issue after an infringement of a valid SEP has been identified.

Put differently, no one would care about an asymmetry of information or anything else like that if there were no injunctions. But "no injunctions" is not the answer. It definitely wasn't the answer the European Court of Justice gave in 2015 when it decided the preliminary reference in Huawei v. ZTE. The answer was--in other words--that neither hold-up nor hold-out are acceptable. EU competition rules protect against hold-up, but their purpose is not to incentitive hold-out either.

From an innovation policy point of view, both types of conduct are harmful. Hold-up will result in a misallocation of resources by allowing SEP holders to overleverage their intellectual property rights. That means money will be siphoned off of those who implement standards to make products. Hold-out, however, has the effect of sometimes highly profitable implementers eating the seed corn of those whose innovations involve contributions to standards. That, too, is a misallocation of resources.

The European Commission's Directorate-General for the Internal Market (DG GROW) acted as if there was an urgent need to act. But there isn't. As always, there are some interested parties who want someone to put a thumb on the scales in their favor, and they don't want to wait. But where's the clear and present danger? It's not like small and medium-sized companies are being sued into oblivion by ruthless SEP holders. DG GROW's official impact assessment only quotes from some submissions by unidentified companies telling stories of all sorts, some of which are not at all plausible. Unverified and unverifiable anecdotes shouldn't count as evidence, especially when there are known astroturfing operations that orchestrate questionable submissions and interviews.

I've criticized conflicts of interest on the part of a couple of the "researchers" contracted by DG GROW in this context, and I've voiced disagreement (and will voice even more disagreement) with their findings going forward. But I do want to give them credit for this perfectly honest paragraph that comes down to saying there is no evidence there for either hold-up or hold-out:

"Existing empirical evidence on the causal effects of current SEP licensing conditions is largely inconclusive. Empirically observable outcomes do not indicate the existence of pervasive 'opt-out' from standards-related innovation as a consequence of SEP licensing conditions; i.e. it does not appear that the observed challenges in SEP licensing are sufficiently severe as to systematically discourage potential contributors from participating in standards development, or discourage potential implementers from creating products that use technology standards subject to potential SEPs."

So if we ask ourselves what DG GROW should really do to enable the EU Council and the Parliament to legislate on the basis of a particular proposal, the number one priority must be an analysis of the hold-out vs. hold-up question. The answer is not that DG GROW simply--and conveniently--ignores what its own researchers say: they don't have that kind of evidence in the record. At least not yet.

The issues are not only evidentiary, but also structural. I mentioned before that I was on a SEP panel at a Concurrences-King's College London conference last week. None of us five panelists thought that the EU proposal was flawless and workable in its current form. One of them, a UK patent litigator, had a different focus. All others raised issues that are problems regardless of whether one philosophically wants the EU to go in that direction or not. In fact, the two academics on our panel cannot be blamed for being unreceptive to implementers' concerns.

It would probably be unprecedented, but it would be an honorable and reasonable decision to go back to the drawing board. The question of hold-up vs. hold-out should be analyzed. Researchers commissioned by the EC could be provided with real-world evidence by industry (SEP holders as well as implementers). And to the extent that a few SMEs claim there are issues, their stories should be independently evaluated by law scholars and economists as opposed to taking at face value what may simply have been submitted by some at the behest of astroturfers.

Some argue that there is evidence for hold-up, but none for hold-out. Some suggest the opposite. My perspective is actually a centrist one. I would encourage the Commission and the researchers it relies on to look into both issues. Where companies took licenses under the threat of an injunction, the question is whether the terms were supra-FRAND or simply market rates. At the same time, cases in which companies refused for many years (in one extreme case that is publicly known even for well over a decade) to take licenses, also need to be analyzed. The first step is to understand the two kinds of problems; the second one is to understand whether one of those problems--and if so, which one--is so prevalent that intervention is warranted.

If there was a pressing problem, the paragraph that I quoted from the impact assessment study would not have been written that way.

The patent dispute between Nokia and OPPO (as well as the latter's OnePlus affiliate) continues to escalate, with no settlement in sight. Today a spokeswoman for the Mannheim Regional Court confirmed to me that on May 26, the court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) granted Nokia injunctive relief against a dozen German resellers of OPPO and OnePlus devices.

The patent-in-suit is EP1704731 on a "method and apparatus for indicating service set identifiers to probe for" and the same court had already granted Nokia an injunction against OPPO over that patent about a year ago. It's not a standard-essential patent (SEP), though the wider patent spat is largely a 5G SEP dispute.

After two Mannheim injunctions (the aforementioned one, and one over a cellular SEP), OPPO (and OnePlus) left the German market last year. Meanwhile, another Chinese smartphone maker, Vivo, has also left the German market as a result of Nokia's patent enforcement.

The Mannheim court provided the list of parallel cases in which the May 26, 2023 decisions came down:

• case no. 2 O 127/22: Nokia ./. Brodos AG

• case no. 2 O 128/22: Nokia ./. Cyberport GmbH

• case no. 2 O 129/22: Nokia ./. Drillisch Online GmbH

• case no. 2 O 130/22: Nokia ./. Grand King Ltd

• case no. 2 O 131/22: Nokia ./. Komsa AG

• case no. 2 O 132/22: Nokia ./. MMS E-Commerce GmbH

  (MMS is the parent company of the Media Markt and Saturn consumer electronics stores)

• case no. 2 O 133/22: Nokia ./. 1&1 Telecommuniction SE

• case no. 2 O 134/22: Nokia ./. Logitel GmbH

• case no. 2 O 135/22: Nokia ./. Otto GmbH & Co. KG

• case no. 2 O 139/22: Nokia ./. expert e-commerce GmbH

• case no. 2 O 140/22: Nokia ./. freenet DLS GmbH

• case no. 2 O 147/22: Nokia ./. OTECH Germany GmbH.

Those resellers kept selling OPPO and OnePlus products after last year's Mannheim injunctions. Formally, they were not enjoined last year as they weren't named as defendants to the original infringement action, but now they are to the extent they offer OPPO and OnePlus products implementing the patent-in-suit.

Legally, Nokia is obviously within its rights to do that. But there are different schools of thought. Some patent holders refrain from enforcement action against resellers. It's a company-by-company and case-by-case question. While today's Nokia-branded phones are made by a company of which Nokia is only a minority shareholder, I'm wondering whether HMD's relationships with those resellers will be adversely impacted by this enforcement action.

Nokia argues that OPPO should take a license (" or enter into binding arbitration to find a fair outcome that works for both parties") and recalls that the dispute has been ongoing for almost two years. OPPO, however, has consistently taken the position that Nokia's royalty demands are supra-FRAND. OPPO is also countersuing Nokia in Germany.

I doubt that this enforcement against German resellers will change OPPO's position.

In the context of the proposed EU SEP Regulation, the fact that Nokia is using a non-SEP to bar those resellers from selling OPPO and OnePlus devices validates something I wrote in April: I discussed various reasons for which even implementers won't necessarily benefit from that envisioned regulation as non-SEPs might end up getting more weight, and I mentioned that in disputes of this kind, net licensors typically assert a mix of SEPs and non-SEPs.

Six weeks ago, I reported on an official announcement made by Chinese smartphone maker Vivo concerning a patent ruling in Nokia's favor. Vivo said they had started preparations to suspend their sales and marketing activities in Germany in the event Nokia would enforce a standard-essential patent (SEP) injunction granted by the Manheim Regional Court.

Vivo's German website now indicates that they have indeed left the market (click on the image to enlarge):

The announcement reads as follows:

"At this point, vivo products are unfortunately unavailable in Germany.

"Accordingly, no product information is availableon our German website.

"Should you be using a vivo product, you can continue to rely on our customer service.

"You will also continue to receive software updates."

This is an unhelpful development. I doubt that Vivo will take a global license on Nokia's preferred terms only because of this enforcement activity: Vivo generates only a tiny portion of its worldwide sales in Germany. OPPO already left the German market last summer, also because of Nokia enforcing a Mannheim injunction and with a view to its competitiveness in price-sensitive markets in other world regions. Now that the legislative institutions of the European Union are about to begin their work on the proposed EU SEP Regulation (which has several major and numerous smaller shortcomings), some parties with a vested interest in the devaluation of SEPs will predictably seek to leverage the removal of multiple smartphone brands (OPPO, One Plus, vivo etc.) from the German market as they claim that the current SEP enforcement framework in Europe--particularly in Germany--warrants legislative intervention.

The proposed EU SEP Regulation would not help, at least not in its current form. It's an attempt to set global royalty rates through an EUIPO-led process, but a company like Vivo generates the bulk of its sales outside of Europe. China is in a better position to make FRAND determinations in those cases.

The European Commission yesterday announced--with only a one-day delay--its formal proposal (PDF) for a regulation on standard-essential patents. It's not a question of whether the glass is half-full or half-empty: while they fixed some of the issues that were highlighted in recent weeks (not only minor but also structural ones), other problems persist.

The most fundamental problem is that what the EC's internal market commissioner Thierry Breton presented yesterday is not really considered useful by anyone anymore:

• IP Europe, whose members are major net licensors, "[r]egrets the European Commission’s decision to propose a harmful and unbalanced [r]egulation."

• Its counterpart in Brussels, the Fair Standards Alliance (FSA), "regret[s] however that the proposal fails to live up to the objectives that earlier drafts sought to aspire to." The FSA represents the views of major net licensees like Apple and some automotive industry players. Apple additionally has ACT, which Bloomberg exposed as an Apple astroturfing operation. That Apple front "is deeply concerned with recent changes made by the Commission in its proposed regulation" and "troubled by" the removal of a passage that suggested a "license to all" policy.

Regrets, regrets, concerned, troubled. Everyone regrets or expresses concerns. No one is happy. According to commissioner Thierry Breton's logic, that would essentially make both camps "bad-faith actors"...

This reminds me of the doomed Directive on the Patentability of Computer-Implemented Inventions, which was jettisoned by the European Parliament in 2005 in a near-unanimous vote because neither camp wanted it anymore (an important difference being that in that case, the original Commission proposal was viewed very favorably by one camp).

Put another way, the current proposal amounts to a lot of bureaucracy and some uncertainty--but ultimately for nothing, even if one wanted to devalue SEPs and complicate their enforcement. It's useless, and I'm skeptical that the co-legislation process involving the EU Council and the European Parliament has the potential to change that. Whether through hundreds of amendments or a "trilogue" (backroom negotiations between EC, Council and EP), this approach is very likely to produce something unlawful or unworkable (or even both at the same time). They're just structurally on the wrong track, and they obviously weren't able to do a complete overhaul over the past month.

That said, I'm happy to see that some of the criticism has been validated by recent changes. I identified many issues myself and also pointed to other writings. For my previous commentary, see the most recent post, the one before, and the link list at the end of that one.

The way I read the current proposal, the de facto antisuit mechanism has been softened. Previously, a SEP holder starting a parallel proceeding in a non-EU jurisdiction (which they now refer to as a "third country") would have been deprived of the right to enforce in the EU because an implementer could have obtained a notice of termination of the FRAND determination proceeding based on the SEP holder's "failure to engage", but the SEP holder would not have received one. Now, both parties get a notice of termination in that scenario, and the SEP holder can then go ahead and enforce.

What they say now is that the EUIPO-led FRAND determination should set global rates unless the parties agree otherwise. While global portfolio licenses are indeed a commercial reality, DG GROW's insensitivity to the concept of international comity is still evidenced by the failure to consider scenarios in which parties may want to obtain valuations in other jurisdictions for the patents they hold or use there (for instance, China). Commissioner Breton is just doing too many things at the same time, which must be the reason why he gave an answer at yesterday's press conference that makes no sense: responding to the question of whether the EU would like other jurisdictions to create similar SEP licensing regimes, he declared himself in favor of others doing so, but the EU's approach--even without the radical antisuit mechanism they dropped--is simply designed to be incompatible with similar rules in other jurisdictions.

Instead of adopting Qualcomm's proposal of a Reciprocal FRAND Agreement, the proposed regulation does not require the parties to commit to be bound by a FRAND determination. The way it works is this:

• Whoever triggers the FRAND determination process (SEP holder or implementer) doesn't have to state initially whether the determination shall be binding.

• When responding, the other party will have to tell whether it wants the determination to be binding.

• But it won't be binding unless the party that started the process also says it accepts to be bound.

It's not even clear how binding a commitment "to comply with the outcome" is. The proposal doesn't clearly say that the parties have to enter into a license agreement on that basis. It envisions that the courts hearing SEP infringement cases between the parties will be informed of those commitments, but after a license agreement there would be no more basis for infringement action.

The term "enforcement", which I criticized as unclear, no longer appears in all contexts. At least Art. 34(1)(a) now says a SEP holder needs a FRAND determination "prior to any inititation of a SEP infringement claim" (emphasis added). That is clearer, though I'm still wondering whether SEP holders can save time by bringing declaratory judgment actions.

DG GROW tried--but in my view failed--to preserve the right to enforce SEPs during a FRAND determination. What the proposal now allows is to seek a "provisional injunction of a financial nature", which is not a sales ban but would merely require an implementer to make a deposit or post a bond to cover license fees. That's not going to discourage hold-out in the slightest. The way the proposal phrases it is also counterintuitive because they literally say that such an injunction should be sought in the courts of a Member States, but even when I asked around on LinkedIn, I got no indication that there is any jurisdiction in the EU (and possibly not beyond, other than interim payments ordered by Indian courts) that allows this. The way the proposal defines Member States courts, however, includes the Unified Patent Court (UPC). Is that a sufficient solution? No, it falls far short, not only because an obligation to make a deposit won't get any unwilling licensee to the negotiating table but also for the following reasons:

• Many patents have been, and will be, opted out of the UPC.

• Not even all EU Member States are UPC Contracting States.

• The UPC doesn't have jurisdiction over national patents.

In the original draft, the definition of "patent" included utility models. That is no longer the case and represents a loophole for right holders. It's actually pretty cheap, quick, and easy to get utility models in Germany. What limits their usefulness that they don't enjoy a presumption of validity, but if they mirror a patent that has been examined by a patent office, that shouldn't be a problem.

The Commission's edits were obviously done under time constraints. The proposal even has typos. It would have been so much better to engage in consultation, given that the people who drafted it clearly don't understand litigation and commercial realities. For instance, that whole idea of achieving through an awareness-raising effort by the EU's trademark office that car makers will let suppliers pass license fees down in the supply chain is nonsensical. In the end, there are market force in play, and the regulation won't move the needle. I'm not blaming public servants for not understanding how things work in the economy, but then they have to solicit feedback based on specific proposals. They refer to extensive consultations, but those were not about the type of proposal that is now on the table and at risk of going nowhere.

Now it's too late for proper consultation. The thing has been put out and now the legislative process must take place, though it could just result in a rejection of the proposal as I mentioned further above.

The SEP Register part of the proposal is still bad for patent pools and has been rightly criticized by the European Telecommunications Standards Institute (ETSI). I can't see any serious improvement there. The only significant change concerning the register is that SEP holders are now in a better position to get a peer review if they disagree with the initial essentiality check. But appeals to the courts of law are still not even an afterthought.

I'm going to take a closer look at the proposal, the impact assesment, and the studies the Commission is referring to. The proposal notes that "[t]he impact assessment relied primarily ... on two external studies." One of them was produced by Charles River Associates, which engages in SEP policy work for Apple and may additionally hope to be hired by parties (especially implementers) with a view to the FRAND conciliation proceedings. The other is co-authored by the founder of IPlytics, who has a vested interest in certain approaches to SEP licensing and litigation that generate more business for that company than others. I'll be sure to write many more posts throughout the legislative process.

This is going to be waste of time, energy, and resources. The chances of that proposal culminating in a useful piece of legislation are very slim.

Nothing is more inconducive to the reputation of the patent system--and here, specifically, Germany's standard-essential patent (SEP) enforcement regime--than a reduction of consumer choice. At a time when the European Commission is finalizing a legislative proposal on SEP/FRAND litigation that raises numerous (and partly structural) issues, I consider it rather unhelpful that another Chinese smartphone maker is preparing its exit from the German market in response to SEP injunctions. But I am committed to keeping you all informed of what's going on regardless of whether one camp or the other may try to gain political mileage out of the facts.

In August 2022, OPPO and its OnePlus affiliate left the German market in response to some German patent injunctions (primarily a Mannheim SEP injunction) that Nokia had obtained. OPPO still hasn't returned, apart from some smaller resellers importing tiny quantities of OPPO devices from neighboring countries. OPPO's exit from Germany drew significant media attention after Wirtschaftswoche ("business week") reported on that development.

History is about to repeat itself. Two weeks ago I reported on a Mannheim injunction that Nokia obtained over two patents from the same family (EP'103 and EP'562) against another high-volume smartphone maker from China, Vivo (which spells its own name in lower case: "vivo"). Juve Patent subsequently reported on that injunction as well as another one over a patent from a different family (EP'626). IAM also reported (paywalled).

When OPPO stopped selling devices in Germany, it had a visible presence in that market, but relative to its sales in other world regions, Europe's share was small. That applies to an even greater extent to Vivo, which is why I was wondering whether the next "DExit" (DE is the top-level domain for Germany) was going to happen. Sadly, the answer appears to be yes.

I've only just now become aware of a German-language statement that Vivo published on its website. Let me provide my own unofficial translation (in which I'll spell "vivo" the official way):

vivo on the ruling by the Mannheim Regional Court

Dusseldorf, April 11, 2023

vivo fully respects intellectual property and is committed to continual innovation through extensive research and development. In the last few years, vivo has entered into cross-licensing agreements with numerous leading companies. We have been negotiating a renewal of our cross-license with Nokia, but have thus far been unable to reach an agreement. We are firmly convinced that Nokia has yet to discharge its obligation to offer a license on "FRAND" (fair, reasonable, and non-discriminatory) terms.

We are disappointed to take note of the decision by the Mannheim Regional Court and have started preparations to suspend, if need be, the sales and marketing of the accused products through vivo Germany's official channels. We are preparing an appeal of the decision and will evaluate our other options. In the meantime we will continue the negotiations with Nokia in order to conclude the matter on the basis of "FRAND" terms.

Our plans for a long-term commitment to the German market remain unchanged. vivo will remain present in Germany, and our customers can rely on our support. Our business outside of Germany will not be impacted.

Nokia sent a statement to the media:

The Regional Court in Mannheim, Germany has ruled that Vivo is using Nokia’s patented technologies in its smartphones and is selling them illegally without a license. The Court also found that Nokia has acted fairly. We welcome the judgments which confirm, once again, the strength of Nokia’s patent portfolio, and call upon Vivo to accept its obligations and agree a license on fair terms.

So we are witnessing two companies accusing each other of not being willing to sign a license agreement on FRAND terms, which is precisely the situation Nokia is also facing with OPPO. The numbers are not known. Just like OPPO and Vivo typically work out license agreements without a need for litigation, Nokia will claim the same. For instance, earlier this year Nokia renewed a license agreement with Samsung.

However, the plot is thickening that the royalties Nokia is seeking from OPPO and vivo may be at a level with what is acceptable to companies whose devices sell, on average, at significantly higher prices in affluent (therefore, less price-sensitive) markets. For OPPO and vivo, it makes no sense to sacrifice their competitiveness in the lower-end segment and in certain world regions (Asia, Africa, Latin America) only to be "allowed" to develop their German business.

Put differently, I cannot imagine that both OPPO and Vivo would leave the German market just because they're unwilling licensees who don't want to pay reasonable royalties to patent holders. They've worked out deals with licensors who are known to understand the specific needs of such companies who must be cost-sensitive due to the competitive environment and limited disposable income of customers in their largest markets.

No one had done what OPPO was first to do: to exit the German market in response to the enforcement of SEP injunctions. It's been almost 22 months since Nokia's infringement litigation against OPPO started, and Germany is the only market in which Nokia has gained leverage. Now Vivo is leaving Germany as well.

Litigation is neither Nokia's problem nor will it be the solution. Let there be no doubt that Nokia's in-house and outside counsel are second to none. It's also a fact that Nokia has managed to identify some winning patents that it can enforce against multiple defendants in a row. For instance, EP'103 was used against Daimler, OPPO, and Vivo, and the Mannheim court ruled in Nokia's favor in each case.

But what for?

The three most basic questions to ask when a business considers a strategic choice are: "Is it real? Can we win it? Is it worth it?"

OPPO and Vivo are real. Nokia can win, and indeed has repeatedly won, injunctions in Germany. But is this the answer? Or shouldn't Nokia recognize that a company like Samsung is in a position to pay a far higher royalty per device than an OPPO or a Vivo?

On Thursday, CNBC reported that "Nokia shares sank 8% [...] as investors responded to its earnings report." The stock price didn't bounce back on Friday. Analysts had expected a quarterly profit of 523.4 million euros (according to a Refinitiv poll), down from the 583 million euros Nokia reported for the same period last year--but the result of 479 million euros fell short even of the analysts' expectations.

Nokia's net sales had actually grown by 10% to 5.86 billion euros, beating analyst estimates (5.72 billion). But profits took a hit "“due to regional mix and a lower contribution from Nokia Technologies partly related to a license option exercised in Q4 2022." Nokia Technologies' revenue source is licensing. If Nokia had accepted OPPO's and Vivo's counteroffers, it presumably would have beaten--not missed--the earnings estimates. And on top it would have avoided potential bad news that the world's richest smartphone maker, Apple, and its allies and astroturfers will leverage in their EU lobbying activities at this critical juncture.

I understand that Nokia doesn't want to devalue its patents, and far be it from me to suggest that. But the path to license agreements with OPPO and Vivo is not litigation, much less litigation in Germany, a market in which they'd definitely like to operate but can't afford to if it puts them at a disadvantage vis-à-vis low-cost competitors in other world regions.

Nokia's most important license agreement--the one with Apple--was last renewed in 2017 (at a time when Apple preferred to focus on the Qualcomm dispute), and the previous had expired at the end of 2016. If it was a seven-year agreement like Apple's recent license agreements with others, it would be up for renewal by the end of this year. A longer term than seven years would be almost unprecedented in this industry (though Apple once signed a ten-year agreement with HTC, but Apple was the net licensor in that case). Apple is known to argue that it should not a pay a cent more than even the makers of the cheapest phones. It has a "most favored nation" mentality. I understand Nokia's dilemma, but I can't see a winning strategy here against OPPO and Vivo. There is no way that those companies would pay Samsung-like royalties. The solution is to work out a deal with them that reflects those licensees' market realities, and to nevertheless expect someone like Apple to pay a lot more, for good reason.

In the meantime, FRAND determination proceedings brought by OPPO and Vivo are going forward in China, a market that Nokia cannot afford to just leave the way OPPO and Vivo can exit Germany. Also, OPPO and Vivo are countersuing Nokia, particularly in "injunction-happy" Germany. Case in point, the Munich I Regional Court wil hold an OPPO v. Nokia trial on Thursday (April 27) and held one a few days ago (April 20). Nokia may be able to fend off various such countersuits, but once OPPO or Vivo has an injunction and enforces it, the terms of an agreement may be less favorable to Nokia than if they worked out a negotiated solution now.

Just like patent licensing firm IPCom (which had acquired patents from Bosch, a company that used to make mobile devices until about 20 years ago) wasn't able to defeat Nokia despite years and years of litigation, Nokia may never be able to get OPPO and Vivo to accept the terms it has in mind. Some nuts are too tough to crack.

One would normally assume that when the executive branch of the government of the world's third-largest economy endeavors to regulate the enforcement of standard-essential patents (SEPs), it would--at minimum--come up with a proper definition of those key terms. Not so. The dumpster fire that is the draft EU SEP regulation (see the previous post for a list of links to earlier commentary and analysis) doesn't even get the basics right, starting with fundamental terminology. And it was apparently authored without taking antitrust law into consideration.

I don't know about you, but I find it hard to trust the people who came up with such a highly deficient draft that they fully understand the practical implications of what they are doing. As a litigation watcher I can tell that they clearly never analyzed an infringement case in detail. They may never have read and understood a single SEP claim. And it remains to be seen whether the quality of the input they received from "researchers" is as low as one must fear--though I hope it's not that bad--based on the draft impact assessment.

So, let's continue with the "bug hunt" (identifying mistakes).

1. Definition of SEP (Art. 2 (1) and (2))

2. A patent can be essential to a standard even if its holder never participated in standardization and, therefore, never made an essentiality declaration

3. Ambiguity of "enforcement"

4. Unclear distinction between "FRAND determination" and "assessment"

5. Potential conflict with cartel laws (EU and beyond)

(1)

‘standard essential patent’ or ‘SEP’ means any patent in force in one or more EU Member States that is found to be essential to a standard;

(2)

‘essential to a standard’ means that the patent contains at least one claim for which it is not possible on technical grounds to make or use an implementation or method which comply with a standard, including options therein, without infringing the patent under the current state of the art and normal technical practice;

Whoever wrote that definition got confused by the fact that colloquially people always talk about "essential patents", while in reality essentiality is a claim-by-claim question. I doubt that 100% of the claims of any of the SEPs-in-suit in the countless infringement cases I've watched over the years are essential, simply because dependent claims narrow the scope and I've never seen a SEP holder assert the narrowest claim of a SEP in litigation.

I'm not being nitpicky; the issue is real. For the envisioned regulation, it has implications including (but not limited to) the following:

• Art. 26 (1)(c) requires the removal of a "claimed SEP" from the register in the event of a "judgment that the patent is not essential to the standard for which a registration is made". Apart from the fact that they don't take into consideration that courts in different countries in which a European patent is in force may arrive at different essentiality determinations, and that such decisions may be appealed, there's another fundamental problem:

  It's hardly ever going to happen. Why? Because in infringement litigation, parties practically never assert all claims of a given patent. Now, if there are dependent claims that further narrow the scope of an independent claim, and the independent claim is held non-essential, then you can cut off a whole branch from the tree. But SEPs--and I've analyzed many of them--typically have different claim groups, such as a set of system claims, a set of method claims, a set of device (apparatus) claims, a set of software claims. I've often seen what could be visualized as a two-dimensional matrix if you have the different types of claims outlined before but separate groups within each category that read on the end-user device, on the network infrastructure (base stations), and on an entire system consisting of infrastructure and end-user devices (such claims exist though it's hard to imagine a single infringer).

  So, what does happen in practice is that a SEP owner asserts one or more select claims from a patent-in-suit, and maybe a court of law will deem those non-essential. But that doesn't mean you get a decision on the patent as a whole. You hardly ever will.

  Even invalidation (Art. 26 (1)(b)) is a claim-by-claim question.

• It makes no sense to have those "FRAND conciliators" perform valuations of non-essential claims, much less with a top-down approach.

• With a view to the EU's own fundamental rights and international law, the EU can't impose restrictions and additional costs with respect to non-essential patent claims. Imagine a patent that has three essential and nine non-essential claims: what if the patent owner wants to enforce any of the 75% of non-essential claims? The draft regulation would apply regardless of the non-essentiality of a claim-in-suit, which would be unconstitutional, infringes international law, and violates treaties.

The draft SEP regulation imposes a registration obligation on SEP owners that is debatable in any event, but undoubtedly unreasonable if a patent holder (even if we assume that--as the draft regulation envisages--prior owners' obligations are transferrred) never participated in the relevant standards development process.

Someone can make an invention, obtain a patent, and it may turn out later that it reads on, say, 5G. That company never participated in standardization, never made a FRAND pledge, never declared the patent essential. But under the language of the draft regulation, it would have to register that patent just like those who actually do participate in the relevant standard-setting process.

What happens all the time in certain fields of technology--video codecs being a great example--is that different groups work on different standards, but some techniques will be used in more than one standard.

Why should a company have any obligations due to the decision of a group (consisting exclusively of third parties) to include in a standard a technique on which that company happens to hold a patent?

The draft regulation fails to define the term "enforcement" (or the verb "to enforce", for that matter).

If you were (or--like some of my readers--actually are) a judge and a SEP owner filed an infringement complaint in your court, what should you do if the requirements imposed by the envisaged SEP regulation (particularly the FRAND determination) have not been fulfilled? Dismiss the complaint? Stay the proceedings? Or go forward anyway because it will take some time before any enforcement in the sense of the enforcement of a final judgment will occur?

If interpreted broadly, the EU would disallow that a patent holder files an infringement action of any kind. Even if one wanted to understand it as broadly as possible while remaining reasonable, what about a declaratory judgment action? You could file a complaint and seek a determination that your patent is valid and infringed (i.e., essential), and possibly even ask the court to furthermore hold that the implementer is an unwilling licensee.

The narrowest interpretation would mean what litigants refer to as "enforcement" when they seek so-called "anti-enforcement" (as opposed to "antisuit") injunctions: they argue that litigation can go forward, but an injunction cannot be enforced. Some might argue that you shouldn't collect a damages award either, but the recitals of the draft regulation actually suggest there's nothing wrong with damages claims.

Think of another scenario that is not unheard of (though it occurs less frequently in Europe than in the U.S.): what if the implementer sought a declaratory judgment that your patent is invalid and/or not infringed? The regulation doesn't mention the term declaratory judgment even once. That's because the people who drafted that bill don't seem to know how litigation works.

Let me give you an example from last year: OPPO sought a declaratory judgment against Nokia in the Netherlands over two patents (from the same family) that the Mannheim deemed valid and essential. Nokia then counterclaimed. In the U.S., such counterclaims are compulsory, and even in European jurisdictions a patentee may actually weaken its position by not responding to a DJ claim with an infringement counterclaim.

The actual decision makers need to understand that if they actually put anything similar to that draft regulation on the table, it will be inconducive to the reputation of the European Commission and even the EU as a whole.

On his Comparative Patent Remedies blog, Professor Thomas Cotter has shared multiple interesting observations on the draft regulation. I believe I can address his first item ("license to all" vs. "access to all") though: the draft regulation just wants the EUIPO to raise awareness for the licensing level as opposed to taking a firm position. Now, the part I want to focus on in this section is item #5, from which I'll quote now:

"Only the 'methodology and the assessment,' however, and not the FRAND determination itself, would be made public absent consent of the parties, see article 60), though it's not clear to me what the difference is between the 'assessment' and the 'FRAND determination.'"

This is another terminology issue with the draft regulation. Art. 59 (2)(b) says the FRAND determination report will come with "a confidential assessment of the FRAND determination" and then there's a reference to "a methodology and the assessment of the FRAND determination by the panel" in Art. 59 (2)(d).

One possible interpretation would be that the assessment is everything minus the exact terms held to be FRAND. But that would mean that terms of other (comparable) licenses would be disclosed, and they will typically be confidential.

What do they want? What do they mean?

Item 4 of Professor Cotter's post also raises a valid and serious issue:

"The regulation contemplates that 'contributors to a standard for which FRAND commitments have been made' could jointly agree on aggregate royalty burdens relating to that standard; and, in the event these contributors can't reach agreement, could ask the EUIPO for assistance in facilitating such agreements (see recitals 15-18, arts. 17-20). This raises a question of whether such agreements violate antitrust law. Perhaps not, for reasons dating back to the U.S. Antitrust Modernization Commission's analysis from 2007 if not earlier, but I imagine this could be a potentially contentious issue."

The draft regulation mentions the word "antitrust" only once (Art. 15 (5): "shall make such disclosures accessible to antitrust authorities, courts and stakeholders"). "Cartel" doesn't occur at all. "Horizontal [cooperation]" comes up five times, but only with reference to existing rules.

The EU risks requiring parties to commit violations of the bloc's own cartel rules. The Court of Justice of the EU might hold that compliance with the SEP regulation just cannot constitute a violation, but even that isn't certain: it really depends on what terms they set. What if the contibutors to a standard agree on an unreasonably high or low aggregate rate? Where does price fixing begin?

Also, parties to such an agreement may still be liable under other jurisdictions' antitrust laws, where an EU SEP regulation would not have an exculpatory effect.

There will be more issues with the draft regulation than the ones I've already identified in my various blog posts on the subject. Some of those problems are structural, and that's why the Commission should engage in proprer consultation on the basis of specific ideas, and get advice from those who know how SEP licenses are negotiated and how SEPs are enforced in court.

In my next post on the draft SEP regulation I plan to comment on various stakeholder reactions (from net licensors as well as net licensees and their respective groups). It appears that even some key implementers are not really "sold" on the draft in its current form. What I would encourage all net licensees to ask themselves is this: are you sure that (a) those "FRAND conciliators" will set the low royalty rates you're dreaming of (when it's actually better for their own business to arrive at rather high rates) and (b) SEP holders won't figure out ways of gaining leverage over you in other jurisdictions, through non-SEPs, and because the judges hearing infringement cases in some key venues would vitiate that regulation beyond recognition?

Both sides should have an interest in helping the Commission to put together a draft that the EU can be proud of.

A spokeswoman for the Mannheim Regional Court has just confirmed to me that the court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher, who is also going to serve on the Unified Patent Court) entered a patent judgment in favor of Nokia on Thursday (April 6) against Vivo (which prefers to spell its name in small caps: "vivo").

The patent-in-suit is EP2981103 on an "allocation of preamble sequences". The Mannheim court enjoined Daimler over the same 4G standard-essential patent (SEP) in 2020, and OPPO about a year ago.

Primarily because of that injunction (and its subsequent enforcement), OPPO withdrew from the German market and hasn't come back, though some resellers (such as T-Mobile) still had OPPO devices in stock for a limited time. That dispute is still pending after more than 21 months as Nokia has not been able to gain leverage in a key market for OPPO..

OPPO never had a huge market share in Germany, but for what I know, Vivo's is a lot smaller. Vivo is the high-volume Android device maker in China now (the largest local player in that market), and also sells high unit volumes in certain other markets. They're successful in Asia and even beyond, but not really big in Europe. That raises the question of what will happen now: will Vivo do what OPPO has already doneand just exit the German market, or will Vivo settle on Nokia's preferred terms in order to be free to grow its German business?

We should find out soon. Nokia is known to enforce such injunctions relentlessly. And a settlement would obviously be announced.

Just like in the dispute with OPPO, Nokia has yet to win anything in a market that matters more to Vivo than Germany does. For instance, Nokia recently lost in Indonesia. That fact makes it a possibility that Vivo, too, will rather leave Germany than be required to raise its prices on a global basis, including in very price-sensitive markets in which it would adversely affect Vivo's competitiveness.

As someone who frequently comments on competition issues, I would like the idea of a high-volume low-cost smartphone maker like Vivo acting as a key competitive constraint on other vendors. At the same time, I can see why a company that sells the largest part of its unit volume in price-sensitive markets has to keep its costs under control--including its IP licensing costs.

Vivo is countersuing Nokia in Germany, so it's conceivable that at some point Vivo could obtain one or more German patent decisions and have greater leverage over Nokia, which would likely find it much harder to comply with a German injunction.

I'll try to find out about the status of other Nokia v. Vivo and--potentially--Vivo v. Nokia cases.

The ultimate answer to the question I'm discussing here may determine whether the UPC is or is not going to become an important venue for the enforcement of standard-essential patents (SEPs), given that most defendants are Chinese or American implementers (and even Samsung has availed itself of a Chinese antisuit injunction in a dispute with Ericsson).

In recent years, it has become pretty common for SEP owners to seek pre-emptive anti-antisuit (and anti-anti-anti-antisuit) injunctions at or prior to the start of any patent enforcement action. The first AASI in a SEP case was ordered by the Munich I Regional Court in 2019 (Nokia v. Continental) and affirmed by the Munich Higher Regional Court. The Dusseldorf Regional Court is also prepared to grant such injunctions in some circumstances.

I've already raised the question on LinkedIn: how will this work with a view to patent infringement cases filed with the UPC?

The UPC is only a patent court. My reading of the UPC Agreement is that it can order injunctions to stop or prevent the infringement of patents, but that's it.

A patentee preparing the filing of UPC enforcement actions may have a reasonable apprehension that the defendant-to-be is going to seek an antisuit injunction (be it in the United States, China, or elsewhere). But--unless I'm mistaken--the UPC itself can't do anything about that.

The European Commission's draft SEP regulation (initial reaction, table of contents and synopsis, impact on net licensees, lack of appellate options, conflicts with fundamental rights and treaties) imposes all sorts of requirements on patent holders that delay enforcement, but if someone seeks a FRAND determination abroad that encroaches on the EU's Single Market, the patentee is free to sue right away and even to seek customs seizures. However, that still doesn't bar the implementer from seeking an antisuit (or anti-enforcement) injunction abroad; it just creates a potential (but very weak, if not negligible) disincentive.

To obtain anti-antisuit injunctions that protect their UPC cases, SEP holders will still need help from national courts such as the Munich I Regional Court or Dusseldorf Regional Court. Can and will those courts do that?

It's a tricky question if my reading of Article 34 of the UPC Agreement is correct:

Territorial scope of decisions

Decisions of the Court shall cover, in the case of a European patent, the territory of those Contracting Member States for which the European patent has effect.

I understand the above as an all-or-nothing proposition: if you sue in the UPC over an EPO-granted patent, you can't just say "leave out Germany" or "leave out all countries other than Germany." Fragmentation by partial opt-out would defeat the purpose of the UPC.

German AASIs are based on the need to protect property rights (even to the extent of using self-defense as a justification). EPO-granted patents are typically valid in Germany (the largest economy among the UPC's Contracting States), and the existence of a German part of a European patent makes it a property right protected by Art. 1004 of the German Civil Code.

But German AASI decisions also have to respect EU law. That first SEP AASI (Nokia v. Continental) already referenced EU law, arguing that it was possible to take action against a potential U.S. antisuit injunction (which never issued) because non-EU jurisdictions are not covered by EU law, more specifically: the Brussels Regime, the latest iteration of which is Regulation EU No. 1215/2012. According to that one, a principle of mutual trust applies to rulings made by courts of other EU Member States.

The Munich appeals court argued in its December 12, 2019 Nokia v. Continental decision that international law is only part of--and not above--German federal law. It also said that any extraterritorial effects of an AASI are legitimized by the need to defend against a threat of interference with German patent rights.

There has never been a debate that a Munich AASI also bars an implementer from seeking an ASI against proceedings in other venues, such as Dusseldorf or Mannheim. The UPC raises a novel question, however, and that is primarily due to Art. 34 UPCA:

• There is an argument that a foreign ASI that would enjoin the enforcement of a UPC SEP injunction (based on an EPO-granted patent) violates German federal law because it vitiates German property rights (the German part of the European patent in question), and that it would merely be collateral damage (or, from the patentee's perspective, a collateral benefit) that an enforcement of an EPO-granted patent must be shielded from a potential ASI. The European patent could then be enforced in all countries in which it is valid, as per Art. 34 UPCA.

• An implementer, however, might argue that a German court can only order an AASI that prevents ASIs affecting German court proceedings, but does not have jurisdiction over the non-German parts of a European patent.

Art. 34 UPCA would be key either way. The patentee will argue that there is no way under Art. 34 UPCA to opt out from enforcement in all other countries, so the AASI will inevitably have some territorial overreach. The implementer will argue that such overreach deprives the German court of jurisdiction.

Now, what if the patentee petitioned for--and actually obtained--AASIs in each and every one of the UPC Contracting States in which the patent is valid? In that case, they would all agree and the UPC enforcement action should go forward. But they can't coordinate. In each country, the decision will have to be made without potentially knowing any (or in most cases one will at least not know all) other countries' decisions. If a German court ordered an AASI, it can't know whether a French court will grant or deny the petition before it. Would the answer be that the patentee has to seek conditional AASIs that say they apply to UPC cases provided that equivalent decisions have been made by the courts of competent jurisdiction in the other relevant Contracting States?

Is there an argument that even if the UPC ordered an injunction relating to all Contracting States in which a SEP is valid, the patentee could still tailor the actual enforcement by telling the infringer in writing that the injunction only has to be respected with a view to one or more--but not all--countries? There could always be national decisions, such as compulsory licenses, that would have that effect anyway.

At what point will we find out how the courts decide?

• If a patentee seeks an AASI that explicitly references enforcement in the UPC, then the national court will have to decide.

• If a patentee instead seeks an AASI that focuses on the intellectual property at stake (patent rights in Germany including German patents of EPO-granted patents) without referencing specific courts (or at least not making it sound like UPC enforcement wasn't meant to be covered), the implementer will have to decide whether to take the risk of potentially violating that AASI through the pursuit of a foreign ASI that would target UPC cases.

  At this post-AASI stage the implementer can't seek an ASI against cases before German courts anyway, so if the patentee has enough (and presumably strong) patents available that it can enforce in national courts, the implementer's problem can't really be solved (only reduced) through a UPC-only ASI.

  If the implementer decides to go for a UPC-only ASI anyway, then the patentee will move for contempt sanctions based on the AASI, and the question will have to be resolved.

As a patentee, I would be a little bit concerned that my AASI petition might be put before a judge with the attitude that if you have a problem with your UPC cases, you should ask the UPC for help, and if it can't help, you should file your complaints with national courts. That would not be a legal principle, but a human factor, especially with judges handling cases in national courts knowing how much more money (after taxes) their colleagues sitting on the UPC make and trying to attract as many cases as possible to the national courts in order to potentially get on the prestigious gravy train in the future.

The UPC will create interesting--even exciting--opportunities for patent holders. But there will also be some initial uncertainty about various questions, one of which is the availability of anti-antisuit injunctions.

It won't be easy for the IP chiefs of major SEP holders to convince their CEOs and CFOs of something that results in significant incremental costs, but the way to hedge your bets and to be in the strongest possible position is to engage in double patenting. Does that term make anyone wince? It's admittedly counterintuitive because it appears antithetical to the way the patent system works. But it's not strictly double patenting if the claims are distinguishable, and some national laws (in Germany and France) actually open the door to what practically amounts to double patenting. The best strategy with a view to the UPC is to obtain both European (EPO-granted) patents and national patents, particularly in Germany. I recommend an IP Quick Tip podcast by the Bardehle Pagenberg firm for further information on that topic. The transitional period with opt-outs will end sooner or later, and any patents resulting from the applications you file now are going to be affected during their lifespan.

While the European Commission is contemplating measures that would complicate standard-essential patent (SEP) infringement lawsuits (see a first reaction to reports on an upcoming proposal and a table of contents and synopsis), the High Court of Delhi at New Delhi rendered an appellate opinion on Wednesday that reflects a pro-enforcement stance:

Ericsson v. Intex cross-appeal: Delhi High Court ruling

Intex Technologies is an electronics manufacturing services company. On LinkedIn, one of Ericsson's lawyers from the Singh and Singh firm welcomed the "much needed clarity on SEP jurisprudence in India" that the decision brings. The firm itself summarized the 10 key aspects of the decision as follows:

1. FRAND is not a one-way street and the same casts an obligation on both the SEP owner and implementor to negotiate and act in conformance with the FRAND protocol specified under the CJEU judgment in Huawei v. ZTE;

2. Parties’ conduct during negotiation of a FRAND license is a relevant factor for determining willingness;

3. Disclosure of third-party license agreements by an SEP owner during negotiations is not mandatory or a precursor for the implementor to revert with a FRAND counter-offer. The implementor can place reliance on its own licenses executed with third-parties and other SEP proprietors to formulate an appropriate counter-offer or to determine if the SEP proprietor’s offer is FRAND;

4. There is no embargo on grant of injunctions (both at the interim and final adjudication stage) against an implementor who is unwilling;

5. If the negotiations between parties fail, that does not mean that an implementor can continue to use the technology of the SEP proprietor for free, without making any payment for such use;

6. Implementors are mandated to make certain deposits/furnish security in favour of the SEP proprietor in case negotiations fail, in order to balance the right of the SEP owner;

7. Infringement is SEP cases can be established by using claim charts;

8. Portfolio licensing on a global basis is in conformance with commercial practices in the industry and is FRAND;

9. The finding of the Ld. Single Judge and four-factor test prescribed in paragraph 77 of the Nokia v. Oppo judgment is contrary to law;

10. Under the Patent Rules, 2022 courts can direct deposits of some kind of security even on the first date of hearing;

11. The peculiarities of the English system of conducting an SEP trial cannot be applied in the Indian context, as the realities of the Indian legal system should be considered.

Here are a couple of observations based on my reading of the decision:

• Nothing in the Indian ruling contrasts more nicely with the European Commission's draft SEP regulation than the holding that FRAND "is not a 'one[-]way street' where obligations are cast on the Essential Patent holder alone."

• The judges considered that India is short on judges (relative to population size) and cases take too long to resolve ("the judge-population ratio is extremely poor in this country and expeditious disposal of patent suits cannot be expected at the cost of other suits"). Therefore, it is key to give leverage reasonably early to SEP holders. This litigation here has apparently been going for many years, and "Ericsson filed the information/complaint before the CCI only after a prolonged negotiation of almost five years during which Ericsson had provided Intex a list of its Standard Essential Patents, Claim Mapping Charts to show essentiality and also a test report to show infringement." For those five years, or even longer, "Intex did not share any of its own claim charts with Ericsson either indicating use of alternate technology or disputing essentiality of Ericsson patents or countering Ericsson’s claim charts and the fact that Ericsson had already issued around One Hundred (100) licenses for its worldwide patents to various third parties"

• Here's the next--and final for this post--reference to the EU initiative: para. 89 of the decision quotes--and describes as reflective of common sense--"a paper dated 9th May, 2022 filed by legal academics, economists, and former United States governmental officials in response to European Commission call for evidence for an impact assessment." According to how the Indian judges summarize a passage from that document, if SEP owners "are flatly precluded from seeking injunctions, then infringers would have little reason ever to agree to, or negotiate in good faith, a licence with a Standard Essential Patent owner." Instead, "[a] well-resourced infringer would rationally reject any licence offer an compel the Standard Essential Patent owner to enter into litigation that typically requires millions of dollars in legal expenses in multiple venues around the world."

E-health device maker AliveCor yesterday announced that the company has been informed of the White House not having vetoed a hypothetical U.S. import ban on the Apple Watch. Apple sought a presidential override of the U.S. trade agency's patent infringement ruling on public-interest grounds.

AliveCor is rather unlikely to get leverage over Apple from its patents, but its story makes Apple look bad in other ways as I'll explain further below. At this point, the noise that AliveCor is making about the White House decision looks like it's just an attempt to pressure Apple into some kind of settlement based on the hypothetical possibility of an import ban entering into force further down the road.

The United States International Trade Commission (USITC, or just ITC) has quasi-judicial powers. It can impose what is called a limited exclusion order and amounts to a U.S. import ban on "unfair imports", with the (alleged) unfairness most of the time consisting in (alleged) patent infringements. The Apple Watch is not affected for now, and may never be. The ITC's notice of final determination (PDF) (i.e., summary of final--though appealable--ruling) clearly states the following:

"The enforcement of these orders, including the bond provision, is suspended pending final resolution of the U.S. Patent and Trademark Office, Patent Trial and Appeal Board’s (“PTAB”) Final Written Decisions finding the asserted patent claims unpatentable."

An infringement of an invalid patent is an infringement only in an academic sense, but has no practical implications. There's no liability. And for now, the relevant patent claims are deemed invalid, meaning the United States Patent and Trademark Office (USPTO) itself has concluded that those patents should never have been granted in the first place. The two relevant patents on heart-rate measuring techniques are close related, which is why the prior art references cited by Apple's (thus far successful) validity challenges partly overlap: U.S. Patent No, 10,595,731 on "methods and systems for arrhythmia tracking and scoring" and U.S. Patent No. 10,638,941 on "discordance monitoring".

On December 6, 2022, the same panel of Patent Trial and Appeal Board (PTAB) judges declared either patent invalid (case nos. IPR2021-00971 and IPR2021-00972). There are two prior art references that are key to either decision. One of them is a Patent Cooperation Treaty (PCT) patent application from 2012: WO 2012/140559 A1 on "pulse oximetry measurement triggering ecg measurement" by inventors Ram Shmueli and Nimrod Sandlerman. In the PTAB decisions, that one is briefly referred to as Shmueli. The other is U.S. Patent Application No. 2014/0275840 on a "pathological state detection using dynamically determined body data variability range values" by inventor Ivan Osorio. That one is briefly referred to as Osorio. Most of the PTAB's invalidity holdings are based on combinations of Shmueli and Osorio, potentially with some other prior art.

So what is required before AliveCor will actually gain leverage over Apple?

AliveCor appealed the two PTAB rulings to the Federal Circuit, raising a multitude of questions. While it cannot be ruled out that one or more patent claims might ultimately be deemed valid, the much more likely scenario is that the PTAB is affirmed, either 100% or to an extent that the net effect won't be different from the current situation. And at the same time, Apple can try to get the ITC's infringement decisions overturned.

AliveCor, which even used a Wall Street Journal op-ed to urge President Biden not to veto the ITC ruling, looks a little bit desperate. It may also have a resource problem as the small company is trying to assert its rights against the world's richest corporation, but that David-versus-Goliath situation doesn't make those patents any more valid.

In retrospect, AliveCor should probably have focused on enforcing some European patents in Germany, where obviousness (as opposed to anticipation) arguments often don't dissuade courts from entering an injunction under the country's bifurcation regime (i.e., validity determinations are made in separate proceedings). In the U.S., it is a bit odd that AliveCor first filed lawsuits in the Western District of Texas--a venue that was extremely popular at the time for patent damages claims--in late 2020, and then brought its ITC complaint a few months later. Normally, litigants file ITC complaints and federal companion complaints at the same time.

The history of interactions between AliveCor and Apple is, hoever, interesting. Here are some passages from the ITC complaint:

"35. After AliveCor presented KardiaBand publicly, its founder Dr. Albert was invited to Apple's campus by Dr. Michael O'Reilly, Apple's Vice President of Medical Technology, to present to Apple on KardiaBand. Dr. Albert demonstrated KardiaBand's operation to Apple engineers and Apple's COO, Jeff Williams. Mr. Williams told Dr. Albert that Apple wanted to figure out how to work with AliveCor.

"36. A few months later, Dr. Albert and AliveCor's then-CEO met with Phil Schiller, Apple's SVP of Worldwide Marketing, in order to further demonstrate the KardiaBand product. Unbeknownst to AliveCor, however, Apple was using these meetings to gather information on the operation of KardiaBand. Apple recognized the value in the combination of AliveCor's KardiaBand and SmartRhythm products and wanted to take those ideas as their own and eliminate AliveCor and everyone else as competition.

"37. In fact, after seeing the utility of KardiaBand and SmartRhythm, Apple decided to copy these features and introduce a version of an Apple Watch with its own ECG and AFib analysis and reporting functionality. In late 2018, Apple announced that it was introducing its own ECG app and irregular heart rhythm notification feature as part of an update to the Operating System for the Apple Watch Series 4."

Now, the above sounds like Apple stealing IP--but if AliveCor's patents are invalid, then there was no actual IP, and what Apple did may have been a way of taking advantage of AliveCor's interest in discussing a business relationship, but wasn't illegal.

It's possible that after the initial discussions with AliveCor, Apple performed a check on what IP AliveCor actually owned, and concluded that any issued patents or pending patent applications belonging to AliveCor and relevant to what Apple wanted to do were weak.

But now comes the part that I find more interesting than AliveCor's patent infringement assertions:

"38. After Apple introduced its KardiaBand and SmartRhythm competitor products, it decided to eliminate AliveCor as a competitor. Specifically, with the Apple Watch series 4, Apple updated the watch operating systems from OS4 to OS5. This operating system update included changes to the algorithm the Watch OS used to report heart rates in specific ways that made it impossible for KardiaBand and SmartRhythm (as well as other third party heartrate analysis app providers) [emphasis added] to identify and predict unexpected heartrates and arrhythmias and suggest users record an ECG for confirming potentially [sic] occurrences of AFib.

"39. Ultimately, the changes Apple made to its operating system in OS5 and the introduction of Apple's copycat ECG watches compelled AliveCor to pull the KardiaBand product and SmartRhythm from the market in 2018. [...]"

That, however, is just stated in the complaint to make Apple look bad and not the basis on which AliveCor wanted an ITC exclusion order. AliveCor is, however, pursuing antitrust claims against Apple in the Northern District of California. In an October 2022 post on an antitrust litigation in the same district brought by credit card issuers against Applem I quoted from Judge Jeffrey S. White's March 21, 2022 order that granted in part--but also denied in part--Apple's motion to dismiss AliveCor's original complaint. The most important part was that Judge White held "AliveCor has plausibly alleged an aftermarket for watchOS apps"--i.e., the court may ultimately find that there is a single-brand market under Kodak/Newcal.

Apple filed a motion to dismiss AliveCor's first amended complaint. A hearing that had been postponed to January 27, 2023 was vacated. The court "will issue a written decision on the papers." That case continues to be interesting, but it could be that AliveCor will somehow have to settle because it might otherwise run out of cash. The antitrust case is another potential risk for Apple, but if Epic Games prevails on a single-brand market definition, AliveCor's case is going to be considered a small problem.

The Munich I Regional Court has recently made three judgments public that provide helpful guidance to litigants concerning the legal standard applied by the world's first and foremost patent injunction venue to

• proportionality defenses in standard-essential patent (SEP) and non-SEP cases, and

• the implications of the pursuit of foreign antisuit injunctions for the determination of whether a defendant is an unwilling licensee.

I'll start with the second item because it's shorter and simpler than the other items:

In case no. 7 O 13016/21, the Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann (who has since been promoted) adjudicated on September 15, 2022 a SEP assertion by a Japanese licensing firm (probably IP Bridge) against a Chinese implementer (the name is redacted; maybe Xiaomi, but doesn't look like OPPO). I obtained a redacted copy of the judgment from the court.

In the same dispute, the court had entered an anti-antisuit injunction based at least in part on the defendant's prior action of obtaining a Chinese antisuit injunction against a different patent holder, Conversant. The plaintiff then argued in the infringement litigation that the defendant was an unwilling licensee for the same reason. The Munich court clarified that the defendant's prior pursuit of an anti-enforcement injunction against a third party may very well give rise to the entry of a pre-emptive anti-antisuit injunction, but has no bearing on whether the defendant is a willing or unwilling licensee vis-à-vis the relevant plaintiff. In other words, the court bases its (un)willingness determination exclusively on the conduct exhibited in the dealings between the two parties in question. If the defendant had sought an antisuit injunction against this particular patentee, it might have been deemed an unwilling licensee--and its products could have been enjoined--for that reason alone.

Whether or not one agrees with the notion of pre-emptive anti-antisuit injunctions, the distinction between that type of relief and the (un)willingness determination in the infringement action undoubtedly makes a lot of sense.

The court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner) has meanwhile published (on a website run by the Bavarian state government) two Nokia v. OPPO decisions (see my battlemap). The public redacted versions don't reveal the parties, but the missing bits and pieces can be deduced from the claim language and dates.

On August 5, 2022, the court granted Nokia two SEP injunctions against OPPO. At around that time, the smartphone maker left the German market, presumably due to the enforcement of a 4G SEP injunction that had previously been ordered by the Mannheim Regional Court. Meanwhile it has become known that Nokia had brought a couple of contempt motions that resulted in fines being imposed on OPPO, but the fact that OPPO withdrew from the German market shows an intent to comply. By now the more interesting question is when OPPO will obtain a German patent injunction against Nokia's mobile base stations. Nokia is challenging OPPO's patents-in-suit.

The Munich court's August 5, 2022 SEP ruling (German text) addressed a mix of FRAND and proportionality questions. A March 2022 hearing that mostly took place behind closed doors (JUVE Patent reported) was about the FRAND issues in all Nokia v. OPPO cases pending in Munich at the time. It is not known whether OPPO's proportionality defenses were also discussed on that occasion or only as part of the patent-specific infringement trials.

The August 5, 2022 decision starts with a syllabus that lays out four key principles that I'll summarize below:

1. The fact that a patent--with no distinction being made here between a SEP or a non-SEP--is being asserted by a non-practicing entity (NPE) does not suffice for a proportionality defense to succeed.

   In this case, Nokia argued (as the judgment also notes) that it is not an NPE, but makes network infrastructure and has licensed its smartphone brand to HMD (of which Nokia is a minority shareholder). The Munich court held that even if Nokia were to be deemed an NPE, that finding wouldn't enable a proportionality defense to succeed.

2. This one actually has two parts that relate to interdependencies between the FRAND defense and the proportionality defense:

   • The court says it can't be held against Nokia in the proportionality context that it offered a SEP license to OPPO, given that this is part and parcel of Nokia's FRAND obligations. In other words, the fact that this dispute is just about money and not about excluding a competitor is simply attributable to Nokia's FRAND obligation and does not, in and of itself, call into question its entitlement to injunctive relief. I already said during the German patent "reform" process that the reform would prove useless without the equivalent of eBay factor #2 (inadequacy of monetary relief)...

   • The Munich court also rejects the notion that a SEP injunction is disproportionate because the patentee sued prior to the definitive failure of FRAND licensing negotiations.

3. The third guideline rejects the notion that an injunction should not be available against a complex product. At first sight, it looks like this would apply to SEP and non-SEP cases alike. The judgment itself suggests that the Munich court may generally view a complexity argument skeptically (i.e., Munich may disagree with the reasoning in Justice Kennedy's eBay concurrence), but focuses specifically on SEP cases and notes that an implementer is entitled to a license on FRAND terms and cannot raise a proportionality defense on top. If an implementer is deemed an unwilling licensee under SEP-specific case law, there is no proportionality defense according to the court.

   As I'll show further below, the same court has meanwhile clarified that this reasoning concerning complex products applies to non-SEPs, too.

4. Finally, Nokia was not faulted for allegedly having failed to explain in detail the calculation of the royalty rate it demanded. the Munich court says that "reasonable parties" do not care about the underlying calculation or a disaggregation of the total royalty.

A few months later, the Munich court granted Nokia a third injunction against OPPO. The patent-in-suit in that case (case no. 21 O 12142/21) was EP1728352 on "secure data transfer" (such as contacts that are already stored in the cloud being downloaded when setting up a new device). That one is a non-SEP as I already noted at the time.

In its November 25 (Black Friday) decision (German text), the court made reference to--and reaffirmed the key takeaways from--its August 5 SEP ruling.

Here's my summary of the guidelines found in the syllabus:

1. The court reminds everyone of the fact that a proportionality defense will succeed only in rare exceptions (with the infringer having to plead the relevant facts and bearing the burden of proof). That is actually an understatement. Thus far, the proportionality defense has not succeeded in a single German patent case--and the so-called reform entered into force approximately 1.5 years ago. It's a monumental lobbying failure, and the fundamental problem was the lack of ambition: the pro-reform camp thought that a minor legislative change would make an impact. It has not moved the needle and I believe it never will. Near-automatic patent injunctions are alive and kicking. It would have taken a more incisive statutory amendment to bring about change (if such change is desirable, which is a separate question I'm not talking about in this post).

2. The second guideline reaffirms what the court held in the August 5 SEP decision: a patentee's NPE status does not per se make the pursuit of a patent injunction disproportionate.

3. The complexity of the enjoined product(s) does not make an injunction disproportionate either.

With a view to OPPO's German countersuits against Nokia, this means that the debate will be all about FRAND and not at all about (dis)proportionality.