BioNTech, Pfizer file complaint against CureVac in District of Massachusetts, seeking declaratory judgment of non-infringement of three mRNA patents

This is the first time for FOSS Patents to report on a life sciences case--a first that is warranted by the extraordinary significance of the related dispute. Less than three weeks after CureVac, a biopharmaceutical company headquartered in Germany and funded by (inter alia) SAP co-founder Dietmar Hopp, announced its Dusseldorf patent infringement action against BioNTech over the alleged use of foundational mRNA-related patents in the latter's COVID vaccine (named Comirnaty), BioNTech and its strategic partner Pfizer filed a declaratory judgment action in the District of Massachussetts taking aim at three of CureVac's U.S. patents.

While BioNTech and Pfizer need no introduction anywhere in the civilized world, there as a time when politicians were bullish about the prospects of CureVac delivering one of the first COVID vaccines--if not the first. Then-President Trump even offered a funding bonanza to CureVac--in exchange for which the company would have had to relocate to the U.S. at least with respect to its work on a coronavirus vaccine. Alarmed by those overtures, the German federal government became minority shareholder, and the European Commission--together with the European Investment Bank--entered into a financing agreement with CureVac. In the end, CureVac wasn't among the winners of the race, though the company is working on a next-generation COVID vaccine that may ultimately be approved.

The question on which it is still too early for me to take a position is whether CureVac is a "sore loser" who is now attempting a patent shakedown of the glorious winner of the race to the first truly effective COVID vaccine--or whether BioNTech was "standing on the shoulders of giants" from the get-go, in which case CureVac would clearly be entitled to substantial compensation. It is potentially a multi-billion dollar question, and it would be wrong to harbor prejudice toward one party or the other, as the idea of patent law is not to reward success in the marketplace but to incentivize research and development. It's not a ball game where you just count the goals. It's a lot more complex and nuanced than that. Simply put, if CureVac made a wrong call in its COVID vaccine development, but had the right vision before BioNTech even started to develop Comirnaty, then its case may be perfectly meritorious and patent law may then be more meritocratic than the marketplace. We just don't know yet.

Here's the U.S. complaint:

https://www.documentcloud.org/documents/22121278-22-07-25-pfizer-biontech-dj-non-infr-complaint-v-curevac

CureVac's German complaint is not seeking an injunction--just fair compensation. CureVac emphasized that it never intended to disrupt the development or delivery of COVID vaccines in the midst of a pandemic, and that the company waited even with its complaint for monetary relief until this point. That makes sense.

At the same time, Pfizer and BioNTech have made a strategically very smart move, too:

• With its narrative that portrays CureVac as a sore loser (without using that term), the complaint is directed not only at the court of law (and the jury to be selected further down the road) but also at the court of public opinion.

• Pfizer is headquartered in New York but has a home-field advantage anywhere in the United States, and BioNTech has one of its two U.S. offices in the Bay State--and that's where CureVac's U.S. office is based, so it would be hard for CureVac to get the case transferred to another district.

  As a cross-jurisdictional patent litigation watcher I don't agree with CureVac's choice to bring only a Dusseldorf case. If CureVac had brought the first U.S. case as well, it could have tried to pick the most favorable district. Some of the preferred districts for patent holders (Eastern District of Texas, Western District of Texas, Eastern District of Virginia) would probably not have been defensible choices as they are merely target markets for Pfizer and BioNTech just like, say, the Southern District of Alabama. But CureVac could have sued in the Southern District of New York (Pfizer HQ), which has recently also been a pretty good venue for patent holders to assert their rights, or in the District of Delaware (Pfizer is a Delaware corporation, as are possibly other parties).

• Pfizer and BioNTech are seeking declarations of non-infringement, not of invalidity. That makes sense for two reasons: U.S. juries are very hard to persuade of invalidity contentions, and when you are already being sued in Germany and don't know whether the patentee may at some point throw in an additional prayer for injunctive relief, any determinations by foreign courts that confirm the validity of the patents-in-suit will dissuade a German court from staying the infringement proceedings pending a local invalidity action. Should Pfizer and BioNTech have reasonably meritorious invalidity arguments, they might instead file for PTAB inter partes reviews.

At this point it looks like Pfizer-BioNTech is the more sophisticated side here, which may be attributable to Pfizer's ample experience more than anything else. But litigation tactics won't prove decisive in the event that CureVac truly did pioneer mRNA-related technologies relevant to mRNA-based COVID vaccines.

It also remains to be seen whether CureVac will enforce its intellectual property rights against other COVID vaccine makers, which would be the logical thing to happen if CureVac's patents are truly mRNA-essential, and whether other companies holding mRNA-related patents will sue BioNTech and/or Pfizer.

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Apple keeps trying to duck infringement claims over three Ericsson 5G patents in Eastern District of Texas: reply brief

Whether in a policy context like the IEEE's standard-essential patent (SEP) policy or in litigation, I often find that Apple will say anything that it believes may advance its agenda--or will even have astroturfers say it. It strikes me as add that one of the most admired companies in history lacks the self-respect to choose its arguments more wisely.

In the multi-jurisdictional 5G SEP dispute with Ericsson, there's now been a pattern of Apple contradicting itself. One might even say that the only thing consistent about Apple's tactics is that they're constantly being inconsistent. Whether one agrees or disagrees with Ericsson's royalty demands (which is for the courts to decide in the end, unless the parties can reach an agreement), Ericsson's actions are straightforward. They have SEPs and non-SEPs that Apple isn't currently licensed to (as the previous contract expired in mid-January), and that's why they're enforcing their intellectual property rights in different venues, all of which have mechanisms in place to protect implementers against so-called patent hold-up. By contrast, Apple will tell one thing to the court in the Eastern District of Texas and another to courts in foreign countries, only to get Ericsson's cases there stayed. Apple even conflated SEPs and non-SEPs (by suggesting that a SEP rate-setting action could dispose of Ericsson's non-SEP assertions, though there is no general entitlement to a non-SEP license) or turned the antitrust concept of tying on its head. That's just not the way to build and maintain credibility with courts and commentators.

The self-contradiction I have to highlight now is that Apple itself challenged three Ericsson 5G SEPs through declaratory-judgment claims back in December, but after Judge Rodney Gilstrap perfectly reasonably severed the FRAND claims from that case (and incorporated them into Ericsson's earlier-filed FRAND actions as compulsory counterclaims), Apple was no longer interested in pursuing its own requests for declaratory judgment. Apple's DJ claims forced Ericsson to bring compulsory counterclaims of infringement (in the alternative, Ericsson would have had to "pull a Qualcomm" and just give up on those patents by not bringing compulsory counterclaims, thereby effectively giving Apple a free license). The only surprise here was that Ericsson didn't take Apple up on its offer to stay those DJ claims but is now exuding maximum confidence in those patents--which Apple thought were Ericsson's weakest 5G declared-essential patents--and insisting that the claims be resolved. By not opposing the stay, Ericsson could have avoided a waiver.

Now, Apple has replied in support of its motion for a stay, and I'll share some observations below the document:

22-05-12 Apple Reply ISO Mo... by Florian Mueller

Two of Apple's three reply arguments are about remedies: Ericsson is allegedly neither entitled to monetary relief because Apple will obtain a license anyway (based on a FRAND claim it brought in the very same complaint as the DJ claims, so this is nothing new) nor can it get an injunction (because Ericsson itself, a looong time ago, opposed an ITC import ban over SEPs, which falls far short of setting binding precedent).

The third item is that Apple describes as "incorrect" Ericsson's suggestion that Apple brought the DJ claims just to give the Federal--not Fifth--Circuit appellate jurisdiction. That is something that I already identified as Apple's transparent tactical objective long before Ericsson said so. It's just too obvious. Now Apple says it "filed the -460 Action with both FRAND-based and patent-based claims because it believed that the merits of the patent claims were relevant to determining a FRAND rate," but as the court severed the claims and the two-way FRAND case "is set for trial first," Apple says "it will be far more efficient to stay the -460 Action pending resolution of the -376 Action."

The implausible part here is that, given the size of Ericsson's portfolio, a sample of three patents that Apple itself handpicked could hardly ever have been relevant to the FRAND rate. Whether Apple would have prevailed on all three DJ claims, or Ericsson on all three of those patents, or something in between would have been the outcome, I can't see what productive purpose those determinations would ever have served.

Also, given that either decision can be appealed and no one can predict today how long it will take for a case to be really resolved, it is still quite possible that the licensing situation remains unclarified at the time a patent infringement decision becomes enforceable.

When Judge Gilstrap denied Ericsson's (somewhat unusual) motion to confirm Apple's commitment to be bound by the court's FRAND decision, he clearly said that Apple, by its own representations, would remain free not to take a license from Ericsson. So Apple's reply in support of its motion to stay the three-patent infringement case looks a little bit like a motion for clarification or even reconsideration of Judge Gilstrap's recent order. We'll see whether he takes the bait or is getting tired of this.

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Ericsson seeks $5 per iPhone for its 5G standard-essential patents, asks federal court to bless that rate, and will probably prevail over Apple unless Samsung pays much less at the upper end

There's a huge new patent licensing dispute in town, and it's hard to see how Apple could realistically win it unless Ericsson made an unlikely mistake in structuring its recent settlement with Samsung. What Ericsson is asking for is FRAND, not only in my opinion but simply in light of a recent decision by the Fifth Circuit in HTC v. Ericsson.

In 2015, it took about a year of litigation between Ericsson and Apple before a new license agreement was signed. That one is going to expire soon--presumably by yearend--but litigation has already commenced. We are not yet talking about any patent infringement assertions (which are barred while a license is in effect), but a declaratory judgment complaint that Ericsson brought against Apple in the Eastern District of Texas on Monday, effectively asking the court to declare that Ericsson's royalty rate of $5 per device is FRAND and that Ericsson's overall conduct is FRAND-compliant (this post continues below the document):

21-10-04 Ericsson v. Apple ... by Florian Mueller

Timing: At first sight, it may seem premature that Ericsson should run to the Marshall, TX courthouse three months prior to the presumed expiration of an existing license agreement. But Apple can't complain. According to Ericsson's new complaint, what happened during the negotiations before the previous agreement expired was that "while Ericsson’s license with Apple was still in force, Apple filed a surprise suit against Ericsson attacking seven Ericsson U.S. patents as not essential and also seeking, in the alternative, a patent-by-patent FRAND adjudication."

Interestingly, Ericsson already reached out to Apple in December 2020 to start discussions of the terms of a renewal. Ericsson knew there was going to be a high risk of a major disagreement. Not only is Apple generally known to play hardball with SEP licensors just like any other suppliers, but Ericsson also took note of Apple's public statements on SEP licensing terms after Ericsson's own 2017 ex ante disclosure of its 5G royalty rates.

U.S. venue: In an international dispute, the race to the courthouse always has something to do with venue choices. Apple dreads Ericsson's choice--the Eastern District of Texas--so much that it doesn't even operate any Apple Store there anymore as any permanent business presence weighs against a motion to transfer a case out of a district. Ericsson, by contrast, has major operations in the Eastern District of Texas and frequently litigates there, recently with a spectacular success against HTC that was upheld by the regional appeals court, the United States Court of Appeals for the Fifth Circuit, which is great for the Swedish wireless innovator and terrible for the smartphone luxury brand from California.

In the venue and jurisdiction part, Ericsson's complaint discusses Apple's "Texas ties" and growing Austin campus. However, Austin is in the Western District of Texas. While Ericsson also argues that Apple sells products to customers in the Eastern District and that it negotiated with Ericsson executives based there, I doubt that Apple would even want to go to the Western District, which has been so good to patent holders in recent years--and where Ericsson's Fifth Circuit victory over HTC would be controlling law, too. If Apple wants to go west, it will want to go much further west, i.e., to the Northern District of California, its home district. But I can't see how Judge Gilstrap would grant such a motion, and the predictable denial would hardly be overturned by the Federal Circuit if Apple brought a mandamus petition.

China: Apple is a major investor in China compared to other foreign companies. In August, the Supreme People's Court (SPC) of the People's Republic of China affirmed a jurisdictional decision in an OPPO v. Sharp case. Apple could try to seek a global royalty determination in China, but other than manufacturing it wouldn't really have a strong argument--and even though some (especially in the EU) misapprehend those Chinese decisions, it's not like the Chinese courts always agree that they should set global licensing terms: their decisions are highly case-specific. Should Apple try anything in China, Ericsson would likely be able to obtain an antisuit injunction in Texas, or at a minimum an anti-antisuit injunction against an actual or potential Chinese antisuit injunction.

UK and Germany: Those two European countries--one of them in the EU, the other not anymore--will become key venues once the existing license agreement has formally expired without a new deal being in place. In those jurisdictions, Ericsson's strategy would predictably be to obtain SEP injunctions unless Apple takes a global portfolio license. In the UK, the court will set terms that Apple will have to accept lest it be enjoined on a UK-wide basis. Apple is losing big-time against Optis, a group of non-practicing entities that also assert former Ericsson patents by the way. A Form of Order hearing will be held in London next Monday after Optis obtained a favorable judgment, and Apple will come under serious pressure in Mr. Justice Meade's courtroom. In Germany, the courts would not engage in rate-setting at the infringement stage. The big question would be whether Apple could avoid a sales ban by means of a § 315 licensing offer (i.e., taking a license but leaving the royalty determination to a subsequent court proceeding if the parties fail to agree). In the meantime, there would already be a decision from Texas on the FRAND compliance of Ericsson's royalty demands.

Alston & Bird again: The lead attorney and first signatory under the new Ericsson v. Apple complaint is Dallas-based Alston & Bird partner Theodore "Ted" Stevenson, III. He helped Ericsson defeat HTC, and that case is the one for Ericsson to build on in the new dispute with Apple. Apple's phones are way more expensive than HTC's, so if HTC owes Ericsson up to $4 per device and for 4G, there's no reason Apple shouldn't pay $5 and for 5G. The parties appear to be so far apart that Apple isn't even prepared to pay what the courts have already found Ericsson can reasonably demand from HTC.

As in most Ericsson patent cases in the U.S., such as the recently-settled dispute with Samsung, the firm of McKool Smith is also involved. Alston & Bird is frequently seen on Nokia's side, but by now it's apparently the go-to firm for both major Northern European wireless SEP holders.

ETSI IPR Policy: Just like in Ericsson's dispute with HTC, the applicable FRAND framework is the ETSI IPR Policy.

Past dispute with Qualcomm hurts Apple in two ways: From early 2017 to the spring of 2019, Apple was embroiled in SEP-related litigation with Qualcomm and supported (already during the investigations preceding litigation) the Federal Trade Commission against the San Diego chipmaker. Ultimately, Apple needed 5G chips--and caved. The FTC kept fighting, but was trounced in the Ninth Circuit, and then didn't even dare or couldn't build a majority (of the commissioners) to file a cert petition with the Supreme Court. While the Ninth Circuit's Qualcomm decision isn't formally binding in the Fifth Circuit and the Eastern District of Texas, it does help Ericsson psychologically. What's more important is that Qualcomm's lead counsel against Apple, Cravath's Evan Chesler, presented in open court (at a time when the parties had actually already signed a settlement, but opening arguments had not been halted) an Apple-internal document according to which the iPhone maker made it a strategic objective to devalue SEPs. Ericsson's new complaint contains six occurrences of the verb "to devalue" and four of the noun "devaluation." In paragraph 44, Ericsson says that "Apple's attacks [meaning public statements directed against Ericsson's 5G royalty rates as well as similar behavior against other major SEP holders] are part of a self-described strategy to devalue standard essential patents" (emphasis added).

Portfolio litigation: Ericsson says that according to a 2019 FRAND policy statement by Apple, Ericsson should have to prove that each and every SEP to be licensed is actually valid and infringed by Apple, which is obviously not doable and simply not the way the courts view it. The following passage makes a compelling case against patent-by-patent country-by-country litigation:

"Apple knows that it would take hundreds of millions, if not billions, of dollars and several human lifetimes to individually adjudicate infringement, essentiality, and validity of the thousands of essential patents owned by Ericsson, then individually value them, in dozens of courts worldwide. By publicly committing to this licensing methodology, Apple intentionally foists the threat of enormous transaction costs on patent owners as a tactic to make them acquiesce to sub-FRAND royalty rates offered by Apple."

Royalty base: Ericsson argues that the price of the end product (in this case, the insanely overpriced iPhone) needs to be considered in a FRAND determination. Apple, however, makes the smallest salable patent-practicing unit (SSPPU) argument, which Ericsson overcame in its dispute with HTC in Texas as well as the Fifth Circuit.

Ericsson-Samsung terms: The overall circumstances suggest to me that Ericsson is going to win this, and the only leverage Apple has is "hold-out." Ericsson needs patent licensing revenues. Apple can try to delay the inevitable. Ericsson will most likely get a favorable decision in the U.S., and it can obtain sales and import bans in multiple jurisdictions, some of which will expect Apple to take a global license on Ericsson's FRAND terms. If there is any risk here to Ericsson, it's purely hypothetical and most likely a non-issue: Ericsson and Samsung settled so quickly this year that I can't rule out Ericsson made major concessions to the Korean consumer electronics giant. However, Ericsson knew that it was anything but unlikely to run into another dispute with Apple, and Samsung won't have had any desire to help Apple. Therefore, I believe the Ericsson-Samsung license deal involves a somewhat lower royalty rate on those Samsung phones that cost a fraction of an iPhone, but that whenever the terms of the Ericsson-Samsung license come into play (comparable licenses, non-discrimination), Ericsson can argue that even Samsung accepted to pay a royalty rate that is consistent with demanding $5 per iPhone from Apple.

Implications for EU policy making: The European Commission's DG GROW is preparing a consultation on potential legislative and/or other policy action regarding SEP enforcement. With Ericsson now having such problems getting Apple to pay a royalty rate that is pretty reasonable, and with everyone out there knowing that Nokia will also have to talk renewal with Apple in the not too distant future, I frankly can't see that the executive branch of the EU government would make any proposal next year that would bring down SEP license fees. There simply wouldn't be any political support for that, much less after the AUKUS deal as a public statement by arguably the most powerful EU commissioner, Thierry Breton, on the need to "rebalance the EU-U.S. relationship" shows.

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Qualcomm may seek declaration of having met FRAND obligations, gets minor adjustment of Korean antitrust fine, wholesale acquittal in Japan

There's three pieces of news regarding Qualcomm's antitrust issues, none of which has huge impact in its own right, but the combination of the three warrants an update.

First, Judge Gonzalo P. Curiel of the United States District Court for the Southern District of California issued an order on Wednesday, denying a motion for judgment on the pleadings through which Apple sought to prevent Qualcomm from seeking, at the trial starting April 15, a declaratory judgment that Qualcomm has met its FRAND obligations under ETSI (a standard-setting organization based in Europe) through its licensing offers (this post continues below the document):

19-03-20 Order Denying Judg... by on Scribd

The legal standard here is that declaratory judgment is available if there's a definite and concrete controversy, and in case of doubt, courts tend to be permissive. In this particular case, the question was whether Qualcomm would stand to gain anything from the declaration it's seeking if it prevailed that it wouldn't already gain from successfully defending itself against Apple's FRAND breach claims. In other words, Qualcomm's defenses would require the court to either agree or disagree with Apple that Qualcomm breached its FRAND obligations; if the court agreed with Apple, Qualcomm would lose anyway, and if the court disagreed with Apple, it would conversely mean that Qualcomm met its obligations. So why issue a specific declaration? Judge Curiel has decided that such a declaration may have value beyond what a successful defense can provide.

Judge Curiel agrees with Apple that the requested declaration of FRAND compliance "will not resolve Apple's antitrust cause of action or disgorgement claims." That's simply the case because Qualcomm's declaratory judgment claim relates to a limited period of only a couple of years (the parties' negotiations in 2015-2017), while the antitrust claims here cover the time since 2008. However, pointing to an Eastern District of Texas decision (HTC v. Ericsson, December 17, 2018), which is obviously not binding on a district court in a different circuit and generally not too persuasive outside of that particular patentee-friendly district, Judge Curiel notes that the theory of an "unwilling licensee" no longer being entitled to the benefits of a FRAND licensing commitment "has been recognized as a legitimate basis for declaratory relief and is legally sufficient to survive Apple's motion." But, in any event, all of the evidence required to resolve this declaratory judgment claim will have to be put before the jury at any rate (just to adjudicate the claims that the parties agree must be resolved)--and Judge Curiel doesn't see a risk of confusion of the issues.

The idea of an implementer of a standard forfeiting its rights to a FRAND license through its conduct in negotiations looks like the kind of pro-patentee extremism the Eastern District of Texas is known for. It's already debatable whether a patent holder may have access to injunctive relief against the products of an unwilling licensee. But the idea that someone's (alleged) failure to make a FRAND counteroffer affords the patent holder the freedom to seek supra-FRAND terms, or hypothetically even to decline granting a license on any terms, is absurd simply because two wrongs don't make a right.

Given the facts, such as that Qualcomm collects about 25% of all patent license fees (counting all industries) in the world and the lion's share of all wireless patent license fees, it's hard to imagine that anyone would find its terms to be FRAND. In fact, Judge Lucy H. Koh's upcoming FTC v. Qualcomm decision may make this clear in a way that the Southern District of California could rely on the Northern District's decision. Even if a jury got confused or misled, the trial judge or, at the latest, the appeals court would certainly find that no reasonable jury could have considered Qualcomm's royalty rates (and various other terms) fair, reasonable, and non-discriminatory. That's why I guess the Ninth Circuit won't even get to decide on whether or not to adopt the Eastern District of Texas line on FRAND compliance declarations.

The second development to report briefly comes down "See I Told Ya So" with respect to a 2009 antitrust fine imposed on Qualcomm by the Korea Fair Trade Commission. As I had explained after a recent decision by South Korea's Supreme Court, it was only about an adjustment in the tens of millions of dollars, while the aggregate of the old 2009 fine and the late-2016 decision that basically kicked off the current wave of Qualcomm antitrust actions is on the order of a billion dollars.

As Reuters reports, the 2009 fine was lowered by 18% to $200 million.

The single most important issue facing Qualcomm in Korea is actually a requirement (resulting from the December 2016 order) to extend SEP licenses on FRAND terms to rival chipset makers. Continued non-compliance could at some point result in criminal charges.

The third tidbit relates to another very old Asian antitrust ruling: a 2009 cease-and-desist order by the Japan Fair Trade Commission. A week ago, Qualcomm issued a press release according to which the nine-year proceeding in Japan resulted in the conclusion that Qualcomm doesn't violate Japanese antitrust law through its cross-licensing requirements and non-assertion covenants. Qualcomm's attorneys also filed the Japanese decision with Judge Koh in the FTC case and announced they'd submit a certified translation later.

I have no idea what exactly the antitrust standard in Japan is and don't even know who the complainants were. What I do suspect very strongly is that the JFTC's about-face has a lot--or simply everything--to do with changes in market shares. In 2009, Japanese device makers played a far greater role in the worldwide handset market than today. They're still around, unlike their European counterparts, but almost insignificant outside of their domestic market compared to their rivals from the U.S. (Apple), Korea (Samsung), and China (Huawei, ZTE, Xiaomi etc.). And Sharp even got acquired by a Chinese company (Foxconn). Therefore, I believe the Japanese government's perspective on what benefits the likes of Sony and Panasonic changed fundamentally during the protracted process. Obviously, Qualcomm would have us believe that it simply prevailed in the end because of a more thorough analysis than the one underlying the original decision. But antitrust agencies don't hand down cease-and-desist orders (the most incisive remedy!) on a whimsical basis--they do so after in-depth investigations (and it's hard to imagine the standard would be lower in Japan). That's why a change in economic-policy priorites, with the JFTC potentially looking at Japanese companies as future net licensors, is the most plausible explanation.

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Changes in Qualcomm's market power over the years and their relevance to antitrust remedies

Tomorrow (Monday) the FTC will get a couple of hours for its rebuttal, and its sole live witness will be Professor Carl Shapiro. Qualcomm's experts tried to discredit his analysis. Reasonable people can always disagree on methodology: economics is not an exact science. But those Qualcomm experts taking aim at Professor Shapiro's approach by claiming it wasn't sufficiently numbers-driven were, to put it mildly, a case of the pot calling the kettle black. One of them, Dr. Chipty, couldn't deny having failed to consider more than 200 million baseband chips in Samsung phones; two others, Professor Snyder and Professor Nevo, had little more to offer than a convoluted version of "you can't argue with success." The latter spouted nonsense about Microsoft's past per-hardware vs. per-software operating system licensing strategy and the practical implications of chipset licensing, and in a language spoken widely in San Jose and even more widely in Qualcomm's town, he was simply "hundido" after he had to concede his FRAND "analysis" ignored key contract terms and multiple major licensees to the point he might have excluded most of the market.

As I said before, I thought Qualcomm could win the battle of the experts, and the FTC would overcompensate for a defeat there (provided it would have been narrow) with its huge victory related to industry testimony. But where things stand now, even prior to Professor Shapiro's rebuttal, the FTC has the upper hand in both respects. It does have the burden of proof, and I don't mean to say the FTC would necessarily win on all counts, but I really can't imagine Qualcomm could successfully defend itself all the way. My prior predictions in this case played out as follows:

• I ruled out that Qualcomm's motion to dismiss (almost two years ago) would dispose of the FTC's case for good, but I was actually sympathetic to some of Qualcomm's criticism and considered it possible that the FTC would have had to amend the complaint. Judge Koh, however, denied Qualcomm's motion in its entirety.

• When Judge Koh denied without prejudice a consumer motion for an antisuit injunction, she did so for the very reason (timing) I had previously identified as the relatively most interesting point Qualcomm raised.

• I viewed the FTC's summary-judgment motion as a slam dunk, and it was indeed granted, with Judge Koh finding it was a very clear case.

The FTC and Professor Shapiro have to take Qualcomm seriously, just like the way to win a sprint is to keep going at full speed for a few more yards. But I'm just an observer, and I'm already looking past the question of merits and on to the subject of remedies.

In order to preserve the record for an appeal, Qualcomm filed an 11th-hour offer to submit evidence related to the post-cutoff period, such as dozens of additional (5G-related) license agreements. Judge Koh denied the motion (as Qualcomm knew she would), just like she had denied a closely-related one in December. And just like before, Qualcomm stressed that it primarily wanted the additional material to be considered with a view to the prospective remedy that is injunctive relief.

Qualcomm argues that injunctive relief is no longer warranted because, according to testimony it elicited, the big three device makers that use premium LTE chips--Samsung, Apple, Huawei--either buy them from Intel (Apple) or build a high percentage of them internally (Huawei has HiSilicon, Samsung has Exynos). Therefore, Qualcomm says it no longer has market power in premium LTE chips, and injunctive relief wouldn't be warranted anymore even in the event of the FTC convincing the court of anticompetitive conduct and harm in the past. During the trial, Qualcomm also elicited such testimony on every occasion, though it had to ask witnesses to limit their answer to the state of affairs as per March 2018, just to comply with the cutoff date.

The FTC already addressed this, without a lot of detail, in the final section of its pretrial brief.

I don't want to go into full detail either, but I want to explain a few general principles here, especially since some Qualcomm-aligned Internet trolls and fake analysts try to make this question of current (or March 2018) market power look like a "get out of jail free" card, which it definitely isn't:

1. The relevance of market power is a statute-by-statute question. As the DOJ explains, "a finding of market power is a prerequisite to a section 2 [of the Sherman Act] violation." But the FTC also has Section 1 theories in this case.

2. My favorite cause here is the duty to extent SEP licenses on FRAND terms to rival chipset makers. The market power from Qualcomm's standard-essential patents, however, is monopoly power (because if a patent is truly standard-essential, you could exclude someone from an entire market with it), and it is powerful enough even without a single chipset being sold. All FRAND-related rulings in the case law were based on the power of SEPs, not that of chips.

3. As the FTC explained toward the end of its pretrial brief, antitrust injunctions have been granted in other cases based on past market power.

4. In practical terms, courts must have some discretion with respect to cutoff dates. Otherwise an antitrust defendant could constantly produce new "evidence," and justice delayed would be justice denied.

5. Even if one or more of the FTC's injunctions were denied for a combination of diminished market power and Section 2, Qualcomm would still be held responsible for its past conduct. The FTC is seeking not only injunctive but, prior to that, also declaratory relief. The FTC itself isn't seeking damages. But:

   • A consumer class action seeking $5 billion to be distributed to up to 250 million people is part of this case. Judge Koh has stayed it because Qualcomm successfully petitioned the Ninth Circuit to hear an interlocutory appeal against class certification. This means Qualcomm has a chance to get rid of the consumer class, but it's far from a foregone conclusion that the class certification will be overruled. Ironically, if Apple loses Apple v. Pepper in the Supreme Court (my impression of the November hearing was that only the Chief Justice is firmly on Apple's side, and no one appeared to agree with Apple on a statutory basis--at best there's just some case law that could be overruled), it will adversely affect the prospects of Qualcomm's class certification appeal. In the most extreme case, Qualcomm might then be left with just a feasibility argument based on the size of the class, pointing to pre-Internet-era case law on how to manage large classes that just doesn't apply to our cloud age.

   • Apple, regardless of that App Store case, has its claims against Qualcomm in San Diego (the trial will start in mid-April). MLex attended a motion hearing there on Friday while also following the FTC case.

   • Anyone else such as Intel or Huawei could bring damages claims against Qualcomm following a declaratory judgment in the FTC's favor regardless of whether or not the FTC is granted injunctive relief.

Some of the stuff in this case may be water under the bridge. For an example, Qualcomm's exclusive deal with Apple is history because Apple is now buying baseband chips from Intel--but even the question of whether there would (if not for Qualcomm's conduct) have been true competition in the merchant (= chipmakers willing to sell to third parties) market for premium LTE chips at an earlier stage could still give rise to significant damages claims. In that particular context, Qualcomm's best shot is its claim that the deal allegedly didn't actually cause anticompetitive harm because, in Qualcomm's opinion that was supported by some of its witnesses, Intel couldn't have supplied chips meeting Apple's requirements. But the question of licenses to rival chipset makers is going to remain important for many years--even decades--to come. The procompetitive effects of the FTC prevailing on that claim would be immeasurable.

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Magistrate judge rebukes Qualcomm for iPhone patent infringement allegations it originally chose not to bring

It's pretrial season in the Huawei-Samsung and Apple-Qualcomm FRAND disputes, thus a flurry of motion practice. Before I'll get to discuss the strategically extremely important exhaustion issue (in light of the Supreme Court's 2017 Lexmark) in Apple v. Qualcomm, there's also a short but interesting ruling that United States Magistrate Judge Mitchell D. Dembin handed down in the Southern District of California on Tuesday (this post continues below the document):

18-09-04 Order on Motion to Strike Qualcomm Allegations by Florian Mueller on Scribd

The procedural context, which the order summarizes at the start, is that Apple's original complaint involved, among other things, requests for declaratory judgment on invalidity and non-infringement of nine Qualcomm patents. With the first amended complaint, Apple tackled another nine Qualcomm patents. As an Apple filing noted (see the update paragraph at the end of this June 2017 post), Qualcomm--quite surprisingly!--elected not to bring compulsory infringement counterclaims, forever precluding Qualcomm from bringing such charges.

With the trial approaching, Qualcomm may have had second thoughts regarding its choice. Its lawyers apparently preferred to have their experts opine on infringement with a view to everything the jury will have to decide.

Apple didn't accept that change of mind and brought a motion to strike. The motion succeeded with respect to certain passages of multiple expert reports, which Qualcomm (unless it successfully appeals this order to Judge Curiel) won't be allowed to leverage at trial. The motion failed with respect to some others (the judge concluded that those expert opinions focused on standard-essentiality of certain patents and valuation; in a way, essentiality is often tantamount to infringement).

The following harsh words show that Magistrate Judge Dembin was annoyed by the way in which multiple Qualcomm expert reports were inconsistent with Qualcomm's decision not to bring infringement counterclaims with respect to the original set of nine patents:

"Qualcomm's counsel know that in a declaratory judgment action by a licensee against a patentee seeking an order of non-infringement, the patentee, Qualcomm, bears the burden of persuasion of infringement. [...] Qualcomm made the tactical decision not to assert infringement and thus avoid certain discovery obligations as mentioned above. In its expert designations, Qualcomm chose not to disclose that certain experts expressly would opine on infringement and assert that Plaintiffs are infringing patents-in-suit. Qualcomm will be held accountable for the consequences of its tactical decisions." (emphasis added)

"To the extent that Qualcomm claims they have disclosed in discovery their views regarding infringement and, consequently, there is no surprise and no prejudice, is unavailing. Rules are rules and tactical decisions have consequences[.]"

In other words (not in the order): you make your bed and you lie in it.

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"Huawei, I shrunk the case": scope of December patent trial against Samsung whittled down

This week in Huawei v. Samsung delivered two more setbacks for the Chinese Android device maker and increasingly aggressive patent enforcer (I don't want to call them a "patent bully" just yet, though it may be an appropriate label at a later stage).

First, the trial that Judge William H. Orrick will preside over in the Northern District of California in December is going to be far narrower, and potentially less impactful, than Huawei had hoped. As I had noted toward the end of this recent post, Huawei previously informed of the court of its willingness to withdraw its request for a declaratory judgment on worldwide FRAND licensing terms to its standard-essential patents, subject to an agreement with Samsung on the specifics. That agreement has indeed materialized, suggesting that Huawei saw a high risk of Judge Orrick throwing out the claim (whose dismissal Samsung was already formally seeking) at any rate. Instead of having to make a decision, Judge Orrick merely had to grant the parties' stipulation of a dismissal that is formally without prejudice, allowing Huawei to try again, but only in a different case and not for at least nine months (this post continues below the document):

18-07-18 Stipulated Dismissal of Huawei-Samsung FRAND Claim by Florian Mueller on Scribd

Just last month, Huawei's offensive case already got narrowed as Judge Orrick, in a matter involving the Supreme Court's recent SAS ruling, stayed two patent infringement claims. So all that's left for the December trial is a bunch of patent infringement claims and the question of a potential breach of a FRAND licensing commitment. Huawei portrays Samsung as an unwilling licensee, and Samsung argues that Huawei's demands are unreasonable and that there hasn't been enough progress of the give-and-take kind.

The second thing that didn't go too well for Huawei this week was its attempt to expedite its Ninth Circuit appeal before the Federal Circuit of the antisuit (more specifically, anti-injunction-enforcement) injunction Samsung obtained three months ago. Huawei was using two procedural attack vectors in parallel, seeking a reconsideration of Judge Orrick's decision in district court while pursuing the aforementioned appeal in Washington, D.C.--but the Federal Circuit told Huawei it should firstly await resolution of its motion in San Francisco. After Judge Orrick's decision to uphold the injunction, Huawei informed the Federal Circuit, which then resumed the proceedings, and Huawei, before even filing an opening brief that isn't publicly accessible yet, brought an emergency motion to expedite the appeal.

Samsung opposed this emergency motion, arguing that Huawei's procedural tactics had caused delay and pointing to the prejudicial effects of having to respond to a Huawei opening brief on a tight schedule, three months after the notice of appeal (meaning Huawei had plenty of time to prepare its argument) and while working hard on some motion practice in the district court case the appeal originated from. The Federal Circuit told Huawei to be patient and suggested that it could file its reply brief as soon as possible--ahead of the court's deadline--after Samsung has had the chance to react to the opening brief. The appeals court will then hold a hearing as soon as possible, but just like Judge Orrick, it doesn't accomodate all of Huawei's procedural preferences.

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Ericsson may demand 1.5% of Apple's sales from LTE-compatible iPhones and iPads for its patents

This is a follow-up to yesterday's post on the dispute between Apple and Ericsson over standard-essential patent royalties. I published Ericsson's complaint first because, though it was filed two days later, it appeared on a publicly-accessible court docket sooner. I also want to show you Apple's complaint now and say a few things about it (below the document):

15-01-12 Apple Complaint Against Ericsson by Florian Mueller

Apple's complaint was filed by Wilmer Hale, one of the firms representing Apple against Samsung. Wilmer Hale originally focused on Apple's defense against Samsung but also became involved with offensive matters, especially in the Federal Circuit (access to injunctive relief). Mark Selwyn has been a very key player on Apple's external legal team in the Samsung cases, in the U.S. as well as abroad (there was at least one Mannheim case in which he officially attended the trial). Joseph Mueller (not a relative of mine) is a co-author of a study according to which smartphone patent royalties may exceed $120 per device and undermine industry profitability. There's no reason to assume he's responsible for Apple's damages claim in the second California Samsung case (over five patents) that I criticized so harshly last year, or the design patent and trade dress damages in the first case.

It's the fate of lawyers and their firms that they stand on different sides of debates from time to time, and in this case it's not even inconsistent per se because Apple's position is that standard-essential patents have little value while non-SEPs should be deemed very valuable. While it's intellectually consistent, I disagree with the unbelievable discrepancy between Apple and WilmerHale's positions on SEP vs. non-SEP royalties. It's like they want non-SEPs on small features to be hundreds, if not thousands, of times more valuable than SEPs without which those devices wouldn't work at all. For example, in the first Samsung case Apple sought $2.5 billion (mostly over design patents) from Samsung while arguing that half a cent per Samsung SEP was a FRAND royalty. To WilmerHale's credit, the aforementioned study raises concerns over patent royalties that are not limited to SEPs.

Apple's complaint cites a former director of patents and licensing at Ericsson who publicly stated in 2010 that Ericsson expected to seek LTE royalties of 1.5% of the end product price. The filing also says the following:

"In its public statements, Ericsson has never retreated from the position that it is entitled to an approximate 25 percent share of a total LTE 'royalty stack' based on a percentage of the end prices of entire LTE devices--such as full smartphone or full tablet computers. And Ericsson has never accepted that LTE licensing should begin with a component-focused royalty base, to which a reasonable rate is applied."

Apple's complaint then picks seven LTE patents Ericsson asserted in other litigation and asks the court to hold those patents non-essential to LTE (in which case Apple wouldn't need to license them merely because it claims its products are LTE-compatible) or, should the court disagree on non-essentiality, to determine a FRAND rate for each of them. This patent-by-patent approach is unacceptable to Ericsson, which is why it asked the court in Texas to determine a portfolio rate.

The much more fundamental controversy here is not whether a FRAND determination should be made on a patent-by-patent basis but the question of the royalty base (see also the second sentence of the paragraph quoted above).

Ericsson basically takes the position that everything you run on an iPhone or iPad depends on wireless connectivity, so they should get a percentage of the device price. Apple's position has been for a long time that the price of a baseband chip is the proper royalty base against which some percentage should be applied, arguing that a "jalopy" and an expensive sports car also pay the same highway toll.

Obviously, access to injunctive relief has become much more difficult for SEP holders as a result of certain judicial decisions and regulatory interventions and settlements in recent years, at least in the U.S. and in Europe. But there were two key FRAND-related battles that the "net implementers" (my term for companies that are implementers of standards to a far greater extent than they seek to exploit SEPs of their own) haven't been able to win. The first one is about whether the exceptional cases in which injunctive relief is available should depend exclusively on the patent holder's behavior (since that's the party that made a FRAND pledge in the first place) or on both parties' conduct. The likes of Google (Motorola) succeeded in convincing judges and regulatory authorities that FRAND is a two-way street and an absolutely unwilling licensee may be enjoined from further infringement, as opposed to one that makes a good-faith, serious effort to obtain a license. There's no reason to believe that courts and regulators will change their stance on this one anytime soon. But the second question is the one Apple has now put front and center in its California case against Ericsson, and it's one on which the jury is still out though Apple does face a significant (or maybe even steep) challenge. The royalty base.

Even Judge Robart held in the Microsoft v. Motorola FRAND contract case that a royalty based on the price of a complete product as opposed to that of the smallest saleable unit (which Microsoft proposed in that case and which Apple is arguing now in the Ericsson case) may still be FRAND, as long as the percentage is low enough. However, in a different case (in Chicago), Judge Holderman agreed with a group of defendants against Innovatio's WiFi claims that the chipset price as the proper royalty base.

It won't be easy for Apple to get a bright-line rule that a FRAND commitment is violated merely by using a different royalty base. In procedural terms, I think Apple would have to take the Ericsson case all the way up to the Supreme Court--and while there are reasons to assume that Apple will drop this case as soon as it can reach a reasonable deal with Ericsson, the question is strategically important enough to Cupertino that it may pursue this as a matter of principle.

While I'm not aware of any ruling in which a U.S. or European court categorically ruled out injunctive relief over SEPs even against unwilling licensees, it looks like the law on the royalty base isn't settled yet, so this could be an increasingly interesting case over the next few years. The days are long gone when this was mostly a "FRAND Patents" blog, but I plan to look at this dispute from time to time.

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Apple-Ericsson spat shows some big-dollar licensing issues remain to be resolved in smartphone industry

Apple and Ericsson teamed up with others (Microsoft, Sony, BlackBerry, EMC) in 2011 to buy up Nortel's wireless patent portfolio. As expected after a November motion, the Rockstar v. Android dispute has come to an end. Patent aggregator RPX Corporation, which is closer to Google than to Apple and Ericsson, bought Rockstar's patents in December.

But Apple and Ericsson now have licensing issues to sort out between the two of them. They had a five-year patent license in place, and it has now expired, according to an Ericsson press release. Traditionally, 'tis the season for patent suits resulting from failure to agree on renewals. Many patent license deals have terms defined by calendar years, and in recent years there have always been filings of this kind in early January.

Apple has won the race to the courthouse with a declaratory judgment action (asking the court to find that some Ericsson LTE patents are neither essential nor infringed) it filed on Monday in the Northern District of California. Two days later, Ericsson brought this very interesting FRAND-declaration complaint in the Eastern District of Texas (this post continues below the document):

15-01-14 Ericsson Complaint Against Apple by Florian Mueller

In the past, FRAND rate determinations were requested by implementers of standards (Microsoft/Motorola, Apple/Motorola, Huawei-ZTE/InterDigital). This is the first such case, at least the first high-profile case, in which the patent holder goes to a court and requests this kind of ruling.

It may be tactics, but Ericsson does exude confidence in the defensibility of its royalty demands by triggering the FRAND rate determination process instead of waiting for Apple to do it at some stage of a patent infringement proceeding.

What's much clearer is that we're going to see a venue fight, and Apple filed first, which means Ericsson is going to need some really strong arguments to avoid formal or factual consolidation of its FRAND declaration suit with the California case. The venue could make quite a difference here. Not only are the Northern California judges less patentee-friendly in my observation than their colleagues in East Texas but Silicon Valley juries are particularly likely to buy Apple's innovation story. I'm not based there but, frankly, I also look at Ericsson as one of those companies, like Nokia, that were way too bureaucratic, technocratic, and unimaginative to deliver a mobile computer and useful mobile Internet device to consumers over all those years, so the world really needed the iPhone revolution for the sake of progress.

Despite the fact that consumers the world over have far more reasons to thank Apple than to thank Ericsson, I want to be rational and Ericsson's innovation story is a pretty good one, too. It can legitimately claim that it still spends billions of dollars every year on research and development (it no longer builds mobile handsets, but is still big in infrastructure), and in its complaint it lists the following accomplishments, most of which go back such a long time that the related patents have expired:

• "in 1878, Ericsson sold its first telephone;

• in 1977, Ericsson introduced the world's first digital telephone exchange;

• in 1981, Ericsson introduced its first mobile telephone system, NMT;

• in 1991, Ericsson launched 2G phones on the world's first 2G network;

• in 1994, Ericsson invented Bluetooth;

• in 2001, Ericsson made the world's first 3G call for Vodafone in the UK; and

• in 2009, Ericsson started the world's first 4G network and made the first 4G call."

Ericsson does deserve respect for all of that. Whether the license fees it wants Apple to pay are excessive may have to be determined in court. While a settlement between these companies is fairly likely to happen before a judicial decision, Ericsson, based on its behavior, may be the most demanding one of the major wireless patent holders and Apple has a lot at stake here financially just because of its huge revenues. So it really could be that pre-trial discovery and motion practice won't provide these parties with enough guidance, and one or more decisions may really be needed.

Paragraph 35 from Ericsson's complaint makes some general allegations about Apple's behavior and how it compares to that of its competitors:

"The parties' licensing negotiations have been unsuccessful because Apple refuses to pay a FRAND royalty corresponding to those paid by its competitors for Ericsson's Essential Patents. Apple fails to honor the fact that FRAND licensing is a two-way street, requiring not only that the licensor is fair and reasonable in providing licensing terms, but also that the licensee negotiates in good faith and accepts FRAND terms when they are offered."

Apple may be the most difficult company to sell a SEP license to, but it's a fact that Apple's competitors that have taken a license from Ericsson haven't always done so without a fight. Ericsson and Samsung settled only after failed renewal talks had resulted in litigation. Still, that deal helps Ericsson now. If any U.S. court (be it a judge or a jury; be it in California, Texas, Washington DC or elsewhere) determined that held that Apple should pay lower royalties (relative to volume) to Ericsson than Samsung, the protectionism question would inevitably come up. It would look like the United States allows Apple to get away with an unusual unwillingness to license SEPs.

Ericsson tends to enforce its patents pretty aggressively in different parts of the world. I've seen them demand rather high (though clearly sub-Motorola) royalties over WiFi patents in Germany, and India's antitrust regulator opened two investigations of Ericsson's demands in FRAND licensing negotiations. Also, a document I discovered about a year ago explains why Ericsson prefers to sue device makers rather than do license deals with chipset makers like Qualcomm.

Apple v. Ericsson is definitely a perfect match when it comes to FRAND licensing. Billions of dollars--probably many billions--are at stake. But it's just about money and not about a strategic conflict between direct competitors. By now it's clear that patent holders who thought to protect or gain market share through patent assertions have been unable to achieve such goals, let alone to wage "thermonuclear war," but there still are some financial issues left to be sorted out in the industry, such as Apple v. Ericsson, and some will have to be rediscussed from time to time as existing agreements expire.

Other industry players are interested in more or less zero-zero cross-license agreements, which is what I believe the Google-Verizon deal announced in December is about. Google has done various such deals, including with Cisco, Samsung, and LG. But that's the way Google and some other companies would like it to work. Ericsson is different. Patent licensing is increasingly important to its business.

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Google tries to get Rockstar's Android lawsuits transferred out of the Eastern District of Texas

On Halloween 2013, the Rockstar Consortium -- the winner of the 2011 Nortel patent auction -- brought patent infringement actions against Google and seven of its Android hardware partners (Samsung, Huawei, ZTE, LG, HTC, Pantech, and ASUSTeK) in the Eastern District of Texas. The lawsuit against Google itself involves seven "associative search engine" patents, while the seven patents-in-suit in the actions against Android OEMs cover a diversity of hardware and software features.

So far, no defendant has answered to the complaint. They were all granted extensions.

On Monday (December 23), Google filed a declaratory judgment lawsuit in the Northern District of California against Rockstar and its MobileStar Technologies subsidiary over the seven patents-in-suit in the Android OEM cases (this post continues below the document):

13-12-23 Google N.D. Cal. DJ Action Against Rockstar Consortium by Florian Mueller

The complaint contains a lot of rhetoric, accusing Rockstar of having "placed a cloud on Google's Android platform" and threatening "Google's business and relationships with its customers and partners, as well as its sales of Nexus-branded Android devices". One tidbit previously unknown to me is that "MobileStar [the subsidiary that is a co-plaintiff in the Rockstar suits against Android device makers) was formed for litigation one day before Rockstar filed its lawsuits against Google's customers". Other than that, it's the usual anti-troll rhetoric, blaming Rockstar's shareholders, with a particular focus on Apple, for the fact that Google's aggressive pursuit of the Nortel patent portfolio (as a matter of fact, Google won the "stalking-horse bid" in 2011) forced other industry players to join forces in order to clear the market of these patents. If not for Google's aggressive pursuit, these patents would have sold at a fraction of the price.

Google alleges that "Rockstar intends the Android OEM Actions to harm Google's Android platform and disrupt Google's relationships with the Android OEM Defendants". Google does not adduce any particular evidence at this stage; it just refers to an Ars Technica article.

I've previously commented on Google's hypocrisy in connection with patents, such as in an op-ed published last month on The Hill's Congress Blog, entitled "Sue when you're winning".

Presuambly none of the defendants wants the liability issues and remedies to be decided in the Eastern District of Texas. But in order to move the Rockstar Lawsuits out of Texas, they need to present a superior alternative. We'll see soon whether they all advocate that their lawsuits be moved to Northern California, where they could and would be consolidated with Google's declaratory judgment action, or whether some or all OEMs additionally bring declaratory judgment actions in districts where their U.S. subsidiary are based.

Rockstar will presuambly request that Google's DJ action be transferred to the Eastern District of Texas and consolidated with the earlier-filed infringement cases.

Quinn Emanuel filed the Northern California action on Google's behalf. Quinn Emanuel has already done, and continues to do, a lot of work for Android device makers (especially Samsung, HTC and Motorola). It remains to be seen whether all defendants agreed that QE should lead their collective defense, or whether some of them have other preferences.

The case was filed with the San Jose division (that's the one closest to Google's Mountan View HQ) and automatically assigned to Magistrate Judge Paul S. Grewal, known for his work on discovery disputes (including the "Patentgate" affair, which also involves QE) on the Apple v. Samsung cases Judge Lucy Koh is presiding over. If any of the parties declines to proceed before a Magistrate Judge, the case will have to be assigned to a United States District Judge. I'm sure Judge Grewal could handle a case like this just as well as any district judge, but chances are someone will want the case reassigned.

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Nokia wins patent case against HTC in the UK over patent asserted in 5 countries on 3 continents

I've been saying for a long time that HTC will end up paying royalties to Nokia for a license to some of Nokia's non-standard-essential patents (it already has a SEP license). It's been defending itself vigorously and effectively so far, but its own assertions against Nokia are not going to give it leverage. It's only a matter of time before a tipping point is reached, and Nokia made major headway today in the most difficult court in the world for plaintiffs, the England and Wales High Court.

Justice Arnold ruled today that Nokia's EP0998024 on a "modular structure for a transmitter and a mobile station", a pretty powerful mobile phone hardware patent, is valid (HTC tried to shoot it down in the UK in hopes of influencing decisions in other jurisdictions) and infringed by various HTC products including its current flagship, the HTC One, which incorporate certain Qualcomm and Broadcom chips. Nokia is suing HTC over this patent not only in the UK, where it can seek an injunction now after today's win on liability, but also in Germany, where the Düsseldorf Regional Court will hold a trial soon, Italy, and Japan. I didn't even know Nokia was also suing HTC in Japan -- so far I was aware of litigation in the US, UK, Germany, and Italy. Today Nokia also mentioned yet another jurisdiction in which it's suing HTC -- the Netherlands (it's not asserting today's winning patent there, at least not yet). All of this means a lot of pressure, and I say it again, HTC will inevitably end up paying. As will Samsung, with which Nokia has been negotiating for some time and which it may have to sue at some point.

This is the public ruling (this post continues below the document):

13-10-30 HTC v Nokia Public UK Judgment EP0998024 by Florian Mueller

Here's the summary of the ruling (click on the image to enlarge or read the text below the image):

"189. For the reasons given above, I conclude that:

i) claim 1 of the Patent is novel over Ikatura;

ii) claim 1 is not obvious over either Ikatura or Tan;

iii) each of the representatives HTC devices falls within claim 1;

iv) HTC has not established its defence of licence."

These are the representative devices and the corresponding chips accused in the UK action:

Devices	Chips
One SV (non-LTE)	Qualcomm WTR1605
One, One SV (LTE)	Qualcomm WTR1605L
Wildfire S	Broadcom BCM4329
One SV (LTE), One SV (non-LTE)	Broadcom BCM4334

Nokia issued the following statement:

"Nokia is pleased that the UK High Court has today confirmed the validity of Nokia's patent EP 0 998 024 and ruled that a number of HTC products, including the HTC One, infringe this patent.

Today's judgment is a significant development in our dispute with HTC. Nokia will now seek an injunction against the import and sale of infringing HTC products in the UK as well as financial compensation. Local counterparts of this patent are already in suit against HTC in Germany, Italy, Japan and the US.

This is the third court this year to find that HTC infringes Nokia patents, bringing the number of patents found infringed to four. In September, the US International Trade Commission gave an initial determination of infringement of two Nokia patents and, in March, the Mannheim court ordered HTC to cease infringing a Nokia power saving patent.

Nokia began its actions against HTC in 2012, with the aim of ending HTC's unauthorised use of Nokia's proprietary innovations. Nokia has now asserted more than 50 patents against HTC in France, Germany, Italy, Japan, the Netherlands, UK and US."

The ITC ruling is preliminary. HTC has petitioned for a Commission review of the initial determination, and it's working together with Qualcomm to modify its products so as to avoid a possible ban.

Next week Nokia may very well win a second German injunction against HTC. I will attend the announcement of that ruling.

Yesterday the Mannheim Regional Court held a trial on a Nokia v. HTC lawsuit over RFID. I did not attend that one, but will try to find out about the ruling when it comes down. I recently also missed a couple of Munich Nokia v. HTC trials (during my week off), but won't miss the rulings.

Many of Nokia's patent assertions against HTC involve Google's Android mobile operating system. A Nokia-HTC license agreement will relate to Android's use of various Nokia patents as well. 22 royalty-bearing patent license deals relating to Android are already known, and a Nokia-HTC settlement will be added to that list sooner or later.

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HTC told UK court it can't sell smartphones if Nokia prevails on certain patents

Based on what I heard in a Mannheim courtroom on Friday I figured that HTC had brought (or was readying) UK declaratory judgment actions against certain patents Nokia is asserting in Germany, a strategy that worked out well for HTC against four Apple patents and for Microsoft against a Google (Motorola Mobility) patent.

I have meanwhile found out the case numbers of HTC's first three UK declaratory judgment cases against Nokia (HC 12 B02049, HC 12 E02095, and HC 12 E02119), I have learned that HTC has brought more than a dozen other UK actions against patents Nokia is asserting in Germany, and I have obtained a copy of a June 2012 judgment denying expedited trials over the validity of the following three Nokia patents:

• EP0812120 on a "method for using services offered by a telecommunication network, a telecommunication system and a terminal for it"

• EP1329982 on an "antenna for wireless communications devices"

• EP0792077 on a "multi-service mobile station"

Nokia is asserting those three (and at least 14 other) European patents against HTC in Germany. In December 2012 the Mannheim Regional Court already held a trial over the first one (EP'120), which is asserted against HTC's distribution of the Google Play store client app (Google is a third-party intervenor in that case), and scheduled a decision (which may or may not be a final ruling) for March 1, 2013. The second one (EP'982) will go to trial in Mannheim in about a month (on February 22, 2013). I don't know the trial date for the third one as far as HTC is concerned, but I know that ViewSonic will have to defend itself against this one in Mannheim on March 12, 2013.

Last spring it appeared that those three patents were going to be the first ones to go to trial against HTC in Germany, but some cases were reorganized and others rescheduled. Anyway, HTC was and presumably still is scared that these three patents are powerful enough to force it to take a license on Nokia's terms because it will be unable to sell smartphones in the German market if Nokia wins injunctions based on the claim constructions it advanced. HTC said so in a motion for expedited trials. It wanted the UK court to declare those patents invalid in time to dissuade the German court from issuing injunctions. Based on regular schedules, a UK validity decision will come down after an infringement ruling by the Mannheim Regional Court, the fastest German court for patent infringement cases. The motion was denied on June 1, 2012, but I obtained a copy only now -- there were no media reports on this UK activity, and UK courts don't make documents available over the Internet the way their US counterparts and the ITC do. Even after all of this time, the ruling provides some interesting information concerning

• the tactical situation between Nokia and HTC,

• Nokia's ability to sell licenses to other Android device makers (such as ViewSonic, which it is already suing), and

• the practical challenges defendants face when turning to UK courts for help against potential German injunctions.

Let me quote some passages from the ruling that refer to HTC's representations concerning the settlement pressure under which it could come from these patents:

"[...] HTC has sought to address by expedition those [patents] which appear to be the most oppressive based upon the construction that Nokia places on these patents for infringement purposes. This means those patents which: first, are the subject of a wide construction by Nokia for infringement purposes; and second: relate to features of HTC's phones that are extremely difficult to remove. EP '120 is pleaded by Nokia in Germany to be infringed by Google Play. This is the means by which HTC phones (and all phones using the Android operating system) acquire new applications ('apps'). Mr. Schulte of HTC gives evidence that a Smart Phone without such features would be unsaleable."

"[According to HTC] EP '[98]2 relates to a plastic spacer in the phone's internal antenna arrangement and says that the breadth of Nokia's construction makes it difficult to design around and that EP '077 relates to the way that long term and short term memory are used. Again, [HTC's outside counsel in the UK, Paul Brown of Hogan Lovells, the firm that is also representing HTC against Nokia in Germany] says that the wide scope put on the claims by Nokia's infringement case makes it difficult to avoid producing smartphones that use this feature."

"[HTC's witness said that] the consequences of an injunction being granted in Germany, without the issue of validity having been investigated and decided in HTC's favour, would be very serious for HTC."

"[This] is essentially a battle about whether HTC need to take a licence [...]"

The passages quoted above confirm what I wrote further above: if Nokia prevails on any of these patents, HTC's witness statement suggests that the company will either have to take a license on Nokia's terms, which I believe would not come at a huge discount, or it would have to say, at least temporarily, Auf Wiedersehen to the German market. In the latter event, Nokia could assert the same patents, or their equivalents, in additional jurisdictions until it reaches a point at which HTC decides to pay up.

HTC obviously wanted to convince the UK court of this being an urgent and pressing problem. In a different context, such as an enforcement proceeding relating to a workaround, HTC would have had just the opposite motivation. But its witness had to tell the truth, and when HTC brought the UK motion it knew that anything it says in it might be used against it elsewhere. All in all, I would not take literally all the desperation reflected by the paragraphs quoted above, but there is undoubtedly some profound concern on HTC's part. Google is also concerned. Otherwise it wouldn't have intervened in the Google Play case. Since Google doesn't guarantee Android licensees that it will defend and indemnify them, it doesn't have a formal obligation to act. It does so because it's worried that a Nokia patent tax will adversely affect the competitiveness of the Android ecosystem.

But it gets even worse: Justice Floyd, a high-profile UK patent judge, explained the denial of the motion with the fact that Nokia's other patents-in-suit might be just as strong as the three HTC claimed to be particularly worried about:

"What I find particularly difficult about HTC's application for expedition is that even if the court were to accede to HTC's application for expedition in relation to one or more of these patents, there would remain the other 14 patents which could, equally, have the consequences for which Mr. Schulte contends. [...] What I fear is that, even if one were to expedite the trial of these cases, the harm of which HTC complain would be by no means extinguished or removed."

It also appeared odd to Justice Floyd that HTC sought expedition with respect to the first three patents it believed, based on the Mannheim court's initial scheduling orders, would go to trial. It's statistically highly unlikely that the first three out of 17 are also the most devastating ones.

The way I read Justice Floyd's decision, the London-based High Court is quite willing to rule on the validity of certain patents that are being asserted in Germany, even though the impact of such a ruling on a German decision is merely persuasive. But the UK court will do so on its regular schedule, and it won't schedule its own cases according to a foreign court's schedules on the related infringement case. The order doesn't rule out categorically that a UK declaratory judgment case could be accelerated because of the commercial implications of a German patent case, but it appears that the hurdle is fairly high and the UK court will suspect purely tactical motivations if the first few out of a long list of patents are described as the most "oppressive" ones: in such a scenario, the far more plausible explanation is that someone just wants to avoid a first-round knockout in a wider dispute, hoping that the passage of time will have value all by itself and allow the defendant to make progress in some other areas. Justice Floyd understands that HTC is in an uncomfortable position, but was not persuaded that "it is right for this case to leapfrog all the other cases in the queue to be heard by this court".

If the motion had not been denied, some UK trials might already have taken place a few months ago, or they would have taken place this month. But now it looks like things will take considerably more time, and in the meantime, some German rulings will come down. Should HTC win any favorable UK judgments on patents on which Nokia prevails in Germany in the meantime, it can still leverage any UK decisions before a German appeals court and/or the Federal Patent Court (Bundespatentgericht), which rules on German nullity (invalidation) actions and is relatively slow.

RIM has already acceded to Nokia's demands. It's only a matter of time when HTC will do so, too. And probably not a whole lot of time.

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