This blog covers software patent news and issues with a particular focus on wireless, mobile devices (smartphones, tablet computers, connected cars) as well as select antitrust matters surrounding those devices.
IPCom, a well-known patent licensing firm based in the Munich area, today announced on its website a settlement agreement with South Korea's LG Electronics. All infringement cases and validity challenges pending between the two have been withdrawn. IPCom's managing director Pio Suh is quoted in the press release as "confirm[ing] that LG and IPCom have finally reached a resolution that also includes all of IPCom's assets."
Several years ago it became known that an IPCom affiliate named FIPA was suing both Samsung and LG over patents formerly owned by Hitachi. Samsung was known to have licensed IPCom's former Bosch patents a long time ago, and the same may apply to LG. There is no indication at this stage of a settlement with Samsung.
In recent years, IPCom has achieved various settlements such as with HTC (after more than 12 years of litigation) and various telecommunications carriers. Its cases against Apple were also withdrawn. IPCom's current management has been consistently positioning the firm as a constructive and cooperative patent holder.
The reference in today's announcement to "all of IPCom's assets" suggests that LG is licensed not only to those IPCom patents that formerly belonged to Bosch and Hitachi but also to IPCom's "homegrown" patents. Starting in the middle of the last decade, IPCom started filing patent applications on its employees' inventions. The timing and the fields of technology make it a possibility that at least some of those patents are 5G-related. Should that be the case, some of the companies who took licenses from IPCom a long time ago may not be licensed to those younger patents, subject to what exactly the capture clauses of those license agreements say. So we may hear more from IPCom in the years ahead.
Non-practicing entity Neo Wireless LLC put itself on the map of U.S. patent litigation through its mid-January filings against Apple, LG, and Dell. As Apple Insider reported, the infringement allegations in the complaint against Apple alleged that Neo Wireless held patents essential to the 4G/LTE and NR/5G cellular telecommunications standards.
Neo has now filed a slew of lawsuits against car makers:
Eastern District of Texas
General Motors Company
Tesla
Toyota
Eastern District of Tennessee: Volkswagen Group
Middle District of Tennessee: Nissan
Southern District of Ohio: Honda
Western District of Missouri: Ford Motor Company
The Eastern District of Texas has tremendous expertise in adjudicating patent disputes; the other districts--with the greatest respect--don't. It will be interesting to see whether any venue transfer motions will succeed and/or whether any of those cases will get consolidated.
Neo is not an Avanci licensor, and will likely seek damages that on a per-patent basis dwarf the cost of Avanci license. Some automakers already have that problem with Intellectual Ventures, which is asserting a mix of standard-essential and non-standard-essential patents (1, 2).
The asserted patents largely overlap between the different cases, but are not always the same. For example, four of the six patents-in-suit against Toyota are also among the five patents asserted against Apple, but two are not.
The claimed inventions were apparently made by Chinese individuals, but Neo Wireless is a U.S. entity. There was or is another company named Neocific that temporarily owned some or all of those patents.
Finally, here are two sample complaints: the E.D. Tex. one against Toyota and the W.D. Mo. lawsuit against Ford.
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)
The ink isn't dry yet on the Biden Administration's draft policy statement on standard-essential patent (SEP) enforcement, and an American industrial icon is already facing yet another SEP infringement lawsuit as Ford Motor Company got slapped yesterday with a complaint by Italian (but globally present) licensing firm Sisvel in the District of Delaware (this post continues below the document):
Last year it became known that Ford had entered into a short-term patent license agreement with Nokia--sort of a covenant not to sue during a standstill period. A few months ago, Nokia announced a deal with an unnamed car maker, and one possibility is that Ford might have acceded to Nokia's royalty demands and taken a "real" license. The Avanci pool does not preclude its members from entering into bilateral license agreements with car makers or automotive suppliers. But when a car maker needs licenses from dozens of Avanci members, it may indeed find it more cost-efficient to take a pool license rather than engage in piecemeal resolution.
The complaint says Sisvel first made Ford a licensing offer in January 2017, and properly identified its 3G SEPs. There was some further correspondence, and in 2018 Sisvel made Ford another offer, which included 4G SEPs. While Ford continued its unlicensed use, Sisvel acquired further patents, which it specified in a 2019 letter. Four of the patents-in-suit were finally identified t Ford in a June 2021 letter. But "Ford refused to take a license to Sisvel's patents," the complaint states. And that's why Sisvel felt forced to bring the complaint shown further above.
The patents-in-suit were originally obtained by Nokia, BlackBerry (formerly known as Research In Motion), and LG Electronics:
U.S. Patent No. 7,751,803 on a "method and arrangement for optimizing the re-establishment of connections in a cellular radio system supporting real time and non-real time communications"
U.S. Patent No. 8,600,383 on an "apparatus and method for making measurements in mobile telecommunications system user equipment"
U.S. Patent No. 8,971,279 on a "method and apparatus for indicating deactivation of semi-persistent scheduling"
Sisvel is represented in this case by the Delaware-based Devlin Law Firm.
I'll try to find out about any European cases. Sisvel has a history of enforcing patents in Germany, a major market in which Ford might be enjoined next year as the U.S. complaint's account of the history of licensing negotiations between the parties makes it fairly likely that German courts would consider Ford an unwilling licensee...
German patent prosecution and litigation firm Bardehle Pagenberg published an article last week on a landmark Mannheim FRAND judgment that came down in early March, but the redacted version of which apparently wasn't published until a couple of months later. In that case, LG Electronics won an injunction against TCL over a standard-essential patent (SEP). The redacted judgment doesn't name the parties, but LG issued a press release a week after its first-instance victory.
I strongly recommend the summary and the analysis provided by Bardehle's Professor Tilman Mueller-Stoy and Jan Boesing. After reading the Mannheim ruling, I don't have much to add, but I do wish to address two of the key holdings (one of them is actually just a dictum) because they are so very relevant to aspects of SEP litigation that this blog has addressed and will continue to discuss. Maybe my way of putting it will even encourage some more people to dig deeper by reading the aforementioned article.
In some patent--not only but also SEP--cases, patent exhaustion has saved the day for defendants. It's been almost ten years that I attended a French Samsung v. Apple preliminary injunction hearing that resulted in a victory for the iPhone maker because of the exhaustive impact of a license agreement between Qualcomm and Samsung. In that Mannheim case that was decided in March, TCL sought to benefit from a license agreement between LG and the same San Diego chipmaker: Qualcomm. Not all of the accused products in LG v. TCL came with a Qualcomm chip (unlike the particular iPhone model at issue in that French case), but some, and TCL wanted to benefit from patent exhaustion in two ways:
TCL's counteroffer excluded Qualcomm-powered devices from the computation of the "release payment" (i.e., back-royalties) that would compensate LG for past infringement.
TCL also reserved the right to dispute its obligation to pay license fees on future product sales if and when its SEPs might be exhausted under a Qualcomm-LG agreement.
The way I understand the Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher), the judges would have considered at least the first part--and possibly even the second part--acceptable if TCL had raised the question of patent exhaustion early in the negotiations and if it had a strong case for exhaustion. However, the court notes that it was a very late stage of the infringement proceedings at which TCL brought this up for the first time, and dilatory tactics are often fatal to a FRAND defense in Germany under the Federal Court of Justice's two Sisvel v. Haier decisions clarifying the application of the European Court of Justice's Huawei v. ZTE guidance. But the court also looked at the clause of the Qualcomm-LG agreement TCL's exhaustion theory was based upon, and found TCL's argument unavailing as a matter of contract law. The ruling also mentions the territorial nature of patent exhaustion.
SEP holders can insist on back-royalties as an indispensable contractual condition. The court was also concerned that TCL might relitigate the exhaustion-related merits in the future by withholding payments.
The ruling doesn't explicitly say that TCL lost the case just because of the shortcomings of the exhaustion-related parts of its counteroffer. It's one of of those multifactorial findings, and TCL did other things that the court deemed to call into question TCL's willingness to take a license on FRAND terms. Also, to be on the safe side, the court also found that LG's offer and negotiating conduct were exemplary (without using that particular term), making TCL look even worse by comparison. Still, my subjective understanding of the decision is that the exhaustion part in and of itself would have been sufficient for TCL to lose the case. Of course, it remains to be seen what the appeals court will say (unless the case gets settled).
Given that the court found TCL's patent exhaustion theory not only belated but also legally deficient, I wouldn't want to jump to conclusions as to what would happen in a case where the patent exhaustion argument is substantially stronger, and made early on, though there still is an argument over whether exhaustion occurred. When products are sold in a different jurisdiction than the one in which they or the relevant components are made, patent exhaustion is rarely a slum dunk for defendants. And a conservative defendant really has to tread carefully in Mannheim now when it comes to exhaustion-related clauses in a proposed license agreement.
The LG v. TCL decision came down shortly after a ruling by the Karlsruhe Higher Regional Court--to which all Mannheim patent decisions are appealed--that breathed new life into the § 315 safe harbor. § 315 German Civil Code enables contract clauses that leave the determination of an exact amount to a court of law if the parties cannot agree. It's like a placeholer for an actual number, enabling a binding agreement to be concluded even though what is often the single most important question may be left open.
In LG v. TCL, § 315 came up only in an obiter dictum. That is so because TCL merely brought it up as an analogy when seeking to defend its approach to patent exhaustion against criticism that a licensing offer is unacceptable to the patentee if it leaves open such a fundamental question of exhaustion, which has the potential to give rise to subsequent litigation. TCL apparently told the court that a § 315 offer doesn't totally resolve everything either, but a license agreement comes into being and an injunction may not issue.
Interestingly, the Mannheim court once again rejected the suggestion that a § 315 offer was sufficient. It didn't say that no § 315 offer would ever be acceptable from an implementer in a SEP case, but took a rather negative position.
That would have been inconceivable in a comparable U.S. case. If the Federal Circuit had addressed a question like this in another patent case and had said pretty clearly that a particular type of approach to the royalty amount is FRAND, a court below wouldn't dare to deviate from it. But the U.S. is a common law jurisdiction, while Germany is a civil law jurisdiction ("civil law" meaning in this case that it is in the tradition of the sixth-century Corpus Juris Civilis and the Napeolonic Code Civil).
What the Mannheim court does here is intransigent: it acts as if it had not been overruled (in the form of an order to stay the enforcement of an injunction due to the defendant likely prevailing, as opposed to an actual appellate opinion) over a § 315 clause in Nokia v. Daimler. But it's not a miscarriage of justice or whatever. They can do it, though they will likely be overruled again and again. In LG v. TCL it's just a dictum, so there can't be a formal reversal. Maybe the appeals court will assert its authority again and also issue a dictum. It might also just ignore this part as it's not outcome-determinative.
As a SEP holder I'd definitely be encouraged by that Mannheim LG v. TCL ruling. Nokia probably knew about it already when it decided to bring 11 (eleven!) patent cases against OPPO in Mannheim this month. Nokia is also suing OPPO in Munich and Dusseldorf, but Mannheim is the center of gravity of the German part of that dispute. At least initially.
LG will even more aggressively enforce its patents now, so I guess we'll see LG in action in Mannheim again in no time. And TCL is a frequent defendant to patent infringement complaints. What we won't see too soon, however, is an Ericsson v. TCL case: they've settled their long-running dispute according to Reuters.
I have a penchant for clever litigation tactics. That's why I've repeatedly credited Arnold & Ruess's Dr. Arno Risse ("Riße" in German) for obtaining the first (at least the first SEP-related) German anti-antisuit injunction in Nokia v. Daimler and getting it, together with lead counsel Cordula Schumacher, affirmed by the Munich Higher Regional Court. Fast forward by two years, and Munich is the go-to venue for anti-antisuit purposes. Talk about breakthrough innovations and agenda-setting.
While we're on the anti-antisuit subject, according to Juve Patent, the Munich I Regional Court just upheld an anti-antisuit injunction it had granted IP Bridge against Huawei. I haven't been able to obtain a redacted copy of the decision. According to the court's press office, they can't release it yet. I did, however, attend, and report on, the late-April injunction hearing.
Sometimes litigators go too far, and the courts decline to condone excessive gamesmanship. On Wednesday, the United States Court of Appeals for the Federal Circuit granted a mandamus petition by Samsung and LG against a patent holder named Ikorongo, which belongs to Concert Technology Corporation. The two Korean smartphone makers (though LG is in the process of exiting that business and will become more patent enforcement-oriented) succeeded in getting Ikorongo's patent infringement claims against them transferred from Judge Alan Albright's Waco division of the Western District of Texas to the Northern District of California.
I already indicated in a Thursday post that Judge Albright's reluctance to relinquish his jurisdiction over patent cases is controversial. He gets overruled from time to time, and the Samsung/LG petition raised a particularly interesting issue:
Ikorongo had set up an entity named Ikorongo Texas to which Ikorongo Tech assigned an exclusive license to the patents-in-suit with respect to a few counties in the Western District of Texas. Ikorongo Tech (which retained the rights with respect to the far larger rest of the country) and Ikorongo Texas then acted as co-plaintiffs, and hoped that the narrow geographic scope of Ikorongo Texas's rights (they might as well have named the entity "Ikorongo Albright") would weigh against a venue transfer as Ikorongo Texas would not have been able to bring its case in the Northern District of California (for lack of having any rights to assert there).
That scheme worked only in the lower court, as it was reversible error in the Federal Circuit's view that Judge Albright "disregarded the pre-litigation acts by Ikorongo Tech and Ikorongo Texas aimed at manipulating venue." In accordance with Supreme Court precedent, the Federal Circuit held that "manipulative activities of the parties" must be "disregarded." Citing to a decision the appeals court made in 2011, the "incorporation, office, and documents in Texas" of Ikorongo Texas "were recent, ephemeral, and a construct for litigation and appeared to exist for no other purpose than to manipulate venue . . . in anticipation of litigation."
This part was not dispositive in its own right. The Federal Circuit also found that Judge Albright had not properly considered some other factors. But Samsung and LG firstly needed to overcome that Ikorongo Texas construct in order to have any chance of getting the case moved out of the Western District of Texas.
If the Federal Circuit had not put a stopper on this kind of gamesmanship, the "market share" of the Western District of Texas would have grown as other patent holders would have set up shell companies with geographically limited rights. Also, the same would then have worked in the Eastern District of Texas, which is a shadow of its former self thanks to TC Heartland, but could quickly have become just as popular as the Western District, if not more.
There's also a fragmentation scheme that has recently been tried in Germany.
The same creative lawyers I mentioned further above still had three patent infringement cases brought by Nokia against Daimler awaiting adjudication in Munich by the time the parties settled. Two of them had previously been filed in Dusseldorf, but were withdrawn there only to resurface in Munich shortly thereafter. The enforcement of a previous Munich injunction turned out unaffordable for Nokia after the Munich appeals court roughly multiplied the amount of the required security (a bond or a deposit, whichever the plaintiff chooses) from $22 million to more than $2 billion. It's not a cheap thing to shut down all Mercedes sales nationwide (plus some exports to other countries that Daimler makes out of Germany).
In order to get leverage over Daimler by being able to afford the enforcement of an injunction during the appellate proceedings (thereafter, no collateral needs to be provided anymore), Nokia tried a different kind of prayer of injunctive relief: instead of the common format, which bars a defendant from further infringement of a given patent claim on German soil, Nokia targeted combinations of (i) patent claims and (ii) particular Mercedes models. Presumably, Nokia would then have focused its enforcement on where the damage to Daimler would have been most hurtful, such as the most profitable line and flagship: the S Class.
I heard from one source that the Munich court was skeptical of the admissibility of such fragmentation. But due to the settlement, no formal decision was made, and maybe someone at Daimler was scared of the prospect of Nokia's strategy working out, and therefore preferred to take a license.
Geographic fragmentation like in the Samsung/LG case is a non-issue in Germany as there are no venue transfers if an infringement occurs nationwide (no forum non conveniens rules).
Further below you can find previously not published data showing what a huge problem with the expiration of 5G-essential patents Nokia faces in the coming years. If you wish to skip right to that passage, please click here.
Among the three most powerful members of the current European Commission, EU commissioner Thierry Breton (Twitter profile) is "Monsieur Non" with respect to enforcing EU competition law against standard-essential patent (SEP) abuser Nokia. He and his cabinet are the ones who adamantly oppose what would not only be right from an antitrust perspective but also benefit Europe's economy at large, from small Internet of Things startups to car makers.
For the EU, it should be a no-brainer to require SEP holders to extend exhaustive component-level SEP licenses to component makers. The enforcement priorities of the Commission's Directorate-General for Competition (DG COMP) appear to pursue only one principle: protectionism. By letting Nokia and its partners in crime (the Avanci gang) get away with what they're doing (they've already obtained two Germany-wide patent injunctions against Daimler and are seeking many more), while coming up with novel and at times even absurd theories of harm concerning American companies, the Commission is systematically destroying the reputation as a competition regulator that it worked so hard to build in earlier decades. But Mr. Breton doesn't care.
Atypically for a Frenchman, he doesn't even give a damn about his own country's economic interests. France holds few cellular SEPs, but has a sizable automotive industry, which may so far not have been sued by the Avanci gang, yet will inevitably face the same shakedown as German and American car makers. There is no such thing as a free lunch--much to the contrary, whatever royalties Nokia and its allies extract from foreign companies will be used as "comparable license agreements" in any license fee dispute with their French counterparts. There are purely tactical reasons for which it hasn't happened yet. Back royalties will be huge.
Mr. Breton's negative influence extends far beyond his informal veto of any DG COMP investigation of Nokia's refusal to live up to its FRAND licensing promise. You can set your watch by him: once the Commission has to provide input to the Court of Justice of the EU on component-level licensing, Mr. Breton is going to have no more regard (i.e., zero) for the Commission's Legal Services than he has for DG COMP's regulatory responsibility. And the Commission's IP policy unit is part of DG GROW, formerly (and less euphemistically) called the Directorate-General for the Internal Market ("growth" is something at which the EU has failed miserably, with no chance that it would ever close the digital-economy gap). The Commission's SEP Expert Group is coordinated by that IP policy unit, which is ultimately under Mr. Breton's control.
What I heard about Mr. Breton acting like a Nokia/Ericsson lobbyist, coupled with the fact that the former CEO of France Telecom may have longstanding contacts with Nokia and Ericsson, made me wonder why a commissioner would do that. The only plausible explanation is that he actually--and very much mistakenly--believes he's doing the right thing for Europe's future. In a recent YouTube interview with Politico EU, he credibly comes across as someone driven by a desire to strengthen Europe in political and economic terms (this post continues below the video):
At minute 39, however, he spouts nonsense--and repeats himself multiple times insisting that it's "a fact":
"We have been always leading in mobile communication, including in 5G. Today, Europe is the leading continent in 5G: the most patents and contracts. We are happy to have two European global companies [Nokia and Ericsson, he means] and these two companies are having [sic] more patents than others. [...] but this is a fact [...] this is just a fact [...] facts are extremely important--not just rhetoric--it's a fact."
No, Mr. Breton. You--and probably your advisers first--have to get your facts right. You're entitled to your opinion, and to your agenda, but not to your own facts. What you say about Europe leading in 5G patents is simply the opposite of a fact. It's completely untrue, and if you check the facts, chances are no one will be more embarrassed than you. So let me give you the real facts since your advisers have either failed to do so or you didn't listen to them because you're predisposed toward buying whatever Nokia's and Ericsson's lobbyists tell you.
There's not even one serious SEP study in the whole wide world that sees Europe ahead in 5G SEPs. All the independent studies see Europe behind, and losing ground.
There's only one plausible--and regrettably poisoned--source for Mr. Breton's misinformation, and that's a "study" that the very law firm representing Nokia in the automotive SEP licensing talks (including the mediation that failed earlier this year) put together. Ericsson published its key findings. Interestingly, the study is not even consistent with what the author of that Ericsson blog post, Mrs. Peterson, testified in FTC v. Qualcomm when she was trying to devalue Qualcomm's portfolio.
[Update on 09/30/2020] Bird & Bird has meanwhile stated on LinkedIn that there's a more recent version of the study, which in fact has Asia ahead of Europe, confirming my point and suggesting that Mr. Breton relies not only on incorrect, but even outdated information. [/Update]
The "methodology" of that "study" is vaguely described as applying Justice Birss's Unwired Planet v. Huawei "filtering" approach (paragraphs 325 et seq. of the ruling, but that one was actually derived from what expert witnesses paid by the litigants told the court. What the ruling indicates is that the methodology involved essentiality determinations based on a sample of patents. If Nokia's own lawyers performed that kind of analysis here, I wouldn't recommend anybody--and especially not an EU commissioner--to take the result at face value.
That "study" was published in response to other statistics based on declarations (such as IPlytics) and/or contributions to the standardization process. Those other approaches didn't lead to the kind of result Nokia and Ericsson would have liked, and while one can indeed level criticism at simple counts, they're at least performed by independent entities, not Nokia's own lawyers.
In the Amplified/GreyB study, Nokia's essentiality rate (i.e., the percentage of declared SEPs that passed a technical plausibility test) was just average, and Ericsson's was rather poor.
Many of Nokia's so-called 5G SEPs are actually patents that were already declared essential to earlier standards. The age of Nokia's portfolio is a huge issue, and I wanted to shed some light on it here. Given that the Amplified/GreyB study is currently the best 5G SEP portfolio analysis out there, I contacted them and asked them for data on how many of the "5G Core SEPs" (i.e., patent families (note they correctly focus on patent families as opposed to separately counting patents on the same invention filed in parallel in multiple jurisdictions) that were declared essential to 5G and passed their plausibility test) will expire in the years ahead. Thankfully, Amplified/GreyB provided the following table showing the number of patent families to expire by the end of a given year as well as subtotal for the years 2020-2023 (click on the image to enlarge; this post continues below the image):
Based on the numbers in the above table, I've done some further calculation that shows the cumulative percentage of the currently-live 5G SEP families (only the ones that passed the Amplified/GreyB plausibility test) that will have expired by then (click on the image to enlarge; this post continues below the image):
The dark green line at the top shows that a far higher percentage of Nokia's currently-live 5G SEP families will expire than of any other major SEP holder. In fact, over the course of the next five years, Nokia alone will lose more 5G SEP families as a result of expiration than the rest of the industry combined.
Amplified and GreyB have nothing to do with the content of this blog post other than that I asked them for the percentages of patent families set to expire in certain years. I very much appreciate the fact that they answered my question, and as I expected, the numbers are telling.
By protecting Nokia, Mr. Breton is placing a postfactual bet on a dying company's shrinking portfolio, coming from an incorrect assumption of Europe's competitiveness in that field. The alternative for him would be to show more appreciation for the innovative potential of European IoT startups and the automotive industry, including the suppliers of digital components. If he did that, his numbers might even work out.
Today's IAM Sunday Supplement drew my attention to a June 2, 2020 article IAM summarized today as follows: "Essentiality analysis finds that so far just 26% of declared 5G SEP grants are core to the standard and claims Huawei, LG and Samsung lead the way." That article notes, among other things, that "[t]he researchers judged 34% of the Huawei patents they analysed to be ‘core’ patents – by far the best hit rate among the top six players." What is meant here by "hit rate" is the percentage of declared-essential 5G patents of a given company that actually come across as essential even upon closer look (click on the image to enlarge; this post continues below the image):
In a May 25 press release, Amplified (an analytics/AI firm) and GreyB (a company that provides patent-related services) announced their collaboration and claimed to have created the "best-in-class report on 5G SEPs." That appears boastful, but having looked at the preliminary report (PDF) more closely, there's no denying that the two companies went an extra mile:
As opposed to conventional studies that just employ statistical methods and data-mining algorithms to connect dots between different data sets (such as essentiality declarations and patent databases), Amplified's partner in this research project, GreyB, conducted a "manual" essentiality analysis of at least one patent for each of the thousands of declared-5G-essential patent families with at least one "live" (granted and not revoked or abandoned) patent. The report makes it clear that GreyB cannot and does not claim to have conducted a legal review: it's ultimately up to the courts to decide. And as I know in my capacity as a litigation watcher, patents are synonymous with legal uncertainty. There are very high reversal rates for claim constructions, infringement findings, and (in)validity determinations on appeal.
GreyB appears to have considerable expertise in the technical analysis of patents, so it's a reasonable assumption that the degree of accuracy with which they assessed the likelihood of a declared-essential patent being truly standard-essential is pretty much the same across the portfolios of all patent holders. In other words, there's no reason whatsoever to assume a bias for or against any particular company. I'm sure they deemed far more patents essential than the courts of law would. The estimated essentiality rate of 26% of all declared-essential patents (by all patent holders) is far higher than the percentage of SEP infringement cases in which the patentees prevail. A large part of the discrepancy may simply be attributable to the fact that the Amplified/GreyB study presumed all those patents to be valid as granted, which flies in the face of what I know from the litigation front.
Only two of the top six 5G SEP holders have an essentiality rate of or above 30%: Huawei towers above the rest with its 34% rate, followed by Qualcomm with 30%. LG performs poorest at 19%, and Ericsson second-poorest at 22%. As for Qualcomm's strong showing, that company has a reputation for instructing its patent attorneys to fight for an extremely broad claim scope, which is helpful in an infringement or (as here) essentiality context, but backfires when facing validity challenges. As for Huawei, I just remember that in their dispute with ZTE, they won one Mannheim case and the merits part of one of their two Dusseldorf cases (otherwise the court wouldn't even have referred Huawei v. ZTE to the Court of Justice of the EU). So their hit rate was also quite high in court (4G patents at the time). Qualcomm very rarely goes to court, and in their dispute with Apple they went to extreme lengths to avoid any judicial decisions on the merits of any of their SEPs. That's why Qualcomm's patents are untested, and Qualcomm's behavior in the Apple case didn't exude confidence to put it mildly.
Anyway, assuming for the sake of the argument that the findings are representative, I'd lke to show you the full version of the chart of which I previously showed only the headline and the bottom part. The column chart I omitted before has three columns per company: their declared-essential 5G patent families (gray); the analyzed patent families (yellow; they only looked at patent families with at least one granted member); and the red column (always the lowest for each company) is the subset of analyzed patent families that actually appeared valid when GreyB conducted its technical analyis. The order in which the patent holders appear is based on the top 6 ranking of patents per company that appeared essential in the analysis, and then the rest ("Others") is shown as an aggregate of dozens of other SEP holders (click on the image to enlarge; this post continues below the image):
The Amplified/GreyB study also contains a ring-shaped chart that shows the distribution of declared-essential 5G patents that passed the plausiblity test (click on the image to enlarge; this post continues below the image):
One takeaway from this is that three Asian companies lead the ranking of patents that passed GreyB's essentiality-related plausibility test: Huawei, Samsung, and LG. Another interesting fact is that Huawei alone holds almost as many actually-essential 5G patents as Nokia and Ericsson combined, though various people who are close to those Nordic companies have previously criticized other studies, suggesting or implying that the major Asian players owed their lead to a high rate of overdeclarations. The Amplified/GreyB study, however, can't easily be dismissed. The best is the enemy of the good, and for the time being--possibly even for a long time to come--that Amplified/GreyB study is the best of its kind. They will update it from time to time.
a case brought by patent troll Sisvel in the District of Delaware over former Nokia patents.
The latest news is that Sisvel stepped up its campaign on Friday (May 15, 2020) by filing a second Delaware complaint against Tesla (this post continues below the document):
The co-complainants are Sisvel and one of its subsidiaries, named 3G Licensing.
The prayers for relief do not include injunctive relief for the time being. It's just about money.
These are the nine patents-in-suit, all of which were declared essential to certain cellular standards (3G and 4G):
U.S. Patent No. 7,979,070 on "mobile equipment for sending an attach request to a network" (a former Nokia patent that was declared essential to the 4G/LTE standard)
U.S. Patent No. 8,600,383 on an "apparatus and method for making measurements in mobile telecommunications system user equipment" (a former BlackBerry patent declared essential to the 4G/LTE standard)
U.S. Patent No. 8,189,611 on a "system and method for resolving contention among applications requiring data connections between a mobile communications device and a wireless network" (another former BlackBerry patent declared essential to the 4G/LTE standard)
U.S. Patent No. 7,215,653 on "controlling data transmission rate on the reverse link for each mobile station in a dedicated manner" (a former LG patent declared essential to the 3G standard)
U.S. Patent No. 7,319,718 on a "CQI coding method for HS-DPCCH" (another former LG patent declared essential to the 3G standard)
U.S. Patent No. 7,661,625 on a "method of scheduling an uplink packet transmission channel in a mobile communication system" (a third former LG patent declared essential to 3G)
U.S. Patent No. 7,580,388 on a "method and apparatus for providing enhanced messages on common control channel in wireless communication system" (a fourth former LG patent declared essential to 3G)
U.S. Patent No. 7,869,396 on a "data transmission method and data re-transmission method" (a former LG patent declared essential to 4G/LTE and temporarily assigned to Thomson)
U.S. Patent No. 8,971,279 on a "method and apparatus for indicating deactivation of semi-persistent scheduling" (a patent filed by Thomson Licensing claiming priority to a patent originally filed by LG; declared essential to 4G/LTE)
So this is a typical "privateering" case, with operating companies--especially a couple whose core business (handsets) failed miserably--having transferred patents to a patent troll for the purpose of extracting royalties from makers of innovative products.
This is a dreadful week for Nokia on the patent assertion front. A pathetic Nokia patent was held non-essential (thus non-infringed) by the Mannheim Regional Court on Tuesday, and yesterday (Thursday) afternoon, the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) of the Munich I Regional Court threw out a Conversant v. LG case over a Nokia patent (click on the image to enlarge; this post continues below the image):
The patent-in-suit, EP1173986 on a "method and arrangement for managing packet data transfer in a cellular system," was incorrectly alleged to be essential to the 4G/LTE cellular standard. Nokia's privateer asserted its broadest method claim (claim 1) and two apparatus claims of similar breadth, but to no avail. The court concluded that the transmission of a traffic volume indicator (TVI) in accordance with the LTE specification does not involve a direct selection of a channel as claimed by the patent. As a result, the LTE standard does not require any technical step going beyond the prior art.
The Nokia patents transferred to Conversant, which is basically acting as a licensing agency for the Finnish failed handset maker, have generally performed very poorly in litigation. Last month the Munich I Regional Court held an early first hearing in a Conversant v. Daimler case, and that patent doesn't appear to have impresssed anyone either.
Nokia failed on Tuesday (Mannheim), indirectly (because it used Conversant as its front) failed on Thursday (Munich), and we'll probably hear very soon that mediation with Daimler and its suppliers failed this week, too.
The mostly Nordic protectionists in the European Commission who are preventing the Directorate-General for Competition (DG COMP) from formally investigating Nokia's unFRANDly refusal to license component makers need to wake up. If anyone still thinks that Nokia is "the Pride of Europe" in terms of wireless innovation, the performance of its patents in litigation shows that it's not. It would be a far smarter decision for Europe to focus on opportunities in connected cars and the wider Internet of Things (IoT). Nokia is basically fin(n)ished.
A Korea-based source has just drawn my attention to an article (in Korean, but I received a translation) by Kyungsin Park, Professor of Law, Korea University Law School. Professor Park accuses the Korea Fair Trade Commission (KFTC) of a failure to act forcefully in "the legal case of the century," i.e., the Qualcomm case. As I reported in March, Qualcomm could face criminal charges in Korea over its refusal to license chipset makers, but so far--and more than eight months later, it's apparently still the situation--the KFTC hasn't referred this contempt matter to the Prosecutor General's office.
Meanwhile, Qualcomm is--according to the article--spending hundreds of millions of dollars on the appeal. What Professor Park explains based on publicly available data is that it's not primarily about the 900 million dollars of fines the KFTC imposed in its late-2016 decision. The professor says it's just about 1% of Qualcomm's Korean revenues over the last 25 years, or 2% of what "Qualcomm generated through its illegal activities in South Korea." Instead, he writes, it's about the KFTC's corrective orders, which are about Qualcomm's business model.
The article talks about how Samsung ceased to complain about Qualcomm's practices after its new (early 2018) deal. Well, during the course of those Qualcomm antitrust investigations in multiple jurisdictions, Samsung was far from the only company to sign a new chipset purchasing and patent licensing agreement. Apple settled during opening statements at the April 2019 trial in San Diego--as did Korea's LG Electronics a few months later. There's no basis for pointing fingers at those companies: they're in the smartphone business, not in the antitrust enforcement business. But I do agree with the professor that Korea's competition authority (and, needless to say, the courts) have a responsibility here. (As for the companies that settled their formal or informal disputes with Qualcomm, there's plenty of testimony from the time before those deals were struck, and that testimony is still useful, as it was in the U.S. FTC v. Qualcomm case--where Samsung also filed a great amicus curiae brief.)
Professor Park argues--in other words--that South Korea's economy simply can't afford Qualcomm's sky-high patent royalties: LG Electronics, he says, has been incurring losses for 20 fiscal quarters in a row, and some Korean phone makers like Sewon Telecom, Telson, VK, Pantech, Curitel, and SKY, are no longer in business. Most mobile phone makers in the world have single-digit profit margins except for Apple and Samsung (but even Samsung isn't comfortably in the double digits, he claims).
All of that is interesting, but one claim really surprised me:
"Qualcomm is eexrting political and diplomatic pressure to influence the outcome of the appeal currently pending in the Seoul High Court. The #1 subject of the bilateral negotiations of the U.S.-South Korea Free Trade Agreement that resumed in July 2019 after a seven-year hiatus was the KFTC's investigation of Qualcomm's practices. The U.S. delegation alleges that Qualcomm was denied due process though it is guaranteed under the US-Korea FTA."
I don't know what happened in that investigation, but just like Professor Park it also strikes me that the findings in Korea were simply consistent with what other jurisdictions--particularly Judge Lucy H. Koh of the United States District Court for the Northern District of California--also found.
But there's one thing I just don't understand: assuming that the claim of Qualcomm's antitrust woes being the #1 priority for the U.S. in trade talks with South Korea is true, how can Qualcomm possibly influence the U.S. Administration to such an unbelievable extent?
It obviously makes sense for any U.S. government, regardless of the party or people in power, to ensure that its companies are treated fairly abroad. There have been cases of hyperaggressive antitrust enforcement against some U.S. companies in different places at different times. But in this case, Apple and Intel--both larger than Qualcomm--were actually among the complainants, or at least respondents to questions from the KFTC whose answers played a key role in the decision against Qualcomm.
If the Seoul High Court upholds the most important one of the KFTC's decisions--that Qualcomm needs to extend exhaustive SEP licenses to rival chipset makers--, it will simply be in the mainstream of global antitrust law:
Judge Koh identified such an obligation first on the basis of contract law (Qualcomm's FRAND declarations), then on a duty-to-deal basis (the FTC is now pursuing an antitrust theory that relies on the contract-related finding as opposed to a contractless duty to deal).
Five automotive companies (Daimler, Continental, Valeo, Gemalto, and BURY Technologies) lodged antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) against Nokia, and they're all about component-level SEP licensing. Just today the new European Commission was confirmed by the European Parliament (with a two-thirds majority), so I guess we will very soon see a decision to investigate those complaints.
In light of the global trend toward enforceable component-level licensing obligations, I hope Korea's courts and the KFTC won't make decisions that would disadvantage their local smartphone makers and other electronics companies compared to those based in other jurisdictions.
Qualcomm presently has to defend itself against antitrust cases around the globe, and is awaiting, like the industry at large, Judge Lucy H. Koh's upcoming ruling following the FTC v. Qualcomm trial held in San Jose in January. But while most of the industry is eagerly anticipating the decision, Qualcomm is still lobbying hard to avoid it. The "national security" concerns purportedly voiced by Department of Defense and Department of Energy officials in this context are the non sequitur of the decade, given that any security issues would relate to actual products (and would have to be addressed at that level, such as by taking a "trust but verify" attitude toward Huawei's base stations), not to patent licensing practices. ACT | The App Association has thankfully already debunked that BS with a short post that points to a more detailed write-up by a Gibson Dunn lawyer (PDF). I recommend both documents strongly. They are so good that I really don't feel I have anything to add at the moment.
But there's also a number of things going on overseas. Today I'd like to draw some attention to the situation in South Korea, where the current earth-spinning wave of antitrust actions against Qualcomm started in December of 2016 with a decision by the Korea Fair Trade Commission (KFTC) that involved a $853 million fine. The fine, however, is not what Qualcomm is primarily concerned about. A highly knowledgeable Korean source tells me that Qualcomm's efforts to appeal the KFTC's decision clearly focus on behavioral remedies: remedial orders that require Qualcomm to do something, or to cease doing something.
Since a Korean court's denial of Qualcomm's motion to stay the execution of the KFTC's remedial orders (a denial that was upheld on appeal as I just learned), I haven't written about the Korean situation. That's because my own primary research is limited to the U.S. (easy for me to do wherever I am, thanks to electronic access), Germany (provided I'm there when something happens), and occasionally also including the rest of Europe (especially the UK, sometimes also the Netherlands, France, and other countries). With respect to Asian cases, I depend on sources, and fortunately I get an increasing quality and quantity of information from that part of the world.
Just like chipset-level licensing is going to be the most interesting part of Judge Koh's impending decision (her summary judgment to that effect was great, but it was limited to two particular FRAND commitments), it's also a cornerstone (to say the least!) of the Korean antitrust case against Qualcomm. As I reported about two years ago, Qualcomm allegedly kept Samsung out of the wireless chipset market through restrictive contract terms, an impression that was confirmed by some of Samsung's videotaped testimony in the FTC trial. However, with a view to the FTC trial and its overall global antitrust woes, Qualcomm entered into a new agreement with Samsung more than a year ago. Qualcomm's "gag orders" in contracts are well-known, so it's a safe assumption that Samsung, whether or not it even has the desire to do so anymore, simply can't pursue antitrust charges against Qualcomm without potentially being held to have breached its contract.
In December 2018 it became known that LG Electronics became (once again) a party to the Korean proceedings. While nowhere near as large and powerful as Samsung, LG is also an interesting and impressive Korean company. In fact, while only number two in this field in Korea, LG is yet a more significant mobile handset maker than everything that the entire, digitally degenerated, European continent (just thinking of that utter morony and indicator of digital-age delusion named "Article 13") brings to the table in that particular product category.
The aforementioned Korean source believes LG wanted a similar deal from Qualcomm as Samsung got, but Qualcomm gave LG short shrift, and that's why LG rejoined the appellate proceedings as an interested party.
In my opinion, the single most important one of the KFTC's remedial orders is the one that requires Qualcomm to extend exhaustive standard-essential patent (SEP) licenses to rival chipset makers including the chipset divisions of device makers. A "covenant to sue last" is the very opposite of a clearly-exhaustive license: it's an attempted end-run around the actual requirement.
From what I hear (including what I heard at the January trial), Qualcomm appears to continue to go about its patent licensing business as if the KFTC's remedial orders didn't exist or weren't enforceable. But they do exist, and they are enforceable, so Qualcomm is practically at the mercy of the Korean government in this regard.
There comes a point when the South Korean government will have to step up the pressure massively. In the alternative, South Korea's reputation as an antitrust jurisdiction would be in jeopardy. The KFTC can't turn a blind eye to Qualcomm's blatant contempt of the remedial order regarding chipset licensing without paying a reputational price. What will other antitrust offenders do in other (present and future) cases?
I have been pointed to two Korean articles:
a story published on hani.co.kr, entitled "Qualcomm Scoffing at the KFTC's 'Remedial Orders Against Patent Bullying'--KFTC 'Not Doing Much'" and
an eDaily.co.kr report on a parliamentary hearing where KFTC chairman Kim Sang-Joo said he would "take actions if Qualcomm does not implement the remedial orders," but a high-ranking KFTC official, its director general Shin Yeong-ho, also pointed to the fact that the competition enforcement agency would firstly have to find that Qualcomm is in contempt of an order that does not state specific deadlines before it can take the next step.
That next step would involve criminal charges. There are some differences between different jurisdictions in terms of antitrust enforcement:
In the U.S., the goverment has to sue an antitrust violator, like in the FTC v. Qualcomm case. It's then up to a court to enter a judgment, and remedial orders must then take the shape of an injunction (absent a settlement such as a consent decree, of course). Failure to comply with the injunction can then give rise to contempt proceedings (again, in court).
The European Commission's competition enforcement division can hand down an order, and the affected company can appeal it to the EU's judiciary in Luxembourg (examples: the Republic of Ireland and Apple are appealing the "state aid" decision on Apple's Irish taxes, and Google is also in the process of appealing a couple of EU antitrust rulings). Enforcement of EU decisions is ultimately always limited to fines, but they can hurt.
The KFTC is in a stronger position. It has quasi-judicial authority like the EC, but the consequences of failing to comply with an enforceable KFTC decision are worse because enforcement means a criminal complaint is filed by the KFTC with the Prosecutor General's office in accordance with Article 71 of Korea's Monopoly Regulations and Fair Trade Act (MRFTA). According t Article 67, para. 6, of the MRTFA, executives failing to comply with a corrective measure or prohibition order taken under various articles of the law can be fined or, in serious cases, imprisoned for up to two years. By contrast, the EU Commission can't imprison anyone because it's a supranational institution.
More and more people in Korea appear to be wondering why the KFTC is sitting by idly as Qualcomm disregards the remedial orders. The articles indicate that Jeon Haechul, a member of South Korea's national parliament, asked tough questions last year.
Talking about companies that have not received a better licensing offer from Qualcomm despite the KFTC's remedial orders, one of the articles specifically names LG, Intel, Apple, Huawei, and MediaTek. The terms of Samsung's agreement with Qualcomm are not known beyond what was said in the public part of the U.S. FTC proceedings.
The KFTC had already been very patient in the build-up to its decision, granting Qualcomm about three times as many hearings as it usually does before making a decision. But whenever its patience will be exhausted, Qualcomm's wireless SEPs will have to be licensed at the chipset level, which will also result in exhaustion, but in the sense of exhaustion under patent law. "Exhaustion" is the magic word here.
With more than a year having passed since Qualcomm's new deal with Samsung, something will have to happen in the not too distant future. If Judge Koh decides the question of chipset-level licensing, on a broader basis than last year, in the U.S. FTC's favor, the KFTC may (and in my view should) be encouraged to take this antitrust matter to the next level, giving Qualcomm one last warning before pursuing criminal charges.
[Update] The analysis below, which was based on Yonhap's first report, has meanwhile been confirmed by the Korea Herald. The Supreme Court decision is largely a win for Korea's Fair Trade Commission (headline: "Supreme Court rules in favor of FTC in decade-old battle with Qualcomm"), with at least 200 billion won out of the 273 billion won fine having been upheld. Just as I had assumed, Qualcomm may get an adjustment in the tens of millions of dollars, but no more than that. [/Update]
South Korea's leading news agency, Yonhap, just reported on a decision by South Korea's Supreme Court relating to a decision the Korea Fair Trade Commission (KFTC) made almost ten years ago: a 273.2 billion won ($243 million) antitrust fine on Qualcomm for one particular type of conduct has been vacated, requiring a new decision by a lower court.
So let's put all of this into perspective. The old 2009 matter, which apparently took almost a decade to make its way up to South Korea's top court, was about incentive payments by Qualcomm "to Samsung Electronics Co. and LG Electronics Inc. between 2000 and 2009 on condition that they only use Qualcomm chips for certain smartphone models" (quoting Yonhap). That decision was affirmed by the Seoul High Court in 2013 for its anticompetitive effect. According to Yonhap, the Seoul High Court determined the incentive payments "effectively forced Korean buyers [= Samsung and LG] to refrain from exploring other deals with [Qualcomm's] competitors," and the Seoul High Court took particular issue with some of what was paid to LG because it "undermined fair competition."
Today, however, South Korea's Supreme Court determined that LG's share in the (presumably Korean) smartphone market in the years 2006-2008 was "well below the 40 percent level," which in the top court's opinion makes it "less likely" that these exclusive dealings had anticompetitive effects.
So what's the actual impact of this decision to vacate the 2009 fine, apart from being unrelated to the 2016 case (in which the fine is almost four times as high)?
My interpretation of Yonhap's report is that a limited adjustment amounting to tens of millions of dollars is somewhat likely, but large parts of the $243 million fine presumably won't be affected. I believe this adjustment will have limited impact on the number because
Samsung is clearly bigger than LG (the fine related to Qualcomm's payments to Samsung and LG), and
the appeal succeeded with respect to only a subset of the period the fine relates to (the fine was for 2000-2009, while the Supreme Court's decision to vacate is based on a market share determination for 2006-2008, i.e., only about a third of the period at issue).
What could be the case is that the KFTC fined Qualcomm particularly hard for the LG deal (should it have taken even more issue with the terms of that deal than with the terms of Qualcomm's deal with Samsung). So maybe the adjustment will be greater than tens of millions of dollars. But even if, hypothetically speaking, half of the 2009 fine was overturned, it would only amount to about 10% of the total of the 2009 and 2016 rulings. [See the update: it really is just about an adjustment in the tens of millions of dollars according to the Korea Herald]
LG recently became a party to the appellate proceedings related to the 2016 matter. Samsung used to be a party to the proceedings relating to the 2016 decision, but dropped out after effectively settling its dispute with Qualcomm throuhg a new commercial deal in 2018 that involved not only patent licenses but also the use of Samsung's foundry by Qualcomm.
Testimony from Samsung and LG, and documents referring to Samsung and LG, also played a role in last month's U.S. antitrust trial (Federal Trade Commission v. Qualcomm) in San Jose.
At the end of the Northern California trial, Judge Koh indicated that her ruling would take more time than her decisions usually do (there's probably no faster federal judge than her). With a view to another potential government shutdown (which may happen after this week), FTC staff inquired about whether they should keep some members of the litigation team available in order to respond to a ruling during the shutdown. Judge Koh then ruled out that a decision would come down before February 15 (after which date government funding might be interupted again) and invited the FTC to inquire again shortly before February 15. But Judge Koh also noted that the next shutdown would also affect her court. I guess we'll see an FTC filing with Judge Koh's court in a couple of days, and then Judge Koh may provide some indication of a likely ruling date. A delay of the decision in the FTC case would potentially affect the Apple et al. v. Qualcomm trial scheduled to go to trial on April 15 in San Diego (Southern District of California), as some of the issues to be decided by Judge Koh are relevant to Judge Curiel's case.
