Banks amend Apple Pay antitrust complaint with elaborate single-brand market definition and French publishers should consider amending their U.S. complaint over App Tracking Transparency

This post discusses two different App Store antitrust class actions pending in the Northern District of California (before different judges) and Apple's related motions to dismiss. I'll start with the Affinity v. Apple case over Apple Pay and access to the NFC chip, but if you wish to skip right to the French publishers' U.S. antitrust action, just click here.

Affinity Credit Union v. Apple: amended complaint contains detailed single-brand market pleadings; Apple withdraws motion to dismiss for now

In mid-July, the class action law firm of Hagens Berman filed a complaint against Apple on behalf of credit card issuers. In October, Apple moved for dismissal, arguing that Apple Pay competes with plenty of other payment methods. A near-simultaneous request by Apple to stay discovery was initially opposed by the class action lawyers, and that opposition brief gave us an idea as to how they would seek to defend their complaint. However, shortly thereafter they announced their intent to amend the complaint, which was possible until yesterday (Friday). And indeed they filed the amended complaint on that day:

Affinity Credit Union, GreenState Credit Union, and Consumers Co-Op Credit Union v. Apple: Amended Class Action Complaint for Violation of the Sherman Act and Clayton Act

The key difference is that the amended complaint pleads facts and contains legal argument related to the banks' single-brand market definition of Tap-and-Pay iOS Mobile Wallets. Market definition is also the part of Epic Games v. Apple that I'm most interested in. It contains of a foremarket and a dissociated aftermarket (Kodak/Newcal precedent). Epic clearly has better arguments than Apple on both.

The original Affinity complaint did not mention the word "foremarket" at all, and "aftermarket" only once (and only in parentheses). The amended one mentions "foremarket" (though they often use the plural--"foremarkets"--which I struggle with) and "aftermarket" several dozen times.

Shortly after the amended complaint was filed, Apple withdrew its motion to dismiss for the time being. I expect them to file a renewed one, but the amended complaint is definitely more defensible.

The Apple Pay case, which is very much about Apple restricting other payment app's access to the iPhone's NFC chip, has a lot of merit. Some of the legal hurdles are higher, however, than the ones Epic is facing (and last year's district court judgment in Epic's case shows it's the opposite of a cakewalk).

Société du Figaro, SAS et al. v. Apple: Apple moves for dismissal

On August 1, the same class action law firm (Hagens Berman)--in cooperation with French antitrust lawyer Fayrouze Masmi-Dazi--filed a complaint against Apple on behalf of major French publishers such as the company that publishes Le Figaro, probably the most famous French newspaper. What I found particularly interesting about it is now also a key target of Apple's motion to dismiss: the complaint seeks an injunction against, inter alia, Apple's App Tracking Transparency (ATT) rules. The fallout from ATT even raises macroeconomic concerns.

Here's Apple's motion to dismiss:

Defendant Apple Inc.'s Motion to Dismiss

It's a motion of the "throw in the kitchen sink" or "leave no stone unturned" kind. Parts of it are unpersuasive. For instance, Apple argues that there is no case over communications restrictions because Apple allows developers (under a recent class action settlement involving the same lawyers) to "send communications outside of the app to their user base about purchasing methods other than in-app purchase." But there still are restrictions for what developers can tell users within an app.

Apple tries to portray this case as--without using that originally French word--encore of the developer class action that the same firm settled with Apple. I do believe that the cases are distinguishable, however, and in particular, ATT was not at issue in that earlier case.

The part that argues the case should be dismissed under the Foreign Trade Antitrust Improvements Act (FTAIA) was expected. It is, at first sight, a bit counterintuitive that French publishers would sue in California. The complaint already anticipated that challenge and addresses any FTAIA questions.

The part that I am most interested in is, as I mentioned before, ATT. Apple argues that the plaintiffs don't have standing, and that is a hurdle I believe the class action lawyers can overcome, but some other points made by Apple are at least somewhat valid. The complaint could state the alleged harm more clearly, and Apple is right that there should be "the definition and analysis of [ATT's] alleged effects in an advertising market, but [the plaintiffs] allege no relevant advertising market."

The ATT part is really important, and it would be wonderful if the class action lawyers could amend their complaint accordingly (as they did in the Apple Pay/NFC case I discussed further above).

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Credit card issuers oppose Apple's motion to stay discovery in Apple Pay antitrust case, cite recent decision by same federal judge in AliveCor v. Apple

In July, the class action law firm of Hagens Berman filed a lawsuit--by far not its first--against Apple in the Northern District of California, this time accusing Apple's anticompetitive conduct in connection with Apple Pay and the restrictions on access to the iPhone's NFC chip by third-party digital wallet apps.

The complaint contained an interesting chart that compares the fees Apple commands in the U.S., where its market share is high (and growing), as compared to other markets:

A week ago, Apple responded to the complaint with a motion to dismiss, accompanied by a motion to stay discovery. While I want the credit card issuers to prevail (because Apple is indeed abusing its monopoly power), they have to do their homework and properly address Apple's motion to dismiss, potentially with an amended complaint.

A couple of hours ago, the parties filed a joint status report, shortly after which the class action lawyers filed their opposition to Apple's motion to stay discovery:

Affinity's opposition to Apple's motion to stay discovery

As their opposition filing notes, discovery normally goes forward in the Northern District of California, so a motion to dismiss must be very strong at first sight in order to convince the court to grant a discovery stay. That's why the opposition brief is, in part, a preview of the forthcoming opposition to the motion to dismiss.

There is one sentence in the opposition brief that I'm struggling hard to make sense of:

"The alleged product market—Tap and Pay iOS Mobile Wallets—is brand neutral."

Well, iOS is a brand (as is Apple Pay, the only product fitting that category).

But the class action lawyers' argument then becomes fundamentally stronger:

"Regardless, Apple’s 'single brand' argument was rejected by this Court in AliveCor, 2022 WL 833628, at *7 (White, J.). There, the Court held that parties can “plausibly assert a single-brand aftermarket at the pleading stage."

AliveCor v. Apple is a case pending before the very same judge (Senior District Judge Jeffrey S. White) over the Apple Watch, with a focus on heart rate analysis and other functionalities. Indeed, in a March 31, 2022 order (PDF), Judge White held that "AliveCor has plausibly alleged an aftermarket for watchOS apps":

"AliveCor’s allegations establish a plausible aftermarket for watchOS apps that is derivative from and dependent on the primary device market. AliveCor has also plausibly alleged that Apple achieved its market power in the aftermarket only after the initial device purchase, which satisfies the second Newcal consideration. The third Newcal factor considers the source of the defendant’s market power. AliveCor alleges that users face high switching costs after the initial device purchase that are unknown at the time of the purchase. Such allegations are sufficient to establish that the challenged aftermarket restraint is not knowingly accepted by users before the device purchase. Finally, AliveCor alleges that high switching costs prevent users and developers from switching to a different operating system after the initial device commitment. These allegations suffice to plausibly establish that competition in the initial market does not necessarily discipline anticompetitive practices in the aftermarket.

"At this stage, AliveCor’s allegations are sufficient to pursue a claim based on the alleged aftermarket. The Court DENIES Apple’s motion to dismiss on this basis."

In footnote 7, Judge White distinguished AliveCor from Pistacchio, an Apple Arcade case before Judge Yvonne Gonzalez Rogers (the judge who also presided over last year's Epic Games v. Apple trial in the same district) that Apple got thrown out a year before that AliveCor decision:

"In Pistacchio, the court concluded that the plaintiff had not adequately pled that the relevant market should be limited to the iOS platform. 4:20-cv-07034-YGR, 2021 WL 949422, at *2 (N.D. Cal. Mar. 11, 2021). However, the plaintiff in Pistacchio did not allege an aftermarket theory, and the complaint contained far fewer allegations supporting the alleged relevant market."

Apple also claims that Affinity failed to allege an aftermarket theory. And as I noted in my commentary on the motion to dismiss, the term "aftermarket" only appears once in Affinity's complaint. Last night's opposition brief, however, argues that all the Kodak/Newcal factors (Newcal is a post-Kodak Ninth Circuit precedent) were properly alleged:

Factor #1

"Tracking these factors, Affinity alleges that the market for Tap-and-Pay iOS Mobile Wallets derives from the primary smartphone and mobile device markets in which Apple operates."

pointing to para. 52 of the complaint:

"Tap and Pay iOS Mobile Wallets are a distinct product for which there is distinct demand. More than 1 billion people use Apple’s mobile iOS devices, and about half of them have enabled the Apple Pay Mobile Wallet to make tap and pay payments."

Factor #2

"The challenged restraint (foreclosure of rival wallets) relates only to the aftermarket."

pointing to para. 48 of the complaint:

"But Apple has taken a distinctly exclusionary approach with NFC technology. Apple currently allows developers to use the NFC interface, but only to provide functionality that does not compete with Apple Pay. For example, developers can utilize the NFC interface to allow users to 'scan a toy to connect it with a video game,' or 'an in-store sign to access coupons,' among other things. Apple also recently announced technology that will “empower millions of merchants' to accept Apple Pay payments from an iPhone. But what developers cannot do is use NFC to create apps that, like Apple Pay, allow users to make tap and pay payments. Only Apple Pay can use NFC for that function."

Factor #3

"Apple’s market power in the aftermarket was not secured contractually in the primary market."

pointing to para. 46 of the complaint:

"But iOS consumers never agree that they will exclusively use Apple Pay as their tap and pay mobile wallet. Instead, as discussed herein, Apple coerces consumers to use Apple Pay by barring all would-be Apple Pay rivals from accessing the NFC interface installed on the mobile devices Apple already sold to the iOS consumers."

Factor #4

"And competition in the primary market does not discipline Apple’s practices in the aftermarket."

pointing to paras. 57-63 of the complaint:

"a. Android Wallets Are Not Reasonable Substitutes For Apple Pay.

"57. There are no tap and pay Android mobile wallets available on Apple’s iOS devices because Apple has barred those wallets from accessing the NFC interface on iOS devices. Thus, while an iOS user can download an iOS version of Google Pay from Apple’s App Store, the iOS Google Pay app cannot be used to make tap and pay payments. The app cannot even be used at the point-of-sale at all. Lacking Apple Pay’s core functionality on an iOS device, Google Pay and other Android wallets are not a substitute for Apple Pay.

"58. Android mobile wallets are also not in the same relevant market as Tap and Pay iOS Mobile Wallets because a Tap and Pay iOS Mobile Wallet is not constrained by substitution in the market for smartphones. To be more precise, a small but significant and non-transitory increase in the price of a Tap and Pay iOS Mobile Wallet transaction would not trigger switching by users to mobile wallets on Android-based devices.

"59. Switching costs from iOS to Android mobile devices are high. As one Apple executive stated internally, 'Who’s going to buy a Samsung phone if they have apps, movies, etc already purchased? They now need to spend hundreds more to get where they are today.' Even if consumers might be induced to switch to Android mobile devices in response to a change in Apple Pay fees, Apple has assured this will not happen. As addressed further below, Apple bars issuers from charging their cardholders additional fees for their participation in Apple Pay. In other words, issuers cannot pass through the cost of Apple Pay. Shielded from Apple Pay’s fees, consumers have no reason to switch in response to a change in the level at which Apple Pay’s fees are set. Apple can (and has) set those fees above the competitive level knowing that, from consumers’ perspective, Apple Pay is, and has always been, available free of charge.

"60. It is also apparent that at the time a mobile device purchaser makes a decision as to whether to purchase an Apple device or an Android device or another brand of device, the purchaser has no ability to take into consideration the additional cost imposed on the market by Apple’s anticompetitive conduct. In fact, the added cost is unseen by the purchaser, who is not even aware of the fees that Apple imposes on card issuers. As a result, the consumer has no incentive when purchasing a mobile device to switch to a competing device that does not charge anticompetitive fees. Apple’s pricing power in the Tap and Pay iOS Mobile Wallet Market is thus not constrained by consumer decisions at the time of purchasing a mobile device.

"61. The only party with the incentive to substitute, or encourage substitution to Android wallets, is therefore the card issuer. Apple has, however, barred issuers from encouraging consumers to switch through surcharges, and so issuers can encourage switching only by ceasing to participate in Apple Pay. This is demonstrably not a viable option for nearly all issuers.

"62. As of September 2020, approximately 51% of iPhone users had activated Apple Pay. Given the substantial population of Apple Pay users, issuers cannot profitably (and generally have not) disabled Apple Pay in an effort to shift demand to Android wallets. Indeed, the number of Apple Pay issuers has increased steadily since Apple Pay’s launch, reaching a reported 5,480 banks worldwide by 2020 (20% increase over 2019). This reveals that issuers do not expect that removing Apple Pay would result in consumers switching to Android wallets, rather they fear consumers would switch to cards issued by other banks instead.

"It is also apparent from historic pricing that Android tap and pay mobile wallets do not impose any constraint on the price of Tap and Pay iOS Mobile Wallets. For years, Apple Pay has found it profitable to impose a significant issuer fee above the $0.0 fee imposed by Android apps providing virtually the same service on Android devices—namely, Google Pay and Samsung Pay. If these Android products were in fact substitutes for Apple Pay, demand would have shifted to Google Pay and Samsung Pay. But this has not happened, as just noted. That issuers have absorbed Apple Pay fees demonstrates issuers’ inability to drive consumers to Android wallets. Imposing no restraint on Apple Pay’s pricing, and hence on the ability of a hypothetical monopolist’s ability to profitably impose a small but significant and non-transitory increase in price (SSNIP), those Android wallets cannot be in the same antitrust market as Apple Pay."

It's obviously no coincidence that the fourth part (aftermarket actions not disciplined by foremarket competition, i.e., the foremarket and the aftermarket are dissociated) is the most elaborate one. That was also the key one in last year's Epic Games v. Apple decision, apart from Judge YGR getting the foremarket part completely wrong.

Apple would presumably have brought a motion to dismiss even if Affinity's complaint had been twice as specific. But it would have been good if the complaint had referenced the Kodak/Newcal factors more clearly. I suspect the class action lawyers didn't do that because they don't want to depend on just a single-brand market definition. Unlike the credit card issuers, I believe Apple has a point that "Tap and Pay iOS Mobile Wallets" is a single-brand market. Otherwise iOS wouldn't be part of that definition. However, Apple may already have so much power in the foremarket that a single-brand aftermarket isn't required.

Affinity's opposition to a motion to dismiss won't be able to cure factual deficiencies. But what they can do in the briefing process is map the factual allegations in their complaint to legal theories that support them, even if the complaint itself didn't do it quite as clearly as it could have.

While I think Affinity's case faces additional hurdles to, or higher hurdles than, the ones that Epic has to overcome (see my preview of the Ninth Circuit hearing in the Fortnite case that will take place on Friday), I do believe it's more similar to AliveCor, where Judge White granted in part and denied in part Apple's motion to dismiss, than Pistacchio (the Apple Arcade that Judge Rogers dismissed).

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Lawyers tried to avoid Epic v. Apple judge for banks' class action against Apple over Apple Pay monopoly abuse--but jury is out on ultimate assignment

The class action-specialized law firm of Hagens Berman yesterday announced an antitrust class action on behalf of payment card issuers against Apple. The complaint (PDF) alleges monopoly abuse in the form of the "manifestly supracompetitive" fees Apple charges payment card issuers for transactions made on Apple Pay. Apple has very high shares in the smartphone, tablet, or smart watch markets in the United States, the geography the lawsuit focuses on, and does not allow other payment apps (particularly "wallet" apps) to use the iPhone's NFC chip. Developers can use NFC for some purposes, but Apple prohibits third-party apps to facilitate payments via NFC. Apple charges transaction fees despite other companies doing almost all of the work--and those amounted to $1 billion last year and are projected to soon reach $4 billion, in the U.S. alone.

I'm going to be following this litigation as it unfolds, so this here is not my "definitive" analysis but merely a few observations to begin with.

Explanatory complaint: One key strength of this complaint is that it does a great job explaining the issues and their effects. It's definitely one of the best U.S. complaints I've ever seen in explanatory terms.

Plaintiffs: The caption is Affinity v. Apple as Affinity Credit Union of Canada (which also does some business in the U.S.) is the initial plaintiff. Hagens Berman now wants payment card issuers to sign up so they will get a share of what could be a multi-billion dollar payout. Depending on who will join the plaintiff class (of the thousands of entities that would meet the eligibility criteria), this case here could get a lot more serious than some consumer or "small developer" class actions that typically end in settlements that benefit the lawyers to a far greater extent than anybody else.

Sherman Act claims: There's a tying claim (Sherman Act Section 1) that is described as a "requirements tie." It's not a general tie that would require anyone purchasing an iPhone, iPad, or Apple Watch to use Appel Pay. But if the users of those devices want to do "tap and pay" transactions, "Apple has made Appe Pay the only option for fulfilling that requirement." In that sense, Apple ties the "tap and pay iOS mobile wallet market" to the "iOS mobile device markets." An additional section 2 claim accuses Apple of monopolization by excluding competition, "including by way of its unlawful practices in restraint of trade." As a fallback, the complaint also alleges "attempted monopolization."

Geographic market: I've already mentioned the geographic focus on the U.S., which in this case doesn't seem arbitrary at all. The complaint contains a chart according to which Apple imposes particularly high transaction fees in the U.S. as compared to the UK and the EU:

Market definition: Given Apple's very high market share in the U.S., the case--unlike cases with a global market definition such as Epic Games v. Apple--doesn't hinge on a single-brand market definition. However, the term "aftermarket" is mentioned once.

Relationship with EU investigations: The complaint makes reference to the European Commission's recent Statement of Objections (a preliminary finding of an antitrust violation) in an Apple Pay case. While there are jurisdictional differences, one can reasonably argue that the Apple Pay situation is worse in the U.S., as evidenced by the fact that fees in the U.S. are several times higher. Besides the investigation in which the EU issued the aforementioned SO, there's a second investigation into Apple Pay (with a slightly different focus) that was announced about two years ago.

Google: This here is not a "Goopple" case where both duopolists--Google and Apple--behave in similar ways. The complaint mentions how much more freedom and, as a result, innovation there is in the market for Android wallets.

Security: The complaint attributes (at least in part) to Apple's exclusionary practices that there have been serious security issues involving Apple Pay. This is going to be a very interesting part of the case to watch, as Apple uses security (alongside privacy) as its favorite pretext for anticompetitive, innovation-stifling terms and policies.

Negative judge-shopping: The Northern District of California, where this complaint was brought, has multiple divisions. Hagens Berman specifically requested "[i]ntra-district assignment to the San Jose division." That's the closest one to Apple's Cupertino HQ, and normally parties prefer not to be in an area where a high percentage of potential jurors may have friends or relatives working for the other party. I'm almost 100% sure that the real reason is not that they want to litigate in the backyard of Apple Park. The presumptive motivation here was to keep the case out of Judge Yvonne Gonzalez Rogers' hands. She's based in Oakland and presiding over the Pepper v. Apple consumer class action (that went all the way up to the Supreme Court) as well as Epic Games v. Apple, which is currently before the Ninth Circuit.

But there is a possibility of her getting the case despite the plaintiff's efforts to sidestep her division. The first thing that happened was that the court assigned the case to Magistrate Judge Thomas Hixson, who has a strong antitrust background but (a) is based in San Francisco and (b) handled discovery-related matters for Judge YGR in Epic Games v. Apple. In this case it's a given that the parties will decline to proceed before a magistrate judge, and then the case might be assigned to that Epic v. Apple judge on the other side of the Bay Bridge...

While she decided Pepper for Apple (only to be overruled by the Ninth Circuit and then the Supreme Court) and then granted Epic only a pointless consolation prize, it would be utterly unfair to suggest that Judge Gonzalez Rogers intends to be protective of Apple. The way she "grilled" Tim Cook at the end of last year's trial was definitely the opposite of what a judge would do if there wasn't a sincere intent to find out the truth even if it might be bad for Apple. She also made a very correct remark during the trial about competition having the potential to leading to security improvements. But there are indeed some issues.

The question of whether consumers had standing in Pepper was tricky, and narrowly decided. If Justice Kavanaugh hadn't joined the liberal minority, Judge YGR's dismissal of the case would probably have been affirmed.

But (at least) the part of the Epic Games v. Apple judgment dealing with Epic's single-brand market definition was a total disaster: wrong on the law, wrong on the economics, wrong on the technology. The sheer absurdity of saying that Epic's foremarket definition of smartphone operating systems was meant to suggest a higher market share for Apple than it actually has in the smartphone market is unbelievable, given that no iPhone gets sold without iOS and vice versa: same market share either way. In January I wrote that "[t]here is a one-to-one relationship (as programmers like me would say) between iPhones and iOS installations." Epic used the same term in its reply brief several months later.

Given that history, I can see why antitrust plaintiffs suing Apple over its death grip on its mobile ecosystem would rather have their case assigned to the San Jose division, which still doesn't mean that anyone accuses an honest judge of being biased. It's just that she has made mistakes that benefit Apple big-time, and no one wants to be on the receiving end of the next such mistake.

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Qualcomm's NXP deal raises chip- and patent-related concerns: in-depth review by European Commission

More than five years ago, Google's acquisition of Motorola Mobility was delayed significantly by merger reviews on both sides of the Atlantic and U.S. regulatory approval was subject to certain promises related to patent enforcement. At the time, Motorola Mobility (the acquisition target) was aggressively asserting FRAND-pledged standard-essential patents against Apple and Microsoft. Against that background of blatant FRAND abuse, competition enforcers weren't prepared to grant fast-track approval.

Qualcomm's planned $45 billion acquisition of NXP Semiconductors, a leader in NFC and secure elements (SE) chips, is now also undergoing an in-depth review by the European Commission and possibly also in other jurisdictions (though the deal surprisingly got fast-track clearance in the U.S.). I'm just in the process of trying to find out more about NXP's patent dealings. But it appears that, unlike in the Google-Motorola case, it's the acquirer's conduct that adds to concerns over what might happen post-transaction. That is even more problematic since the acquirer, not the acquisition target, will make the decisions post-transaction. The press release the Commission published late on Friday contains a few keywords that sound all too familiar in the ears of anyone following the current flurry of antitrust activity relating to Qualcomm:

• "bundling": Presumably this is about chips that might be the equivalent of having a baseband processor and an NFC/SE chipset in a single product. Bundling is a sensitive issue in the EU and the Microsoft Media Player case created some case law.

• "tying": This is also a key issue in the U.S. FRAND abuse case. The FTC would want Qualcomm to offer its chipsets without requiring a patent license on devices that use other companies' chipsets, and as far as Qualcomm's own chipsets are concerned, patent exhaustion, which is stronger in the U.S. than ever after a recent Supreme Court decision, should take care of the licensing question.

  Intel raised the issue of a dual, mutually-reinforcing monopoly in a recent amicus brief. I had written about that kind of dynamic before. The worst-case scenario in the NXP context is now that Qualcomm might expand on its monopoly. A highly simplified way to put it would be that Qualcomm will go from a dual to triple or quadruple monopoly, forcing customers to buy chipsets of one kind if they want access to others, and/or designing its patent license terms (including "rebates") in such a way that companies will end up sourcing various types of chips from Qualcomm.

• "increased royalties for customers": Qualcomm is synonymous with out-of-this-world royalty rates. Last month I quoted an Apple letter (which Qualcomm had attached to a court filing) according to which "Qualcomm forces the contract manufacturers and Apple to pay many times more in royalty payments than all the other cellular patent licensors combined!"

  Why has Qualcomm been able to command such royalty levels? It's not just a matter of innovation. They do a lot of R&D, without a doubt, but without the two mutually reinforcing monopolies, even Qualcomm couldn't collect many times the amount of royalties of the rest of the industry combined. If Qualcomm now gets more leverage on both the chip side and the patent side because of the NXP deal, things will get even worse.

  Qualcomm already holds more NFC patents and applications than any other company such as Sony (#2) or Samsung (#3)--almost 1,000, or roughly 5.5% of the pool. After acquiring NXP, Qualcomm's position will go up to approximately 1,350 patents and applications, putting Qualcomm far ahead of the rest (almost twice as many as Samsung, for example). While consolidation of patent ownership positions is still preferable over Nokia- and Ericsson-style privateering, it does raise issues when a company is known to overcharge.

• "exclusion of competitors": NXP's competitors, just like Qualcomm's, are chipset makers. The only remedy that could address this concern would be that the combined company would have to license other chipset makers on FRAND terms.

While the nature of the concerns is familiar, the NXP deal involves different technologies than the other Qualcomm cases--and it affects additional industries. Mobile device makers will be affected since an increasing number of smartphones come with NFC. But NXP also appears to be a key supplier to automotive companies; otherwise the Commission's press release wouldn't "particularly" mention that industry. Even independently of its contemplated acquisition of NXP, Qualcomm is trying to position itself as a technology licensor to automotive companies such as in connection with wireless electric vehicle charging. Qualcomm's inductive charging road is impressive.

In Europe, automotive companies have a lot of political clout. Maybe some of them have, directly or indirectly (through trade associations and national governments) made the EU Commission's Directorate-General for Competition (DG COMP) aware of their industry-specific concerns.

Reuters reported on Friday that Qualcomm is confident it can address the EU's concerns. I'm sure that the EU doesn't want to block the deal if it can be avoided, but any remedies would really have to have teeth. Negotiations are likely going to continue. The next key juncture is when the Commission will have to decide whether to issue a Statement of Objections (SO), which it will likely begin drafting soon in case it needs to take that step. It's been almost eight years since the SO against Oracle's acquisition of Sun Microsystems (the only SO against a merger during that entire year). At the time, I was a consultant to a complainant. Now I'm just an app developer and blogger, and I don't know how much time I'll find to dig into the details of this process, so if you can support my efforts with information, please make use of the contact form here. I protect my sources, of course.

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Nokia wins German patent injunction against all HTC Android devices including the One series

The New Year's Eve fireworks kicked off a day early at the Munich I Regional Court, where Judge Dr. Matthias Zigann just handed Nokia a Germany-wide patent injunction against all HTC Android devices (including the One series) that infringe EP1148681 on a "method for transferring resource information" by allowing end users to connect two HTC devices directly over NFC or Bluetooth (but not over WiFi or the Internet) to transfer resource information such as a URL. The patent is not standard-essential, meaning that Nokia does not have any FRAND licensing obligations.

HTC can and undoubtedly will appeal this ruling. But in the meantime, unless HTC manages to convince the appeals court right away that it is more likely than not to succeed with its appeal (a reasonably high hurdle), Nokia can enforce this injunction (including a recall of infringing devices from resellers and commercial users) on a provisional basis by posting a 400 million euro ($550 million) bond or giving security to the same amount. This is a permanent -- not preliminary -- injunction following an early first hearing held in October 2012 and a full trial held a few months ago (which I did not attend). But enforcement is provisional until all appeals are exhausted.

Nokia has enough cash to be able to afford the provisional enforcement of this injunction. The purpose of the bond is just to enable HTC to recover wrongful-enforcement damages should it prevail at the end of the proceedings and Nokia's financial condition deteriorate. At that stage, HTC would have to prove any damages it claims, and since it could always just remove the patented feature from its devices, it would have to convince the court (in that scenario) that it lost a certain amount of sales because of the reduced marketability of its products to German consumers. This is hardly going to deter Nokia from enforcement. Nokia has issued numerous statements since the start of its multijurisdictional infringement litigation campaign against HTC (in May 2012) that it seeks to put an end to HTC's alleged -- and repeatedly-proven -- infringement of Nokia's intellectual property.

Google realized during the course of this litigation that this Nokia patent is of concern to the entire Android ecosystem. (Earlier today I found out that Nokia is also in Android-related patent licensing discussions with Google's Motorola Mobility.) In addition to HTC's nullity complaint (invalidation action) challenging this patent before the Federal Patent Court of Germany, Google also brought a nullity complaint -- but too late to be considered by the Munich I Regional Court in connection with HTC's motion to stay the case pending those nullity cases. Under German law, a lawsuit is "rechtshängig" (pending) only after the complaint has been served by the court (which doesn't act before receiving an advance on court fees) on the defendant. Google acted too late, which is typical: it took Google (under a different CEO, though) quite long before it started to respond to the infringement actions brought against Android by Apple, Microsoft and other patent holders. Once again, it acted too late. Google's nullity complaint appears to involve additional invalidity contentions and may ultimately succeed -- but it wasn't legally pending at the time of the infringement trial, and the court found that HTC's declaration of its intent to add the same additional invalidity theories and prior art references to its own (pending) complaint was also too little, too late.

Originally, Nokia was alleging that a transfer of resource information over WiFi also fell within the scope of the patent-in-suit. It withdrew that part of the complaint ahead of the ruling. Since NFC and Bluetooth played a far greater role in this case at any rate, the court exercised its discretion to impose 100% of the court fees and of the recoverable part of Nokia's legal fees on HTC.

Ten days ago, Nokia won another Munich injunction against HTC, from a different panel of judges. Today's injunction was issued by the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann), while the pre-Christmas ruling was handed down by the 21st Civil Chamber (Presiding Judge: Andreas Mueller). The earlier one did not relate to the HTC One according to a statement by HTC. In March Nokia had already won an injunction from another German court, the Mannheim Regional Court, but HTC simply removed a certain power-saving feature from its devices and kept selling its products in Germany. All three German Nokia injunctions against HTC were won by lawyers from the Dusseldorf office of the Bird & Bird firm.

Another Nokia v. HTC decision by Judge Dr. Zigann's court is scheduled for January 9, 2014.

Nokia is suing HTC in seven countries (U.S., UK, Germany, France, Italy, Netherlands, Japan) on three continents (North America, Europe, Asia).

In the U.S., the ITC, a trade agency with quasi-judicial powers, is currently reviewing a preliminary ruling that held HTC to infringe two Nokia hardware patents. Google, Verizon and Sprint, as well as other parties, have asked the ITC not to issue an import ban, citing public interest grounds, or to at least give HTC 12 months to modify the products it imports into the U.S. market. But Nokia argues that the ITC has already ordered import bans against smartphone and tablet computer makers with far greater market share, and counters arguments that injunctive relief should not issue against multifunctional products over patents covering single, minor features by saying that if the feature is minor, HTC should simply remove it.

In the UK, Nokia recently won an injunction, which was stayed by an appeals court for the duration of the appellate proceedings. The hurdle for such a stay is substantially lower in the UK than in Germany, where an infringement holding generally entitles patentees to injunctive relief without any equitable discretion.

Nokia's patent enforcement against HTC clearly has momentum now. The injunctions it has won so far have not given it decisive leverage. And it could be that HTC will decide to simply remove the resource transfer feature in Germany. But sooner or later, HTC will end up sending patent royalty checks to Finland.

So far Nokia's enforcement focuses on devices rather than the Android platform or Google's services, but a Nokia v. HTC lawsuit in Dusseldorf, Germany, involves Google Maps and Google Navigation, two services that are key to Google's overall strategy.

[Update] Nokia has released a statement, suggesting that HTC make it its first New Year's Resolution for 2014 to stop infringing:

"Nokia is pleased that the Regional Court in Munich, Germany has today ruled that any HTC product using Bluetooth or NFC connections infringes Nokia's patent EP 1 148 681, which covers the transfer of network resource information between mobile devices.

This judgment enables Nokia to enforce an injunction against the import and sale of all infringing HTC products in Germany, as well as to obtain damages for past infringement. This follows another ruling from the same court ten days earlier, which found that HTC products infringed Nokia's USB patent EP 1 246 071 and granting Nokia right to an injunction and damages against products infringing that patent.

Nokia began its actions against HTC in 2012, with the aim of ending HTC's unauthorised use of Nokia's proprietary innovations and has asserted more than 50 patents against HTC. During 2013, Nokia believes it has demonstrated beyond doubt the extent to which HTC has been free riding on Nokia technologies, with HTC found to infringe seven Nokia patents in venues including the Regional Courts in Mannheim and Munich, Germany, the UK High Court and the US International Trade Commission. HTC’s first New Year’s resolution for 2014 should be to stop this free riding and compete fairly in the market."

[/Update]

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