FOSS Patents

Here's the second "Japanese" story in a row (the first one was about the JFTC's market study report on mobile ecosystems):

Roughly six months after Sisvel announced the launch of a WiFi 6 standard-essential patent (SEP) pool, the initial group of licensors (notably including--among others--Huawei, Philips, Panasonic, and MediaTek) has been joined by another rather significant patent holder: Mitsubishi Electric.

The announcement was made today. About 24 hours earlier, Sisvel announced that Chinese 5G fabless chipset maker UNISOC joined its 5G Multimode patent pool for smartphones and other consumer electronics products. Mitsubishi is one of the founding licensors of that 5G pool.

Last month, Sisvel president Mattia Fogliacco participated in a Licensing Executives Society International (LESI) webinar on WiFi 6 patent licensing that was moderated by the largest contributor to this pool, Huawei's IP chief Alan Fan. The message was that infringement litigation should be very limited, but it is up to implementers to seize the opportunity to save license fees by signing up early.

This blog will continue to stay on top of significant announcements relating to wireless and video codec patent pools--as well as enforcement actions. There will be a WiFi 6 SEP infringement trial in Munich next month that I plan to report on.

The funniest exchange I've ever seen at an IP conference occurred today at the Licensing Executives Society International (LESI) Thought Leadership Program. The first panel--about WiFi standard-essential patents (SEPs)--was moderated by Huawei's IP chief Zhiyong (Alan) Fan, who was joined by Sisvel president Mattia Fogliacco, Panasonic's Kaoru Takagahara, Jako Eleveld from Philips, and Jim Sam Kwak of licensing firm Wilus. The organizer was LESI Executive Director Dana Robert Colarulli.

After Sisvel's Mr. Fogliacco discussed his company's experience in the WiFi patent licensing space and touted its efforts to make sure that the WiFi 6 licensing program launched last summer would be well received by the market, Huawei's Mr. Fan credited Mr. Fogliacco for having been "so good in front of licensors" like Huawei when arguing for a palatable royalty rate that "[Mr. Fogliacco] would be an expert in holding out."

That one made people laugh, and the notion of Sisvel engaging in hold-out is hilarious indeed. Hold-out is the last thing the pool administrator and licensing firm is known to promote. Much to the contrary, it's hard to think of anyone who would have made a greater contribution to the fight against hold-out: the two Sisvel v. Haier cases decided by the Federal Court of Justice of Germany, which clarified the application of the European Court of Justice guidance in Huawei v. ZTE with respect to what characterizes an unwilling licensee, have arguably done more than any other patent dispute to discourage SEP hold-out.

What the post I already linked to further above already reported on was a key topic of discussion at today's webinar: LIFT (Licensing Incentive Framework for Technologies. As Mr. Fogliacco explained today, LIFT was designed to reduce the time to adoption and the need for enforcement. He says people should to the right thing anyway and take a license, but LIFT is meant to reassure them that it won't put them at a competitive disadvantage to be paying royalties while others aren't. Large parts of the royalty payments are deferred in time, meaning that at the early stage, licensees pay only a fraction of the normal rate until their competitors also sign up.

The other panelists agreed that LIFT was a good idea and a valid approach. For example, Panasonic's Mrs. Takagahara called LIFT's design "well-thought-out".

She likes the idea that LIFT makes it a smart business choice for implementers "to take a license as early a possible" as the more efficient as opposed to costlier choice.

Mr. Fan noted that if one company pays royalties earlier than its competitors, then it's disadvantaged because of higher costs (in that regard, Mr. Fogliacco stressed the need to "establish and maintain a level playing field"). LIFT is the mechanism in Sisvel's WiFi 6 pool--of which Huawei is the largest licensor--to address this issue. And given that there are thousands of potential licensees in this space, Mr. Fan believes in the transactional efficiencies of the pool approach.

Mr. Fogliacco noted that Sisvel reinvests some of the licensing income "to make liensing more efficient." Mrs. Takagahara said Panasonic wants to make the world a better place with WiFi. Mr. Fogliacco stated his company's mission, on top of everything else, of creating opportunities for companies to actually monetize their patents who couldn't do it on their own, such as companies that are spun off from universities.

The panelists all agreed that "litigation is a last resort" (as Mrs. Takagahara put it). But they all made it clear that it may have to happen, though hopefully only in a few outlier cases. Mr. Fogliacco said that if there are "clear signs of hold-out in the market", Sisvel as a pool administrator will have to recommend enforcement. Given that he believes his pool's structure is very reasonable, he deems it even more necessary to enforce against "bad citizen" implementers if need be. And he noted taht Sisvel is known to enforce if it has to.

Mr. Eleveld from Philips said that they were not so naive as to believe that no hold-out would occur, though obviously they hope that there will only have to be very little infringement litigation.

There's a carrot--the LIFT program that encourages taking a license early on--but also a stick. I'll keep an eye on interesting WiFi SEP enforcement actions and will report on them if and when I spot them.

The Dusseldorf Regional Court used to be the world's leading video codec patent litigation venue--and it may still be, though Munich has gained popularity. Four licensors of Access Advance's HEVC (H.265) pool sued Chinese consumer electronics giant Xiaomi over H.265 standard-essential patents (SEPs): Philips, Mitsubishi, General Electric, and IP Bridge. The latest information that I've obtained from the Dusseldorf Regional Court's press office suggests that those lawsuits are coming to an end, but interestingly, Xiaomi and the various litigants may be opting for bilateral licenses instead of a pool license.

Let's take a step back. The most important Access Advance licensor is Samsung, but Xiaomi is licensed to those patents by virtue of an MPEG LA license it took in early 2020, shortly before Samsung left MPEG LA.

In March, Xiaomi settled a patent dispute with Philips that involved not only video codecs but also wireless standards. As a result of that settlement, Philips withdrew all lawsuits against Xiaomi, including any case(s) over video codec patents.

That left three plaintiffs from Access Advance's circle of licensors: Mitsubishi, General Electric (GE), and Japanese licensing firm IP Bridge. Here's what the Dusseldorf Regional Court has told me about those cases:

• Case no. 4c O 50/20 (Mitsubishi v. Xiaomi) has been stayed by stipulation of the parties. Note that this is not a stay for the duration of a parallel nullity or opposition proceeding that is deemed likely to dispose of the case ("Aussetzung") but the kind of stay that parties seek when they believe they can work out a near-term settlement. That kind of stay is called "Ruhen" in German and rarely happens in patent infringement actions.

• Cases no. 4c O 49/20 and 57/20 (General Electric v. Xiaomi) have also been stayed by stipulation ("Ruhen").

• Case no. 4c O 51/20 (IP Bridge v. Xiaomi) was stayed by the court as Xiaomi's nullity complaint pending before the Federal Patent Court appeared likely to succeed.

It's unlikely that any of those cases will go anywhere. But what's the endgame? A set of bilateral licenses (to the extent that Xiaomi isn't already licensed to some of those patents thanks to MPEG LA)--or a pool license?

A pool license is an efficient one-stop solution; but when a pool has high administrative fees and when there are disagreements on how to avoid (partly) duplicative royalties, bilateral licenses may be easier for the parties to agree on.

If all complaints had been near-simultaneously withdrawn, the most plausible assumption would be that Xiaomi has taken a pool license. That would be the Tesla-Avanci pattern, where several cases brought by Avanci licensors against the automaker were voluntarily dismissed at around the same time, and no Avanci licensor has since filed suit against Tesla. It seemed odd that Tesla subsequently submitted an amicus brief against Avanci, supporting Continental's case that went nowhere and is now officially dead. That oddity, however, was outweighed by the extremely strong indications of a pool license that I mentioned before. But the Access Advance/Xiaomi situation is nowhere near that clear-cut. The procedural status of the IP Bridge case differs from that of the GE and Mitsubishi cases; Samsung's patents are the most important ones and Xiaomi is licensed to them; and what's telling is that Xiaomi agreed on a bilateral license with Philips instead of simultaneously taking an Advance license and settling only the non-codec parts of the dispute with Philips.

There's also a possibility of Xiaomi taking several bilateral licenses first, and a pool license later, just like Daimler settled with Sharp and Nokia before ultimately signing up to Avanci.

I'll try to find out more.

Earlier today, patent pool administrator Sisvel effectively made two announcements in one press release:

• a WiFi 6 (IEEE 802.11ax) standard-essential patent (SEP) pool, whose initial members are Huawei, Philips, MediaTek, SK Telecom, and Wilus; and

• a new "structured payment plan" named Licensing Incentive Framework for Technologies (acronym: LIFT) that is designed to incentivize the early conclusion of license agreements.

Both initiatives address certain industry needs, so let's have a quick first look.

Huawei owns one of the two most important WiFi 6 SEP portfolios. The only other patent holder to have a similar position is Qualcomm. But Huawei is also a major implementer, as is Philips. Those two companies are now the first licensees of the newly-formed pool.

The license terms are simple and transparent: for most WiFi products, the Standard Rate is 0ドル.60 per unit, and those who are licensees in good standing (full compliance with obligations), it goes down to 0ドル.50 per unit. Enterprise access points are the only product category for which the rates are higher (simply multiply either of the rates I just mentioned by a factor of six).

Huawei is known to take rather balanced positions on SEP licensing terms, as it is both a large SEP holder as well as a high-volume implementer (though its presence in Western markets has been affected by geopolitical circumstances). When Huawei is involved with a pool, there is a justified presumption that it's probably neither a devaluation-oriented pool nor one optimized only for licensors' purposes.

In retrospect it now makes a lot of sense that Sisvel president Mattia Fogliacco was one of the panelists at last month's Huawei corporate event in Shenzhen. That participation is now reciprocated in the form of a quote in today's press release from Alan Fan, the head of Huawei's IPR Department, who expects the new pool to "increase transparency of patent licensing and reduce licensing disputes in the field."

WiFi 6 SEPs are a much smaller business opportunities than cellular SEPs, but volumes are high: a typical use case for a patent pool, as pools are all about leveraging transactional efficiencies.

When I read about LIFT today, I instantly remembered something an Audi executive (who may have retired since) had said at a Munich conference on automotive patent licensing last year. He said it's better not to take a license in the beginning, as prices will only go down. In other words, hold-out amounted to intelligent infringement.

Patent pools often face the challenging of ensuring that those who sign up early don't regret their decision when they look at still-infringing competitors years later. For instance, Avanci must, as a matter of fairness, raise its 4G license fee on September 1. There still is a window of opportunity for the next six weeks enabling automakers to get the same deal as BMW got almost five years back.

The TL;DR version of the LIFT story is that early birds don't instantly pay the full license fee but a percentage thereof that depends on the pool's market penetration (ranging from 10% if less than 5% of the market is licensed to 100% if at least 55% of the market has taken a license)--and the difference doesn't work like a definitive discount but is deferred. This means that if the pool succeeds in signing up more licensees, the amount actually paid will be retroactively increased, though a depreciation formula will be applied.

This means that licensees won't have to worry too much about a scenario in which they'd be paying while others would be infringing. If that happened, they'd pay a lot less than otherwise. Obviously, only a pool administrator confident of its ability to reach a high market penetration is in a position to implement this royalty structure.

It's definitely an interesting and innovative approach that rewards lawful conduct and protects early licensees against scenarios in which others gain a potential competitive advantage from infringement.

For further detail, I'll just refer you to a 16-page PDF (step-by-step explanation). Let me also show you a video that explains the idea:

Thanks to the Comparative Patent Remedies blog I've just become aware of today's Federal Circuit opinion in a case in which Thales was appealing the denial of a preliminary injunction against Philips. In the court below (Delaware), Thales sought an antisuit injunction of the anti-enforcement type so that Philips would not have been able to enforce a potential U.S. import ban had the US International Trade Commission (USITC, or just ITC) granted one.

At the appellate hearing, the question of whether it is appropriate to seek an enforce an import ban against a willing licensee of standard-essential patents was on the agenda. Today's decision doesn't touch on it: the short Federal Circuit decision holds that Thales had "failed to show it is likely to suffer irreparable harm from Philips' ITC action." Here, however, the appeals court believes that "The district court did not clearly err in determining that Thales’ evidence of harm was conclusory and that it failed to meet its burden of establishing likely irreparable harm. Thales did not present any evidence that it lost customers, had customers delay purchases, or struggled to acquire new business because of the ongoing ITC proceedings." Therefore, it all just amounted to speculative harm (such as "affidavits stating only that the threat of an ITC exclusion order caused several customers to “voice concerns” and express doubt regarding Thales’ ability to deliver products."), which falls far short of what it takes to "justify the rare and extraordinary relief of a preliminary injunction."

It may or may not be a coincidence that the Federal Circuit came down shortly after a final ITC decision that in my opinion practically mooted the appeal: no violation was found (which was also the view of the Administrative Law Judge presiding over the investigation). Philips can appeal that decision, but it would take quite some time before an import ban would loom large.

The question of whether a patentee can pursue an import ban despite the alleged infringer being, or claiming to be, a willing licensee--which is also at issue in Ericsson v. Apple--has been left for another day.

This is a follow-up to what I wrote four weeks ago, Federal Circuit calls into question whether ITC should impose import bans on willing licensees' products infringing standard-essential patents: Thales v. Philips appellate hearing. There is a certain overlap--not in terms of parties or patents, but legal questions--with an Ericsson v. Apple standard-essential patent (SEP) case before the ITC, where Apple just failed to obtain permission to amend its FRAND defenses and a U.S. trade judge found Apple's conduct puzzling.

On Wednesday, the Commission--in this case meaning the five-member decision-making body at the top of the United States International Trade Commission (USITC, or just ITC)--gave notice of a final determination that terminates the Sec. 337 Unfair Imports Investigation of a Philips complaint against French industrial giant Thales and other defendants (Telit, Quectel, Xirgo, Laird Connectivity). Bottom line: no import ban (unless Philips successfully appeals the decision to the United States Court of Appeals for the Federal Circuit).

In the post I linked to further above I discussed a Federal Circuit hearing of a preliminary injunction appeal by Thales. Let me also refer you to a late-March post on the multi-jurisdictional Philips v. Thales dispute (Delaware, ITC, France...). Suffice it to say here that what the Federal Circuit heard was an appeal that Thales brought after the Delaware district court, in a case in which the federal court was going to set the rate for a global portfolio license, denied a preliminary injunction--an antisuit or, at minimum, anti-enforcement injunction that would have precluded Philips from enforcing a U.S. import ban against Thales had Philips obtained one from the ITC. But Philips hasn't. What's next?

At last month's hearing, the Federal Circuit panel raised the question of whether there was actually a need to render an opinion. An Administrative Law Judge--ALJ David P. Shaw, who was in charge of the ITC investigation of an Ericsson v. Apple complaint over standard-essential patents (SEPs) until that one was reassigned to ALJ Bryan Moore--had made a final initial determination (a recommended decision that is subject to approval by the Commission) finding no violation of any of the four SEPs-in-suit. However, he did make a recommendation on remedy and said that an import ban should issue in the event he'd be reversed on the merits.

So the Federal Circuit panel thought one might just await the final ITC decision (which was pushed back by a few weeks, but still on the horizon), as Thales might no longer need a preliminary injunction. Counsel for Thales told the Federal Circuit that even a final finding of no violation wouldn't reliably solve the problem as it would merely take a successful appeal for an import ban to come down. That appeal, however, would also have to be filed with the Federal Circuit. Looking at what precisely the Commission has decided and (especially) elected not to decide, it would make a whole lot of sense for the Federal Circuit to declare the appeal moot.

The Commission

• "determined to review and, on review, take no position on [some] issues," and

• "determined not to review, and thus [to] adopt[], the remaining findings in the [ALJ's initial determination]."

The non-reviewed issues (the second group) are more than sufficient to throw out the case: not only did ALJ Shaw hold none of the four patents-in-suit to be infringed but he also didn't see the technical prong of the domestic industry requirement satisfied with respect to any of them. Moreover, he invalidated several of the asserted claims.

The first group--issues on which the Commission took no position despite having taken a look at them--includes three kind of SEP-specific defenses raised by Thales:

1. Implied waiver: ALJ Shaw found that "it has been shown by clear and convincing evidence that the four asserted patents are unenforceable under the doctrine of implied waiver" because "Philips had a duty of disclosure to the standard setting organization [ETSI], and it breached that duty."

   Commissioner Jason E. Kearns , a Democrat who served as Chair of the USITC from mid-2020 until three weeks ago, stated that he would affirm the implied-waiver finding with respect to one of the four patents-in-suit but takes no position on the other three.

   Implied waiver is specific to this case and has no bearing on Ericsson v. Apple.

2. Express/implied license: ALJ Shaw disagreed with the following line of defense by Thales:

   "Philips has granted Thales both an express and an implied license to its self-declared SEPs, including the asserted patents, based on the FRAND licensing commitments that Philips made to ETSI and Thales’s unconditional agreement to license the patents on the FRAND terms determined by the Delaware District Court."

   ALJ Shaw held that Thales would have "to prove that Philips conducted in such a way that led Thales to infer consent to use Philips’ patents," and not only was there no evidence for that, but "Philips and Thales entered into lengthy negotiations demonstrating no such inference."

   Commissioner Kearns agrees with ALJ Shaw.

3. Equitable estoppel: ALJ Shaw also disagreed with this Thales defense (as does Commissioner Kearns):

   "The record evidence demonstrates that Philips is equitably estopped by its FRAND commitments from seeking, and has waived its right to seek, an exclusion order against Thales, which is a willing licensee that negotiated in good faith. The equitable estoppel defense has been recognized by the ITC and requires: '(1) misleading conduct by the patentee, which can be either an affirmative act or inaction, that leads the alleged infringer to reasonably infer that patent rights will not be asserted against it; (2) reliance by the alleged infringer on the patentee’s conduct; and (3) material prejudice to the alleged infringer.” Where the defense of equitable estoppel is established, the claim is barred in its entirety.'"

   ALJ Shaw noted that there was nothing misleading about Philips's FRAND pledge, and "Philips was entitled to bring an infringement action, including one seeking an exclusion order, after those years of negotiations failed to lead to a license." The latter is also a key argument made by Philips in the Federal Circuit.

There would be very strong reasons for the Federal Circuit not to adjudicate Thales's PI appeal. For each of the patent claims-in-suit, Philips faces at least two, in most cases even three hurdles to overcome on appeal. I also believe that even in a hypothetical best-case scenario for Philips, a remand to the ITC would be more likely than a direct decision by the ITC resulting in an import ban. And in any event, Thales's SEP-specific defenses (especially the claim that equitable estoppel bars Philips from pursuing an import ban against a willing licensee) are still in the case and could be raised again with the Federal Circuit.

All in all, Thales's PI appeal raises a purely academic question, and other cases could clearly be better vehicles for deciding the appropriateness of an import ban against someone who claims to be a willing licensee--such as Ericsson v. Apple, where the ITC staff believes Apple has met the pleading standard for an "unclean hands" defense (whether meritorious or not), but agrees with Ericsson that Apple failed to plead equitable estoppel, waiver, and patent misuse.

In the Philips-Thales dispute, the fact that Philips won't get leverage from an ITC import ban (at least not in the near term) means that the terms of the license will likely be determined in Delaware, and a French court--the Tribunal judiciare de Paris--may award Thales damages against Philips and ETSI (though only nominal damages against the letter) based on U.S. litigation expenses.

For the most part, this has been a bad week for implementers of standard-essential patents (SEPs) because three U.S. government agencies (DOJ, USPTO, NIST) merely did away with a Trump-era policy but neither agreed on an implementer-friendlier position nor did they reinstate the Obama Administration's SEP policy. But the picture wouldn't be complete without a development over at the United States Appeals Court for the Federal Circuit that could--in a worst-case but far-from-impossible scenario--complicate matters for SEP holders in the only U.S. forum where they have a realistic shot at getting (the equivalent of) an injunction against implementers: the United States International Trade Commission (USITC, or just ITC).

It's already so difficult to obtain SEP injunctions in U.S. federal court that even small U.S. non-practicing entities like Longhorn IP are flocking to the Munich I Regional Court for help. That trend could be reinforced should the ITC no longer be able to impose import bans on willing licensees--unless, of course, the ITC ultimately set the bar for an implementer's willingness to take a FRAND license similarly high as German courts under Sisvel v. Haier I & II.

The ITC can't award damages. Its only remedy is a U.S. import ban on infringing products (which it can reinforce through a cease-and-desist order, to be precise). As I explained at yesterday's Concurrences webinar keynoted by FTC commissioner Christine Wilson and moderated by Paul Lugard of BakerBotts, the ITC does consider public-interest arguments prior to entering an exclusion order, and respondents to ITC complaints can try to raise eBay-like arguments (or even import entire antitrust cases into the public-interest part of an ITC investigation), but the ITC is not bound by the eBay precedent. It operates under its own statutory framework (Sec. 337 Unfair Import Investigations) and is not an Article III court.

Even the Presidential veto in a Samsung-Apple case in 2013, which was based on FRAND considerations, didn't discourage SEP holders from bringing ITC complaints. In my observations, pending ITC investigations have repeatedly made a key contribution to getting SEP disputes settled.

A Presidential veto, however, is only one of two bites at the apple for implementers seeking to have an ITC import ban overturned. The other avenue is an appeal to the Federal Circuit, which could (by granting an emergency motion) stay the enforcement of an ITC exclusion order pending the appellate proceedings. In light of what a Federal Circuit panel--Chief Judge Kimberly Moore and Circuit Judges Timothy Dyk and Raymond Chen--said at a Tuesday hearing in Thales v. Philips, ITC complainants asserting SEPs would be well advised to ensure that their adversaries are deemed unwilling licensees. If ITC SEP complainants are looking for inspiration, I strongly recommend that they study German SEP cases, especially recent Munich case law and statements made by judges and counsel at Munich trials--a treasure trove of ways to argue that an implementer is an unwilling licensee.

It's an ordeal to listen to the recording of the Federal Circuit's Thales v. Philips hearing due to an extremely unpleasant sound effect. I went through it nonetheless. On the aforementioned Concurrences panel, Axinn's Michael Keeley, who is on Thales's legal team in the Philips dispute and therefore wasn't at liberty to discuss that case (which Commissioner Wilson had referenced), recommended it.

In the first part, the circuit judges appeared outright hostile to Axinn's Paul Zeineddin, who argued that a district judge in Delaware was wrong to deny a U.S.-internal antisuit injunction that would bar Philips from enforcing an ITC import ban. A circuit judge even called one of Mr. Zeineddin's arguments "ridiculous." The appeals court placed the emphasis on whether Thales could establish irreparable harm--a requirement for any injunction. The procedural state of affairs is that an Administrative Law Judge (ALJ) did not find a violation (i.e., an infringement of a valid Philips patent), but he did say that in the event his ruling should be overturned by the ITC's final decision-making body, an import ban should issue. The ITC postponed the deadline for deciding whether to review that decision until next week. Should it not review the final initial determination, or agree with it at the end of a review, it would really become final, though it could be appealed to the Federal Circuit. So the question is whether Thales is really suffering irreparable harm just because of the effects that the shadow of a potential import ban may have on existing or prospective customer relationships.

It's definitely possible that the Federal Circuit will duck the tricky and sensitive question of whether U.S. district courts should enjoin litigants under certain circumstances from pursuing an ITC import ban over SEPs. The circuit judges didn't appear convinced that Thales had provided enough evidence of the actual business implications of the threat of an import ban. Frankly, I think there is no irreparable harm: Thales has five licensing offers from Philips on the table, and Thales's customers have no reason to assume that Philips would actually want to bar Thales from selling its products. Philips just wants to get paid--though it has repeatedly been criticized to make supra-FRAND demands and even been held out of compliance with its FRAND licensing obligations by the Mannheim Regional Court (in two different disputes a few years ago).

Another potential weakness in Thales's case is that it allegedly limited its "willing licensee" argument before the Federal Circuit to the fact that it wants the Delaware district court to set a FRAND rate and to take a license on whatever the court-determined dterms may be.

Thales v. Philips is, however, one of those cases in which the Federal Circuit appeared hostile to an appellant (in fact, a judge even considered one of Mr. Zeineddin's arguments ridiculous) only to put similar or even greater pressure on the appellee. Foley & Lardner's Eley Thompson got a rough ride, too. The Federal Circuit may or may not conclude that Thales has established irreparable harm, but that would be highly case-specific and a different litigant could take that hurdle, such as by means of customer testimony. But the very fundamental question raised by the Federal Circuit is whether it was appropriate for Philips to seek an exclusion order, given that the Delaware proceedings will result in a license agreement on FRAND terms.

It became clear during the hearing that the Federal Circuit struggles with the notion of the ITC--if it were to ultimately find a violation and to adopt the ALJ's recommendation on remedy--potentially enjoining Thales despite the ALJ having conceded that Thales is a willing licensee. Philips argues that it's not enough for Thales to be a willing licensee: Philips has made five offers, and if at least one of them is FRAND, Thales should take it. Still, the Federal Circuit panel appeared to be concerned that an import ban would be inappropriate against a willing licensee--though the circuit judges at the same time look at the willingness question holistically and may not be sold that someone who (and this was just a hypothetical scenario they outlined) shows no willingness to take a license for five years and then, after being sued, runs to a district court and asks for a rate-setting decision.

Whatever the outcome of that particular appeal may be (the dispute could even be settled before the appellate opinion comes down), the ITC and its ALJs will likely read the writing on the wall, so ITC complainants asserting SEPs should develop a robust "unwilling licensee" argument.

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Almost mid-way into President Joe Biden's term, his Administration is unable to take clear and official positions on the antitrust aspects of standard-essential patent (SEP) licensing and enforcement. Two things happened yesterday that involve a total of four agencies--the Antitrust Division of the Department of Justice (DOJ-ATR), the United States Patent and Trademark Office (USPTO), the National Institute of Standards and Technology (NIST), and the Federal Trade Commission (FTC):

• At a Concurrences webinar, IP & Antitrust: Hot Issues 2nd Edition (in which I participated as a panelist, which I rarely do), FTC Commissioner Christine Wilson (a Republican) delivered a keynote, the #1 priority of which was to distance herself from a recent submission to the United States International Trade Commission (ITC) by FTC Chair Lina Khan and Commissioner Rebecca Kelly Slaughter (both Democrats) in the investigation of a patent infringement complaint by Philips against Thales and others.

  Mrs. Wilson, who publicly dissented in no uncertain terms from her agency's action against Qualcomm in years past, sharply disagrees with the content of the aforementioned recent filing with the ITC and expressed outrage at the absence of an explicit clarification that her colleagues were only speaking for themselves and not for the FTC. According to Mrs. Wilson, it is an FTC tradition that commissioners clearly distinguish their personal views from those of the Commission, and the public-interest statement in question had not been adopted by the FTC as an agency position.

  To me it was always clear that two commissioners--even if one of them is the FTC Chair--can't speak for the Commission as a whole: it's not a majority. The ITC itself has a similar decision-making setup as the FTC, so presumably no one there got confused. However, the official headline of the filing was "written submission on the public interest of Federal Trade Commission Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter" and may have confused some people--even more so when a letter on FTC stationery was sent to the ITC requesting leave to file a corrected statement (signatures were missing from the original document) out of time (which was granted).

  There was a timing problem: public-interest statements in that investigation were due on May 16, 2022, and the fifth member of the current FTC, Commissioner Alvaro Bedoya (a Democrat), was sworn in just that day. The Biden White House has not really excelled at getting its appointments confirmed (it also took an unusually long time until Kathi Vidal was finally appointed USPTO Director). There was a 2-2 Democratic-Republican stalemate at the FTC for a long time, only because the Biden White House wasn't effective. It's fairly possible that an earlier confirmation of Mr. Bedoya would have enabled the FTC as an agency to adopt a formal position with a 3-2 vote. But under the circumstances, Chair Khan and Commissioner Slaughter decided to just go ahead in their own names, and they arguably could have made it clearer that the FTC itself was unable to agree on a position on U.S. import bans over SEPs, even if apparently just for timing reasons. Commissioner Wilson may be right to criticize her colleagues, but the FTC can actually cure any formal defect by adopting a formal agency position now that there is a Democratic majority in office.

  It is, by the way, far from certain that the question of U.S. import bans over SEPs will ever play a role in that Philips case. If the ITC affirms the final initial determination by an Administrative Law Judge, there is no infringement of a valid patent. The ITC has extended until June 16 (one week from today) the deadline for deciding whether to review the ALJ's decision. Should it decide not to review, then Philips needs to appeal the rejection of its complaint to the Federal Circuit--which on Tuesday heard a related case originating from a district court (MP3 recording; and I provided an overview of the various Philips-Thales cases back in March).

• Also yesterday, the DOJ issued a press release together with the USPTO and NIST, announcing the withdrawal of the Trump Administration's 2019 SEP Policy Statement. The official document (PDF) withdrawing the three agencies' prior statement not only declares the 2019 statement (which was very much driven by then-Antitrust Assistant Attorney General Makan Delrahim) withdrawn but also abandons any "potential revisions to that statement" (i.e., the controversial 2021 draft statement) as "the Agencies have concluded that withdrawal best serves the interests of innovation and competition."

  Footnote 1 is key:

  "In withdrawing the 2019 Policy Statement, the agencies do not reinstate the January 8, 2013, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued by the DOJ and the USPTO.

  The 2019 (Trump Administration) statement replaced the 2013 (Obama Admistration) statement. The 2021 Biden Administration draft statement, if adopted in that or any similar form, would have been much closer to the 2013 than the 2019 statement. But now there's a vacuum: there simply is no formal statement. All we have is the aforementioned press release, which makes it a possibility that the three agencies couldn't reach an agreement: while USPTO Director Kathi Vidal and NIST Director Laurie Locascio stress the importance of U.S. companies' contributions to standard-setting (which sounds like those two agencies wouldn't want to weaken SEP enforcement too much, if at all), the DOJ's antitrust chief Jonathan Kanter warns SEP holders against "opportunistic conduct [...] that threatens to stifle competition" particularly through SEP abuse that would "disproportionately affect small and medium sized businesses or highly concentrated markets." In the end, however, Assistant Attorney General Kanter just promises a "case-by-case approach" as opposed to broad and sweeping rules.

  I hope Mr. Kanter and his staff have not been misled by deceptive lobbying alleging that there are serious issues harming small and medium-sized companies.

  In the end, the consensus is now that it's up to the courts to further develop their SEP case law as the judges see fit. Litigants can still quote the 2019 statement (if they're enforcing their SEPs, particularly if they pursue injunctions) or the 2013 statement (if they're defending against infringement complaints), but both have been withdrawn, so they are just history, not current policy.

  So who has won this battle and who has lost? SEP holders like Qualcomm lost the 2019 statement, which favored those seeking SEP injunctions. But companies like Apple, which are trying to devalue SEPs, lost the opportunity to have the U.S. federal government adopt a position in their favor now that Democrats are in power: neither will the Biden Administration adopt a statement along the lines of the 2021 draft policy nor has it reinstated the 2013 statement. Implementers are better off today than they were under the Trump Administration, but net licensors are in a way better position now than they were in the Obama years.

  Looking at it from a global perspective, the picture looks even better for net licensors. Apple and its allies were very much hoping to make some headway on SEPs after Donald Trump was voted out of office. They wanted the U.S. to send out a strong signal, to serve as a beacon (from their perspective) for other jurisdictions, and they were looking for something that would help them persuade judges in the U.S. and abroad to take implementer-friendlier positions. What implementers achieved falls far short of what they needed. The glass is, very clearly, more than half-full for net licensors. Even the Biden Administration wasn't going to advance the cause of devaluing SEPs--so why should the EU?

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It's hard to think of a standard-essential patent (SEP) holder I trust less to be fair than Philips. Before Philips settled with Xiaomi, there were clear signs of Philips just seeking leverage from injunctions and trying to prevent Xiaomi's licensing negotiators from knowing the terms of comparable license agreements. There also appear to be interesting issues in the multijurisdictional dispute between Philips and French industrial giant Thales, and this week the Chair of the Federal Trade Commission, Lina Khan, filed a public-interest statement in the investigation of Philips's complaint against Thales and several other defendants. She was joined by Commissioner Rebecca Kelly Slaughter (like her, a Democrat--and that party now has a 3-2 majority of the votes as the Senate confirmed Álvaro Bedoya).

SEPs have so far not really been a priority topic for Ms. Khan (nor for Jonathan Kanter's Antitrust Division of the DOJ). Also, it's important to note that the statement in ITC investigation no. 337-TA-1240 is not based in antitrust law per se: the two commissioners make it clear that they are not claiming to have identified a violation of the federal antitrust laws (Sherman Act, FTC Act). There's also a disclaimer regarding the specific issues in the case. But the bottom line is that they urge the ITC, a U.S. trade agency with the quasijudicial power to order import bans against infringing products, to seriously consider whether monetary relief would be sufficient to make SEP holders (in this case, Philips) whole. Administrative Law Judge David P. Shaw recommended an import ban, though he also recommended that it "be delayed by 12 months" in order to "mitigate its effects on third parties" by giving the respondents sufficient time not only to develop workaround products but also to have them (re-)certified. A 12-month workaround period is unusually ong by ITC standards, but if any truly essential patent was at issue, it couldn't be worked around even in 12 months.

All of this is, of course, subject to whether the decision made by the Commission, the ITC's top-decision making body, results in a finding of a violation at all.

Assuming that the ITC's final determination comes down to an infringement finding and an import ban is ordered (with or without a grace period), there'll be a Presidential review. And at that stage the FTC's input could make a decisive impact. U.S. presidents typically delegate the authority to veto ITC import bans to the U.S. Trade Representative.

Just yesterday, IPWatchdog published an opinion piece by former two-term ITC chair Deanna Tanner Okun warning against weakening the ITC's Sec. 337 remedy (import bans) with respect to SEPs. That article expresses concern over the new SEP policy statement that is in the making. But I'm sure Mrs. Tanner Okun isn't happy about the two FTC commissioners' public-interest statement in the Philips case either.

Finally, let me show you the document (for the first time I'm using DocumentCloud to publish a document here, as I continue to have issues with Scribd):

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A standard-essential patent (SEP) dispute between Philips and Xiaomi that started in 2020--and which also involved the European Telecommunications Standards Institute (ETSI)--has been put to rest. Mr. Justice Mellor of the London-based High Court of Justice entered a consent order last week as a result of "the Claimant and the Defendants having agreed to settle the proceedings on the basis of a confidential agreement dated 11 March 2022."

Arguably, the parties remain adverse to each other, but only indirectly so: Philips is one of the founding shareholders of the Access Advance video codec patent pool. While Philips's co-founders are among the HEVC Advance plaintiffs suing Xiaomi over HEVC (H.265) patents, Access Advance's pool management fees are rumored to be exorbitant (like 40%). But Xiaomi is already licensed to a large chunk of HEVC Advance patents, such as Samsung's H.265 patents. That's another story.

The primary reason this blog hasn't written much about Xiaomi's cases is that it hasn't had a large-scale high-profile dispute so far, despite being one of the world's top three smartphone makers. Relatively speaking, the spat with Philips may have been its largest one to date, with complaints brought in multiple jurisdictions. What I hear from industry sources is that Xiaomi has a business-oriented approach to licensing. For example, Sisvel president Mattia Fogliacco declared himself "impressed with the professional and effective approach of Xiaomi's licensing team." I'll take his word for it.

Haier, which took four years to make Sisvel a FRAND counteroffer, is not representative of China's leading technology companies. Companies like Huawei, Xiaomi, and OPPO (which is currently defending against Nokia) have substantial patent holdings of their own because they invest heavily in R&D, sometimes filling the vacuum left by certain European companies such as Philips. Whether their positions are FRAND must be looked at on a case-by-case basis, of course.

While there were no signs of hold-out by Xiaomi, Philips had a distinct preference for leverage from injunctions over judicial FRAND determinations and for opacity over transparency.

I'm genuinely disappointed that three really interesting legal issues raised by Xiaomi in that dispute won't come to judgment now, though I expect them to resurface in other cases:

1. Is an implementer a willing licensee if it takes the position that there already is a license agreement in place under French law (the law governing the ETSI FRAND pledge) with just some blanks (essentially, the license fee) to be filled out by means of judicial determination?

   Xiaomi was ready to discontinue all other litigation in order to let the Tribunal judiciaire de Paris set the terms. Philips, however, was pursuing injunctions in multiple jurisdictions. The London-based High Court bought Philips's allegation that the French proceedings would take ten years or so, but it was actually Philips itself that delayed them through a jurisdictional challenge including an interlocutory appeal. For whatever reason, Philips had no faith in that neutral jurisdiction.

   In the FRAND context, we all say "willing licensee" all the time. But what we mean in almost every case is that someone is "willing to become a licensee." Very interestingly, Xiaomi wasn't merely prepared to take a license: it said a license agreement was already in place. That position intuitively sounds like a "willing licensee" in the narrowest sense of the term. As a result of the settlement, we won't know how this would have played out.

   Xiaomi might have had any number of valid reasons for seeking a Chinese FRAND determination. Instead, it chose to go to France. But it takes two to tango.

   Philips's aversion to the French proceeding and the notion of a license agreement already being in place is typical. In the U.S. part of its dispute with Thales, Philips prefers an ITC exclusion order (with a preliminary decision scheduled for tomorrow) over a FRAND determination in Delaware, though Philips argues that Thales isn't sincere and may or may not have a point.

   It strikes me as odd that not only Philips but also a UK judge thought it made more sense to resolve a question of French contract law in the UK when there was already a French proceeding pending.

2. Xiaomi named ETSI as a co-defendant, arguing that ETSI had a responsibility here. Thales--arguably the most important technology company in France--is doing the same now, which is going to get interesting.

   While we're on the subject of ETSI: Philips objected to Xiaomi's membership in ETSI, despite Xiaomi holding tens of thousands of patents and being a major wireless device maker. As a result, the question of Xiaomi's admission had to be escalated to ETSI's General Assembly. A childish kind of retaliation by Philips if you ask me. Xiaomi won the vote (I don't even want to think about what would have happened in the other event).

3. Transparency in connection with the "ND" in FRAND was a major issue. Philips doggedly tried to prevent Xiaomi's licensing team from seeing any comparable license agreements. At most, Philips would have accepted that Xiaomi's in-house litigators could see those contracts, but Philips wanted to erect a Chinese wall inside a Chinese company: Xiaomi's litigators wouldn't have been allowed to tell their licensing colleagues or join in negotiations.

   That issue came up in Munich, where it even reached the appeals court (with no decision prior to the settlement), the Netherlands, the UK, and possibly elsewhere. It was like the most extreme position anyone has ever taken on a "confidentiality club." I know that other industry players were watching those developments with profound concern.

   That obstruction of informed negotiations also suggests to me that Philips was just seeking to unilaterally impose its terms.

From the outside it looks like Xiaomi was raising interesting legal questions in good faith. Neither did Xiaomi cave nor were there any signs of delay tactics. The fact that Philips lost two of its patents-in-suit in Germany (in one nullity proceeding it gave up, and in another there had already been a negative preliminary opinion) shows that the right of a defendant--under Huawei v. ZTE--to challenge the essentiality and validity of the SEPs in question is an important one. To exercise that right reasonably does not constitute hold-out.

Just as I'm about to finish this post, I can see that Juve Patent has already reported on the settlement. Their article lists the lawyers involved, with Simmons & Simmons interestingly having represented Xiaomi in three jurisdictions (UK, Netherlands, Germany). That firm has done similar work for Samsung. And when I read Munich-based Simmons & Simmons partner Dr. Thomas Gniadek's name, I was instantly reminded of his work--as a Bardehle Pagenberg associate at the time--on Microsoft's behalf against Motorola Mobility. For more information on the parties' outside counsel, let me just refer you to Juve Patent. Their focus is on the business of law, while mine is on the impact of the law on business, which sometimes makes us complementary.

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It almost appears to be a ritual in standard-essential patent (SEP) disputes that the patent holder faults the implementer for hold-out while the accusation flying in the other direction is hold-up. They can't both be right at the same time. On a case-by-case basis, I try to deduce from publicly available information which of the two is more likely in its right to blame the other side, also factoring in what I've previously learned about certain parties' behavior.

When Thales and Philips are the parties, I frankly have reservations concerning either one. Thales is pursuing an ill-conceived antitrust case in Munich over automotive SEP licensing. You can't blame a patent pool for offering a certain license but not another as long as it doesn't contractually prevent its licensors from entering into whatever bilateral license they wish to grant. As for Philips, I've clearly seen a pattern of hold-up from that organization in more than one context, and its positions on patent enforcement always seem oblivious to the fact that even Philips is still making products (though it's lost market share in some product categories and exited other segments, such as mobile phones).

The two companies are now entangled in an interesting cross-jurisdictional web of partly interdependent SEP cases:

• Philips is seeking an exclusion order (import ban) from the ITC, with ALJ David Shaw's final initial determination due tomorrow, April 1. "Final" isn't "final-final": the truly final ITC determination is made by the Commission, the trade agency's top decision-making body, and even that one is appealable to the Federal Circuit.

  Thales--along with its Gemalto and Cinterion subsidiaries--is not the only respondent to that ITC complaint, which also targeted (back in December 2020) Thales's competitors Telit, Quectel, CalAmp, Xirgo, and Laird.

  The accused Thales products appear to be identity/security components used in various products, even including airplanes, and implement cellular standards, especially 3G and 4G.

• There's a case in the United States District Court of Delaware where apparently both Thales and Philips agreed that the court should set a global FRAND rate for a license agreement between them. Thales says Philips should just let the Delaware court do its job instead of seeking leverage from the ITC in orer to unilaterally impose its preferred terms on Thales.

• The Delaware court denied a Thales motion for a U.S.-internal antisuit injunction (an instrument of which some United States Senators are, or pretend to be, blissfully ignorant) that would bar Philips from enforcing a U.S. import ban. But Thales appealed that decision. The preliminary-injunction appeal has been fully briefed and will be heard in the coming months.

  It's just laughable that ACT | The App(le) Association filed an amicus curiae brief in support of the appeal--as if small app developers cared about a U.S. import ban on telecommunications modules incorporated into airplanes and similar products. And three other Thales amici--Honda, Continental, and u-blox--first failed to file mandatory paper copies of their brief and then even their paper vesion was out of compliance with the appeals court's rules. But those stories don't mean that the appeal itself doesn't raise interesting questions. I haven't formed an opinion on the merits yet as I just downloaded the documents from the Federal Circuit docket this morning.

• Either party would be interested in arbitration, but they disagree on the parameters, with Thales insisting on its rights under the ECJ's Huawei v. ZTE case law to challenge the essentiality and validity of Philips's declared-essential patents.

• Meanwhile, Thales has become the third party--following in the footsteps of TCL and Xiaomi--to name the European Telecommunications Standards Institute (ETSI) as a co-defendant in a FRAND antitrust case primarily targeting Philips. Philips filed the original complaint with the Tribunal juidiciare de Paris and an ex parte motion for the seizure of documents from a French Philips patent licensing executive (Sophie Pasquier), along with (obviously unofficial) English translations, with the ITC in late December, arguing that this was an attack on the U.S. case (as the seized documents also include communication between Philips and its U.S. outside counsel in the Thales dispute) with the help of a foreign court--and which Philip characterizes as typical of a party engaging in hold-out.

  For now, Thales is seeking €13.5 million from Philips--an antitrust damages claim based on U.S. litigation expenses. But the amount will go up should Philips actually obtain and enforce an ITC import ban. Thales criticizes ETSI for not having sanctioned Philips for its alleged FRAND breaches, and is seeking nominal damages (€1) from the standard-setting organization.

  I haven't formed an opinion on the merits of the French case either, for the same reason that I have yet to fully understand the parties' arguments in the Federal Circuit.

For now, let me just show you Philips's 272-page filing with the ITC that includes documents from the French case and English translations thereof:

21-12-23 Philips Motion to ... by Florian Mueller

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When it comes to video codecs, Dusseldorf has been the world's leading patent enforcement forum for about a decade. However, Access Advance has lately suffered a major setback there, and it appears that the HEVC Advance pool's answer to the duplicate-royalty problem is still lacking and wanting.

Meanwhile I've done some research on patent infringement actions brought by HEVC Advance licensors against Chinese electronics maker TCL, a frequent defendant to standard-essential patent (SEP) assertions. Those cases were filed with the Munich I Regional Court, where TCL has also been sued by LG Elecronics over a couple of wireless patents, but those cases are stayed until at least the end of next month. The patents-in-suit in those wireless cases (case nos. 7 O 12979/20 and 7 O 12656/20) EP2239905 and EP2086155, both on an "apparatus for transmitting and receiving a signal and method of transmitting and receiving a signal."

A spokeswoman for the Munich court has confirmed the pendency of the following HEVC Advance v. TCL cases:

• 21st Civil Chamber (Presiding Judge: Dr. Georg Werner); hearing dates in September and November

  • Dolby v. TCL, case no. 21 O 4139/21, EP2777270 on a "procedure for coding and decoding of images, apparatus for coding and decoding and corresponding computer programs"

  • Mitsubishi v. TCL, case no. 21 O 4136/21, EP2720468 on a "moving image decoding method"

  • GE v. TCL, case no. 21 O 4140/21, EP2559245 on "video coding using multi-tree sub-divisions of images"

  • ETRI v. TCL, case no. 21 O 4141/21, EP2723078 on an "image decoding apparatus"

  • IP Bridge v. TCL, case no. 21 O 8819/21, EP3288261 on a "moving picture decoding method"

• 44th Civil Chamber (Presiding Judge: Dr. Anne-Kristin Fricke)

  • Philips v. TCL, case no. 44 O 6966/21, EP2950544 on "adaptive coding of the prediction error in hybrid video coding" (hearing date TBD)

In a somewhat related context, Juve Patent reported last year that TCL is typically represented in German patent infringement cases by Dr. Andreas Kramer of Vossius & Partner.

It's a safe assumption that TCL won't be the last company to be sued by HEVC Advance licensors in Munich...

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2022 has resumed where 2021 left off with respect to Access Advance's patent enforcement attempts in Germany. Between Christmas and New Year's, Turkish TV maker Vestel prevailed on a FRAND counterclaim--and an affirmative FRAND defense to injunctive relief--over the Access Advance pool and some of its licensors. The patent pool firm--which was founded by Philips, General Electric, Dolby, and Mitsubishi--has so far failed to address the serious issue of duplicative royalties.

The first court ruling in 2022 to involve Access Advance's enforcement efforts has also favored a defendant: in this case, Xiaomi, one of the world's largest smartphone makers. Yesterday, the Oberlandesgericht Düsseldorf (Dusseldorf Higher Regional Court) lifted a set of anti-antisuit injunctions granted by the lower Dusseldorf court to Philips, GE, and Mitsubishi last summer (Juve Patent reported).

The Dusseldorf appeals court's 2nd Civil Senate under Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German) reversed the Dusseldorf Regional Court's 4c Civil Chamber on the question of whether the moving parties had a Rechtsschutzbedürfnis--"need for protection under the law" (against an imminent violation)--in this particular case. The three-judge appellate panel concurred with the Munich Higher Regional Court's 2019 decision affirming a Nokia v. Continental anti-antisuit injunction, but begged to differ slightly from the Munich I Regional Court's more expansive framework as laid out in InterDigital v. Xiaomi last year by the Munich court's 7th Civil Chamber under Presiding Judge Dr. Matthias Zigann.

Just like the courts in Munich, the Dusseldorf courts believe that the pursuit of a foreign antisuit injunction against the enforcement of German patents is an illegal attack on property rights protected by Germany's de facto constitution. Even more importantly, just like the Munich I Regional Court, the Dusseldorf Higher Regional Court is of the opinion that an implementer seeking an antisuit injunction may be deemed an unwilling licensee, resulting in a sales ban once a SEP infringement has been identified.

What decided the case for Xiaomi against those HEVC Advance licensors is that there was no specific threat of Xiaomi seeking a Chinese antisuit injunction that would have prevented the patentees from enforcing their German patent rights. The mere fact that Xiaomi had obtained a Chinese antisuit injunction against InterDigital under fundamentally different circumstances was not deemed sufficient by the Dusseldorf appeals court to suspect that the same might happen in the HEVC Advance cases. (By the way, InterDigital and Xiaomi settled last summer.)

The Dusseldorf appeals court did not even see a basis for those HEVC Advance licensors to obligate Xiaomi to inform them beforehand of a motion for an antisuit injunction.

Whether the Munich I Regional Court and/or the Munich Higher Regional Court would have granted an anti-antisuit injunction when faced with the same fact pattern is hard to tell because each case is different and the lower Munich court's criteria for pre-emptive anti-antisuit injunctions are applied to the entire set of facts, with no single criterion necessarily being decisive in its own right. But there is a discernible difference between the Dusseldorf appeals court and the Munich lower court as the latter does attach some importance (in the multifactorial analysis of whether an anti-antisuit injunction should issue) to an implementer's conduct vis-à-vis other SEP holders--which the Dusseldorf appeals court is rather disinclined to take into consideration--as well as to an implementer's refusal to promise in writing not to move for a foreign antisuit injunction.

Munich's anti-antisuit case law is influential in Europe (and potentially beyond). A few months ago, a Dutch court denied Ericsson an anti-antisuit injunction against Apple (which denial was later affirmed by an appeals court) on similar grounds as the Dusseldorf appeals court's reversal of the anti-antisuit injunctions against Xiaomi, but applied some of the Munich logic.

It appears likely that the Mannheim Regional Court and its regional appeals court, the Karlsruhe Higher Regional Court, will reach similar conclusions. Mannheim is a key SEP venue and reasonably protective of IPR owners.

The legal innovator who successfully obtained the first German anti-antisuit injunction (at a minimum, the first SEP-related one) is Dr. Arno Risse ("Riße" in German) of the Arnold & Ruess firm. On an ex parte basis, it was granted by the Munich I Regional Court's 21st Civil Chamber, then under Presiding Judge Tobias Pichlmaier (who has recently been reassigned, at his request, to an antitrust-specialized division). Judge Dr. Hubertus Schacht filled in for Judge Pichlmaier (during the main vacation season) to preside over a hearing on Continental's motion for reconsideration--and affirmed the prior decision, which was ultimately affirmed by the Munich appeals court (6th Civil Senate, under meanwhile-retired Presiding Judge Konrad Retzer). Later, Presiding Judge Dr. Matthias Zigann of the Munich I Regional Court's 7th Civil Chamber further developed the criteria to be applied to motions for anti-antisuit injunctions. And now the Dusseldorf Higher Regional Court agrees with the Munich stance on anti-antisuit injunctions (including the potential stigmatization of an implementer as an unwilling licensee) to a larger extent than it differs from it on the hurdles for a pre-emptive anti-antisuit injunction.

Arguably, the Munich court's decisive action against foreign antisuit injunctions has been the primary reason why no SEP implementer appears to have employed that tactic in about two years.

Finally, I wish to thank the Loeffel Abrar firm for drawing my attention to this decision via Twitter.

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This is a follow-up to 'Access Advance' patent pool can rename itself 'Suffer Setback' after Dusseldorf court ruling: flagrant FRAND abuse concerning video codec patents. In the previous post I discussed the logic of the Dusseldorf Regional Court's holding that certain Access Advance licensors owe Vestel damages for FRAND abuse, and cannot obtain injunctive relief against the Turkish TV manufacturer.

Weeks before I commented on this, Access Advance already sent an email to its existing and prospective partners, claiming that the outcome of the Dusseldorf cases was largely a win (as all of the asserted patents were deemed essential to the HEVC standard), and the denial of injunctive relief was disappointing but based on a narrow holding, which according to Access Advance wouldn't even have come down if a recent change to its Duplicate Royalty Policy had been made before--not after--trial. I disagree in at least three respects:

1. Access Advance can't explain away the significance of a denial of injunctive relief by a German court on unprecedented grounds. Dusseldorf is a video codec patent enforcement hotspot, and MPEG LA's licensors never faced any such issue.

2. While the court considered it dispositive that implementers who already had an MPEG LA license (such as Vestel) didn't enjoy legal certainty with respect to the avoidance or recovery of duplicate royalties when taking an HEVC Advance license, the court did express some skepticism concerning other aspects of the Access Advance business model--it just didn't have to analyze them to the full extent.

3. The duplicate royalty policy of the HEVC Advance pool is publicly available, and it doesn't withstand scrutiny. The problem is structural. The inadequacy of that duplicate royalty policy is crystal clear if one takes into consideration the way the Access Advance pool optimized its dealings with third parties (licensors as well as licensees) for just the needs of its four owners (General Electric, Philips, Dolby, and Mitsubishi). That conflict of interest is only going to exacerbate, as those four companies own a much smaller piece of the VVC patent cake than the one for HEVC.

It's high time that someone told the story of what's wrong with the Access Advance scheme. The more I've looked into this, the more I consider Access Advance a liability not only for HEVC but even more so with a view to the industry's transition to VVC (H.266).

In Germany, patent enforcement is all about injunctive relief. Damages don't matter unless you're asserting an expired patent. Access Advance's defeat is all the more shocking when compared to other video codec judgments in the same jurisdiction. I've been able to research 32 video codec enforcement campaigns (27 over MPEG-2, 5 over AVC) that started in Dusseldorf and were in each case brought by multiple MPEG LA licensors against partly large and sophisticated defendants (even including Huawei). 32 is a rounding error compared to more than 7,000 license agreements concluded by MPEG LA without litigation, but in absolute terms it's a large enough sample to serve as a point of reference here.

In at least six of those disputes, injunctions came down. Time and time again, MPEG LA's terms were considered FRAND, from the Dusseldorf Regional Court (where all those cases were filed) all the way up to the Federal Court of Justice. Is it just because MPEG LA's lawyers are better? Well, Krieger Mes's Axel Verhauwen and patent attorney Gottfried Schuell ("Schüll" in German) of Cohausz & Florack are extremely well-respected in the German patent litigation community. But I believe even they could not have defended Access Advance's duplicate royalty policy--a type of issue that never once came up in an MPEG LA case.

The duplicate-royalty issue facing those who previously took an MPEG LA (or direct) license cannot be fully understood without looking into how Access Advance entices a certain category of patent holders to join its pool as licensors. Not the only but by far the most important patent holder of this kind is Samsung, which holds far more HEVC patents than any other Access Advance member (arguably, Samsung alone accounts for about 40% of the pool)--but which is also an ultra-large-scale implementer with its phones, tablets, and TVs.

For a long time, during which the focus was almost exclusively on AVC/H.264, companies like that were actually happy to work with MPEG LA. They had an interest in encouraging widespread adoption of those standards, but due to their high-volume implementations of video codec standards they wanted to limit their spend on license fees.

So what was Access Advance able to offer an organization like Samsung--other than impeding the adoption of a standard and driving up licensing costs, none of which would normally be too appealing?

The story was that the likes of Samsung could still license all of MPEG LA's patents at the usual rate, but by joining HEVC Advance they also got the other patents in that (normally very expensive) pool at an extremely low cost in exchange for getting only a small payout from Access Advance relative to the actual size of their portfolios. If Samsung got its fair share of HEVC Advance's royalty distribution, it would get--like I said--about 40%. But it would drive up its royalty costs as an implementer, as Access Advance is like four times as expensive as MPEG LA. The oversimplified version is that Access Advance invited them to join the pool and the primary incentive was to save costs as an implementer, not to generate much of a license fee income as a patent holder--though the latter is what Access Advance's owners (GE, Dolby, Philips, Mitsubishi) very much care about.

Intuitively, one may ask: "What's wrong with that? Shouldn't patent holders who are also implementers be free to optimize their bottom line?"

Of course they can do that. The problem with the Advance scheme is just that its key success factor is not a more reasonable royalty rate--it's that others must be treated unfairly in order for Access Advance's owners to maximize their revenues and for certain patent holders who are large-scale implementers (first and foremost, Samsung) to optimize their bottom line.

And that takes us full circle back to the problem with duplicate royalties.

Access Advance is not merely about double-dipping, such as if a patent holder licensed a supplier and had actually exhausted its patent rights, but tried to get paid again somewhere downstream. The problem is more fundamental than that:

• By the time HEVC Advance started, and especially by the time some other major patent holders defected from MPEG LA as a result of the type of deal I outlined in the previous section, wide swaths of the implementer landscape had already taken an MPEG LA license, and therefore remain licensed to some companies' patents even after those patent holders left MPEG LA. But Advance is all about "let's charge several times more." Its business model critically depends on extracting higher royalties from some who already have a license to many of those patents.

• It would seem logical that if a licensee can get a cheap license to a set of patents or an expensive one, the licensee will prefer the less expensive option. Alternatively, some might argue that the principled approach is that the first license you take is a done deal and must be respected, so any pool licenses you take subsequently must factor out the patents to which you are already licensed. Whether one agrees with the first approach (let the customer choose) or the second (earlier-concluded license shall remain in force), there is just no principled--FRAND--basis on which the second pool can tell licensees they should pay for another (and more expensive) license to patents they've already licensed, and should then seek a refund from the first pool when the second pool is way more expensive than the first. But that's what Advance has been trying for a while, and what it's still trying, though the Dusseldorf court has just complicated--if not thwarted--that scheme.

• Advance's economics just wouldn't work if they had to do the right thing, which is to reduce the royalty rate if a licensee is already licensed to many of the patents in the pool. That's because large parts of the portfolio come from patent holders like Samsung, who don't actually get much money out of the pool (because they joined with their interests as net implementers in mind). If, say, a licensee had to pay 100ドル million, 40% of which would be distributed to Samsung (minus management fees, which I'll talk about in a moment), and the licensee already had a license to Samsung's patents, then the royalty payment could be reduced to, say, 60ドル million. But here, while Samsung's patents would be used by the Advance pool in order to inflate the portfolio value when a court has to evaluate or determine a royalty rate, Samsung wouldn't get 40ドル million anyway, so there isn't really anything that Access Advance can deduct without its owners losing money on the deal.

• What makes all of this even more complicated is that Access Advance is known to charge very high management fees. In the aggregate of multiple types of fees and charges, Access Advance keeps roughly 40% of the royalty income, which is several times more than MPEG LA's cut according to what people in the industry say about it. The higher the management fee, the more of an incentive the pool administrator has to avoid any reductions (no matter how reasonable in light of prior licenses), and the harder it is to make an adjustment work economically for all parties involved.

For the reasons I've just explained, it is essential to the Advance scheme that implementers are forced to take a license at a far higher rate than the MPEG LA rate.

Having laid the foundation in the previous passages, let's now look at HEVC Advance's Duplicate Royalty Policy. That one is a joke.

The first glaring deficiency is that it talks only about patents that are "also included in the patent list of another patent licensing pool, or joint licensing program," without addressing the scenario in which someone took a direct (bilateral) license, which is not at all uncommon in this industry. Bilateral licenses can result from license agreements or even from patent exhaustion. The Access Advance folks know that, and it must be attributed to bad faith that their Duplicate Royalty Policy fails to address that problem.

Even with respect to pools and joint licensing programs, that policy is merely reflective of the problem and does not provide a workable solution. In a duplicate-license sceario, Access Advance does nothing for licensees other than to "refer the request to the applicable Licensor(s)" (footnote 3), which falls far short of what the Dusseldorf court wanted, which was legal certainty for licensees. Unless a licensor and a licensee reach an agreement (in which case one doesn't need a policy anyway because they're on the same page), each licensor then gets to choose the lesser of two refund amounts:

• the net distribution the Licensor received from Access Advance, or

• the net distribution the Licensor received from another pool or joint licensing program.

Footnote 5 clarifies that net distribution "expressly exclude[s] all fees and other allocations/deductions made by Access Advance prior to apportionment and distribution of net royalty collections to all Licensors based on their respective patent portfolios." One of the problems is that Access Advance takes a huge cut, which the policy declares immune from a refund. With a much more reasonable pool management fee, even licensees might accept not getting that part refunded, but in the case of Access Advance, it's a major economic issue.

Furthermore, Access Advance is so intransparent and asymmetrical that you can't just look at the percentage of the patents you've licensed and you know what refund you'll get: a Samsung may contribute lots of patents but not actually get much (if any) money out of the pool.

Another problem with "net distribution" is that if Samsung makes products and obtains a cheaper license for them by contributing its patents to the pool, why should--to use the current Dusseldorf examples as examples--Vestel and Xiaomi (who compete with Samsung) indirectly pay for that by Samsung's true benefits from is membership in the Access Advance pool not being taken into consideration in the refund context? It's so unfair and unreasonable.

There will be some licensors who get a lot of money out of Access Advance (especially its founders). They're obviously going to elect the more profitable option for them: they'll refer implementers to MPEG LA for a refund. Someone like Samsung, however, could argue--based on Access Advance's policy--that they don't really get much money out of that pool, so there's pretty much nothing they can offer as a refund.

The root cause of all of the problems outlined in here (and I don't even claim that this is an exhaustive list of issues) is that Access Advance serves the interests of its four founders, then does asymmetrical deals with patent holders who are major implementers, and in the end tries to let the Vestels and Xiaomis of the world pay the bill, which in turn impedes the widespread adoption of the standard.

The exorbitant pool management fees I mentioned in the previous section are just an example of a construct that is just meant to make GE, Philips, Dolby, and Mitsubishi more money. The implications of asymmetrical terms (with some getting a lot of money out of Access Advance, while others are just interested in reducing their own licensing costs) for refunds are another example. And now that the industry is transitioning to VVC, there's another problem to bear in mind: the collective share in HEVC patents belonging to Access Advance's founders is far greater than their positions in VVC. IPlytics held an "Unpacking VVC SEPs and standards contribution data" webinar last summer. IPlytics explained how difficult it is to analyze who owns how much of VVC, but they gave it a try, and one can see that some companies who held no AVC or HEVC patents are now pretty big significant contributors to VVC (TikTok operator Bytedance, for instance), while GE, Philips and Mitsubishi don't seem to play a major role in VVC. Dolby is still somewhat significant, but not a leading VVC contributor either.

For Access Advance's founders, HEVC is therefore more lucrative than VVC. That's why it makes economic sense for Access Advance to offer a combined VVC-HEVC license with a certain discount: its founders own a larger share of a combined VVC-HEVC pool than a VVC-only pool.

With respect to VVC, Access Advance is an early entrant and may be able to avoid the problem that licensees got a less expensive license through another pool before Access Advance came to them and wanted them to pay even more for a license they already had. But the root cause of the Dusseldorf disaster is deep and structural. It's that Access Advance games the SEP licensing system to the benefit of a small group of companies. It's not a transparent pool administrator who treats everyone at arm's length regardless of whether a patent holder is a shareholder in the pool firm or not. Instead, Access Advance is a scheme that makes its founders money, makes NPEs money, saves patent holders who are major implementers money by giving them terms that are fundamentally different from the terms offered to founders and other net licensors, and then has to prey on other implementers in order to make money.

This is not the right way forward for the industry.

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