Nokia withdraws interlocutory appeal of ECJ referral of component-level patent licensing question: dilatory tactics, disrespectful style

We're witnessing the third stage of Nokia's decline. First it failed to stay competitive in the handset business. Then its business model turned ever more trollish and its patent litigation strategies ever more abusive. The third and latest downturn is that Nokia is now abusing not only its patents, but also its procedural options in litigation.

Throughout almost 11 years of blogging about patent litigation, I have acknowledged on numerous occasions when parties played the litigation game smart. Very recently, I even gave automotive supplier Continental credit for an interesting strategy in a Delaware state court, even though I bashed them in 2019 for their U.S. antisuit motion (which indeed went nowhere). Up to a certain point, litigants--whether plaintiffs or defendants--are simply in their right to exercise their procedural rights for tactical purposes. But beyond that point, such behavior is no longer legitimate, even if it is still technically legal. For example, trolls that file dozens of cases against a single defendant over the course of a few months--or simultaneously sue hundreds of defendants--give patent assertion a bad name. I still have the greatest respect for the skills of Nokia's in-house litigators and outside counsel, but in recent months it has gone a bit too far with its withdrawals of cases just on the eve of trials or decisions.

In December, Nokia dropped two patent infringement cases against Daimler in Dusseldorf just before trial (at a point where the court presumably had already spent a lot of time studying the pleadings and preparing the trial), only to refile in Munich. And now, just before Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German) of one of the patent-specialized divisions of the Dusseldorf Higher Regional Court was going to rule on Nokia's interlocutory appeal of the lower Dusseldorf court's preliminary reference to the European Court of Justice, Nokia has withdrawn its appeal. Today a spokesman for the Dusseldorf appeals court informed me by email (appellate case no. 2 W 21/21).

From the beginning, Nokia knew that this interlocutory appeal was a bit of a long shot. Its appeal talked in more detail about whether it was admissible at all than about the question at issue. After the lower court didn't reconsider, this went up to the regional appeals court, and was assigned to the Second Civil Senate, whose aforementioned presiding judge took a very clear position on component-level SEP licensing in an article he published in GRUR, the leading German IP law journal, in 2019. For Judge Dr. Kuehnen, the order on Nokia's interlocutory appeal, which he had presumably been working on for some time, would have been an opportunity to provide his input to the top EU court. Not so anymore. Nokia abused the appellate process to engage in stalling, and apparently never really wanted a decision by the regional appeals court.

When pursuing its infringement cases, Nokia can't wait to get rulings (with the exception of those infringement cases it dropped in Dusseldorf because it probably expected them to be stayed, if not rejected). It's typically the defendants to those infringement complaints who seek to extend filng deadlines, move to file post-trial briefs, and so forth. It would have been better for Nokia's credibility to act consistently, as opposed to stalling in Dusseldorf while insisting on speedy dispute resolution in other venues.

The question of component-level licensing is the key issue in Nokia's--and various other parties'--automotive patent cases. Whether one prefers one outcome of that ECJ referral or another, clarification will help, and if the ECJ ruling provides clarification (there is always a risk of a decision raising new questions), licensing negotiations will benefit from such guidance. Why does Nokia prefer to delay such resolution? Are they so worried they're going to lose? Is Nokia's plan to gain leverage over Daimler in some infringement case in the meantime? In light of a key appellate decision Nokia lost in Karlsruhe (where all appeals from Mannheim go) on Friday (which I'll discuss in the next post), it's just become even harder for Nokia to enforce any SEP injunction against Daimler in the near term.

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Today is the 10th anniversary of the launch of FOSS Patents--and here's a Microsoft patent threat from 2004 no one reported before

Ten years ago to the day, the first FOSS Patents blog post went live. (In the table of contents on the right side you can also find an entry for January 2010, but that one was added subsequently--and backdated so the contact form would be listed behind all of the actual content.)

When I talk to readers at courthouses or on other occasions, I realize most people don't even know what the "FOSS" stands for. That means Free and Open Source Software, a "politically and philosophically correct" term that describes both persuasions of the same movement. At the outset, the idea was indeed to focus on patent threats and assertions against open-source programs such as Linux. I always viewed the Open Invention Network (OIN) very skeptically as it appeared to part of the problem to a several times greater extent than it was part of the solution. And I was aware of some threats no one had reported on at the time. In fact, there is one that I hadn't written about in the more than 16 years since it was made, but with so much water under the bridge by now--and with Microsoft being a member in good standing of the open-source community these days--I'm going to reveal it on this occasion:

In early 2004, Microsoft's patent licensing department contacted MySQL AB, the originally Finnish-Swedish and, at that time, heavily Americanized open-sourced database company (whose CEO I was advising at the time). What Linux was in comparison to Windows, MySQL was to Oracle, Microsoft SQL Server, and IBM Db2. The term isn't used much anymore, but back then the "LAMP Stack" meant Linux, the Apache webserver, the MySQL database, and one of the P languages (mostly PHP, with a few people using Perl, or even Python): an open-source technology stack powering more websites than any other comparable configuration. MySQL had risen to popularity alongside Linux. It was a symbiotic relationship. Microsoft, of course, favored Windows + Internet Information Server + SQL Server + Visual Studio (C# or Visual Basic).

What Microsoft--and again, the Microsoft of then is not the Microsoft of now when it comes to these types of issues--told MySQL (a company that had received tens of millions of dollars of venture funding while Microsoft already had roughly 10,000 times greater resources) was that they claimed to hold a patent that covered functionality at the very core of the MySQL database engine. From a software development perspective, a database engine is a relatively monolithic (as opposed to modular) thing. If someone asserted a patent against the basic architecture of your engine, it could mean that you have to almost start all over. You'd lose years.

Microsoft was clear about its demand: a 2% royalty on MySQL's (tiny) sales. Two things were not clear, however: whether Microsoft had an agenda to actually start a patent war against open source and, particularly, the LAMP Stack, so that an initial royalty agreement would not have been an amicable resolution of an IP issue but could have been the beginning of the end for MySQL and LAMP; and Microsoft declined to disclose that mysterious killer patent.

The concern I just outlined--that Microsoft would wage an all-out patent war against open source--was not merely paranoia. A Microsoft exec in charge of corporate strategy at the time had told some Silicon Valley venture investors a year or two before that "if it comes to worst with open source, [they'd] just use some of [their] patents." So what was presented as a shakedown might have been a concealed attempt at a shutdown.

Microsoft was the only company at the time to have an issue with Linux; the rest of the industry viewed Linux as a chance of liberation from Microsoft dominance. When it came to MySQL, however, two other major patent holders--IBM and Oracle--potentially had just the same strategic motivation to attack the successful startup, as those companies were pro-Linux, but faced a disruptive-innovation threat from MySQL. While that would have been a gigantic violation of antitrust law, one of MySQL's founders even feared that Microsoft, IBM and Oracle might have agreed to launch near-simultaneous patent attacks on them. And they had only a very few patents (from a smaller startup they had acquired)--likely of zero retaliatory value.

MySQL didn't accede to Microsoft's demand, and Microsoft never stepped up the pressure or sued. Part of the reason may very well have been (and in my view, most likely has been) that there were two things going on in the EU that Microsoft had to be cautious about. The European Commission going after Microsoft for its conduct in some other conduct; and the EU's legislative bodies (Council and Parliament) were working on a Directive for the Patentability of Computer-Implemented Inventions, i.e., software patents directive. Concerns by the open-source community played an important role in the political debate.

At some point MySQL was seriously considering making Microsoft's patent royalty demand public. We had already prepared a press release, and it was going to be centered around an open letter to EU policy-makers urging them to abolish software patents in Europe (though that wouldn't have solved the problem for MySQL anywhere else, and it actually generated most of its revenues in the U.S. anyway). We didn't escalate the conflict, and ultimately that was better for everyone involved.

Oddly, about five years later Microsoft actually tried to defend MySQL's independence. Oracle was in the process of acquiring Sun Microsystems, which had acquired MySQL the previous year for $1 billion. While Sun wanted MySQL's business to grow, there were reasons to assume Oracle simply wanted to control it so as to eliminate a competitive threat. Microsoft and SAP (even though mostly concerned about Java in the beginning) were the two large complainants, and MySQL's founder, Michael "Monty" Widenius, was the third complainant, with help from me. So MySQL's founder and I ended up in an alliance with Redmond about five years after we had thought Microsoft would potentially use patents to destroy it.

If not for that old Microsoft patent threat against MySQL--16 years under wraps--, I might never have gotten involved with patent policy in the first place. And I had it very much in mind when I launched FOSS Patents. At that time, I already knew that Microsoft wasn't necessarily a foe (as the Oracle-Sun merger review showed). In fact, I felt that some FOSS people, maybe because they received funding from the likes of IBM and Oracle, weren't being fair: they turned a blind eye to some other large tech companies' (especially their financial backers') questionable patent dealings and pro-software-patent lobbying, but even when Microsoft had good intentions in specific areas, they looked at whatever Microsoft did or announced like Sherlock Holmes with a magnifier glass and, if all else failed, simply made up concerns that weren't warranted. Part of the FOSS Patents agenda was to focus more on companies whose patent abuse got less attention, but "deserved" more. The first big story here was the second post ever: on an IBM threat against an open-source mainframe emulator.

This blog's focus evolved dynamically. In fact, just about four weeks before I launched FOSS Patents, Apple had filed its first patent infringement complaint against an Android device maker (HTC). Android became the most heavily-attacked piece of open-source software that year as Oracle sued Google (a case that later became only a copyright dispute as Oracle's patents failed in court), Microsoft sued Motorola, Motorola sued Apple (which countersued using largely the same patents as against HTC), and the following year Apple sued Samsung.

Of the roughly 2,300 FOSS Patents posts I've written to date (also, there were a few guests posts), roughly 63% (1,456 posts) went live in the years 2011-2013, the three years in which the "smartphone patent wars" were raging on a very large scale. By 2014 they had already subsided, and in 2014 various disputes came to a partial or complete end.

With those Android companies countersuing, my litigation reporting simply had a mobile focus (and occasionally even gaming consoles). If I had anticipated that, I'd have named the blog "Mobile Patents" or "Phone Patents."

Actually, "FRAND Patents" would have made even more sense. I already took a clear position against injunctions over standard-essential patents in 2010. And a few years later, a Research In Motion/BlackBerry lawyer accused me, after a Mannheim trial, of having "devalued" SEPs and that companies were cutting back on their standardization activities (obviously not true, as we all know now with the benefit of 2020 hindsight).

More recently, this blog has almost been an "automotive" blog, only because car makers are currently the ones that SEP holders like Nokia primarily seek to prey on.

So there's probably no point in ever renaming a blog, much less when it is as well-known as this one. I'm very grateful for having so many loyal readers, and a number of highly important people in the industry as well as in the judiciary, executive and (to a lesser degree) legislative branches of government. I really am.

There's one thing I had envisioned for the 10th anniversary that I haven't found the time for: a redesign. This blog still uses the "Blogspot" platform's original blog layout. Blogspot became Google's "Blogger" service, and undoubtedly supports more fashionable layouts. However, since I have manually entered and edited all the HTML tags here from the outset, it's a bit risky to switch to a newer layout (I ran a test and the result looked awkward)--I or someone I'd pay for it might have to go over 2,000+ posts and make countless manual adjustments. Nevertheless, it may happen later this year--certainly sometime before the potential 20th anniversary :-)

There were times when I was seriously considering discontinuing this blog, or handing it to some other organization, such as an IP-focused publishing company. But in recent years there have been some really exciting developments--and I've found a way to keep blogging while continuing to run an app development company (I'll have a new game to announce this summer).

Some of you encouraged me to keep going--even some who have rather different positions on SEPs or on patent policy in general. Thanks for that, too. I'll keep sharing my honest observations and opinions with all of you for quite some more time!

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Google's petition for Supreme Court review of Android-Java copyright decisions should be granted--but Oracle should still win

Several months after requesting an extension to file a petition for writ of certiorari (request for Supreme Court review), Google today announced the filing of that petition today (one day before the extended deadline), and published the document (PDF).

As I suspected, Google is seeking a review of both the Federal Circuit's 2014 copyrightability finding and the same appeals court's 2018 holding that the way Google incorporated many thousands of lines of Java API declaring code does not constitute fair use.

My positions on the issues have not changed. However, I do keep my fingers crossed for Google's petition, and here's why:

At the cert stage, it's not about whether a petitioner's theories have merit. It's about whether the issues raised are important enough to warrant review because clarification is needed.

I want Google to win at the cert stage, even on both counts (copyrightability and fair use), but then I hope (and think it's very likely) that the Supreme Court of the United States will affirm the Federal Circuit's well-reasoned opinions, which are good for innovation.

No one can blame Oracle for preferring that the Supreme Court deny the petition: then the case, filed in 2010, could finally proceed to the remedies stage, where it would have been a long time ago if not for totally outrageous decisions by Judge William H. Alsup in San Francisco.

But Oracle's interest in saving time, no matter how understandable and legitimate, doesn't make the issues any less important.

If the Federal Circuit's decisions had been handed down by the United States Court of Appeals for the Ninth Circuit, I'd still prefer a ruling by the top U.S. court, but then the benefit of a denial of cert would at least be legal certainty in the most important circuit.

Here, however, the case went to the Federal Circuit because Oracle had originally also asserted software patents, which went nowhere but made this a case that must be appealed to the Federal Circuit and not the regional circuit (here, the Ninth Circuit).

In such a situation, the Federal Circuit applies the regional circuit's law. But it doesn't make or modify another circuit's case law. As a result, those two beautiful Oracle v. Google appellate opinions--which I welcomed as an app developer and trivia content author (the latter is also a field where the fact-expression dichotomy plays a role)--aren't really binding on anyone. In theory, even the Federal Circuit, next time it applies Ninth Circuit law, could easily take a new position (though it probably wouldn't).

This means that if the Supreme Court didn't agree to hear the matter, all the people I disagree with (respectfully in most cases, though admittedly not in all) would keep running around telling everybody that the Oracle v. Google appellate rulings aren't binding.

I have confidence in the Supreme Court, especially in its conservative majority, protecting us software developers. Oracle's appellate counsel, Orrick Herrington Sutcliffe's Joshua Rosenkranz, and his team are so great they can do it again.

But even if, contrary to what I expect, the Supreme Court sided with Google on one or both issues, I'd rather have clarity on that basis than a situation where some are still going to point to Ninth Circuit rulings that I believe don't support those other people's positions at a closer look.

I want strong software copyright, and I view software as something where it's very hard to imagine "fair use" when significant amounts of code (not just a dozen bytes) are distributed in large numbers (as opposed to a few private copies). So I hope the Supreme Court will grant Google's petitions on both counts and then affirm the Federal Circuit 100%.

Neither copyrightability nor fair use are, in my view, the appropriate level at which to ensure software interoperability. Trying to protect interoperability at those levels would throw out the baby with the bath water and do too much harm to software copyright, which someone who's invested and keeps investing in software development doesn't want.

If, when and where there is a case where an API (Application Programming Interface) really must be available to other parties even without the copyright holder being prepared to extend a license, the solution is a compulsory license under antitrust law on FRAND (fair, reasonable and non-discriminatory) terms. There are standard-essential patents; in Germany and possibly some other jurisdictions, they additionally have standard-essential utility models; and there's no reason why the same FRAND rules wouldn't and couldn't apply just as well to standard-essential copyrighted works.

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When defending against standard-essential patents, beware of standard-essential utility models

While "standard-essential patents" (SEPs) is one of the most common terms in the tech sector, it would sometimes be more accurate and inclusive to refer to "standard-essential intellectual property rights" (SEIPRs). That collective term would include both SEPs and SEUMs: standard-essential utility models. Utility models are a German specialty, basically a second-class type of patent with a shorter term but instant registration (no substantive examination). This blog covered a utility model case years ago when Apple asserted a slide-to-unlock utility model against Samsung in Germany; that case got stayed over validity concerns and never went anywhere. Beyond German utility models, the collective term "SEIPRs" would cover any other IPRs that may exist in other jurisdictions and are like patents, but aren't called patents.

Yesterday I went to the Munich I Regional Court to watch a standard-essential utility model case, Netlist v. SK Hynix and HP, over German utility model no. DE2020100185017, which was derived last year, in preparation of this lawsuit as counsel for Netlist explained, from a pending European patent application, EP2454735 on a "system and method utilizing distributed byte-wise buffers on a memory module." From what I've been able to find out, this patent was declared essential to a JEDEC memory standard.

An EPO patent examiner rejected the application, though Netlist is still trying to persuade the EPO to grant a patent. But in parallel to that effort, they quickly took out a utility model, with claim language drafted specifically for the purposes of the lawsuit against SK Hynix and HP, and sued in Munich.

The previous Munich trial I reported on took 12 hours; yesterday's trial took only about four. No would-be witness was sitting on the hard wooden seats outside.

Netlist's counsel in this action, Fieldfisher's Benjamin Grzimek, was mentioned on this blog about five years ago when Unwired Planet, an Ericsson privateer, sued a bunch of mobile device makers. A filing made by SK Hynix with the ITC suggests Netlist is also a patent assertion entity (unsurprising after I had noticed the extent to which they emphasize their patent infringement cases on their corporate website):

"Netlist does not design or manufacture JEDEC compliant DDR4 RDIMM or LRDIMM, and it never has. It does not compete with Respondents. And, Netlist freely admits that it made no technical contribution to any JEDEC standard. Others contributed the technologies JEDEC adopted into its standards, which JEDEC compliant products implement. Indeed, in years past when Netlist designed and sold memory modules, its business model was to sell non-JEDEC compliant memory modules; these are the products, according to Netlist, from which the patents arose. Tellingly, despite having litigated the patents and defended IPRs, Netlist did not even disclose four of the five patents asserted at the [ITC] hearing to JEDEC as potentially essential to the standard until years after the patents issued, and just months before filing its [ITC] complaint. All of this reflects a shift in Netlist's overall strategy. After operating at a loss for all but one year of its existence, Netlist now touts that '[t]he Company is focused on monetizing its patent portfolio' and that it 'plans to pursue an intellectual property-based licensing business in which it would generate revenue by selling or licensing its technology, and it intends to vigorously enforce its patent rights against infringers of such rights.'"

"Consistent with this strategy, Netlist has secured third-party funding for its litigation campaign against SK hynix, which is by no means limited to the two investigations in the ITC. Netlist recently announced that it 'obtained outside investment to finance the legal fees and costs of its legal action against SK hynix” from TR Global Funding V, LLC."

The defendants in the Munich utility model are represented by IP and antitrust litigators from Bardehle Pagenberg led by Professor Peter Chrocziel (who has been named German IP litigator of the year twice and was mentioned numerous times on this blog because of his past work for Microsoft and Apple), with rising star Dr. Anna Giedke arguing non-infringement for the most part. Interestingly, even though Bardehle has many patent attorneys itself, including some of the most well-known ones in Europe, two patent attorneys from Samson & Partner (another top-notch firm I mentioned often because of its work on behalf of Nokia and, such as in the pending Qualcomm cases, Apple) represented SK Hynix and HP yesterday: Dr. Georg Jacoby and Dr. Robert Baier. The involvement of Samson's patent attorneys doesn't imply anything negative for Bardehle's great patent attorneys; if anything, it speaks to the strength of Bardehle's litigation team.

The court will announce a decision at the end of January, and Presding Judge Dr. Matthias Zigann said at the end of the trial that he can't indicate an inclination before a post-trial conference with his two side judges. If I had to make a guess, I'd expect the case to be dismissed or stayed. Defendants made a pretty good "squeeze" case, where the asserted claim would either have to be construed too narrowly to support an infringement finding or, in the alternative, the claim would be too broad to be valid. A patent attorney from the Bosch Jehle firm, representing Netlist, showed a computer animation meant to distinguish the claimed invention from the prior art, but patent attorney Dr. Baier dismissed its core--the idea of taking CAS latency into account-as a "triviality" and, while Judge Dr. Zigann didn't say what he thought of it, I wouldn't bet on Netlist's chances here.

Judge Dr. Zigann noted at the start of the trial that the utility model and its underlying patent specification lack clarity. He explained that "the upside for you is that counsel can read anything into it; the downside is that so can the Court."

There are two important lessons to be learned:

1. Reference was made to a U.S. case in which one or more defendants sought or even obtained (at some point, however, that case got stayed by stipulation) a U.S. antisuit injunction barring Netlist from the enforcement of injunctive relief over SEPs--but if Netlist prevailed in the case tried by the Munich court yesterday, there would be an argument over whether an SEUM falls within the scope of that injunction. I believe SK Hynix and/or HP would have a strong case, given that this SEUM was simply derived from a pending SEP application. But there could be an enforcement dispute, and there would be a risk of a court saying that if they wanted to preclude Netlist from enforcing utility models, they should have requested a differently-worded antisuit injunction. And that could give Netlist leverage, even if perhaps only for a short period.

2. While utility models don't enjoy any presumption of validity (for lack of substantive examination), there can be situations in which a (final or non-final) rejection of the underlying patent application by the EPO actually suggests to a German court that the utility model is likely valid. In yesterday's case, that doesn't appear to be an issue. But there have been utility model cases in Germany in which an EPO examiner based a rejection on a theory that doesn't apply to German utility models. The differences between the two jurisdictions are limited and sometimes subtle, but there are some and they can prove outcome-determinative, resulting in a utility-model injunction while a patent couldn't be enforced.

Implementers of standards should always bear the additional risks arising from utility models in mind, especially when there is a threat of litigation, or already an ongoing one. You need an invalidation strategy that will not only work against a European patent or patent application, but also take down a utility model. And you shouldn't forget about utility models when crafting antisuit injunction motions.

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Google joins the Fair Standards Alliance: discontinued the bad fight, now fighting the good fight

The following press release by the Brussels-based Fair Standards Alliance would have been nothing more than an April Fools' Day joke a few years ago (this post continues with commentary below the press release):

--- START OF PRESS RELEASE ---

Google Joins Fair Standards Alliance

Brussels, March 31st 2016 – The Fair Standards Alliance (FSA) announced today that Google has become its 19th member.

Launched in November 2015 and based in Europe, the Alliance seeks to promote the licensing of standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms.

"We are delighted in the vote of confidence that a company such as Google is showing in our growing coalition. FRAND licensing of SEPs is a critical part of ensuring that the innovation ecosystem for 5G and the Internet of Things (IoT) can flourish, and we relish the opportunity to work with Google to further our goals of fair and reasonable SEP licensing on a non-discriminatory basis," said Robert Pocknell, Chairman of the FSA.

Allen Lo, Deputy General Counsel for Patents at Google, said: "Google has joined the FSA to support the leadership that it has demonstrated in showing the way to a fair and principled result."

The FSA believes that the entire innovation ecosystem is threatened by unfair and unreasonable SEP licensing practices. Failure to honour the FRAND commitment that exists in most standardisation licensing creates barriers to market entry, threatens to stifle the full potential for economic growth across major industry sectors, and ultimately curbs consumer choice.

The FSA's member companies, who hold more than 160,000 patents and spend more than 32 billion euros per year on R&D and innovation, include: AirTies, BMW, Cisco, Dell, Fairphone, HP, Intel, ip.acess, Juniper Networks, Lenovo, Micromax, peiker acustic, Sierra Wireless, Telit, u-blox and Volkswagen.

--- END OF PRESS RELEASE ---

This is excellent news for the FRAND cause. Google's economic weight alone exceeds that of all the other FSA members, though they already had a pretty good membership base before. Moreover, I could imagine that this here increases the chances of other heavyweights--Apple and Samsung, I'm looking at you in particular--joining the same organization.

Google's decision to join the FSA comes about a year after it contributed 4G (LTE) patents to Via Licensing's pool, a move that I already credited to "the real Google--not the FRAND abuser." There is an unfortunate history of Google (through Motorola) having tried to gain undue leverage with SEPs, a fact for which a court ordered (and the Ninth Circuit affirmed) it owed Microsoft damages, and no one in the blogosphere fought Google (and Samsung) harder over that kind of behavior. I knew that it was all reactive: Google and Samsung didn't draw first blood (only Motorola did, but that was before anyone would even have imagined that Google would buy it). They just wanted patent peace and sought to protect Android. But the end doesn't always justify the means.

Two major players who have fought the good FRAND fight in court are not FSA members as we speak: Apple and Microsoft. I have consistently supported them and everyone else (also smaller players like India's Micromax) in this regard. I was, of course, disappointed when I saw Apple take positions on reasonable royalties in a non-SEP damages context (including the position it's still defending with regard to design patents) that are not just inconsistent but totally irreconcilable with some of the really good points it has made in connection with SEP royalty demands by others.

When Apple and Google/Motorola entered into a second-class settlement of their patent suits almost two years ago, they said they'd work together on certain aspects of patent policy. So maybe Google can persuade Apple that the FSA's efforts would benefit greatly from being supported by both of the world's most valuable companies.

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Fair Standards Alliance welcomes [EU Competition Commissioner] Vestager’s comments on patent licensing

This here is a first for this blog: it's the first time I publish a complete press release without any my own commentary of my own. I don't know if and when I'll do so again, so please don't urge me to publish your press releases :-) In this case, the factual information contained in it is worth sharing, and I simply share the organization's perspective on this. I reported on the creation of the Fair Standards Alliance last year.

PRESS RELEASE: Fair Standards Alliance welcomes Vestager's comments on patent licensing

BRUSSELS, 5 February 2016 – The Fair Standards Alliance (FSA) welcomes European Competition Commissioner Margrethe Vestager’s statement that companies that have committed to license their standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms must be kept to that promise.

"We are delighted to see the Commissioner giving such a clear message that companies simply must license patents on the FRAND terms that they have committed to. This is very much in line with our view that something must be done about unfair and unreasonable SEP licensing practices," FSA chairman Robert Pocknell said.

In a speech to the College of Europe's Global Competition Law Centre on 1 February, the Commissioner also said guidelines can "be a more efficient way than cases to provide guidance and legal certainty," adding that formulating appropriate guidelines is much easier on the basis of the resolution of cases, and noting that the Commission's decisions in Motorola and Samsung as well as the European Court of Justice decision in the Huawei case have removed a lot of uncertainty.

The FSA's Pocknell said the Alliance would be pleased to constructively support further efforts to establish fair licensing conditions for SEPs, and will continue offering perspectives and recommendations on these matters.

The Europe-based association believes that unfair and unreasonable SEP licensing practices pose a significant risk to the innovation eco-system. The failure to abide by the FRAND commitment, existing in most standardisation licensing, creates barriers to entry for new market entrants, threatens to stifle the full potential for economic growth across major industry sectors, and ultimately harms consumer choice.

FSA's member companies, who hold more than 160,000 patents and spend more than 32 billion euros per year on R&D and innovation, include: BMW, Cisco, Dell, Fairphone, HP, Intel, ip.acess, Juniper Networks, Lenovo, Micromax, peiker acustic, Sierra Wireless, Telit, ublox and Volkswagen.

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As I suspected, the 2013 Nokia-Samsung patent deal is far from comprehensive: litigation still a possibility

In November 2013, Nokia and Samsung announced a five-year extension of an existing patent license agreement, with the financial terms left to determination by an arbitration panel. The scope was not announced, but back then, I expressed my belief that it was a license covering only (wireless) standard-essential patents (SEPs):

"I continue to believe it's a SEP-only license, including the 'additional' compensation."

Today, Nokia has announced that the arbitration result has a "positive financial impact" for its patent licensing division. Today's announcement explicitly states that this agreement has only a limited scope:

"This award covers part of the Nokia Technologies patent portfolio until the end of 2018. Nokia will continue to discuss with Samsung its other relevant intellectual property portfolios. Nokia has strong intellectual property assets consisting of intellectual property rights in the separate Nokia Technologies, Nokia Networks and Alcatel-Lucent portfolios, which include patents essential for a variety of standardized technologies as well as relevant implementation patents and proprietary technologies." (emphasis added)

See, I told you so. I remember a call I had with professional investors in late 2013 who told me they had spoken with Nokia's investor relations department and had concluded from their conversation that the deal was comprehensive. I told them I didn't believe so. I told everyone via this blog I didn't believe so. Now it's a fact.

While these two parties have so far been able to avoid going to court against each other, the above passage does mean that litigation (in the event they fail to reach an agreement) is still a possibility.

Nokia is the worst patent holder in this industry with respect to privateering. I've raised that issue in a couple of posts (see 1, 2). The fact that having a license from Nokia itself doesn't mean you couldn't still be approached by dozens of other entities monetizing Nokia patents probably makes negotiations between Nokia and potential licensees a lot harder than those talks used to be years ago.

The fact that most of Nokia's patent assertions against HTC failed (though HTC ultimately felt forced to take a license on whatever terms) may also make prospective licensees feel they should take their chances in court.

The next Nokia-Samsung announcement, whenever that one may issue, will most likely be a "fish or cut bait" statement. They won't be talking forever. At some point they will agree or Nokia will sue. I, for my part, would recommend to Samsung (if they asked me, which they obviously don't) not to overpay.

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Privateering: UK court holds Ericsson patent valid, essential to LTE in case against Huawei, Samsung

In March 2014, Unwired Planet sued several smartphone makers over various patents it had "acquired" from Ericsson. Actually, "acquired" misses the key commercial point here. In April I took a closer look at the related arrangements and couldn't help but conclude that this was just a pseudo-sale of patents and simply an act of what is commonly referred to as "privateering."

The first decision relating to Ericsson's (technically, Unwired Planet's) infringement claims came down yesterday in the England and Wales High Court. Judge Colin Birss held that EP2229744 on a "method and arrangement in a wireless communication network" is valid (and in the UK) and "infringed by wireless telecommunication networks which operate in accordance with the relevant LTE standard," or more specifically, "essential to standard 3GPP TS 36.322 release 8 version 8.8.0."

This decision came down against Huawei and Samsung's challenges to this patent. According to Bloomberg, "Samsung said it was confident it had not infringed Unwired Planet's patents." I don't know whether this means Samsung will appeal and/or whether Samsung will argue that its own implementations of the LTE standard don't make use of the technique covered by the patent in Judge Birss's opinion.

If the patent was ultimately deemed valid as well as infringed by Huawei and Samsung's LTE devices, there might be equitable defenses (relating to privateering) and there almost certainly would be a debate over what constitutes a FRAND royalty for that patent and possibly some other patents. Privateering and FRAND are the two issue heres that I'm going to be more interested in. Those two parts are intertwined, especially because Ericsson once made a promise not to demand more than a certain royalty rate for all of its LTE patents--a promise Ericsson may have circumvented by "selling" some patents to a privateer like Unwired Planet.

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FRAND flurry: two new initiatives promote fair licensing of standard-essential patents, Qualcomm in trouble

FRAND-pledged standard-essential patents (SEPs) were a major topic (actually, the #1 topic) on this blog a few years ago. Then my focus shifted, but my positions on this issue did not. I'm following with great interest Apple's efforts not to bow to Ericsson's notoriously-aggressive SEP royalty demands and pleased to see that two new industry initatives relating to FRAND were launched this week:

1. ACT | The App Association has announced a new web resource for innovators, policy-makers, and academics. It's called All Things FRAND and supported by significant players including Cisco, Intel, and Microsoft. ACT is headquartered in the U.S. but also quite active abroad.

2. The new FairStandards Alliance is based in Brussels, the de facto EU capital. Its website says: "We are friends of FRAND"

   The FairStandards Alliance is off to a pretty good start with this position paper and support from an interesting mix of IT (Cisco, Dell, HP, Intel, Juniper), mobile/IoT (Fairphone, India's Micromax, Lenovo, Sierra Wireless, Telit) and--this is particularly interesting but not surprising to me given that cars are increasingly "smartphones on wheels"--automotive companies (BMW, Volkswagen).

Both these initiatives are interested in various FRAND-related issues. The FairStandards alliance is particularly clear in its support of a proper royalty base. That question (on which Apple has been vocal in court and in standard-setting organizations) also appears to be key to findings of South Korea's Fair Trade Commission in an investigation of Qualcomm's licensing practices, including its device-based pricing strategy. I agree with analysts who view this as spelling trouble for Qualcomm. South Korea's FTC may very well get support, in political terms, from the two new FRAND initatives launched this week.

In the past, Qualcomm got away pretty much unscathed, at least in the EU. Even its Chinese settlements appears not to have caused similar worries in the investment community. South Korean antitrust enforcers are apparently taking the lead now with respect to this particular SEP holder, and I applaud them for their courage and steadfastness.

It would be great if Apple (which has always been on the good side of FRAND) and Google (which appears to be on the good side by now) could also lend support to one or more initatives of this kind. Google and Cisco have often agreed on patent policy matters. Why not on this one?

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Ericsson wants to obtain Apple's carrier agreements in order to buttress its patent royalty demands

I write about discovery disputes only once or twice a year because most of them don't matter to anyone other than the parties. But two letters filed by Apple and Ericsson in the Northern District of California last night are worth taking a look because the underlying legal question is of the utmost importance--even more important than their Alice motion process.

Ericsson wants to compel Apple to show its carrier agreements so Ericsson can see which commercial benefits Apple derives form those partnerships, such as

• volume commitments,

• preferential marketing treatment,

• network traffic priority,

• agreements to sell other Apple products,

• development subsidies,

• lump sums for the right to resell and service Apple devices, and

• portions of monthly subscriber fees

Ericsson argues that this information is relevant because it shows what commercial benefits Apple derives from wireless technologies (co-)developed by Ericsson, and describes other discovery methods such as depositions of Apple witnesses as inadequate (this post continues below the document):

15-11-06 Ericsson Letter Re. Apple's Carrier Agreements by Florian Mueller

Apple opposes this discovery request. Apple basically says that those carrier agreements might be relevant in connection with damages over non-standard-essential patents, but have no bearing on a fair, reasonable and non-discriminatory (FRAND) royalty, a context in which standard patent damages rules can only be applied with certain modifications of the Georgia-Pacific factors (this post continues below the document):

15-11-06 Apple Letter Re. Ericsson's Discovery Request for Carrier Agreements by Florian Mueller

When this dispute started, I wrote that the question of the proper royalty base was going to be the most important one in this dispute. Apple's position is that the difference between the price of an iPhone and that of a cheap "feature" phone (colloquially also called "dumbphone") is unrelated to wireless communications standards. I support Apple on that one; I'm just more consistent in that regard than Apple, so I believe the "smallest saleable unit" approach should, for example, also apply to mobile operating systems, which in Android's case suggests minimal royalties.

In the famous Microsoft v. Motorola "Robart case" the question of the proper royalty base was not resolved the way I'd have liked to see it addressed. In a way, Judge Robart did everything right because the Ninth Circuit handed him a first-class affirmance (even twice: the first one with respect to a preliminary injunction preventing Motorola from enforcing two German patent injunctions against Microsoft, and the second one with respect to his final FRAND ruling). First-class, wholesale affirmance is truly remarkable when someone has to actually venture into unchartered territory, as Judge Robart had. Commentators thought that Judge Alsup had made his non-copyrightability decision in Oracle v. Google very appeals-proof, but it was a flawed ruling in various respects, so very hard to defend on appeal that it would be too diplomatic to say it merely failed to impress the circuit judges. By contrast, Judge Robart really made all the right choices, and the results speak for themselves.

But Judge Robart just stopped short of holding Motorola's royalty demand to be out of the FRAND ballpark simply for using an impermissibly broad royalty base, though he did express skepticism about a FRAND royalty rate based on the entire price of a multifunctional device. It was the only context in which I was disappointed because I thought Judge Robart could have done (even) more to give meaning to FRAND.

Apple v. Ericsson is now the dispute in which this unfinished FRAND business has to be dealt with, and which (given how much is at stake between these parties) might fix the problem. Injunctive relief over standard-essential patents is still a bit of a problem because of the way the ITC approaches cases (just like the ITC is also considered to largely ignore the Alice case law), but it's no longer a pressing problem. By contrast, royalty demands based on the entire price of a complex device still are a huge issue.

Judge Robart had basically said that a percentage of the price of an entire device just has to be low enough in order for the bottom line (the royalty) still to be in compliance with a FRAND licensing obligation. He doubted that it would work, and in Microsoft v. Motorola, it obviously didn't for Google/Motorola. But he didn't rule it out categorically.

Without a bright-line rule on the royalty base, Ericsson is right to demand access to Apple's carrier agreements. But I keep my fingers crossed that Apple will ultimately prevail over Ericsson in such a way that the much-needed bright-line rule against SEP royalty demands based on entire revenues from the sale of multifunctional devices will be established. The current discovery dispute only underscores the need for such a rule. For SEP trolls (and Ericsson is unfortunately a non-practicing entity now with respect to Apple's product markets), the ability to obtain carrier agreements is desirable because someone might pay up to (among other things) avoid that details of those deals end up being discussed in public filings or at trials.

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Apple reinforces its Alice attack on two Ericsson patents, says claims don't specify solutions

Last month, Apple brought a motion for summary judgment of invalidity against two Ericsson patents, based on the exclusion of abstract subject matter under 35 U.S.C. § 101 and its interpretation by the Supreme Court in the famous Alice case, in the declaratory judgment case in the Northern District of California. Ericsson's opposition brief argues that there is so much technology involved in the operation of a wireless network, it's just impossible to hold such patents to cover abstract subject matter, lest an extreme interpretation of Alice spell doom for patent law as a whole.

Reply briefs are often very repetitive, reinforcing points already made in the motion in light of the opposition brief. Over the years I was actually bored by many such filings, including a number of Apple replies. Apple's reply brief in this context is one of my favorite ones, however, because it addresses some important post-Alice legal questions and convincingly dismantles Ericsson's arguments with great specificity (this post continues below the document):

15-11-04 Apple Reply in Support of Alice Motion Against Two Ericsson Patents by Florian Mueller

The first footnote counters Ericsson's assertion that the clear-and-convincing-evidence standard of proof should apply to Alice. Apple points to case law that supports applying the preponderance standard. The recent Supreme Court decisions on § 101 (Alice, Bilski, Mayo etc.) didn't address the evidentiary standard. The Federal Circuit has clarified that "while a presumption of validity attaches in many contexts, no equivalent presumption of eligibility applies in the section 101 calculus." A decision from the District of Oregon cites Justice Breyer's concurring opinion on Microsoft v. i4i (where clear and convincing evidence was held to be the applicable standard for other invalidity theories):

"Where the question of invalidity depends 'not upon factual disputes, but upon how the law applies to facts as given,' the clear and convincing evidentiary standard simply does not come into play."

Apple then addresses the two Alice steps (is there an abstract idea in play, and does the patent claim go beyond the abstract idea identified) for either patent it challenges. If you're interested in the details of this, you may find Apple's argument worth reading in detail. I'd like to just talk about a couple of aspects.

I know that those who would like to mitigate the impact of Alice tend to argue that the § 101 patent-eligibility analysis should be totally separate from novelty and non-obviousness considerations. Admittedly, my previous post on this motion process may have appeared to blur the line. But the Alice logic is simply that if you only use "generic" hardware to implement what you claim to be an "invention" (referring to the claim limitations, not whatever the description might contain beyond the claim elements), your "invention" isn't patent-eligible. While "generic" is not the same as "new" or "non-obvious," it's still a somewhat similar analysis. Before the first computer or the first mobile network was invented, it wouldn't have been generic.

Over here in Europe, we've had this kind of discussion for a long time because of the exclusion of computer programs "as such" from the scope of patent-eligible subject matter under the European Patent Convention. I've followed numerous nullity cases before the Federal Patent Court of Germany and related discussions in courts hearing infringement cases (where nullity cannot be decided, but the outcome of nullity cases must be predicted because a strong prognosis of invalidation results in a stay). Both the lawyers arguing these cases for parties challenging patents and the judges rarely conclude that an entire patent claim falls under the exclusion. They're much more comfortable arguing on the basis of (non-)novelty) and (non-)obviousness and then finding that the question of patent-(in)eligible subject matter doesn't even have to be reached.

In no small part, this is due to the fact that it would simply be bad for the business of those lawyers and bad for the domain of patent-specialized judges if many patents were declared invalid on the basis of wholesale ineligibility. It would be a show stopper, and the show must go on for the professionals working in that area, which at least subconsciously and in some cases probably also at the conscious level prevents them from proposing or establishing rules that would end the discussion about most software patents. For example, the Federal Court of Justice affirmed the nullity ruling on Apple's slide-to-unlock patent, but disagreed with the Federal Patent Court for fear that its decision contained at least one statement that would get too many user interface patents invalidated. What they are more willing to do over here (though they still prefer decisions to be based on obviousness or non-novelty) is that they identify the novel claim elements and then determine whether those are technical under the EPC.

While it's easy to imagine patents that are so abstract one wouldn't have to consider what is "generic" (Alice logic) or "software as such" (EPC logic), those are hard to come by, and patent claims like the ones at issue in Alice were not like that. In most cases, the claim drafters had tried to inject some token references to technical means of solving a technical problem. Therefore, Apple is right to refer to the following Alice passage:

"A claim that recites an abstract idea must include 'additional features' to ensure 'that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].'" (bracketed language in original)

And an indirect Mayo quote by Apple shows again that novelty/non-obviousness considerations inevitably overlap with the abstract subject matter analysis:

"explaining the additional elements within the claims, apart from the abstract idea itself, must involve more than ''well-understood, routine, conventional activit[ies]' previously known to the industry' (quoting Mayo [...]; bracketed language in original)"

Here, the Ericsson patent claims at issue are just about abstract protocols and their generic implementation on run-of-the-mill mobile communications technology.

Finaly, a really good quote from Source Search Techs., LLC v. Kayak Software Corp., District of New Jersey:

"DDR Holdings tells us that when a patent holder seeking to establish § 101 eligibility for an otherwise abstract idea points to a particular element of a patent's claims as solving a computer-centric problem, the claims must specify how that solution works. [emphasis in Apple's filing] That specificity removes the claims from the abstract realm."

Apple says that Ericsson's claims just don't meet that requirement, and many pages of legal argument that now tries to portray the subject matter of those patent claims as technical inventions can't change what's written in the claims. I agree.

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Ericsson says Apple's Alice motion against wireless patents threatens to swallow all of patent law

An Alice motion in the Apple v. Ericsson case pending in the Northern District of California has reignited my interest in this dispute, and I'll soon take a look at the ITC and Eastern District of Texas proceedings and will try to find out more about the cases that will go to trial in Mannheim, Germany, on January 19, 2016.

Yesterday, Ericsson filed its opposition to Apple's motion (this post continues below the document):

15-10-28 Ericsson Opposition to Apple Motion for Summary Judgment by Florian Mueller

I'm not convinced by Ericsson's legal argument that the challenged patents cover more than the underlying abstract ideas. Basically, Ericsson refers to all sorts of technology and real-world values that are referenced, but that's not the substance of the patent: the most important question is whether whatever may (or may not) be novel goes beyond the underlying abstract concepts. Those patents don't cover antennas, for example. They refer to radio transmissions of signals, but they aren't radio patents. They are protocol patents, and I stand by what I wrote in my previous post: protocols should be patent-ineligible under any reasonable interpretation of Alice.

Ericsson points to "the Supreme Court's caution against too broad an application of 'this exclusionary principle lest it swallow all of patent law.'" It's true that the most extreme interpretation of 35 U.S.C. § 101 could limit the patent system to little more than mechanics, molecular pharmaceutics, and maybe electricity, too. But even if Apple succeeded in shooting down protocol patents, it wouldn't even be the end of all wireless patents.

Ericsson says the following about the lack of legal certainty in the Alice context:

"The Supreme Court has not 'delimit[ed] the precise contours of the ‘abstract ideas’ category.' [...] Nevertheless, the cases in which the Court has found patent claims to be directed to abstract ideas provide guidance."

The first sentence is correct. The second one is not incorrect per se, but it's incomplete. It's a half-truth. Of course, the cases in which the Supreme Court has held subject matter patent-ineligible are even more extreme cases than protocol patents. But Ericsson doesn't talk about how little the Supreme Court actually has held patent-eligible. Legal certainty for holders of patents that involve software exists pretty much only in connection with computer-controlled manufacturing processes. Protocols are far closer to the Bilski and Alice kind of patents than the physical process patent in Diamond v. Diehr.

Apple is fighting a good fight here.

Via TechRights I've become aware of this Lexology article by four Morrison & Foerster lawyers (I had seen the names of two of them before, in Oracle v. Google if I recall correctly) about "[a] chilly reception for Section 101 challenges at the ITC." I haven't watched any ITC cases recently but will at least take a look at the investigation of Ericsson's complaint against Apple. The ITC also took a different position on injunctive relief over standard-essential patents than district courts. In connection with validity determinations, however, the ITC cannot even argue that it faces a different situation because of a different set of remedies. In that context it absolutely has to be consistent with the case law outside the U.S. trade agency.

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Apple motion against Ericsson could result in devaluation of wireless patent portfolios: protocols patent-ineligible under Alice

The Apple v. Ericsson docket in the Northern District of California was worth taking another look (after quite a while): two weeks ago, Apple brought a motion for summary judgment of invalidity of two patents asserted by Ericsson in its counterclaims to Apple's declaratory judgment complaint, and the motion is entirely based on 35. U.S.C. § 101 in light of last year's famous (or infamous in the eyes of patent attorneys) Alice ruling by the Supreme Court on patent-ineligible subject matter (this post continues below the document):

15-10-14 Apple Motion for Summary Judgment Against Ericsson by Florian Mueller

The introductory part must have all owners of wireless patent portfolios--not just Ericsson, but also the likes of Nokia and InterDigital--profoundly concerned:

"Ericsson's '917 and '990 patents, two of the seven patents in suit, claim abstract concepts in the context of cellular systems. The '917 patent is directed to the concept of generating and sending a report upon the occurrence of an event. The '990 patent is directed to the concept of following commands to an individual while ignoring commands broadcast to a group. None of the asserted claims purports to claim any inventive hardware or method for carrying out the claimed abstract concepts. The asserted claims are directed to patent-ineligible subject matter and fail the two-step framework articulated in Alice Corp. Pty. Ltd. v. CLS Bank Int'l [...], and therefore they are invalid under 35 U.S.C. § 101."

If this motion succeeds, and if a ruling in Apple's favor is upheld on appeal, the CFOs of various companies that have wireless communications patents in their books have to contemplate write-offs.

As my loyal readers know, I've watched countless wireless (especially standard-essential) patent lawsuits over the course of the last five years. Those have not all been equally weak, but I found most of them very unimpressive from a technical invention point of view. One can easily be misled to think that there is great innovation involved--but only if one turns a blind eye to the fact that a patent is only worth the delta it claims over the prior art, and that delta is usually rather questionable.

What Apple says about patents that just relate to "generating and sending a report upon the occurrence of an event" or "following commands to an individual while ignoring commands broadcast to a group" being patent-ineligible if they fail to "to claim any inventive hardware or method for carrying out the claimed abstract concepts" would apply, directly or indirectly (by applying the same standard and building, mutatis mutandis, the same kind of argument for other types of wireless patents) to most of the wireless patents-in-suit I've seen. For example, patents that cover handovers between cells (meaning that your phone connects to a different base station when you are walking or driving) could also be described as abstract concepts implemented with standard hardware.

A full-text search in Apple's filing for the word "protocol" (with Adobe Reader) didn't find a single occurrence. Maybe that's because the word "protocol" would sound too technical for Apple's purposes. But the way I see it, those patents are protocol patents. Protocols--conventions to do certain things in a certain order in certain situations--exist in the non-digital world as well. A handshake, for example, is a protocol--and the term "handshake" is also used to describe a technical concept in telecommunications.

I agree with Apple all the way: protocols per se, unless there's really some new, serious technology involved, should not be patent-eligible. I also believe that the way the Supreme Court's Alice ruling is increasingly interpreted supports Apple's case.

I admit that I underestimated the impact of Alice before and shortly after the ruling came down. Over time I realized that those who predicted from the start that this was going to kill many software patent claims--and those Ericsson wireless patents here are just software patents--had been right all along. I predicted lots of decisions in high-profile cases right, especially appellate decisions, but I've also been wrong a few times. Alice is the most important context. And with respect to Apple, I once thought--after listening to the official recording of an appellate hearing--that Apple was going to be granted injunctive relief, but it did not happen, and the next time I interpreted a recording as indicating that the court was going to uphold the denial of an injunction, and the opposite happened, though the Chief Judge of the Federal Circuit, in her dissent, took the kind of position I thought a majority or a unanimous panel was going to take (Chief Judge Prost wrote that this was not even a close case), though I'm optimistic that Samsung's pending petition for a rehearing (Apple has been asked to respond on or before November 5) will lead to a full-court review. Well, if Apple brings any new appeal of a denial of injunctive relief, you may be able to set your watch by in terms of betting on the opposite of the outcome I predict.

Back to abstract subject matter and invalid patents. The impact of Alice is really huge, and I view that as a very, very good thing. A few days ago, the thought leader of those who got Alice right from the beginning, Stanford professor Mark Lemley, pointed to a legal website that had no content to offer in a section entitled "Advice for Applicants Trying to Avoid Alice Pitfalls":

I love the fact that the "advice for avoiding Alice" section is blank. pic.twitter.com/sgu5LWsGff

— Mark Lemley (@marklemley) October 26, 2015

Yesterday, Forbes contributor Oliver Herzfeld, the Beanstalk agency's chief legal officer, gave "five reasons to copyright register your software now," and the fifth one of them is the "reduced availability" of software patents as a result of Alice.

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How much leverage will Ericsson gain over Apple with its European patent infringement actions?

On Friday, Ericsson announced the filing of " suits in Germany, the United Kingdom and the Netherlands against Apple's products" because negotiations in a global patent license have not resulted in a deal in more than two years but Apple "continues to sell products, for which its licenses have expired, on a global scale." Four months ago Ericsson had already sued Apple in the Eastern District of Texas, followed by an ITC complaint (request for U.S. import ban).

The gist of Ericsson's Friday press release is that Apple is allegedly an unwilling licensee. That term does not appear in the statement, but it's what Ericsson wants to say. Motorola and Samsung said it before. The willingness of an implementer of an industry standard to reach a license agreement on FRAND terms is a key consideration for antitrust regulators and courts. Even the defendant-friendliest FRAND ruling ever, which Judge Posner handed down in an Apple-Motorola case and the FRAND-related part of which was affirmed by the Federal Circuit (though then-Chief Judge Rader dissented), did not rule out access to injunctive relief over standard-essential patents (SEPs) on a "no matter what (the defendant will or will not do)" basis. The bar for SEP injunctions has been raised in recent years, also in Europe, but implementers of standards still have to proceed with caution because their own conduct, not only that of the patent holder, will be taken into consideration.

In any event, Ericsson says it is also asserting non-SEPs against Apple in Europe. Those are unencumbered, so Ericsson is free to seek and enforce injunctive relief.

Compared to the size of Ericsson's patent portfolio, very few assertions have ever come to judgment. The most optimistic (for Ericsson) perspective would be that this is because defendants realized this was a strong portfolio and backed down. It's also a valid perspective, however, to say that Ericsson's portfolio is largely untested in court. With so much money being at stake between Apple and Ericsson, it's now more likely that at least some decisions will come down.

In light of the entire industry's low "hit rate" with smartphone-related patent infringement actions, it's unlikely that Ericsson's European lawsuits will scare Apple to death:

• Non-SEPs have usually been worked around. There was only one dispute in which I saw an indication that a company may have agreed to pay because workarounds weren't going to be immediately available (at least not without major cost implications), and that was HTC in its dispute with Nokia, but Nokia had lost so many cases by the time of the settlement that it may have offered HTC a relatively good deal just to get a result rather than lose dozens of additional cases.

• Of the three European jurisdictions in which Ericsson has sued Apple, only Germany makes access to injunctive relief generally available over non-SEPs. In the UK and the Netherlands, the question of whether monetary compensation is sufficient always comes up.

• While Germany is very patent holder-friendly on the remedies side and infringement actions tend to be adjudicated rather quickly, its courts are increasingly inclined to stay smartphone patent cases because those patents are normally invalidated in their entirety or narrowed beyond recognition when they come to judgment in the Federal Patent Court. If the patent holder then loses the first validity ruling, the infringement case won't be resumed (if at all) until the Federal Court of Justice has spoken.

• In the UK, infringement and validity are adjudged in the same proceeding, and the invalidation rate there is extremely high (rightly so).

• Ericsson's press release states that Apple let an offer to set a FRAND rate by arbitration expire. So what? Arbitration is an option if both parties agree. If one of them (typically the implementer) doesn't want to go down that avenue, any rate-setting decision will have to be made by a court of law, in a public proceeding (public at least to some extent, while arbitration is 100% private).

Ericsson will have to perform better than other smartphone patent litigants to even reach the point at which Apple will seek a FRAND rate determination by one or more European courts, and for the reasons I just explained, this could also take quite some time. If and when it happens, Apple will likely emphasize the royalty base issue in Europe as well (it already does so in the U.S.). That one has the potential to go all the way up to the Court of Justice of the European Union (CJEU).

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The Google that has joined Via Licensing's LTE pool is the real Google--not the FRAND abuser

Yesterday's announcement that Google has agreed to make its LTE (4G) standard-essential patents, all or most of which previously belonged to Motorola, available through Via Licensing's LTE patent pool, is for all intents and purposes more meaningful than most settlements of patent disputes between industry players are. It means that Google is being Google again, and has distanced itself from the abusive conduct that gave rise to antitrust investigations in the U.S. (consent order) and Europe (decision, but no fine, which also looks like a compromise).

By "Google being Google again" I mean that the search giant and Android maker has given up on the notion that two wrongs (overwhelmingly meritless, at least impactless, patent assertions against Android on the one hand, and retaliatory abuse of FRAND-pledged standard-essential patents on the other hand) could make a right. Google temporarily used its SEPs in ways that ran counter to positions it was simultaneously taking on non-SEPs, even to the extent that Google, the parent company, submitted a public interest statement in an ITC proceeding that was amazingly inconsistent with what Motorola, the subsidiary, was saying in its own submission in connection with a parallel case. Also, Google's (ab)use of SEPs didn't really lend credibility to its positions on patent reform.

Now the "Don't Be Evil" company has apparently decided to become consistent again. In the LTE context Google is now aligned with companies that have never abused FRAND-pledged SEPs, some of which have even made significant efforts to advocate reasonable interpretations of FRAND. These are the other contributors to the Via Licensing LTE pool: AT&T, China Mobile, Clear Wireless, Deutsche Telekom, DTVG Licensing, Hewlett-Packard, KDDI, NTT DOCOMO, SK Telecom, Telecom Italia, Telefonica, and ZTE. Temporarily, Google's (Motorola's) FRAND positions were actually the same that some infamous SEP trolls and some failed businesses with an increasing or near-exclusive focus on patent licensing (and the privateers they feed with patents) tend to take.

This is the very Google that more than any other (IT) industry giant wants to make the world a better place through investments that the stock market doesn't reward in the short term but Google can afford, such as self-driving cars and "interventions that enable people to lead longer and healthier lives." More than any other large company I know, Google is truly about much more than just making money for its shareholders and other stakeholders. (Of course, this still doesn't give Google the right to violate antitrust rules in its core business, or to leverage excessive control over Android in anticompetitive ways.)

I find it hard to believe that the timing of the announcement--one day after an appellate hearing at which Google saw that it can't win the FRAND part of its Microsoft dispute, though it is winning the real war over Android royalties--is a coincidence. In that Microsoft v. Motorola case, Google's lawyers consistently argued that patent pool rates should not be used as an indicator of FRAND rates. Different standards (H.264 and WiFi) are at issue in that case, but still: Google wouldn't have wanted to undermine its anti-pool-rate argument. It certainly didn't want to give Microsoft's counsel the chance to mention its new position at the hearing, and if it had seen any realistic chance of Judge Robart's FRAND rate-setting opinion being overturned, it might have waited (possibly forever) with this move. Yes, this is speculative, but the connection is close and strong enough to support such a theory.

It's not clear whether Apple and Microsoft (which builds LTE devices as a result of the Nokia acquisition) will be able to benefit directly from Google's contribution to the Via Licensing LTE pool. With Apple, Google has a ceasefire in place, but no license deal (at least none that would have been announced). With Microsoft, it is still embroiled in litigation, though Microsoft hasn't brought any new offensive cases against Motorola in a while (at least none that would be discoverable).

Maybe Google's agreement with Via Licensing precludes Apple and Microsoft from licensing Motorola's LTE patents through that pool until comprehensive license agreements between those companies and Google are in place. In that case, Apple and Microsoft could still use the Via Licensing pool rates as pretty powerful evidence in any FRAND rate-setting dispute with Google.

Maybe Google doesn't even care if Apple and Microsoft license its LTE patents through that pool. Google could still assert older (3G) patents if necessary, as long as those haven't expired. And with the lack of success of Apple and Microsoft's patent assertions against Android devices so far, Google may not even be afraid and, therefore, may not feel it needs any leverage from LTE patents to counterbalance Apple and Microsoft's non-SEP enforcement. Apple started its enforcement against Android more than five years ago; Microsoft, more than four-and-a-half. After all this time, Google may be convinced that it doesn't need a good offense as its best defense because a defense-defense will always do the job to protect Android.

The main reason I used to criticize Google's position on patents so much was its inconsistency. It wanted to devalue non-SEPs while trying to gain undue leverage from SEPs. At first sight, one could also say that Apple and Microsoft are inconsistent because they want to bring SEP license fees down while exaggerating the value of non-SEPs. But FRAND-pledged SEPs are encumbered, and encumbrance is not a value enhancer. Consistency obviously depends on the particular arguments that are used and on whether any differences in value have a logical basis. For example, Apple is in my opinion being inconsistent by stressing its royalty base and "smallest saleable unit" point in connection with SEPs but arguing that even minor aspects of minor features (where the price of the smallest saleable unit, Android, is technically zero) make a substantial percentage of the entire value of a smartphone.

Overnight, Google has gone from "most inconsistent" to "most consistent" when it comes to patent licensing. This overnight change took years of litigation and a couple of antitrust investigations. Still it's great news, and I hope that some others, such as Apple, will soon match Google's level of consistency in this regard.

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