OPPO defends another 5G patent against Nokia's opposition: Mannheim trial scheduled for December, UPC PI motion conceivable, and what would the EUIPO do under the proposed regulation?

Nokia and OPPO are giving each other a hard time in different patent validity fora. Recently, even some Nokia patents that gave rise to German injunctions have been deemed invalid in other--but definitely reputable--jurisdictions. It's a monumental, earth-spanning dispute. There hasn't been anything so large and long-running in the wireless sector for years.

The latest development involves OPPO's EP3624524 on "wireless communication methods, network device, and terminal device." It's a 5G declared-essential patent that OPPO asserted against Nokia in Mannheim, with a trial scheduled for December 5, 2023. In early February, an opposition panel of the European Patent Office (EPO) declared the challenged claims non-novel, but did not take a specific position on (non-)obviousness. Yesterday, the panel upheld the patent in an amended form.

The Bardehle Pagenberg patent attorneys who achieved that partial victory are Tobias Kaufmann and Dr. Nikolaus Buchheim.

In June, another OPPO patent-in-suit was also defended in an amended form, and a modification of the claim language that looked like a minor clarification to me resulted in a non-essentiality determination by the Mannheim Regional Court. So I want to be careful about any predictions at this point. The patent may or may not be standard-essential in its narrowed form. And if it's not essential, then it may or may not be infringed, but an infringement allegation would have to be based on what Nokia's baseband stations actually do as opposed to a (rebuttable) presumption that what reads on the standard is infringed by a product that has been declared standard-compliant. As there is no pretrial discovery in Germany (in fact, nothing even remotely like U.S. discovery), it is far easier to properly plead an infringement case over a SEP than over a non-SEP.

I've recently attended several preliminary injunction hearings before Local Divisions of the Unified Patent Court (UPC): two in Munich (with Bardehle Pagenberg having won one case while the other is under advisement), and one each in Vienna and Helsinki. Companies are increasingly concerned about the implications of a patent surviving, in one form or another, a validity challenge, as the UPC appears rather willing to grant preliminary injunctions over such battle-tested patents, provided (of course) that other requirements, such as urgency, are met.

The Nokia v. OPPO/OPPO v. Nokia dispute showcases various of the things that can happen in SEP enforcement, raising the question of what would happen--or would have happened--if the proposed EU SEP Regulation was already in force.

With respect to what implications the amended claims of EP3624524 would have under the EU SEP Regulation, there are at least two interesting questions:

• If there had been an essentiality check based on the patent as originally granted, would the EUIPO routinely perform a new one in a situation like this?

• If the claim amendments pushed the patent out of the area of essentiality, but the patent could still be asserted as a non-SEP, wouldn't the patent holder actually be in a stronger position than if it was deemed essential for purposes of the EU SEP Regulation?

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Avanci 5G doubles number of licensees, quadruples number of licensed brands as BMW signs up: Volkswagen/Audi next?

The Avanci 5G automotive standard-essential patent (SEP) pool revealed Mercedes-Benz as its first licensee last month. Today the licensing program announced that BMW has joined as well, which takes the number of licensed brands from one to four: Mercedes, BMW, MINI, and Rolls-Royce. Today's press release also indicates that the number of licensors has increased from 58 to 61.

By now, almost the entire automotive industry has an Avanci 4G license. But back in 2017, BMW became Avanci's first 4G licensee. It took a while for that pool to be widely adopted. Things appear to be going significantly faster with Avanci 5G now.

In retrospect, BMW's decision made business sense unless one believes in the illegal concept of group boycott: Mercedes (then named Daimler) and Volkswagen did not save money by opposing the Avanci model. They ended up choosing the pool license over bilateral licensing negotiations and disputes, but unlike BMW they incurred litigation expenses (in Volkswagen's case, the dispute was short-lived and due to the fact they licensed only 3G patents for most of the cars the group makes). BMW saved money, time, and energy. They stayed above the fray.

While I have not yet seen a German SEP infringement case targeting BMW, they are clearly not a soft target for non-SEP holders. Typically represented by Bardehle Pagenberg's Professor Tilman Mueller-Stoy ("Müller-Stoy in German), BMW is known to defend itself vigorously against patent infringement assertions, though most of the time the outcome is, obviously, a license agreement. If such a company takes a license without litigation, it must have concluded that the licensed patents are valuable.

Germany's remaining three automotive brands are Volkswagen, Audi, and Porsche, all of which belong to Volkswagen Group. Audi and Porsche clearly compete in some of the same market segments as BMW and Mercedes. It would make a lot of sense for VW to join the pool now. Sooner or later, some 5G SEP holders will start to enforce their rights against unwilling licensees. Just like German judges pressed Mercedes (then named Daimler) to explain why a license that had been taken by their closest (and equally German) competitors: BMW and Audi. I doubt that Audi would want to have to justify--particularly in front of the same judges who heard Nokia v. Daimler--a refusal to take a license that Mercedes and BMW deem to make economic sense.

Just like actions speak louder than words, real-world license deals are way more meaningful than spin doctoring and political propaganda. Mercedes-Benz told the EU that the proposed SEP regulation (or something even more lopsided) was badly needed, yet became the first Avanci 5G licensee because they deemed it prudent. Similarly, BMW Group is now an early adopter of the Avanci 5G license, yet it is a member of the Fair Standards Alliance and of certain automotive industry organizations that take similar positions.

There's nothing difficult to understand: every company would like to bring any cost category--here, cellular SEP license fees--down, even if such costs are already fair and reasonable. Automakers are no different. That is unrelated to the merits of Avanci providing a one-stop solution that Mercedes and BMW have twice (4G and now 5G) considered superior over dozens and dozens of bilateral deals. And opportunism by some car makers certainly doesn't make the EU proposal any less misguided. Case in point, a single Nokia v. OPPO decision in Sweden (which went in the defendant's favor) showcases at least four of the countless flaws of that bill.

Accurate and holistic analysis needs to look at what those companies say and what they do. License deals that are concluded in the absence of litigation--and presumably even without the slightest threat of litigation other than the fact that any infringement may sooner or later become the subject of enforcement action.

Europe's and particularly Germany's automotive industry is facing undeniably large problems. Cellular SEP licensing is none of them, though. Even if those costs were reduced through political intervention (which I don't see happening, though it is some people's agenda), that wouldn't help to address any of the fundamental challenges facing the European auto sector, particularly because there's no comparative advantage for companies selling cars in a given target market in which certain patents must be licensed.

Today's Avanci-BMW announcement is good news for those who argue that the market can and will find solutions, as are other recent license deals such as Huawei's recent agreement with Xiaomi.

Patent pools exist to simplify licensing--which must have been the reason why BMW entered into one agreement rather than 60+ bilateral deals--while some EU officials and politicians are trying to complicate the process and mistakenly view pools as part of the problem, not part of the solution.

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Huawei and Xiaomi sign patent cross-license agreement

This article was delayed by the fact that I attended a Unified Patent Court hearing in Vienna yesterday (which was really interesting and I'll write about it later). That same day, Huawei and Xiaomi announced a global patent cross-license agreement that covers, among other things, 5G. They provided the following quotes:

Huawei IP chief Alan Fan:

"We are delighted to reach this licensing deal with Xiaomi. This licensing agreement once again reflects the industry's recognition of Huawei's contributions to communications standards and will help us enhance our investment in researching future mobile communications technologies."

Xiaomi IP chief Ran Xu:

"We are glad to reach a patent cross-licensing agreement with Huawei. This shows that both parties recognize and respect each other's intellectual property. As part of our commitment to our values around IP, Xiaomi will, as always, respect IP, seek long-term and sustainable IP partnerships for shared success, drive technology inclusion with IP, and allow more people to benefit from technology."

It was reported a while ago that Huawei had requested a special Chinese proceeding that was not tantamount to infringement litigation, but designed to give the parties valuable guidance so they could strike a deal. That objective has clearly been accomplished.

In December 2022, Huawei already announced an agreement of this kind with OPPO.

Neither Xiaomi nor OPPO can be blamed for the geopolitical aberrations that have effectively forced Huawei out of the handset market. And the vacuum created by those circumstances was an opportunity for device makers anywhere on this planet. But it's also true that Xiaomi and OPPO benefited from that development, and some people would argue that Xiaomi did so to an even greater extent.

While Huawei is an Avanci licensor, Xiaomi is not (and OPPO only for 4G so far, but they can still join 5G and I guess they will sooner or later).

Huawei remains consistent with its approach that IP absolutely must be respected--but not overleveraged.

Last month Huawei also announced a cross-license agreement with Ericsson.

While the EU focuses on complicating the standard-essential patent licensing process (see 1, 2, 3), key market actors such as Huawei continue to work out solutions. EU policy makers should ask themselves how Chinese companies manage to agree on cross-licensing terms with each other in the absence of what the kind of register and FRAND determination proceedings the proposed EU SEP Regulation would put in place in Europe.

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New Mercedes-Benz statement: despite Avanci 5G license, EU should enact regulation on standard-essential patents in accordance with DG GROW's legislative proposal

Mercedes-Benz (formerly known as Daimler, though Mercedes has been its most famous brand for a long time) recently became known as the first licensee to participate in the Avanci 5G standard-essential patent (SEP) platform. The company previously engaged in bilateral licensing of 4G patents with Nokia and others, only to then opt for Avanci's 4G pool as a one-stop solution.

Last month, the European Commission published the car maker's feedback to the proposal for an EU SEP Regulation by the Commission's Directorate-General for the Internal Market (DG GROW). According to Mercedes, the proposed regulation "is urgently needed to eliminate the current lack of transparency and the associated imbalance in license negotiations on standard essential patents." The document advocates moving the needle even further to suit the interests of implementers.

I reached out to Mercedes to help me understand whether, after securing the vast majority of cellular communications licenses they need, there is any practical reason at this stage for them to call for legislative intervention. A spokeswoman replied later in the day. Let me show you the original statement in German, followed by my translation:

Mercedes-Benz steht für Innovation und wird mit der neuen E-Klasse die 5G Konnektivität als einer der ersten Automobilhersteller in den Markt einführen (Herbst 2023).

Wir bekennen uns klar zu den FRAND-Regeln und werden trotz eines derzeit erst entstehenden Lizenzmarktes nur lizenzierte Produkte in den Verkehr bringen.

Mercedes-Benz hat sich auch aus wirtschaftlichen Erwägungen entschieden, die angebotenen Rechte über den 5G-Avanci-Pool zu lizenzieren. Grund dafür waren mangelnde Transparenz z.B. in Bezug auf Preise und Schutzrechte sowie fehlende effiziente Alternativen.

Mercedes-Benz hält es weiterhin für erforderlich, dass der von der EU-Kommission vorgelegte Entwurf einer Verordnung über Standard-Essentielle Patente umgesetzt wird. Eine solche Verordnung kann einen klaren und vorhersehbaren Rechtsrahmen sowohl für SEP-Inhaber als auch für die Implementierer schaffen.

Translation:

Mercedes-Benz promotes innovation and, with its new E-Class generation in the fall of 2023, will be one of the first car makers to launch 5G-connected automobiles.

We are clearly committed to the FRAND regime and will only release licensed products into commerce, even though the licensing market is currently just developing.

Mercedes-Benz decided for economic reasons to license the relevant intellectual property rights via the Avanci 5G pool. The reason was a lack of transparency with respect to fees and intellectual property rights as well as the absence of efficient alternatives.

Mercedes-Benz continues to deem it imperative that the European Commission's proposal for a regulation on standard-essential patents be implemented. A regulation of that kind can establish a clear and predictable legal framework for SEP holders as well as implementers.

The part that has me particularly puzzled is the one about a lack of transparency concerning licensing costs and IPRs:

• The Avanci 5G fee is public: it's on the Avanci website.

• The licensors are all listed on the same website.

• Mercedes can find out via ETSI and other standards development organizations, or certain patent databases maintained by private enterprises, what patents those licensors have declared essential to 5G.

• The alternative to Avanci 5G would have been bilateral licensing, which they tried with 4G and apparently deemed inefficient in 2021. They could have reached out to patent holders and inquired about bilateral licensing terms.

Pragmatic or dogmatic?

Mercedes sees value in Avanci and doesn't want to risk a new round of infringement litigation (like they experienced with 4G), but the feedback they submitted to the European Commission and the statement they provided to me suggest that they believe they could get a better deal from their perspective if the EU proposal was passed into law.

This is like if one of their customers said "yes, I'll buy the new E-Class because I think it's a good deal, but I want an even better one, so I'll ask lawmakers to regulate the market so I'll get it at a lower price next time."

The praise they heap on the EU proposal is premised on two assumptions:

• that the costs of an EU SEP Register and the related essentiality checks and FRAND determinations (to be conducted by expensive experts) will not only be borne but also internalized by SEP holders; and

• that the EUIPO-appointed "conciliators" will set low aggregate and bilateral royalty rates.

What Mercedes is hoping for here may very well be consistent with DG GROW's intention. But it may just not be how the market is going to work.

Mercedes is far from the only car maker to have endorsed the EU proposal. I will comment on various other submissions (and resumed my commentary on the EU SEP Regulation with yesterday's post on Dr. Justus Baron's new paper). They are, however, the first Avanci 5G licensee, which they clearly say made economic sense for them. In other words, Avanci 5G is part of the solution. The problem is practically solved given Avanci 5G's sky-high share of the overall 5G SEP landscape. There's not a lot of 5G SEPs left outside that pool over which anyone would have to fear infringement actions. The ones who do seek to generate licensing revenue overwhelmingly participate in the program.

The Avanci 5G rate is presumably a lot less than what Mercedes will charge its customers for just one year of mobile data service (after the first couple of years, which are typically included). Mercedes also knows for how many years its cars are used: typically like 15 years or more. The license fee, however, is paid only once per car.

All of that leaves me to wonder whether Mercedes is just trying to get a better deal or whether there is a difference between the business perspective ("good deal") and a legal philosophy ("we want more of an opportunity to hold out").

I'm sure that I'm not the only one who raised that question. EU lawmakers (in the Parliament as well as the Council's experts, who are de facto--though unelected--legislators) can easily see that the automotive industry has a solution for cellular SEPs that makes economic sense. Against that background, there is no case for massive legislative intervention. As FT columnist Brooke Masters wrote last week, "heavy-handed intervention from Brussels could be counter-productive" and "[g]overnment price-setting rarely works as intended."

It would be interesting to see "government price-setting" in the automotive sector, including for automotive data plans. When it comes to the transparency of fees, many purchasers of cars don't even know what they will be charged for data services after the first few years until they get an email or letter telling them to pay up. There's also no transparency of how the annual fees for those services are split between the car maker and whatever carrier it partnered with.

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Avanci announces 5G patent pool with 58 licensors, notably also including Huawei, and former Nokia foe Mercedes as inaugural licensee

It's been well over two years since I first heard from industry colleagues about an Avanci 5G pool being supposedly launched in a matter of months. Things can always take longer, especially when the adoption of a new technology by a particular industry is somewhat slow. But now--right in the middle of a month with hardly any patent-related news--the 5G standard-essential patent (SEP) licensing program for the automotive industry has just been launched.

Compared to how huge this story is--arguably the biggest development in patent licensing this year--Avanci's press release is relatively short and low-key (apart from the firm describing itself as "the independent global leader in joint licensing solutions"). Two numbers are interesting:

• 59 participants in the sum of licensors and licensees prove market acceptance for the new offering from Day One.

• The reference to "more than 130 million connected vehicles" licensed by Avanci's 4G program recalls the platform's prior success.

When Avanci started with its 2G, 3G and 4G programs, there was only a small circle of licensors; eventually, BMW signed up as the first licensee; and it took several more years to achieve a high level of market penetration. I was a skeptic and a critic at the early stages, but recognized that an automotive suefest was not the answer and that bilateral licensing--which does (as it must) remain an option--is economically inefficient given the relatively low unit volume of most car makers (even the big ones have an annual unit volume comparable to any major smartphone maker's monthly output).

If one looks beyond the press release, the licensing program's website reveals the terms and who's involved:

• The royalty rate is $29 per vehicle for those who sign up "before the later of February 16, 2024 or first sale of [a given car maker's] 5G connected vehicle." Thereafter, the price goes up to $32. About a year ago, many car makers signed up ahead of a $15-to-$20 price increase for 4G. For those who are already selling 5G vehicles, there is now a six-month window to secure the early-bird rate.

• The first licensee is Mercedes (formerly known as Daimler, though arguably the Mercedes was always more famous than any of the organization's different corporate names). Its logo, the steering wheel-like star, is displayed on the website.

• Qualcomm, Ericsson, Nokia, and InterDigital--the four major net licensors of cellular SEPs--are all on board again, as are dozens of others. (Last time, Nokia wasn't even on the initial list, but joined later on.)

• The most famous new licensor (not only of Avanci 5G but also 4G) is Huawei. They have a huge and powerful portfolio of cellular SEPs (the 5G leader by some measure). Huawei very much emphasizes the pursuit of a balance between licensors' and licensee's interests and believes in application-specific licensing terms.

• Two other Asian companies that are major automotive industry suppliers and were previously known to participate in Avanci's 4G program are also among the 58 initial 5G licensors: Samsung and LG.

• What about absentees? Conversant participated in Avanci 4G and is not listed now, but its portfolio is pretty much expired anyway. Deutsche Telekom was an outlier anyway, given that it was the only member of the Fair Standards Alliance to participate. The only major 5G patent holder missing at this point despite having participated in the 4G pool is OPPO. But OPPO is embroiled in litigation with (at least) four other licensors: Nokia (that's the largest-scale SEP dispute at the moment), InterDigital, Philips, and now also Panasonic.

• Avanci's 4G program kept adding licensors through the years, and we may see the same trend here, though the initial coverage is already impressively comprehensive.

• From a half-dozen of patent holders who are listed among Avanci's 5G licensors but weren't (and apparently still aren't) involved with the 4G program, China Telecom stands out.

There'll be more to say about Avanci 5G in the months and years ahead. For now, suffice it to comment from a few interesting angles on today's story.

Rapid ramp-up: On the licensor side, the job is largely already done. For licensees, the decision shouldn't be hard. Those making 5G cars at this point will likely seize the opportunity. The reason I think so is that no one could stand up inside those organizations and put forward a superior plan. Infringement is illegal, bilateral licensing is (in this context) inefficient: too many portfolios to license. Not only would it take a lot of negotiations and potentially even lawsuits, but the aggregate licensing costs (not even considering transactional inefficiencies) would easily exceed the pool rate. In any FRAND dispute in a court of law, it would have to be considered that cars are in use for far longer periods than smartphones, and that car makers generate incremental revenues from data services over the years.

Licensing preferred over litigation: It's quite a coincidence that on the same day Mercedes is revealed as the first Avanci 5G licensee and Huawei as a new (4G and 5G) licensor. The former brought an EU antitrust complaint against Nokia in late 2018 (which went nowhere), and the latter was not just one more intervenor on the automaker's behalf in the Nokia v. Daimler infringement dispute but filed a third-party counterclaim seeking an exhaustive component-level SEP license from Nokia (as opposed to have-made rights, which Avanci has always offered, as have Nokia and others on a bilateral basis). That one was withdrawn last year, and a new cross-license agreement was concluded a little later. The two companies who disagreed with Nokia on automotive SEP licensing years ago are now on board--alongside Nokia--the next generation of the licensing program. It shows that reasonable people can work things out with each other.

Chinese dimension: The involvement of Huawei, China Telecom, and other Chinese entities as well as Sharp (Japanese, but owned by Foxconn) seems very significant in geopolitical terms. It would now make a lot of sense for Chinese car makers to take licenses.

EU patent policy: Among the quasi-legislative powers that the European Commission's Directorate-General for the Internal Market (DG GROW) is asking lawmakers to bestow upon the EC there is the decision on what standards and use cases should be subject to the proposed EU SEP Regulation. Arguably, automotive SEP licensing could be excluded as the market has solved the problem. Where's the value-add of the envisioned legislation? A rational analysis of what royalties wireless innovators are entitled to when their technologies are incorporated into vehicles could easily result in a substantially higher aggregate royalty rate. While DG GROW is creating unnecessary problems, licensors taking their FRAND commitment seriously and willing licensees are coming together.

Leaders: I rarely mention patent pool managers unless they speak at conferences. Here, I noticed that besides Avanci founder Kasim Alfalahi, whose vision has indisputably come to fruition, the press release also quotes senior VP Laurie Fitzgerald, a U.S. attorney based in Dublin whom different patent holders mentioned to me this year and last as their point of contact for the 5G program.

Today's announcement is a milestone. In order for autonomous driving (which will, of course, have limitations for many years to come) to materialize, connectivity is key, and the advantages of 5G are not just related to bandwidth, but 5G also reduces latency. Ideally, car makers and their suppliers will focus on innovative applications--and cross cellular SEP licensing off of their to-do lists, for the most part at least.

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OPPO effectively defends 5G standard-essential patent against Nokia's opposition: EPO upholds claims based on minor clarification; Mannheim trial scheduled for 6/27

The patent spat between Nokia and OPPO is about two weeks away from its second anniversary. It became known this month that Nokia obtained injunctions against a dozen German resellers of OPPO and OnePlus devices. The parties' efforts to invalidate each others patents (not only the ones that are actually being asserted) are a major part of the earth-spanning dispute. Last month OPPO invalidated another two Nokia patents and a written decision in favor of Nokia's opposition to one OPPO patent came down as well.

This week, OPPO achieved something that might have paved the way for a Mannheim injunction against Nokia this summer. At the end of an opposition hearing held on Tuesday (6/13), the European Patent Office (EPO) upheld, with only a minor clarification added to the claims and the description, one of OPPO's patents-in-suit (click on the image to enlarge):

The patent-in-suit is EP3672346 on an "information transmission method, terminal and network device." The Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) will hear the OPPO v. Nokia infringement case over this 5G standard-essential patent the week after next (June 27 to be precise). That trial could get really interesting.

All that it took for OPPO (lead patent attorneys: Bardehle Pagenberg's Tobias Kaufmann and Dr. Patrick Heckeler) to fend off Nokia's opposition was the following insertion into the claim language as well as the first page of the description:

determining, by the terminal, that the time interval is not less than a preset time interval;

An interval defined by a standard is only meaningful if a minimum period of time is predefined. Presumably the relevant determination here is made by the end-user device, so I assume that this insertion is not going to change anything about the essentiality analysis. While OPPO has already exited the German market, I doubt that Nokia would want to do so, and that's why Nokia must defend itself against OPPO's offensive cases or it might have to settle before it gains decisive leverage in another jurisdiction.

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Sisvel announces standard-essential patent license agreement with Microsoft covering 5G-capable Surface devices: first (known) 'blue chip' licensee of new program

Patent pool administrator and licensing firm Sisvel just issued a press release announcing that Microsoft "has entered into a patent license agreement for the Sisvel 5G Multimode (5G MM) Program."

I wrote about that standard-essential patent (SEP) pool in December, noting that the 5G royalty rates are actually lower than past published rates (4G program), which I said should make the offer more palatable to licensees. It's clearly a good sign that Sisvel announces the first big-name licensee of that pool within about six months of the creation of that particular licensing program.

Some of Microsoft's Surface devices (which are tablet-notebook hybrids) come with 5G connectivity. For instance, the technical specifications of the Surface Pro 9 state the following:

5G-NR NSA (mmWave): Release 15 DL 64 QAM up to 4.2 Gbps 4xDL CA (400MHz), 2x2 MIMO

5G-NR NSA (mmWave): Release 15 UL 64 QAM, 2xUL CA (200MHz), 2x2 MIMO

5G-NR NSA (mmWave) Bands: n257, n260, n261

What makes this so meaningful for Sisvel is that Microsoft--while obviously not one of the largest makers of devices with cellular connectivity--is one of the most sophisticated licensors and licensees. I'm saying so because I've seen them enforce and defend against patents. While I've disclosed a working relationship with the company, it is entirely unrelated to SEP matters. I only learned about this license deal as a result of Sisvel's announcement.

Sisvel's 5G MultiMode licensing program manager, Donald Chan, is quoted in the press release as expressing his belief that this agreement with Microsoft "not only confirms [Sisvel's] license offer to be fair and reasonable, but also underlines the merits of the patent portfolio of [Sisvel's] partners."

The terms of the agreement were obviously not announced, but that statement in the press release combined with the fact that the published terms on the website are still the same as in December suggests that the deal validates the pool's standard terms. The short period of time between the creation of that pool and today's announcement indicates smooth negotiations. Microsoft wouldn't have taken the license if they didn't believe that other 5G device makers would reach the same conclusion on whether the terms are FRAND.

Looking beyond this particular pool, I consider today's Sisvel-Microsoft announcement significant with a view to the legislative process in the European Union concerning SEPs: the proposed EU SEP Regulation. There are various issues with that one, including an inconsistency I discussed this week, and it's hard to understand why the European Commission's stance on patent pools turned a bit negative. The license agreement announced today is actually a pretty good (and representative) example of how pools can create transactional efficiencies: the alternative would have been for Microsoft to work out bilateral agreements with more than a dozen patent holders. They could have done that here. The contributors to this pool remain free to enter into direct license agreements. But if the terms make sense, it's more efficient for an implementer to opt for a one-stop solution. I highlighted verb "to opt" because it's optional.

I frankly found it surprising that the Commission did not fix a misrepresentation of Sisvel's history (the clearly incorrect claim that Sisvel was originally in some unspecified product business, which actually never existed) between the leaked late-March draft and the final version of the impact assessment. But that's just an oddity.

The SEP licensing progress can be improved, and pools can contribute in their way. The proposed EU SEP Regulation would just impose costs and onerous disclosure requirements on SEP holders and pools as if those on the licensor side of the negotiating table were responsible for all of the problems. If there were no SEP holders, there would be no licenses and no litigation. Then, if there were no patents in the first place, there would be no SEP holders. And if there were no patent offices, there would be no patents. The ultimate solution would be to have no inventors and no standards. Oh wait. Maybe we're going too far now? Just a little bit?

It's hard to see why the proposed EU SEP Regulation imposes so many requirements on pools. That Sisvel 5G Multimode pool actually does provide a lot of transparency. It essentially meets the envisioned requirements, except that they can only disclose licensees when they are authorized to do so. Microsoft apparently had no problem with it, but other licensees don't allow such announcements.

Like in any business, there are outliers. There are also some outlier pools. But by and large the system works pretty well, and today's announcement supports that view.

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OPPO has invalidated another two Nokia patents this month: European Patent Office revoked patents and rejected proposed amendments

The 5G patent dispute between Nokia and OPPO will "celebrate" it second anniversary in about six weeks. Nokia won and started to enforce some German injunctions, but OPPO decided to exit the market--for the time being, and who knows for how long. In other jurisdictions, Nokia did not get leverage either. As a result, the dispute drags on and on, with no resolution in sight.

The parties are attacking each other's patents, not only the patents-in-suit but also additional ones. They've both made some headway, but OPPO's challenges started earlier and that's why OPPO is ahead in terms of actual invalidation decisions (as opposed to preliminary opinions, several of which favor Nokia's attacks on OPPO patents).

OPPO is rather defensive and makes use of its patents only for retaliatory purposes, while patent licensing is a strategic business area for Nokia. Therefore, whatever patents OPPO manages to strike down has implications for what represents a major revenue source to Nokia.

None of the decisions so far is final as they can all be appealed, but this month OPPO has won two more favorable decisions from the Opposition Division of the European Patent Office:

• On March 3, the EPO revoked, at the end of an oral hearing, EP3167669 on "apparatuses and methods to introduce flexible support for services" in its granted form and also rejected Nokia's proposed amendments to the claims.

• As the result of an oral hearing on March 9, the EPO also revoked EP3395029 on "methods, apparatuses and computer program product for pdu formatting according to sdu segmentation", in the form in which it was granted and simultaneously rejecting Nokia's proposed amendments (click on the image to enlarge or read the text below the image):

  

  "The European patent is revoked because, account being taken of the amendments made by the patent proprietor during opposition proceedings, the patent and the invention to which it relates were found not to meet the requirements of the EPC (Art. 101(3)(b) EPC)."

A Chinese article provides an overview of 10 oppositions (nine by OPPO, and a tenth by a third party) to Nokia patents.

There'll be more news from this dispute, unless they settle, which they presumably will, but possibly later, not sooner...

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OPPO asserting patents from Huawei against Nokia in Germany while Indian court notes OPPO's rejection of Nokia's recent arbitration proposal

Approximately 20 months after Nokia sued OPPO, the two companies' positions appear to be further apart than ever. Time is on OPPO's side, however:

• Nokia's financials are affected by not getting any patent royalties from OPPO (and Vivo, a dispute on which I provided an update a few days ago).

• A Chinese court in Chongqing will in the not too distant future make a FRAND determination that Nokia seems to try hard to avoid: Nokia's strategy is to gain leverage in the meantime, which is why Nokia obtained a preliminary injunction in Brazil (I mentioned this latest escalation of the dispute on LinkedIn).

• At some point OPPO may beat Nokia at its own game and get decisive leverage from an injunction--not because that was OPPO's original idea, but as a result of a protracted dispute.

It became known about a week ago--as I mentioned on LinkedIn first--that OPPO brought three additional patent assertions against Nokia in January. They all involve patents that belong to Huawei but have been exclusively licensed to OPPO, which is sufficient to confer standing in Germany. These are the patents-in-suit:

• EP3386131 on an "information transmission method and device"

• EP2863570 on a "method, user equipment, and base station evolved node for determining precoding matrix indicator"

• EP3582567 on an "indication method and device for physical resource block (prb) grid"

With respect to the last one of those patents, the Mannheim Regional Court has confirmed that OPPO amended an existing complaint to assert that patent. The other two patents are being asserted in Munich.

Nokia issued a statement, the first sentence of which holds this strategy against OPPO's own portfolio:

"The fact that OPPO has had to resort to using another company’s patents to bring these actions against us significantly undermines OPPO’s arguments on the strength of its own 5G patent portfolio."

I believe the reason OPPO is asserting those Huawei patents is not that it doesn't have confidence in the value of its own patents. The primary benefit that OPPO gets out of this strategy is that it adds an element of unpredictability. Unlike assignments, exclusive licenses are not registered. No one knows what exclusively-licensed patents (and from whom) OPPO may assert in the next countersuit. As for the value of the portfolio for FRAND purposes, the courts will have to consider exclusively-licensed patents just like homegrown patents or assets that were reassigned to OPPO.

I understand what Nokia wants to say, but German patent cases are not like U.S. jury trials, where psychological elements can impact the outcome. The German judges will just look at those patents in terms of whether they're valid and infringed.

In December, Huawei signed patent cross-license agreement with both OPPO and Nokia.

There is an indication now that Nokia wants more--potentially a whole lot more--from OPPO than under the previous (2018-2021) license agreement. As IAM was first to report (paywalled), Nokia made an arbitration proposal in India, but the court noted that OPPO is going to decline. The first provision of that proposal--as quoted by the Delhi High Court--is the following:

"Oppo pays the same amount as under the 2018 Agreement directly to Nokia as an interim payment. This interim payment will obviously will not be reflective of the full FRAND rate for the new licence agreement."

In November, the Indian court denied a Nokia motion to force OPPO to make such interim payments. The passage from Nokia's proposal that I just quoted is probably not the only reason why OPPO is unreceptive to the idea. But if OPPO accepted that one, it would imply that Nokia is now entitled to a higher royalty rate.

Nokia's proposal would have involved a stay of all pending litigation around the world while arbitration would be taking place in Hong Kong or Singapore. Contrary to de-escalation, however, Nokia obtained a preliminary injunction in Brazil as I mentioned further above.

What represents far more of a contradiction is that Nokia makes an arbitration proposal in 2023, but in 2022 Nokia told a UK court that "it was now too late to arbitrate this dispute given the passage of time since 1 July 2021 and the substantial investments made by the parties in litigation in the national courts."

In an IAM interview, OPPO's IP chief Adler Feng stressed that OPPO wanted to start mediation even before Nokia's first 2021 lawsuit against OPPO. And he pointed to a passage from a UK court ruling that I had also quoted in November 2021 and according to which "the Chongqing Court, if and when it rules on royalty rates, will do so justly."

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China-based 5G chipset designer UNISOC contributes its patents to Sisvel's 5G standard-essential patent pool for smartphones, other consumer electronics products

When new licensors join a pool, it always means that additional patent holders believe in the pool's success, and that the value proposition to licensees becomes more attractive. Depending on who joins, additional aspects may be relevant. That is the case with what Sisvel announced this morning: Shanghai-based 5G chip design company UNISOC (formerly known as Spreadtrum) has joined Sisvel's 5G Multimode patent pool for consumer electronics products (smartphones, tablets, etc.).

UNISOC--a fabless chip maker--is not to be confused with Uniloc, a patent licensing firm that drew the ire of Apple (with whom it has meanwhile settled) and others a few years ago.

In December I reported on the creation of that pool. The initial group of licensors included players like Mitsubishi, Siemens, and various telcos, which suggested substance (in terms of their portfolios) as well as a reasonable diversity as telcos are major implementers. It's a good sign for a pool when its terms are appealing to patent licensing firms as well as net licensees. UNISOC falls into a key category: it's a supplier to major implementers.

According to Counterpoint Research, UNISOC's global smartphone chipset market share in the period from Q2 2021 to Q3 2022 was 9%, making it the fourth largest player. The top three are Mediatek, Qualcomm, and Apple, but UNISOC has a greater market share than Samsung (which actually incorporates UNISOC chips into the Galaxy A series) and Huawei's HiSilicon combined (the latter is obviously affected by geopolitics). A particularly interesting UNISOC customer is realme, the low-price brand of the OPPO group. In certain markets, Nokia is asserting patents against realme as my Nokia-OPPO battlemap indicates.

The head of UNISOC's legal department, Yang Jiejing, contributed the following quote to Sisvel's press release:

"UNISOC is a world leading 5G chip design company. We look forward to cooperating with Sisvel through its 5G MM Licensing Program to offer implementers 5G patent license at a fair and reasonable rate, which will further promote the widespread adoption and development of 5G technologies."

Obviously, no patent holder would ever say "we joined pool X because it's a tremendous vehicle to extract supra-FRAND royalties from implementers." That's why my plausibility check always involves a company's business interests. In this case, we are talking about a supplier of 5G chips, and particularly one from China and with major Chinese customers, including some rather price-sensitive ones. That, to me, serves to validate my initial reaction, which was that the pool rate would easily be deemed FRAND (should a court reach that question).

At a Licensing Executives Society International webinar last month, Sisvel president Mattia Fogliacco explained his firm's efforts to offer palatable licensing terms. Those efforts include the Licensing Incentive Framework for Technologies (LIFT), a mechanism that encourages early adoption and discourages hold-out. But like any other intermediary, a pool administrator primarily has to identify the right price points that bring both sides of the market together (and then has to execute effectively and efficiently).

After Via Licensing's exit from cellular SEP licensing, there has been some consolidation by virtue of former Via licensors joining Sisvel's pool. Things should go smoothly for this pool. Other licensors may very well follow UNISOC's example, but the ball is now primarily in the implementers' corner.

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Nokia gets preliminary opinions from European Patent Office according to which two more OPPO patents-in-suit are invalid as granted: outcome will likely hinge on amended claims

It's been more than 19 months since Nokia sued OPPO, and almost as long since OPPO filed its first countersuits. It's already an "epic" dispute. Most other patent spats in this industry are settled within about a year, as a result of which there are normally--at best--some infringement decisions, but nothing significant happens on the post-grant review front before it's already over.

OPPO has managed to get seven Nokia lawsuits stayed over validity doubts, most recently a Munich case. But Nokia is also working hard to poke some holes into OPPO's patent portfolio, and has received preliminary opinions supporting its invalidity theories in several cases.

Late last week, the European Patent Office (EPO) rendered preliminary opinions on two more OPPO patents-in-suit challenged by Nokia:

• EP3624524 on "wireless communication methods, network device, and terminal device"; and

• EP3557938 on a "method and device for random access."

As my Nokia-OPPO battlemap shows, EP'524 is being asserted in Mannheim (Second Civil Chamber; Presiding Judge: Dr. Holger Kircher) and EP'938 in Hamburg.

The preliminary opinions reflect that the Opposition Division deems either of those patents invalid in its granted form. But there is still time for auxiliary requests as the related opposition hearings have been scheduled for (different days in) September. Preliminary opinions are "newsworthy", but the longer I watch those EPO post-grant reviews, the more I focus on actual decisions such as this one in January.

No auxiliary requests have been filed for EP'938 so far, and on the ones for EP'524, the EPO did not take a position on the existence of an inventive step:

• "Claim 1 of Auxiliary Request 1 differs from claim 1 of the patent in that the alternative feature 1.3B has been deleted. Feature 1.3A, which is still present in the claim[,] is not disclosed in D3. For this reason, the subject matter [...] is new [...]."

  The Opposition Division leaves it to the parties to argue for or against the presence of an inventive step, and "note[s] that feature 1.3A is disclosed as such in D1, D2 and D5 [...]."

  A disclosure "as such" is just the starting point of an inventiveness debate. The question is then whether there is a teaching, suggestion, or motivation to combine.

• "Claim 1 of Auxiliary Request 2 differs from claim 1 of Auxiliary Request 1 in that the features of dependent claims 2 and 3 have been added. So, the 'first time domain unit' has been replaced with the more specific feature 'time slot' and the 'second time domain unit' has been replaced with the more specific feature 'symbol'. So, claim 1 of Auxiliary Request 2 is more restricted than claim 1 of Auxiliary Request 1. Since[] the latter claim is new [...], this also applies [to] claim 1 of Auxiliary Request 2. This applies mutatis mutandis to the other independent claims 5, 8 and 9."

  Here, again, the Opposition Division does not take a position on the inventive step, and "note[s] that 'slot/subframe' and 'symbols' as such are disclosed in D1, D2, D3 and D5 [...]."

• Auxiliary Request 3 further narrows the scope by specifying that the first research is a search space. Novelty is not an issue, but "a 'search space' as such is disclosed in D1, D2, D3 and D5." This means there will again have to be a discussion of whether there is a teaching, suggestion, or motivation to combine certain prior art references.

The preliminary opinion on EP'524 stresses that Nokia cannot "freely develop as many inventive step attacks as [it] wishes in the hope that one of said attacks has the chance of succeeding." Instead, Nokia will have to present a single theory starting from what it considers to be the closest prior art, unless there are specific reasons for which several starting points are "equally valid."

The Mannheim Regional Court will hold the EP'524 infringement trial on May 23. That court--especially its Second Civil Chamber--is known to be difficult to persuade of invalidity contentions based on an alleged lack of an inventive step. In Mannheim you ideally want to rely on non-novelty as an obviousness theory will not persuade the court to stay the case unless there really is no reasonable argument that can be made for the presence of an inventive step.

Defendants routinely argue in Mannheim and other German courts that an amended claim should not enjoy a strong presumption of validity as it has not been examined. Here, however, OPPO can now point to a preliminary opinion by the EPO's Opposition Division (i.e., by a panel of three patent examiners) that acknowledges novelty and leaves open the question of the inventive step at this procedural juncture. Plus there still is time to file additional auxiliary requests.

There is an asymmetry here: OPPO has left the German market, and there are no signs of it coming back anytime soon. As a result, Nokia's German injunctions do not put OPPO under any particular pressure to settle, but Nokia presumably does want to retain its ability to ship mobile base stations to its German customers. Right now, Nokia has more at stake in Germany than OPPO. If several OPPO patents get invalidated, but one or two are upheld even if in an amended form (so long as they are still infringed), a situation can arise in which Nokia will deem it prudent to settle the global dispute.

Meanwhile, proceedings are ongoing in a Chinese court (Chongqing) to set a global FRAND rate for an OPPO license to Nokia's standard-essential patents.

Should this dispute not be settled in the coming months, then both parties may file complaints with the Unified Patent Court (UPC)...

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Automakers' cellular patent licenses must be upgraded to 5G this year: Continental, FSA to argue with success (Avanci, Huawei) at Auto IP Summit in Munich

A few months ago, the Avanci patent pool announced that its 4G program had licensed most of the industry. This year, the world's car makers will have to upgrade their cellular standard-essential patent (SEP) licenses from 4G to 5G. Will that transition go smoothly? I think it should, but it's too early to tell.

In the first part of this post I'd like to draw your attention to an interesting automotive IP conference that will be held in Munich on March 1-2; subsequently I'll also share a few observations on IPlytics' efforts to market their services to the automotive sector in ways that may raise false hopes.

Auto IP & Legal World Summit (Munich, March 1-2, 2023)

Last April, conference organizer Ardensi held its Auto IP & Legal World Summit in Frankfurt, and it was a very interesting event in terms of attendees and content. This year's edition will take place in Munich on the first two days of March (click on the image to enlarge):

The conference covers a broad range of auto IP topics. The first part is about the ramifications of the Unified Patent Court (UPC), with speakers from industry players Thyssen Krupp and ABB, the EPO's Michael Froehlich (whom I remember from his days as Germany-based IP in-house counsel of BlackBerry), and two lawyers from well-known firms: Meissner Bolte's Philipp Rastemborski, who also spoke at last year's Auto IP Summit and now heads his firm's litigation practice, and Powell Gilbert's Rajvinder Jagdev, whose list of key cases is truly impressive.

A panel discussion FRAND litigation, negotiation, and dispute resolution promises some rather lively debate: Continental's Michael Schloegl ("Schlögl" in German) and the Fair Standard Alliance's Secretary General Evelina Kurgonaite will represent implementers in a debate with Avanci's Senior VP Laurie Fitzgerald and the head of Huawei's European IP department, Xiaowu (Emil) Zhang. As I wrote earlier this month, Huawei--which has recently signed up a number of car makers as licensees--has become an "accidental" net licensor, but remains a major implementer, too.

In a way, Conti and the FSA--represented at the conference by speakers who do not shy away from controversy--will have to argue with success: Avanci works. Huawei's licensing program works. But the FSA has members such as Apple and Continental who have a different vision for how they would like wireless SEP licensing to work.

One of Conti's key competitors, TomTom, will give a presentation on the changing licensing landscape.

Upon my request, the organizers provided the following short description:

The Annual Auto IP & Legal World Summit discusses the most pressing challenges faced by the global auto industry. Every year attendees from leading companies like Continental, VW, Bosch, BMW, Volvo, Mercedes Benz, Schaeffler and more gather to talk key issues, potential solutions surrounding IP risks, SEPs & FRAND negotiations, UPC, technology and more through panels, presentations and roundtable discussions. Join 100+ attendees and 30+ speakers from 01-02 March 2023 at the Hilton Munich City, Munich, Germany. Contact Vaishali on [email protected] to get involved in the Summit.

IPlytics claims to speak for the automotive industry, favors complications over simple solutions

Patent database services are useful or certain purposes, but what I take issue with is when those offering them overstate the reliability of their results or the impact their tools can make.

A few days ago, IAM published an op-ed by IPlytics' founder, Auto industry demands a fresh SEP/FRAND focus in 2023. What does this mean? Has IPlytics become a lobbying front for the automotive industry? What mandate does Tim Pohlmann have to speak for an entire sector?

The automotive industry wants smooth and efficient solutions. But if things go too smoothly and efficiently, that industry may not have much of a need for patent analytics services. In that indirect sense, IPlytics definitely is an automotive stakeholder...

The previous day, IPlytics hosted a webinar, How to gain the competitive edge for V2X technology. Can a patent analytics firm really give innovators and implementers as "competitive edge"? You be the judge.

Back to the IAM op-ed. I disagree with the suggestion that something disruptive is needed: we're just talking about an upgrade from 4G to 5G. I also disagree with some specific statements.

Mr. Pohlmann says "[car makers' buying] power is so significant that most suppliers include indemnification provisions in their contracts." But in the Continental v. Avanci dispute (which ended last year when Conti finally stopped throwing good money after bad) Conti was unable to establish injury, and a key reason for that was that it couldn't point to any actual indemnification claim. Almost the entire automotive industry has the Avanci 4G license by now, but no indemnification claim by any of those licensees against any of their suppliers has become known to date.

The traditional allocation of liability in the automotive industry is indeed that suppliers are responsible. But by now that industry has accepted to take licenses at the end-product (i.e., car) level, which eliminates the need for indemnification clauses.

The following suggestion of a causation makes no sense to me:

"A battle of where to license in the value chain was fought in US courts between automotive supplier Continental, and Avanci and Nokia. Much of the heat dissipated from the dispute when Daimler opted to take a licence from Avanci."

Conti filed its U.S. complaint (in the Northern District of California, from where it was transferred at Avanci's request to the Northern District of Texas) in 2019. Daimler initially took a car-level license from Nokia, which was announced on June 1, 2021. But Continental's federal lawsuit had been dismissed (with prejudice) approximately nine months earlier: on September 10, 2020--and it took well over a year from that dismissal until Daimler took an Avanci license (December 2021).

A few months later, the Fifth Circuit affirmed the dismissal. My article on the initial panel opinion has since been nominated for the Antitrust Writing Awards by Concurrences and George Washington University.

The chronology of events renders IPlytics' theory implausible. If there was any causation, it was the opposite: the fact that Conti failed with its U.S. litigation may have persuaded not only Daimler but also other car makers that taking an Avanci license was a pragmatic choice.

After Daimler took not only the Nokia but ultimately also the Avanci license, Conti still brought two petitions for rehearing en banc with the Fifth Circuit. The only thing Conti did not try was to appeal the case further to the Supreme Court, presumably for lack of support from potential amici curiae who didn't deem such a weak case the right vehicle to push for an obligation to license SEPs at the component level.

No one stands to gain anything from fighting the lost war over component-level licensing again in connection with 5G, other than litigation firms and other service providers, such as IPlytics.

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Nokia announces 5G patent license agreement with Samsung: details unknown, 'multi-year period'

Nokia just announced a new patent cross-license agreement with Samsung. The previous agreement expired "at the end of 2022" according to Nokia's press release; the new contract term starts on January 1, 2023, and "Samsung will make payments to Nokia for a multi-year period."

The last announcement of a Nokia-Samsung renewal was about four years ago. Prior to that one, the parties agreed to have the financial terms set by an arbitration panel (which is what Samsung recently agreed upon with InterDigital). So far, Nokia and Samsung have always been able to avoid infringement litigation.

Nokia's press release contains the following quote from Jenni Lukander, President of Nokia Technologies:

"Samsung is a leader in the smartphone industry, and we are delighted to have reached an amicable agreement with them. The agreement gives both companies the freedom to innovate, and reflects the strength of Nokia’s patent portfolio, decades-long investments in R&D and contributions to cellular standards and other technologies."

In September, Mrs. Lukander gave a presentation in New York City, explaining Nokia's IP strategy (particularly also its growth strategy) to financial investors and analysts. She said that Nokia was facing the need to renew various license agreements in the fiscal quarters ahead. Certainly Samsung was a major item on the list, and that one has been crossed off in a positive way for Nokia.

Samsung is known to negotiate hard, but constructively. It is interesting to see that the parties kept negotiating for another three weeks after the expiration of the previous agreement instead of resorting to litigation. By contrast, Nokia sued OPPO a couple of days after the previous license agreement expired in mid-2021.

In December it became known that Samsung recently (and silently) extended its patent license agreement with Huawei, a company that has become a net licensor without even treating patent licensing as a strategic business area.

What is unknown is when Nokia's current patent license agreement with Apple will expire. From industry circles and analysts I've heard different views. According to some people, the agreement would have expired last summer, but Nokia's numbers don't suggest that Apple stopped paying. Currently, the most likely dates of expiration would be the end of this year or the middle of next year, given that the last renewal was in mid-2017 (and the related agreement had expired at the end of 2016).

The biggest renewal problem that Nokia is facing as we speak is the situation with OPPO. Nokia has recently lost more decisions than it won. Where Nokia has leverage, OPPO has left the market; where OPPO sells large numbers of phones, Nokia lacks leverage so far. Nokia accuses OPPO of hold-out, and OPPO gave Juve Patent the following quote:

"OPPO has committed to enter into a licence with Nokia on the FRAND terms that the Chongqing court will set in the ongoing rate setting proceedings between the parties. Nokia has so far been unwilling to renew its licence with OPPO on fair and reasonable terms. However, OPPO hopes that Nokia will now fully engage with the Chongqing proceedings and confirm that it will honour its FRAND undertaking by similarly committing to enter into a licence on the terms set, in order that this dispute can be brought to an end."

Nokia is also embroiled in litigation with vivo, another Chinese smartphone maker that has a limited presence in Europe and largely serves other geographic markets.

The terms on which Nokia agreed with Samsung are unknown, and Samsung's gadgets have a higher average price than OPPO's and vivo's products, which is why I can't tell whether the agreement announced today will impact Nokia's negotiations with OPPO and vivo, such as the Chinese FRAND determination case that is underway in Chongqing.

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Huawei uniquely attains net-licensor status without defining its patent licensing business as profit center: 20+ license agreements struck in 2022

Huawei may have become the information and communications technology industry's first "accidental net licensor" of major proportions. In this context, "accidental" doesn't mean that anybody got hurt (nor that it was never intended): it's just that this outcome wasn't the original ambition.

The week before last, the South China Morning Post reported that "last year the company’s royalty income exceeded the expenses it paid for licensing technologies from other companies for the first time, according to Huawei."

What makes this all the more surprising is that Huawei's 2021 total revenue was still in the $100 billion range. It's easy to be a net licensor with a small product business, but for a large-scale (actually, hyperscale) implementer it's astounding, even when considering that "Huawei last year filed a record 6,952 patent applications, up 27 per cent from the previous year, through the Patent Cooperation Treaty (PCT)," which "made Huawei the world’s biggest PCT filer for five consecutive years."

While it is now imperative for Huawei to generate more revenue from patent licensing in order to fund its innovative activity despite the fallout from a U.S. trade ban, there are no signs of Huawei having sacrificed the values it defended during its net-implementer times. It's just that when it runs the numbers at (or toward) the end of a given year, the company now finds that its income from outbound patent licensing exceeds its royalty payments to third parties. That's my interpretation of the following one-sentence paragraph from the South China Morning Post article:

"However, [Huawei IP chief Alan] Fan said the company is not treating IP licensing as a business or relying on it as a major revenue stream."

The Chinese newspaper says "Huawei founder Ren Zhengfei told the company’s intellectual property (IP) team to step up efforts to turn its vast pool of patents into revenue via 'reasonable pricing' and 'generate an appropriate return' on the R&D investments, according to a company memo made public in April." So it is probably fair to say that

• yes, Huawei is now placing greater strategic emphasis than before on outbound licensing, but

• no, this doesn't mean Huawei intends to generate a high percentage of its total profits from IP royalties.

Another factor that enabled Huawei's licensing income to surpass its licensing costs is that certain types of technologies with respect to which Huawei holds particularly powerful rights--such as wireless connectivity and video/audio codecs--have become extremely ubiquitous. Take connected cars: according to the SCMP article, Huawei "has reached royalty agreements with 15 carmakers globally, including Audi, Mercedes-Benz and BMW."

The article also mentions two major cross-license agreements that Huawei announced last month: one with OPPO and another with Nokia.

On the bottom line, it appears that Huawei is now less prepared than in the past to condone free-riding on its innovations, but constructive implementers won't find it hard to strike agreements, compared to the royalty demands they face in most other negotiations...

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InterDigital announces arbitration agreement with Samsung, renewal with Panasonic, video codec license deal with LG

This morning, publicly-traded patent licensing firm InterDigital (NASDAQ:IDCC) announced license agreements with three major East Asian companies:

• The most important one of those press releases involves consumer electronics giant Samsung--a company whose licensing department is known to be tough, but definitely effective. It was no secret that the previous license agreement was set to expire on December 31. Ten years ago, InterDigital brought infringement lawsuits against Samsung. This time around, it's a renewal with final terms to be decided by binding arbitration. InterDigital CEO Liren Chen commented on this suboptimal but apparently acceptable solution:

  "While we always prefer to conclude our license agreements through amicable good faith negotiation, independent binding arbitration provides an effective mechanism for resolving licensing disputes. I welcome Samsung’s willingness to enter into a new license with us and their commitment to work through the remaining issues in arbitration."

  An InterDigital filing with the Securities and Exchange Commission is more specific, though it still doesn't answer my most important questions:

  "On January 1, 2023, InterDigital, Inc. (the 'Company') and Samsung Electronics Co. Ltd. ('Samsung') agreed to have a panel of arbitrators establish the royalties to be paid by Samsung for a worldwide license to certain of the Company’s patents from and after January 1, 2023, as well as any other terms to a patent license agreement on which the parties are unable to agree. The determination by the panel will be in the form of a patent license agreement and will be final, binding and non-appealable, subject to certain limited exceptions. The parties have agreed to conduct the arbitration in a diligent manner. The Company expects the arbitration to conclude within approximately 18 months.

  "Each of the parties has also agreed not to initiate certain claims against the other party during the arbitration. Any licenses under our joint licensing program with Sony relating to digital televisions and standalone computer display monitors will not be included in the scope of the arbitration."

  Arbitration is inherently opaque. We'll likely never find out what parameters the parties gave the arbitrators. What we may be able to deduce from InterDigital's quarterly financial reports is whether Samsung continues to make some payments in the meantime. It's possible that the parties agreed on a certain amount that Samsung will pay per quarter while still reserving its rights to take the position in arbitration that the royalty rate should actually be lower.

  Ten years ago, Samsung also agreed with Nokia on arbitration to determine the royalty amount, though it was unclear what subset of patents was subject to arbitration. Third parties who believe to know the terms of the deal mostly suspect that the arbitration result fell short of Nokia's expectations--but again, this depends on the parameters, which can favor one side or the other, or provide a level playing field.

  At some point some news of a Nokia-Samsung renewal or, failing that, infringement litigation should also surface, but I don't know when that agreement expires.

• Panasonic renewed its DTV and HEVC patent licenses with InterDigital. Unlike the scope of the InterDigital-Samsung arbitration, the Panasonic deals also involve some Sony patents, as InterDigital's Chief Licensing Officer Eeva Hakoranta said that the DTV deal was signed under a "joint digital TV licensing program which continues to deliver considerable value to InterDigital, [its] partner Sony, and to [its] licensees."

• The announcement of InterDigital's HEVC and VVC video codec patent license agreements with LG Electronics sounds like a new license (covering LG's TVs and PCs) rather than a renewal, but this may be due to the fact that the Korean company exited the smartphone business, which according to a February 2018 press release had a license to InterDigital's patents. It could be that the only reason the new deal is not called a "renewal" is that it no longer involves cellular SEPs.

In the summer, InterDigital announced a license agreement with Amazon, and in early October a renewal (by seven years) of its license deal with Apple. InterDigital is, however, embroiled in litigation with a couple of companies. The more important one of them is OPPO, which fights hard when sued but prefers to reach license agreements on reasonable terms, such as very recently with Huawei. InterDigital is now also waiting for a UK court ruling in its SEP dispute with Lenovo.

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Huawei, Qualcomm, InterDigital agree that licensing level must not serve as pretext for driving down standard-essential patent royalties: IAM Connect 2022 panel

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

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

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

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

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

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

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

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

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

Price differentiation isn't price discrimination.

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

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

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

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

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

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

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

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

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

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

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

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