Showing posts with label Volkswagen. Show all posts
Showing posts with label Volkswagen. Show all posts

Monday, September 18, 2023

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

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

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

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

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

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

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

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

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

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

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

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

Sunday, November 27, 2022

'Autocalypse Now' or Tesla Phone: what can save the digital dilettantes at Volkswagen, Toyota, and other car makers from Apple's and Google's world domination?

The latest edition of Wirtschaftswoche (German for "business week") came out on Black Friday, and there's a great article on pages 32 and 33 (available only to subscribers, at least for the time being) that I'd like to recommend: Autokalypse now (the "k" instead of the "c" is due to the German spelling of "apocalypse"). It's about an issue that this blog has dubbed as "carjacking"--meaning that Apple and Google use their mobile operating system monopolies to take control over connected vehicles:

Another term than "carjacking" is "carmageddon" (see The Android-ification of Cars).

The Wirtschaftswoche article starts with a high-profile Mercedes customer: former EU commissioner Guenther Oettinger says he uses Google Maps for navigation because it suggests better routes and more accurately predicts the time of arrival. That's what many of us have experienced with cars of different brands. During his tenure as the EU commissioner in charge of digital industry policy, Mr. Oettinger was already--and rightly--concerned about traditional car makers' share of the future automotive value chain. That concern is shared on Capitol Hill: on November 1, Sen. Elizabeth Warren (D-Mass.) wrote a six-page letter (PDF) to U.S. antitrust enforcers about this threat.

The problem is that the C-level execs, chief lawyers, and lobbyists of automotive companies don't get it. They're sort of aware of the problem, but far from taking the measures that would be required to respond to the threat. Those execs and the "experts" they rely upon would rather downplay the issue than take decisive action outside their comfort zone. Meanwhile,

There is only one outlier: Elon Musk. While he may not have had the chance yet to develop a regulatory strategy and to figure out the full potential of the EU's Digital Markets Act, he is clearly prepared to go to bat. That's a lot more than those traditional automakers can say: it seems to me that most of the decision makers there have no strategy other than hoping that they won't have to deal with the problem before they reach the age of retirement. But that could prove a mistake not only for their companies but even for those decision makers: Wirtschaftswoche quotes a McKinsey partner who says it will be decided in a matter of three to five years who will be in control of the automotive industry (car makers or gatekeepers).

Earlier this week I outlined the three reasons Mr. Musk has to fight Apple's and Google's gatekeeper power: the third one involves Tesla and is no less important than the other two, which are about Twitter in the short term. On Black Friday, Mr. Musk said he didn't rule out making "an alternative phone" if that was the last resort to deal with the mobile gatekeeper problem:

Patently Apple reported on it. That's where I first saw the tweet.

I agree with Jim Hanson, who says Mr. Musk should "[f]irst give Apple a good taste of lawfare."

But what would an Elon Phone, Twitter Phone, or Tesla Phone (about which there have previously been rumors) mean for the automotive industry at large?

That depends on interoperability. That new phone (likely based on the open-source code base of Android, but without a Google license and, a as result, without Google Maps, the Google Play Store etc.) could give Tesla another competitive advantage. But it might also be the lesser evil than the "Goopple" duopoly for the digital dilettantes at companies like General Motors, Ford, Volkswagen, Toyota, BMW, and Mercedes. If Mr. Musk made the strategic decision to enable all car makers to provide the same level of integration, it would be an opportunity for the entire industry.

Again, I think the first step is to put pressure on Apple and Google at other levels: policy, regulation, and litigation. Whether Apple and Google will make concessions because of Mr. Musk threatening to enter the smartphone market is doubtful. So far it seems that both mobile gatekeepers only make changes to their terms and policies when they absolutely have to. But anything can happen, and a Tesla Phone is yet more of a possibility than seeing the Facebook Phone rise from the ashes...

Thursday, May 19, 2022

OPPO says Nokia base stations infringe patent that is foundational to 5G as key enabler of ultra-reliable low-latency communication (URLLC): Munich litigation

This morning, the Landgericht München I (Munich I Regional Court) held a first hearing in case no. 7 O 14390/21, Guangdong OPPO Mobile Telecommunications Corp.. Ltd. v. nokia solutions over EP3598819 on a "method, apparatus and system for transmitting periodic uplink information/signals." The asserted claim is (apparatus) claim 9. OPPO's lead counsel, Professor Tilman Mueller-Stoy, was accompanied by attorney-at-law Dr. Jan Boesing ("Bösing" in German) and patent attorney Tobias Kaufmann. The Bardehle Pagenberg team squared off with Boris Kreye of Bird & Bird, another lawyer (presumably from Bird & Bird) I didn't know, and Samson patent attorney Alexander Muenster ("Münster" in German).

While Nokia is pursuing injunctive relief against OPPO in numerous cases around the globe, it turned out that OPPO has not (yet) requested injunctions in its countersuits in Germany, though Professor Mueller-Stoy reserved his client's right to do so at a later stage if need be. For the time being, OPPO is just seeking a judgment on the merits, i.e., a finding that it's entitled to damages for past infringement (with the amount to be determined further down the road).

Whatever the remedies may ultimately be, this was a historic event. Unless I've missed something in an exotic jurisdiction, this was the first time in history for a court to hear a case in which OPPO is enforcing a patent. It's not that OPPO doesn't have plenty of them: it's a major SEP holder especially but not only in 5G, and owns numerous non-SEPs, too. But it makes huge volumes of consumer electronics products, so OPPO is a net licensee despite a formidable patent portfolio that it calls its own.

I hadn't seen Professor Mueller-Stoy in action for almost a decade. I've linked to a few of his write-ups, and today I saw him again in the vey same place and courtroom where he achieved great results for Microsoft v. Motorola in the early 2010s. His performance was impeccable: structured, coherent, compelling.

His counterpart Mr. Kreye was also very good (and the two treated each other with great respect and civility), but fighting an uphill battle on some issues. When Mr. Kreye argued that OPPO should have picked other defendants from the Nokia group than the two German legal entities it's presently suing in Munich, he insisted that the official minutes (in German proceedings, there's no transcript--it's up to the presiding judge to dictate the minutes) should mention that the same law firm representing OPPO, Bardehle Pagenberg, was representing Vivo in another case against Nokia, but targeting two Finnish entities (Nokia Corp. and Nokia Solutions and Networks). That's a Dusseldorf case I also found out about this month. But pointing to an unrelated case (with the overlap being limited to outside counsel) is not a substitute for clearly denying that the defendants in the present case have a hand in the allegedly infringing actions, which is why Judge Dr. Zigann (who previously alerted Nokia to the insufficiency of its attempted denial) asked: "So, what's your point?"

There are a couple of disputed claim constructions in the case, but Nokia's attempts to narrow the scope of the claims didn't appear to get much traction. Unless Nokia manages to persuade the court that the disputed limitations should be interpreted narrowly, the focus at the second hearing--the actual trial--on March 9, 2023 will likely be on the infringement analysis. While I don't mean to say that this is going to be a get-out-of-jail-free card for Nokia, this here is one of a minority of German SEP cases in which the defendant denies that its devices actually implement the relevant part of the standard. Most of the time, those cases turn on whether the SEP-in-suit reads on the standard that the accused devices are advertised to be compliant with. (In the event of an enforcement proceeding, actual infringement does come into play--but normally not before.)

A key term brought up by OPPO's counsel in this regard was URLLC: ultra-reliable low-latency communication. Here's a Nature Electronics article on the subject--and the Wikipedia article on 5G states in its "Application areas" section that URLLC is about "using the network for mission critical applications that require uninterrupted and robust data exchange."

Professor Mueller-Stoy started his argument today by stressing that low latency is absolutely key to the advantages 5G offers over 4G, and that the patent-in-suit covers a groundbreaking invention enabling low latency by minimizing the number of messages going back and forth between a base station and a handset seeking permission to send data on an uplink channel, and by organizing such coordination in a way that allows the base station to release some of its resources by determining it doesn't have to listen to a particular end-user device in a given situation.

In cellular SEP cases one can increasingly see 4G patents that also read on 5G (at least allegedly). 4G was named LTE: long-term evolution. LTE was a paradigm shift from 3G and meant to serve as a basis for several future standards. Some 4G techniques are found in 5G as well. A good example is EP'103, the patent the Mannheim court discussed at the recent Nokia v. OPPO trial. Presiding Judge Dr. Holger Kircher said that the implementation of the same technique in 5G didn't differ from the one in 4G to the extent that the court would even have to make a distinction for the purposes of that case.

5G-only patents like OPPO's EP'819 (today's patent-in-suit) are deemed particularly valuable. Based on what I heard in that Munich courtroom today, I start to see why: if a major performance increase can indeed be attributed to a specific patented invention, and if that performance enables particular applications such as fully autonomous driving, that means something.

Nokia pointed to the fact that the patent had only been granted last summer, so any infringement allegations would have to relate to the period since then. And Nokia asserts that the part of the standard that OPPO says the patent reads on isn't mandatory. However, in order for OPPO to win the case, it's sufficient if there are some scenarios in which an infringement occurs. OPPO appears convinced that the patent is infringed when 5G is used for low-latency communication, and in this context pointed to a private 5G network that Nokia set up for Volkswagen at its Wolfsburg HQ. I've googled a December 6, 2021 press release by Nokia on the Wolfsburg deployment, which indeed touts "reliable high-bandwidth and low-latency connectivity for sensors, machines, vehicles and other equipment".

The Munich court is so busy--in general, but also with this Nokia v. OPPO/OPPO v. Nokia dispute, in which there'll basically be hearings and trials every month now--that it couldn't give the parties a sooner trial date than next March. This means the parties now have several months for the next pleadings. Mr. Kreye stressed that Nokia had a "bunch" of defenses. But it's not a numbers game. If they have an availing defense, one is enough. Today it seemed like Nokia was on the defense, which is a rare sight--even more so in Munich.

By now I'm sure Nokia has realized that OPPO is an adversary of a different caliber than Daimler. I have no doubt that Nokia will ultimately earn very significant royalties as OPPO's exposure to patent assertions is far greater. But the question is how much more Nokia can get under the next deal than under the one that expired last summer--and at some point Nokia will have to ask itself whether protracted litigation is likely to be profitable. OPPO's countersuits make the FRAND analysis more interesting than in cases where you have only one licensor and one licensee.

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Tuesday, April 26, 2022

Lawyer at Auto IP conference: German judges will take patentee-friendly tendencies to Unified Patent Court, standard-essential patent holders will have upper hand again

This is my second post on what's happening at the Auto IP & Legal World Summit in Frankfurt today. The previous post summarized, and commented on, Volkswagen's outgoing IP chief Uwe Wiesner's keynote.

Mr. Wiesner was also a panelist, discussing automotive standard-essential patent (SEP) licensing with Nokia's litigation chief Clemens Heusch (clearly one of the most knowledgeable and experienced patent litigators in the wireless sector), Meissner Bolte partner Philipp Rastemborski, and IPlytics founder Tim Pohlmann. Continental's Roderick McConnell had to cancel on short notice.

At the most abstract level, licensor representative Clemens Heusch and licensee representative Uwe Wiesner agreed that their companies--both of which are European--want the best for the European economy. It is as regrettable as it is unsurprising that they don't agree on much more than that. And Mr. Wiesner stated repeatedly today--during his keynote as well as the panel debate--that the real issue in connection with the licensing level (components or end product) is price.

In the end, the price on which the parties agree depends on leverage in litigation. In that regard, SEP holders have an advantage, especially if they can gain leverage over implementers in Germany.

Earlier this month I explained that the Munich I Regional Court's new approach--a pilot project for the time being--of identifying a "lead case" among a set of related SEP cases--provides SEP holders with an even better opportunity to maximize their royalty income, if they are willing to take their time and their chances.

Mr. Rastemborski, who appears to advise automotive companies (and his firm does a lot of work for Deutsche Telekom, another major implementers), stated in no uncertain terms that the Munich and Mannheim courts give SEP holders a great deal of leverage. He said that those courts essentially say they can't really determine what royalty rate is FRAND, so in the end there is pressure on implementers to reach an agreement with licensors--or they will face an injunction.

He said that the Dusseldorf court used to have a different approach, but its preliminary reference to the ECJ was withdrawn because Nokia and Daimler settled. In Mr. Rastemborski's opinion, the Dusseldorf could "should have just decided." I disagree because German judges are not bound by precedent, not even within their own district or circuit. There is no way that a Dusseldorf decision to the effect of--for instance--denying Nokia an injunction over its refusal to license Daimler's suppliers on certain terms would have dissuaded the judges in Mannheim and Munich from anything. I also disagree with Mr. Rastemborski's criticism of the European Commission not taking a sufficiently global position so far (which he voiced in connection with the question of whether the Commission should bless licensing negotiation groups). The Commission does define markets as global when it is warranted, and it is clearly conscious of its influence on the global stage.

Mr. Rastemborski predicted that the Unified Patent Court (UPC), which is expected to commence its operation in early 2023, is likely going to create additional opportunities for patentees to gain leverage. I agree with that prediction. Mr. Rastemborski specifically mentioned that the Munich court's 7th Civil Chamber's Presiding Judge Dr. Matthias Zigann is going to serve on the UPC, and said he and other German judges (he also mentioned Federal Court of Justice judge Dr. Klaus Grabinski) would bring their well-known, patentee-friendly judicial philosophy to the UPC.

As a result, I wouldn't be surprised if Munich and Mannheim became the two most popular UPC venues of first instance, at least in the beginning.

Net implementers already tried almost a decade ago to influence the UPC's future case law, but their lobbying was focused on the UPC's Rules of Procedure. It is the UPC Agreement that really matters. They missed the opportunity to influence that one. I consider the efforts of that UPC Industry Coalition about as misguided as the attempt to soften Germany's patent injunction regime: more than eight months after the entry of a "reform" bill into force, not a single case is known in which a German court denied or substantially delayed the grant of an injunction because of a disproportionality defense...

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Avanci licensee Volkswagen continues to advocate automotive patent licensing negotiation groups without alleviating cartel concerns in any way

At the Auto IP conference in Frankfurt that I mentioned in a recent post, Volkswagen's IP chief Uwe Wiesner delivered his first public speech since the appointment of his successor--Silke Reinhold--was made official (see yesterday's Juve Patent article)--and possibly also since VW upgraded its Avanci standard-essential patent (SEP) license to 4G on a group-wide basis.

Mr. Wiesner, who was accurately introduced as a very well-respected figure in the IP community, portrayed VW's attitude as follows: "Don't complain, don't go to courts, find acceptable solutions." While VW may not have formally lodged complaints, it is a fact that the car maker has been lobbying competition authorities and policy makers in multiple jurisdictions in an effort to secure green light for an exemption from cartel law. This blog has discussed the concept of licensing (or "licensee") negotiation groups (LNGs) on a few occasions, such as when one of Qualcomm's most senior executives said everyone involved in such buyers' cartels "should go to jail." In its patent infringement complaint against VW (one of several cases that were settled by VW upgrading its Avanci license to the cellular standard it had already been implementing for years), Acer pointed to this blog for a more detailed discussion of the legal and policy concerns that LNGs would raise.

In today's presentation, Mr. Wiesner did give Avanci some credit for its efforts to bring cellular SEP licensors and car makers together, but he then called for different measures and developments he would consider prerequisite to a more balanced framework for automotive SEP licensing. In an effort to make the case for change, he pointed to the fact that there are approximately 10,000 components in a car, any single one of which could be patented in one way or another, and the multiplicity of patent owners, with Huawei and Qualcomm towering above all other contributors to cellular standards according to the numbers Mr. Wiesner relied on. He then went on to raise the issue of informational asymmetry, though I, quite frankly, don't think that Continental--the most vocal one of all tier 1 (= direct) automotive suppliers to demand exhaustive SEP licenses for its components--is really a match for the likes of Ericsson, Nokia, and Qualcomm (to name but three major Avanci licensors) when it comes to cellular standards and SEP licensing.

Mr. Wiesner is clearly dismayed at the patentee-friendly leanings of the German judiciary and, in today's context (SEP licensing), primarily with the Sisvel v. Haier case law. He called for a return to the pre-Sisvel v. Haier application of Huawei v. ZTE, and mentioned a challenge to Sisvel v. Haier that is pending before the Federal Constitutional Court of Germany. What sets the Federal Constitutional Court apart from the U.S. Supreme Court, however, is that it is not a court of final appeal with broad in rem jurisdiction. It only deals with a narrow range of questions, and in context like patent law, this mostly comes down to alleged violations of the right to be heard. One may or may not agree with Sisvel v. Haier, but I'd be very surprised if the Federal Constitutional Court overruled the Federal Court of Justice. It would be unprecedented in German patent law. Most likely, the constitutional complaint will go nowhere.

Part of VW's strategy is to describe automotive SEP licensing as a "pilot" for the wider IoT industry. I wouldn't deny that there are parallels, but there are also some important differences. In particular, many IoT companies are tiny compared to even niche automakers. Also, things are very much in flux and I expect some interesting developments in IoT SEP licensing this year and beyond.

The most aggressive demand continues to be that "licensor pools should negotiate with LNGs." In today's 30-minute presentation, there was nothing new that would address or assuage patentees' and competition authorities' legitimate concerns over LNGs being tantamount to buyers' cartels and leading to a group boycott. It also appears that negotiations between pools and LNGs would still give potential licensees the option to decline to take a pool license and pursue bilateral licensing instead, entailing further holdout.

Arguably, another one of his proposals is comparably radical: no non-disclosure agreements (NDAs) in SEP licensing negotiations. Mr. Wiesner rightly noted that the specifications of the standards in question and the declared-essential patents are public documents. That is just a limited part of the picture (and, at any rate, I believe every NDA I've ever signed or seen defined what constitutes Confidential Information, clearly excluding public documents from the scope of the term). What I would agree is that NDAs should not get in the way of working out solutions to the problem of duplicative royalties. But neither patentees nor car makers or their suppliers would really want to negotiate without at least some degree of confidentiality.

In sum, there's quite some discrepancy between the far-reaching proposals and demands that Volkswagen makes on the one hand and the specifics it states in public--on such occasions as this week's Frankfurt conference--about how it wants to make all of that work without wreaking havoc to the licensing process. I would encourage VW to publish a position paper that lays out what the company has in mind, how it would work, and addresses the concerns that have been raised (not only, but also by this blog). The alternative would be to just abandon the idea altogether, given its conspicuous lack of support from antitrust watchdogs.

VW's patent department has grown from a small team (when he started, they were just about a dozen people) to--if I recall correctly--approximately 100 professionals. The fields of technology relevant to the automotive sector changed a lot during his 30+ years with the company.

Are VW's C-level execs are fully aware of how important IP will be to the future of the entire company? Is the world around VW possibly changing faster than its approach to IP? Those are important questions. The jury is still out on them.

Mr. Wiesner's successor--Mrs. Reinhold--will take over in July and has most recently been in charge of "electronics, mobility, designs and SEPs." She graduated in "material science," which is quite far from the digital space, but I don't know her and by now she may understand wireless technologies and artificial intelligence extremely well. The alternative (which I believe management consultants would have seriously recommended at this transformative stage) would have been to bring in new IP leadership from the industry with which the auto sector is converging, such as someone from Apple, Google, Samsung, Qualcomm, Ericsson, or Nokia, and to grant the new IP chief significant autonomy to adapt to the needs of our times, which has structural implications and should also involve substantial investments in the creation and acquisition of IP in certain fields. That opportunity for deliberate discontinuity--in order to accelerate developments that Mr. Wiesner had already put in motion--was probably missed.

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Wednesday, March 30, 2022

Neo Wireless expanding patent enforcement campaign to automotive: actions filed against Ford, Honda, VW, Nissan, GM, Tesla, Toyota with five U.S. district courts

This is the third standard-essential patent (SEP) post in a row. The previous ones discussed patent assertions by some unnamed MPEG LA licensors against their former partner Samsung and some rather interesting developments surrounding Nokia v. OPPO/OPPO v. Nokia.

Non-practicing entity Neo Wireless LLC put itself on the map of U.S. patent litigation through its mid-January filings against Apple, LG, and Dell. As Apple Insider reported, the infringement allegations in the complaint against Apple alleged that Neo Wireless held patents essential to the 4G/LTE and NR/5G cellular telecommunications standards.

Neo has now filed a slew of lawsuits against car makers:

  • Eastern District of Texas

    • General Motors Company

    • Tesla

    • Toyota

  • Eastern District of Tennessee: Volkswagen Group

  • Middle District of Tennessee: Nissan

  • Southern District of Ohio: Honda

  • Western District of Missouri: Ford Motor Company

The Eastern District of Texas has tremendous expertise in adjudicating patent disputes; the other districts--with the greatest respect--don't. It will be interesting to see whether any venue transfer motions will succeed and/or whether any of those cases will get consolidated.

Neo is not an Avanci licensor, and will likely seek damages that on a per-patent basis dwarf the cost of Avanci license. Some automakers already have that problem with Intellectual Ventures, which is asserting a mix of standard-essential and non-standard-essential patents (1, 2).

Only one of the defendants is a publicly-known Avanci licensee: Volkswagen. Tesla has been rumored to be one ever since multiple enforcement actions by Avanci licensors were withdrawn near-simultaneously in different jurisdictions. The other defendants are presumably among the companies Member of the European Parliament Alfred Sant had in mind when he asked the European Commission three questions concerning the distortion of competition because of some car makers having taken an Avanci license while their competitors from outside of Europe largely haven't.

The asserted patents largely overlap between the different cases, but are not always the same. For example, four of the six patents-in-suit against Toyota are also among the five patents asserted against Apple, but two are not.

The claimed inventions were apparently made by Chinese individuals, but Neo Wireless is a U.S. entity. There was or is another company named Neocific that temporarily owned some or all of those patents.

Finally, here are two sample complaints: the E.D. Tex. one against Toyota and the W.D. Mo. lawsuit against Ford.

22-03-29 Neo Wireless LLC v... by Florian Mueller

22-03-29 Neo Wireless LLC v... by Florian Mueller

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Monday, March 14, 2022

Acer, IP Bridge patent infringement actions against Volkswagen withdrawn following Avanci 4G upgrade while EU politician voices concern over still-unlicensed non-European car makers

This is a follow-up to last week's big standard-essential patent (SEP) licensing news, Volkswagen's agreement with the Avanci patent pool to upgrade its license to 4G for the entire VW group (as opposed to only a few premium brands being licensed up to 4G). VW's initial press release suggested that some issues (presumably relating to litigation expenses) were left to be resolved in connection with patent infringement actions pending against the car maker at the time. It appears that the clean-up has been completed:

While all German and German-owned automotive brands are now licensed under Avanci's 4G program, many car makers in the world still aren't licensed. In other words, barring the highly unlikely existence of thousands of unknown bilateral license agreements (49 Avanci licensors times numerous car makers), there's a lot of infringing products rolling on the world's roads.

This has a Member of the European Parliament (MEP) worried. Alfred Sant, a former prime minister of Malta with a long-standing interest in the EU's intellectual property policy, posed three written parliamentary questions to the European Commission last month. He's taking an interesting angle: when some companies in a given industry (here, automotive) are licensed while others are not, "competitive distortion" is indeed caused. When companies headquartered in some jurisdictions respect IP to a greater extent than their counterparts abroad, it's an issue of global trade policy.

Mr. Sant says it's "unfair to EU companies that pay for these rights when their competitors do not." To be fair, there are still some unlicensed EU companies. For example, I haven't heard of Stellantis (FIAT, Peugeot, Chrysler, Open, Citroën, Dodge, Maserati, and others) having taken an Avanci license. It's the world's sixth-largest car maker and headquartered in Amsterdam--just up the road from the EU's de facto capital of Brussels. But Mr. Sant is probably right that the degree--so many things are a question of degree rather than binary--to which EU automakers have licensed cellular SEPs is substantially greater than in other parts of the world.

All three of Mr. Sant's questions relate to measures the European Commission could take, such as raising this issue in bilateral trade talks (with "Japan, South Korea, the United States etc."). I find the second question particularly well-put:

"2. Has the Commission informed non‑EU governments that a failure by non‑EU car manufacturers to fulfil SEP licencing obligations would constitute a distortion of the competitive level playing field vis‑à‑vis EU car manufacturers that have the necessary SEP licences, and what commitments has it received?"

It would be unrealistic to expect any car maker--be it American icon Ford, which is being sued by some Avanci licensors, or a Toyota or Hyundai/KIA--to be scared into action only because of those parliamentary questions. Also, the Commission rarely gives surprising or enlightening answers to such questions. The standard response to "are you doing something about it?" is "Yes, of course we do our job" without going into the specifics one would really like to hear. But what those questions do get is mind share. They draw the Commission's attention to political concern over a problem. They show that there are politicians who want the Commission to make significant progress in a particular regard. I do believe Mr. Sant's questions have the potential to raise awareness and to persuade EC decision makers to assign a higher priority than in the past to this competitiveness issue.

It's like a law of nature in patent licensing that a party that has taken a license is interested in ensuring that its competitors, too, pay for their use of the same patents (and that they don't pay less). Daimler defended itself against Nokia for more than two years (only to get a result it could have had at a much lower cost); Volkswagen was advocating "Licensing Negotiation Groups" for a long time. By now, it's not in VW's or Daimler's interest that others remain unlicensed.

Mr. Sant's official questions also serve as a signal to the governments of countries like Japan that the EU probably won't take it lightly should those jurisdictions shield their local car makers from SEP enforcement. To some degree they're all susceptible to infringement litigation in Germany. In the United States, this month's Fifth Circuit decision in Continental v. Avanci et al. also ups the pressure on car makers to license cellular SEPs. But it obviously makes a difference whether a company has to fear effective enforcement in only a couple of export markets or may even have to close down factories if all else fails.

It's high time the car industry resolved its 3G/4G SEP licensing issues as the world is moving on to 5G at a fast pace.

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Tuesday, March 8, 2022

Volkswagen upgrades Avanci patent pool license from 3G to 4G for entire group, paving way for settlement of Acer's and IP Bridge's infringement cases in Virginia and Munich

On the last day of January, Volkswagen asked the United States District Court for the Eastern District of Virginia for an extension of time to respond to Acer 's 4G standard-essential patent (SEP) infringement complaint because the parties were discussing a settlement. Theoretically, this could have meant bilateral licensing talks, but Acer had filed its complaint because VW still hadn't upgraded a 2019 Avanci pool license from 3G to 4G. Only certain VW subsidiaries such as Audi and Porsche had a 4G license--but not the ones where most of the volume is. The VW group as a whole sells approximately 10 million vehicles annually.

We now know that VW has chosen a license to the 4G SEP portfolios of 49 different companies over countless bilateral deals: Avanci just announced that the Volkswagen Group has "expanded its existing relationship" with the patent pool so as to include 4G SEPs.

This makes a whole lot of sense. Volkswagen has now caught up with its German rivals BMW (Avanci's first announced licensee) and Daimler (which firstly settled with Nokia and then took an Avanci license in late 2021). Frankly, the previous state of affairs was an anachronism. Many of us remember when 3G was the latest and greatest in cellular telecommunications, so hot that carriers would bid huge amounts of money when spectrum was auctioned. Then the best is the enemy of the good. The best right now is, of course, 5G--for that standard, however, a pool rate has yet to be announced. 4G is now the lowest common denominator, given that some countries such as Germany, where Volkswagen is famously headquartered, have already switched off 3G.

Interestingly, when Volkswagen--through a supplier (Rolling Wireless according to media reports)--took a SEP license from Huawei last year, it was a 4G license.

The published Avanci rate for 3G is $9 per vehicle versus $15 per vehicle for 4G. Volkswagen's legal problem was that licensing is a binary question for each patent-product combination. You're licensed, or you're not licensed. If Audi--an almost-wholly-owned VW subsidiary--has a 4G license, it doesn't mean that its parent company's brand is licensed. If VW has a 3G Avanci license but implements the 4G, it simply infringes any 4G patents in the pool. But that's a thing of the past. A deal is a deal.

Not only Acer but also IP Bridge--another Avanci licensor--was enforcing 4G patents against Volkswagen. In the Acer case, the extended deadline for VW's response to the complaint ends tomorrow.

It shouldn't be hard to settle those cases now, but German business weekly Wirtschaftswoche quotes Volkswagen as saying that the Avanci license agreement "provides relief from pending litigation to an extent that is not clear-cut yet." VW also told Wirtschaftswoche that it has "reached a pragmatic solution that makes economic sense."

It is well known in the industry that LG is a Volkswagen supplier. The last major announcement by Avanci was that LG, one of the world's largest 4G SEP holders (if not the number one according to some statistics), joined the Avanci 4G pool as a licensor.

Just last week, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal of automotive supplier Continental's U.S. antitrust case against Avanci and some of its licensors, particularly Nokia. In what represents a ringing endorsement of Avanci's business model, the panel held that granting a license to "third parties up the [supply] chain [...] is unnecessary to effectuate the purpose of the FRAND commitments and reduce patent hold-up." Volkswagen used to advocate so-called Licensing Negotiation Groups (1, 2, 3), which would raise serious issues under cartel law. It looks like Volkswagen didn't need to form an LNG in order to work things out with Avanci--neither for the original license in 2019 nor the 4G upgrade announced today.

Volkswagen did what was certainly best for Volkswagen under the circumstances. They chose a negotiated agreement over potentially protracted litigation. It is now actually in VW's interest that its competitors also take an Avanci license. One example of a major VW rival without such a license is Ford, which may already be under significant pressure in Germany. With every car maker that takes such a license, others will find it harder to convince the courts that they are willing licensees even if they decline to take a one-stop license for $15 per car to 49 SEP portfolios, including some very large ones (LG, Ericsson, Nokia, Qualcomm). Whether Avanci has 75% or 80% of all 4G SEPs, there can be no doubt that its share is huge.

If history repeats itself, Volkswagen will take an Avanci 5G license when 4G has been switched off in Germany. I don't expect it to take that long, however. Car makers are relatively new to the cellular SEP licensing business, but some are learning faster--and especially at a lower cost--than others.

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Tuesday, February 8, 2022

Volkswagen told court of settlement talks--unclear if negotiating bilateral patent license from Acer and/or upgrade to 4G license from Avanci

Two weeks after Acer filed a patent infringement action in the Eastern District of Virginia over the insufficiency of Volkswagen's 3G Avanci license and refusal to pay for the 4G-essential IP it's actually been using, VW moved for an extension of time for its answer (or other form of response) to Acer's complaint until February 7, 2022 (yesterday). A first extension of time is always granted by U.S. district courts, while a second extension is not a given.

Today I thought I'd download VW's answer to Acer's complaint, which I mentioned last week in my commentary on Ford's response to Sisvel's patent suit in the District of Delaware. What I found instead was the following motion for another extension, which interestingly reveals settlement talks between the German car maker and Acer and/or Avanci (this post continues below the document):

22-01-31 VW Motion for Exte... by Florian Mueller

Here's the relevant passage:

"Good cause exists for this Court to grant this second extension because the parties are in negotiations to settle all matters in controversy between them. VWGoA respectfully requests that this Court grant the requested extension to allow the parties to more effectively continue with negotiations and finalize an agreement. Counsel for VWGoA has spoken with Plaintiff’s counsel, and Plaintiff does not oppose Defendant’s request for an extension of time." (emphases added)

On this basis, the judge granted the extension.

There are two possibilities here, which are not mutually exclusive:

  • VW's objective may be a bilateral license from Acer.

  • But Acer brought its complaint in the first place because it wanted VW to recognize that a 3G Avanci license fell short of the IP coverage needed for 4G cars. Also, a bilateral agreement with Acer would not resolve the dispute with Japan's IP Bridge, an other Avanci licensor suing VW (I discovered at least one case that was pending in Munich), nor would VW be licensed to roughly four dozen other cellular SEP portfolios in the Avanci pool. That's why an Avanci license would be a logical outcome.

It's possible that both options are being negotiated in parallel.

The extension gives Volkswagen another month: the new deadline is March 9, 2022.

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Thursday, February 3, 2022

Japan's IP Bridge--an Avanci licensor--is suing Volkswagen in Munich while Japanese car makers run PR campaign against Avanci's patent licensing terms

A spokeswoman for the Landgericht München I (Munich I Regional Court) has just confirmed to me that Volkswagen will have to defend itself in that court on November 10, 2022, against patent infringement case no. 7 O 16858/2 (Presiding Judge: Dr. Matthias Zigann) over EP2294737 on "control channel signalling for triggering the independent transmission of a channel quality indicator."

EP'737--which has been declared essential to the 4G/LTE standard--was originally filed by Panasonic and assigned to Japan's national patent licensing entity IP Bridge, which previously brought cases against other companies over this patent, all of them in Munich:

Volkswagen has a 3G Avanci license for its volume brands (and 4G only for premium brands like Porsche, Audi, Lamborghini). In Volkswagen's own country, 3G has already been switched off. Acer sued Volkswagen in the Eastern District of Virginia (traditionally a "rocket docket" for patent cases) because a 3G license is not a defense to 4G infringement any more than you could buy the cheapest Golf, return to the store, and steal an ID4. Now, with IP Bridge suing Volkswagen in Munich, the pressure is increasing on Europe's largest automotive group to upgrade its license.

This newly discovered litigation once again confirms that Munich is the automotive patent enforcement hotspot: just yesterday I reported on a couple of Sisvel v. Ford cases in Munich (Sisvel, too, is an Avanci licensor). Mannheim continues to be a major automotive patent venue, where almost-wholly-owned Volkswagen subsidiary Audi is being sued (in case no. 7 O 132/21; Presiding Judge: Dr. Peter Tochtermann) over German Patent DE102009060504 on "a circuit and method for adjusting an offset output current for an input current amplifier" with parallel litigation pending in the U.S., also against parent company Volkswagen).

About ten years ago, when European policy makers were discussing where to set up the different appellate divisions of Europe's Unified Patent Court, it was part of the consideration that Munich might be a suitable venue for automotive patent cases. At the time, however, different types of patents than cellular SEPs were on the agenda.

Japanese companies like Sony, NTT, and Panasonic hold a significant number of cellular SEPs, and seek compensation from car makers, particularly through the Avanci pool which provides a one-stop solution: a license to roughly four dozen SEP portfolios. But Japanese car makers Toyota, Honda, and Nissan still appear to be adamantly opposed to the Avanci licensing model, despite car makers in other countries increasingly having embraced the pool licensing option.

On Tuesday, Nikkei Asia published an article with the headline Qualcomm, Nokia demand patent fees from Toyota, Honda and Nissan, but mentions right below the headline that "48 companies including [Japan's own] Sony, NTT join move to seek $15 for each connected car."

The following passage on Toyota is...well, interesting:

"Toyota aims to sell 10.29 million vehicles across the group in the fiscal year ending March 2022. If all of its cars were equipped with communication devices and used the patents, it will have to pay about 18 billion yen, or 0.7% of its expected consolidated net profit for the same period."

This makes it sound that the end of profitability justifies the means of patent infringement. Patent license fees are a small part of the cost of making cars, while the value of connectivity to drivers as well as the industry itself (maintenance etc.) increases almost evey day. If Toyota has a profitability issue with a $15 license to four dozen SEP portfolios, it might have to look for other ways to increase its margins.

Daimler wasted millions and millions defending itself against patents it could have licensed at a fairly low cost. That Nikkei article appears to indicate that Japanese car makers have not learned a lesson from the outcome of Daimler's efforts. As long as they aren't licensed, the likes of Toyota will at some point be slapped with SEP infringement actions in Munich, too. That's just the way it goes.

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Wednesday, December 22, 2021

Daimler takes Avanci patent license--all major German car makers now Avanci-licensed, but Volkswagen only up to 3G

Germany's leading business weekly, Wirtschaftswoche, has just been first (and I might still be second) to report that Daimler has finally taken a standard-essential patent (SEP) license from the Avanci pool, whose licensors include Qualcomm, Nokia, Ericsson as well as dozens of other companies from around the globe.

If you can't beat'em, join'em.

It was actually Avanci's approach of licensing the end product--the vehicle as opposed to a component thereof--which Daimler had originally rejected. As a result, the Nokia v. Daimler patent infringement dispute lasted more than two years and ended in a bilateral (just Nokia and Daimler) license agreement that was announced on June 1, 2021. Daimler had also brought an EU antitrust complaint (over Nokia's refusal to grant Daimler's suppliers an exhaustive SEP license) that it withdrew after the settlement.

Prior to settling with Nokia, Daimler had already taken bilateral licenses from Japanese electronics giant Sharp and non-practicing entity Conversant Wireless. All those companies--plus Japan's IP Bridge--had sued Daimler in Germany over patent infringements. And all of them are among the Avanci pool's more than three dozen licensors.

Piecemeal resolution--licensing one portfolio at a time--apparently turned out uneconomic, and litigation involves major uncertainty, so Daimler's decision-makers opted for a one-stop solution. In the alternative, I guess one Avanci licensor after the other would have wanted Daimler to take a bilateral license. If you're a Qualcomm or an Ericsson, why would you not want to get paid if Nokia does? If you're an Unwired Planet or Longhorn IP, why wouldn't you want to collect royalties if Daimler took a license from Conversant? Why would anyone condone an ongoing infringement while similarly situated patent holders are raking in license fees? Daimler avoided a lot of issues by signing a deal with Avanci. I've criticized Daimler on various occasions, but this pragmatic choice just makes sense under the current circumstances.

Of the three major German car makers, BMW was first to take a 4G Avanci license (in January 2017). In 2019, Volkswagen subsidiaries Audi and Porsche followed--and the following month, other car makers in the Volkswagen Group took a 3G license, but is now being sued by Acer because its license does not cover the 4G standard Volkswagen actually implements. The fact that the other major German car makers had accepted Avanci's car-level licensing model was held against Daimler in the German Nokia cases. Daimler's license deal will now weigh against other car makers' FRAND arguments. I'm thinking of Volkswagen's defenses against Acer but also about Ford, which is facing an infringement case brought by Sisvel as well as other lawsuits (IP Bridge, Longhorn IP) over its refusal to take an Avanci license.

Continental and Thales remain on the losing track

Some Daimler suppliers are still fighting against end product-level licensing. Continental (which knows a lot more about making tires than about patent licensing, litigation, and policy) continues to be a vocal critic of the Avanci model. These days it's hard to attend a FRAND/SEP webinar without someone from Continental expressing concerns. French industrial conglomerate Thales, whose primary competence it is to make high-speed trains, brought an antitrust case in Munich that is highly unlikely to get traction.

The likes of Conti and Thales can keep trying to tell courts and competition watchdogs that they should be granted an exhaustive component-level SEP license by Avanci's licensors, but judges and antitrust officials will see that their customer--Daimler--has determined that a car-level pool license is the way to go. Neither Thales nor Conti will be able to explain away that market reality.

Also, a Fifth Circuit opinion affirming the dismissal of Continental's U.S. case against Avanci and several Avanci licensors will come down soon. Conti's Delaware case against Nokia has been sent back from the federal court to the state court, which means that the case was basically just going in a circle for about a year--and the state court could still find that the case actually belongs in federal court (which in my opinion it does, as patent exhaustion is a theory under patent law, which is federal law, even if contractual questions are involved). It could also dismiss Conti's case, which is actually a fairly likely outcome.

Tout ça pour ça? Questioning the wisdom of Daimler's dispute with Nokia

This outcome does beg the question of why Daimler picked a fight with Nokia (and other Avanci licensors) in the first place. In the end, Daimler wasted millions and millions of euros on Quinn Emanuel's litigation services, only to be enjoined four times (two injunctions in Nokia's favor, one for Sharp, and one for Conversant) just over the course of a few months in 2020. If the Nokia dispute had continued, there would most likely have been several more injunctions, as some cases had been stayed but the patents-in-suit survived Daimler's validity challenges. Daimler could have had this outcome with pretty much any other German patent litigation firm (and they're all less expensive than QE), and could have taken an Avanci license in the first place without ever having to defend against SEP assertions by an Avanci licensor.

For a company that generally prides itself on cost efficiency, such a waste is unusual, if not unprecedented, and I wouldn't be surprised if some people were now struggling to justify the decisions they made a couple of years ago.

It's not that it's necessarily wrong to fight--because if you win, it's hard for others to argue with your success. Daimler wanted to bring down patent license fees. That's their job, just like it's the job of those people's counterparts at other companies to maximize their revenues. But then you have to play a game that you know how to win, and there was no sign of the people in charge of Daimler's Nokia cases being up to the challenge. They lacked the experience and the broad perspective that you need to win a war like that. I'm quite convinced that a company like Apple would have done a far better job by virtue of the strategic sophistication of its in-house litigators (who play this game more holistically and know how to get a better price-performance ratio from outside counsel). They also never figured out how to successfully influence Germany's patent reform process, despite the automotive industry's privileged access to politicians.

By comparison, major U.S. corporations value their in-house counsel a lot more. As a result, they bring in people who could easily be partners at some of the world's leading law firms. By contrast, the general perception in Germany is that if someone becomes in-house counsel, it's because they're not up to the way more lucrative challenge in Big Law. Going in-house is pretty much a point of no return in Germany, not a revolving door like in America. This doesn't mean that there aren't some very capable people in the legal departments of German corporations, but on average they're clearly nowhere near as sophisticated as their U.S. counterparts. That's also what I hear from patent holders of different sizes trying to work out deals.

For German legal departments, it's less about achieving results than justifying their decisions internally, such as by fooling their superiors into believing that something (such as German patent "reform") is a success story when it actually isn't. But at this stage Daimler's lawyers can hardly justify their waste of money on those Nokia, Sharp, Conversant, and IP Bridge cases. The negative ROI is all too clear.

German corporations treat legal departments are mere service providers. In major U.S. corporations, they have a strategic role and are a sparring partner for management in certain contexts. A great example is Brad Smith, who joined Microsoft as in-house counsel, ran its legal department for many years, and was then promoted to President (beyond still being the company's top lawyer).

Possibly the most important breakthrough for Avanci to date

For Avanci, Daimler's decision to take the pool license is a breakthrough. Its importance can hardly be overstated as other car makers are now going to be increasingly inclined to do the same, as opposed to betting on that non-starter called Licensing Negotiation Groups. Early last month, an Avanci executive mentioned new license agreements with Jaguar, Land Rover, and Aston Martin. And while neither Avanci nor Tesla ever confirmed it, there's a strong assumption of Tesla having taken an Avanci license, as multiple infringement actions brought by Avanci licensors against Tesla were withdrawn near-simultaneously.

Shortly after Nokia's settlement with Daimler, another--unnamed, but possibly Ford--car maker took a bilateral license. We may see similar effects now, but with respect to Avanci.

Meanwhile, the automotive industry is awaiting with interest the (delayed) announcement of Avanci's 5G pool rate.

Ramifications for Ericsson v. Apple

As I touched in a previous section on how Apple would have performed in Daimler's place, the iPhone maker is now going to be indirectly impacted by this in case it fails to renew its license agreement with Ericsson. Should we see another round of Ericsson v. Apple infringement cases in 10 days' time, Ericsson will benefit from Daimler's Avanci license in two ways. Apple famously makes a smallest salable patent-practicing unit (SSPPU) argument, and the momentum behind the Avanci pool--even though in a different industry--ups the ante for anyone arguing that SEPs should be licensed at the chipset level. And even though there are differences between these industries, the more traction Avanci has, the harder it will be for Apple with its huge margins to argue that it can't just pay Ericsson $5 per iPhone for its entire patent portfolio all the way up to 5G (for a reminder, Avanci has yet to announce its 5G rate, but the rate is expected to be substantially higher--for good reason--than the 4G fee).

Wirtschaftswoche's recent patent coverage

Today's Daimler-Avanci breaking news is actually the third patent-related Wirtschaftswoche story on patents within less than a week that is recommended reading for those who understand German and are interested in patent licensing and litigation. "WiWo" also researched the creepy story of dozens of jobs lost at a small family-owned company due to Germany's bifurcation regime (which allows injunctions to be enforced prior to a ruling on the (in)validity of a patent-in-suit). That article appeared in Friday's print edition, and was additionally uploaded to wiwo.de yesterday.

Also yesterday, Wirtschaftswoche reported on the Acer v. Volkswagen patent lawsuit. In that article, I am quoted as saying that Volkswagen should long have acquired a SEP portfolio (given that such patents are for sale from time to time) and needs to approach IP more strategically at the top level. To be clear, VW has a fully functional patent department, and they're ahead of others in their industry, but without C-level executives taking a stronger interest in IP and deciding not to make themselves dependent on other companies (such as Daimler) through slavish adherence to industry associations, they're not going to be match for wireless patent licensors. Volkswagen told the VDA (Germany's automotive industry association) point blank that they'd leave the organization unless it fully commits to electric mobility.

C-level interest in IP differs greatly between the automotive industry and Big Tech. Big Tech CEOs have subscribed to this blog and the related Twitter account, but I'm not aware of the top brass of automotive companies ever having subscribed to FOSS Patents.

As Daimler's Avanci license shows, the automotive industry has to come to terms with the fact that major wireless companies are now in the position to impose their preferred business models on car makers, no matter how much the auto industry may point to century-old traditions regarding their supply chains and what have you.

The battle over the business model is practically over. Daimler's legal fees are a sunk cost, and its financial controllers will be crying tears. What all car makers--above all, Volkswagen--need to reflect on now is how to achieve the best results possible under a framework that wasn't their first choice, but which has simply prevailed. They've all learned a few lessons in recent years--and they've paid their tuition fees. The problem they face is that the world around them is changing faster than their organizations can adjust. Increasingly they're going to face competition from companies that hold SEPs, such as Apple, Google, or Xiaomi. In times of transformation, leadership from the very top of those organizations is needed. Otherwise the only beneficiaries will continue to be patent litigation firms.

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Thursday, December 16, 2021

Acer sues Volkswagen over handful of 4G patents, decries VW's hold-out tactics against Avanci including 'licensing negotiation groups'

Intellectual Ventures predicted an "IP reckoning" for the automotive industry and did its part to turn this into a self-fulfilling prophecy (by suing GM, Toyota, and Honda). Just yesterday I reported on Sisvel v. Ford, and now I've become aware of the latest SEP enforcement action against a car maker: Acer, a Taiwanese device maker known to be a very reasonable patent holder (as that company is on the receiving end of patent suits all the time), is tired of Volkswagen's hold-out tactics vis-à-vis the Avanci 4G patent pool that offers a one-stop license to dozens of SEP portfolios. Acer has brought a patent infringement complaint against VW in the Eastern District of Virginia, which (as I'll show you further below) points to a couple of FOSS Patents posts:

21-12-15 Acer v. Volkswagen... by Florian Mueller

Some of you saw me at the short-lived Apple v. Qualcomm trial in San Diego in April 2019, and while I don't expect anyone to remember this, I used an Acer notebook for my live commentary from the overflow room. On the only occasion so far that I attended a patent trial involving Acer, they were being sued in Mannheim over WiFi SEPs, with the accused components being supplied by Broadcom. While Acer holds a number of standard-essential patents, it's primarily an implementer of standards, much more so than it is a patent enforcer.

So why does a peaceful and usually defensive company tell Volkswagen that "enough is enough" and bring an infringement complaint over five 4G standard-essential patents (SEPs)? The answer is in the complaint--and it's all about Volkswagen's Avanci license only covering 2G and 3G patents (as I noted in a post on Volkswagen's indirect license deal with Huawei), but not 4G SEPs (VW did, however, take a 4G license for some of its premium brands, namely Porsche and Audi, the latter of which is the corporate parent of, inter alia, Lamborghini).

Here are the sections of the complaint that expose Volkswagen's hold-out tactics (and we're now getting closer to the passage that points to FOSS Patents):

3. Plaintiff, through their licensing agent Avanci, LLC, has offered a license to the Patents in Suit on FRAND terms, and are prepared to grant a license agreement to Defendants’ infringing products on terms and conditions that are fair, reasonable, and non-discriminatory (“FRAND”). Plaintiff brings this action because Defendants have refused the FRAND offers of Plaintiff’s licensing agent, have refused to negotiate in good faith, but continue to sell products that practice, use, or otherwise comply with the standards covered by the Patents in Suit.

25. The Patents in Suit are part of a licensing platform that is managed by Avanci, LLC.

26. Plaintiff, through its licensing agent Avanci, has made a FRAND offer to Volkswagen AG to license the Patents in Suit as part of a license to the licensing platform managed by Avanci. This offer was on terms made to, and accepted by, other licensees who have taken licenses from the Avanci licensing platform. Notwithstanding the FRAND offer, Defendants have refused to license the patents for 4G LTE technology.

27. Specifically, Avanci first discussed a license with Volkswagen AG in 2016. Since that time, Avanci has had many meetings, phone conferences, and email exchanges with Volkswagen AG to discuss and explain Avanci’s 2G/3G and 2G/3G/4G license offers. Volkswagen AG concluded a 2G/3G license with Avanci in April 2019. Although Volkswagen AG affiliates Audi and Porsche also concluded 2G/3G/4G license with Avanci, Volkswagen AG did not execute a 2G/3G/4G license with Avanci at that time.

28. Over the past two years since signing the 2G/3G license agreement, and although Volkswagen AG has increasingly incorporated 4G connectivity into its connected vehicle line-up, it still has not concluded a 2G/3G/4G license with Avanci. Instead of signing a license on the same terms as others in the industry, Volkswagen AG has engaged in delay tactics, including efforts to create a “licensee negotiation group” including many companies in the auto industry to jointly negotiate more favorable licensing terms for Volkswagen AG and other participants in the group. See http://www.fosspatents.com/2021/07/sep-licensing-negotiation-groups-part-i.html; http://www.fosspatents.com/2021/07/sep-licensing-negotiation-groups-part.html; https://www.kidonip.com/standard-essential-patents/car-or-car-tels/.

FOSS Patents posts have been mentioned in various court filings over the years, not only but mostly in the U.S., but this may be the first time for FOSS Patents to be mentioned in a complaint. Here's a screenshot of that passage (click on the image to enlarge):

Let that sink in: for its high-volume brands, Volkswagen only has a license up to 3G, a standard that is already deprecated in some countries such as the country in which VW is headquartered, when in reality VW is already selling huge numbers of 4G-connected cars--and increasingly incorporates 5G into its products (I believe it won't take long before Avanci also announces its 5G rate). Acer decided not to tolerate that type of infringement after all those years, and turned to IP litigation boutiques Davidson Berquist Jackson & Gowdey (of Virginia) and TechKnowledge Law Group (of California). I wouldn't be surprised if other Avanci licensors were equally annoyed as Acer, so Volkswagen may face more 4G patent assertions soon unless it upgrades its license. Also, it would be a logical step for Acer to sue in Germany as well, and I'll try to find out more about that.

The complaint provides non-exhaustive lists of Volkswagen models that implement the relevant 4G techniques, such as VW ID4, Arteon, Atlas, Atlas Cross Sport, Golf, Golf GTI, Jetta, Passat, Taos, and Tiguan. Those types of cars may be less expensive than the average Porsche or Audi, but Avanci's 4G license costs $15 per unit, so there's no way Volkswagen could afford it only if a car costs $100K. As the complaint notes, "Defendants tout their communications technology marketed as Car-Net as including 4G LTE connectivity." According to the complaint, Car-Net "was introduced into Volkswagen cars at least as of the 2020 model year."

These are the five patents-in-suit:

Some of the relevant claims are product claims, making Volkswagen a direct infringer if the allegations are proven. Other claims-in-suit are method claims, raising the question of contributory infringement (as Volkswagen directs and induces its customers to infringe, provided that Acer is right about 4G essentiality).

In the U.S., Acer is not asking for an injunction at this stage but seeking damages for past infringement as well as "post-trial damages in the form of a counter-determined royalty" and, which is granted in the U.S. only under exceptional circumstances, a recovery of its legal fees. Should Acer sue Volkswagen in Germany, chances are that VW would be considered an unwilling licensee and, as a result, enjoined.

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Wednesday, November 3, 2021

At IAM Auto IP conference, calls for patent licensing meet exhortations to hold out: more automotive SEP litigation may just be inevitable

The automotive industry is facing a learning curve with respect to standard-essential patent (SEP) licensing. Given what I heard at yesterday's IAM Auto IP Europe conference in Munich, I see partial progress--such as Avanci's announcement of 4G patent license agreements with three more automotive brands--while some automotive industry players appear to be learning too slowly for their own good. As a result, we're going to see more litigation, such as the cases recently brought by Intellectual Ventures (not an Avanci licensor) over a mix of three SEPs and even more non-SEPs.

In my previous post I reported on a Qualcomm executive's perspective on the illegality of licensing negotiation groups. In this post I'll discuss some of the other things that were said.

The IAM conference took place in the aftermath of two strategic defeats for automotive holdouts:

  • Daimler had wasted millions and millions of euros as it ultimately took a car-level SEP license from Nokia anyway. Last year, Daimler was slapped with four German SEP injunctions over the course of less than three months. It settled two of those disputes rather quickly, and finally caved to Nokia.

    After the Daimler-Nokia settlement I researched the state of affairs in that dispute, and found out that Daimler was losing to a far greater extent than it initially appeared. The stage was set for two or three more Nokia injunctions, and one of the two that were already in place was going to become enforceable without collateral in a matter of months. Daimler's last hope would then have been a so-called § 315 offer: a declaration of one's willingness to take a license on terms that, if need be, can be adjusted by a court of law. Whether that defense would have succeeded is another question, as Daimler's overall conduct was typical of an unwilling licensee, and it's very hard to imagine that a § 315 royalty determination would have resulted in any lower rate than Nokia's share of the Avanci pool license. There just is no comparable in automotive SEP licensing that would be more likely to be recognized by the courts. So even if the § 315 defense had dissuaded the appeals court from allowing the enforcement of an injunction, Daimler would have lost.

    Nokia probably managed its litigation costs more intelligently, and in any event, Nokia's benefit from having demonstrated its preparedness to enforce patents against car makers will lead to deals with companies who'd rather not lose in court. In retrospect, Daimler was the perfect target for Nokia because the dispute even ended up hardening some of Nokia's patents, which will help Nokia in other industries, above all in disputes with smartphone makers. By contrast, Daimler is not going to get better deals from other patent holders after its poor results in litigation so far.

  • Automotive companies lobbied very hard for a reform of Germany's patent injunction statute, but all levels of the judiciary have already made it clear that the availability of patent injunctions has not been compromised on the bottom line.

In this environment, the "licensing > litigation" inequation should be a no-brainer. Licensing executives from companies such as Avanci and Philips did make a compelling case. Avanci Sr. VP Laurie Fitzgerald explained that Avanci doesn't prevent its licensors from direct agreements with automotive licensees. It's an offer, a one-stop solution for access to dozens of SEP portfolios, but it's optional. It already works for some. But some others display defiance even after Nokia v. Daimler.

Automotive supplier Continental is still fighting the war that Daimler has already lost. Sitting next to Conti's IP chief Roman Bonn, U.S. trial lawyer Ed Haug said that it always depends on someone's business goals, but generally he'd not advise clients to litigate SEP matters in the United States. But that is what Conti is still trying, with the Fifth Circuit recently having heard its appeal of Continental v. Avanci (with Conti on the losing track) and a somewhat duplicative case against Nokia pending in Delaware. It's probably too late for Mr. Bonn to heed Mr. Haug's advice. Conti will likely continue to throw good money after bad.

Mr. Bonn also sounded like a visitor from a parallel universe when he was discussing the recent amendment of the German Patent Act. He suggested that automotive defendants would benefit from it, but Meissner Bolte's Philipp Rastemborski, a German patent litigator, set the record straight and explained that Germany would remain just as attractive a jurisdiction to patentees as before.

In my view, Mr. Bonn and some others don't make the proper distinction between whether a statute applies to a case pattern and whether it actually makes a difference. The revised patent injunction statute doesn't come with a carve-out for SEPs, so defendants are not precluded from raising a proportionality defense in a SEP case. However, an unwilling licensee will simply be told to take a license as neither the defendant nor any third parties will be harmed then.

More recently, Continental also appears to be obsessed with China. Mr. Bonn expressed the view that the recently-updated Chinese Patent Law was going to be applied in ways that favor Chinese companies. And like in a recent German media interview, he used Huawei for a bogeyman, saying that Huawei (and ZTE) would place greater emphasis now on revenue generation from patent licenses. I'd just like to note that Huawei is not new to outbound patent licensing. Ten years ago, in the famous EU Huawei v. ZTE, they were already a plaintiff. Now, by the standards of the automotive industry a decade may just be like a year (or less) in tech...

Matthias Schneider, who is in charge of patent licensing at almost-wholly-owned Volkswagen subsidiary Audi, used to praise "the beauty of the Avanci model" on earlier occasions. This time around, however, he made it clear that he was just expressing his own views and not necessarily those of his company, though in reality he appeared to be his master's voice, parroting Volkswagen's talking points.

The most insightful thing he said was that currently some cars cannot be made because of a shortage in supply affecting a $1 chip, and that fact had more of an impact on the automotive ecosystem than a $15 (that's Avanci's 4G rate) or $20 patent royalty, whether levied on a $10K or $80K car.

Two of Mr. Schneider's statements left me speechless though:

  • He questioned the value of the Avanci license because it wouldn't "solve [his] problem": there are SEP holders outside the Avanci pool. "Why should I take an Avanci license for $15?", he asked. That's an argument I had never heard in the automotive context. There's no legal or other obligation that pools are only allowed to exist if they offer 100% coverage of a standard. Mr. Schneider would like some sort of insurance policy, but I just don't think anyone can hold Avanci responsible for what others do (or choose not to do) outside that pool any more than one could complain to Audi about a warranty issue with a Tesla. The question is whether the $15 deal streamlines the licensing process and obviates litigation--and whether the Volkswagen Group (including its Audi subsidiary) likes it or not, the case law in various major jurisdictions favors SEP holders as different speakers (other than Conti's Mr. Bonn) explained yesterday.

  • Mr. Schneider still believes companies can get better deals by means of holdout. He likened patent licensing to a pick-up sticks game: the first one to move loses; if you wait longer, it gets cheaper, he said.

    Even though he disclaimed speaking for his company, this was an "intelligent infringement" argument in favor of being an unwilling licensee. One may question the wisdom of going on the record with that kind of statement.

    That attitude neither helps to avoid litigation nor are policy makers going to be inclined to support holdout. A conference like yesterday's IAM Auto IP Europe isn't a dealmaking or peace-making event. But it is a chance for constructive discussions, and neither Conti nor Audi made it sound like amicable solutions were in sight. There will be more deals, but SEP holders will have to take car makers to court again and again and again.

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