Mr Justice Mellor declares Lenovo the overall winner of FRAND dispute with InterDigital, awards fee-shifting but InterDigital is awarded interest of $46 million

In March I described the outcome of the InterDigital v. Lenovo FRAND dispute before the High Court of Justice for England and Wales as a resounding victory for the defendant and predicted that other net implementers, such as OPPO, stood to gain from it. Of course, such decisions can and this one is indeed going to be appealed--which is also a safe assumption with respect to an even higher-profile recent FRAND ruling by the same court, Mr Justice Marcus Smith's Optis v. Apple decision, which I heard Optis intends to appeal.

My description of the outcome as a major win for Lenovo has been validated by a follow-up judgment. According to Lenovo's press release, the actual decision should become available later, and the court declared Lenovo "undoubtedly the overall winner," a finding that entitles Lenovo to recovery of the bulk of its litigation costs.

A press release by InterDigital highlights two other aspects of the decision: primarily the fact that the amount to be paid by Lenovo goes up from $138.7 million to $184.9 million due to interest on past royalties, and also the fact that the court granted the parties the right to appeal certain aspects of the judgment.

Mr Justice Mellor's original judgment expressed surprise over the fact that InterDigital had not sought interest on past royalties. Lenovo had been using InterDigital's IP for well over a decade without paying. In the March decision, Mr Justice Mellor invited InterDigital to seek interest now, and determined that $46.2 million was the correct amount.

I heard that the interest award must be paid now sa opposed to be placed into escrow.

The March decision was mentioned at a Brussels event related to the European Commission's proposal for a regulation on standard-essential patents (SEPs). Someone close to Apple referenced it in the context of whether small and medium-sized enterprises (SMEs) are at risk of paying supra-FRAND royalties as they lack the resources and sophistication to defend themselves as effectively as larger players. Someone from the net licensor camp clarified that SMEs were not involved in the license agreements with third parties that Mr Justice Mellor declined to accept as comparable agreements because the licensees were smaller companies than the ones that Lenovo pointed to (such as Apple, Samsung, and LG). So the ones who argue that legislative intervention is needed to shield SMEs from SEP abuse can't point to the UK InterDigital v. Lenovo ruling as evidence of SMEs being overcharged--the "smaller" licensees referenced in that decision were still pretty sizable. However, a reasonable argument can be made that if SEP holders were to go after SMEs (which is not the case yet, at least not to a noticeable extent), SMEs would likely--actually, almost definitely--end up paying supra-FRAND royalties.

InterDigital's problem remains (as the interest award changes nothing about it) that the company tends to cave to large implementers: the likes of Apple and Samsung get discounts that are not just high but next to irrational. As a result, InterDigital's headline rates have a credibility problem when companies like Lenovo or OPPO (with OPPO clearly being a high-volume implementer as well) are sued.

InterDigital has only one revenue stream: license fees, and most of that revenue comes from a small group of companies: major smartphone makers. The rest of the industry took note of the fact that Apple is not paying InterDigital more than in the past, and while litigation with Apple could have been costly and protracted, the terms of that agreement do nothing to persuade a company like OPPO (whose devices sell at a much lower average per-unit price than Apple's) to cave to InterDigital's demands. And unlike Lenovo, OPPO is in a far stronger position to convince courts that it is a willing licensee.

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Telit drops antitrust lawsuit against Avanci and Nokia over component-level licensing of standard-essential patents started by Thales in Munich, also withdraws U.S. discovery requests

A few months ago, IoT module maker Telit consummated the acquisition of the cellular IoT products unit of French industrial conglomerate Thales. As a result of the transaction, Telit inherited the antitrust dispute Thales had started in 2021, accusing the Avanci patent pool firm and one of its licensors--Nokia--of violating EU antitrust law by declining to grant exhaustive component-level licenses covering cellular standard-essential patents (SEPs).

From the beginning I had--and expressed--my doubts about the prospects of that complaint, just like I never believed in Continental's U.S. litigation against Avanci, Nokia, and others, a case that indeed went nowhere. At some point a Thales v. Avanci & Nokia trial was scheduled for September 2022, but it didn't take place. There were delays, and with what is known now it's fairly possible that Thales knew Telit--which was in the process of acquiring that business unit--wasn't really interested in pursuing that litigation.

I noticed the withdrawal of the three related U.S. discovery motions earlier this month. Thales was seeking discovery (for use in the Munich proceedings) of Avanci (Northern District of Texas), Ericsson (Eastern District of Texas), and InterDigital (District of Delaware). For instance, on May 4 Thales gave notice that the Delaware action was "dismissed without prejudice, with each party to bear own costs, attorney’s fees, and expenses." The other dismissals were also without prejudice, and there is generally no indication of an agreement having been worked out between the parties along the lines of a license agreement. If anything, there was probably just a procedural agreement to terminate the litigation.

Yesterday afternoon the Munich I Regional Court was able to confirm to me that Thales (Telit) withdrew its antitrust complaint on May 4, 2023. The case was pending before the court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner).

While Continental was primarily seeking injunctive relief (and is still suing Nokia in Delaware state court, though nothing important has happened there so far), Thales brought a complaint for damages, which was unusual. Whatever the strategy may have been, the net effect is that those automotive supplier lawsuits over component-level SEP licensing are just a waste of resources.

The automotive sector has stepped up its lobbying efforts, which is reflected by the European Commission's proposed SEP Regulation. That bill does not require SEPs to be licensed at a specific level of the supply chain, but the EUIPO may in the end encourage component-level licensing through its recommendations further to the regulation. It is too early to tell whether that will happen, as the legislative proposal is likely to undergo lots of changes in the further process. Given that car-level licensing demonstrably works (by now most car makers have an Avanci license), the case for governmental intervention, even if merely in the form of an official recommendation, is increasingly hard to make. The failure of those lawsuits brought by Conti and Thales also doesn't suggest that there's an actual problem to be solved.

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InterDigital v. OPPO patent infringement lawsuits stayed in Mannheim (formally) and Munich (de facto) after Federal Patent Court rendered negative preliminary opinions

After a UK FRAND determination that InterDigital said it would appeal, the research and licensing firm has now also suffered a few setbacks against OPPO in Germany. In late December 2021, InterDigital announced standard-essential patent (SEP) enforcement against actions OPPO in Germany, the UK, and India.

I found out at the time that one case had been filed in Mannheim, and two in Munich.

Like other plaintiffs in recent months (example, InterDigital faces the problem that ever more infringement actions in Germany get stayed or otherwise delayed by preliminary opinions of the Federal Patent Court. Those preliminary opinions used to take about two years to come down. But roughly a year ago, a provision of Germany's 2021 patent "reform" bill entered into force (for nullity actions filed from there on out) and now calls on the Federal Patent Court to hand down preliminary assessments within six months of a nullity complaint. The statute that was originally considered the most important one of the "reform" bill--the injunction statute--has proved just as useless as I predicted (there is not a single case in which a disproportionality defense even came close to preventing or otherwise affecting a patent injunction). And that one took effect more than 20 months ago.

The six-month target for the Federal Patent Court is, however, making a difference, even though it is not a hard requirement and the judges of the Federal Patent Court wouldn't have to express a strong opinion on the validity or invalidity of the challenged patent claims (they could just outline what issues appear likely to be outcome-determinative).

Plaintiffs now need a good strategy to amend the claims, though new claim language that has not been examined by a patent office meets a lot of skepticism in some German courts. Otherwise they need to be patient or, if they are not (and few licensors want to wait years to get paid), they must assert more patents against a given defendant than before.

Apart from the fact that the Federal Patent Court often deems patents--on a preliminary basis--invalid, it's generally neither enjoyable nor profitable to sue OPPO over patents. Nokia sued OPPO almost two frustrating years ago, and InterDigital's campaign started almost 16 months back and is not likely to yield results in Germany anytime soon.

A spokesman for the Mannheim Regional Court has confirmed to me that on March 10, 2023, the court's Seventh Civil Chamber stayed InterDigital v. OPPO case no. 7 O 46/22 over EP2485558 on a "method and apparatus for providing and utilizing a non-contention based channel in a wireless communication system." That same patent was actually deemed valid and essential to 4G by a UK judge in an InterDigital v. Lenovo case less than two years ago. But the Federal Patent Court of Germany handed down a preliminary opinion on February 2, 2023, in light of which the Mannheim Regional Court stayed the case.

I've also received information from a spokesman for the Munich I Regional Court concerning two cases pending before different civil chambers (judicial panels):

• In case no. 21 O 17303/21 (21st Civil Chamber; Presiding Judge: Dr. Georg Werner) over EP2421318 on a "method and apparatus for transmitting scheduling information in a wireless communication system." That patent, too, fared well in the UK InterDigital v. Lenovo litigation. But instead of entering final judgment on March 1, 2023, the Munich court scheduled an additional trial day for October 18, 2023. According to the court, InterDigital had asked to reopen the proceedings.

  On February 20, 2023, the Federal Patent Court issued a preliminary opinion in preparation of a September 14, 2023 nullity trial. The new trial date in the infringement case suggests that the outcome of the nullity trial (where a decision is typically announced, though the written judgment still takes several months to come down) will be considered. Should InterDigital be able to salvage the patent in one form or another, the trial will go ahead. Otherwise the case will presumably be stayed. The Federal Patent Court's preliminary opinion raises non-novelty issues for the challenged claims and declares some--but not all--auxiliary claims (amended claims) inadmissible.

• On April 27, 2023 (i.e., in a week from today), the Munich I Regional Court will announce a decision in case no. 7 O 17302/21 (Seventh Civil Chamber; Presiding Judge: Dr. Oliver Schoen ("Schön" in German)) over EP2127420 on an "implicit drx cycle length adjustment control in lte_active mode." It is unclear whether next week's decision will be a final judgment or, practically, a stay. For the latter case, the court has already scheduled a new trial date: November 23, 2023.

  The Federal Patent Court had rendered a preliminary opinion on that patent on March 27, 2023.

When InterDigital sued OPPO in December 2021, expectations were presumably higher than what has come out of those German cases so far. And even if InterDigital wins a German patent injunction against OPPO at some point, it may prove useless as the company stopped selling devices in Germany last summer so as not to be forced to take worldwide patent licenses that would adversely impact OPPO's competitiveness in some large but rather price-sensitive markets.

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OPPO, others stand to benefit from Lenovo's resounding UK FRAND victory over InterDigital: experts' selectivity, excessive discounts, conduct-based arguments fail to persuade judge

This is not a "rapid response" piece by any measure. It's been three days since Justice Edward James Mellor rendered his InterDigital v. Lenovo FRAND judgment. Many others have reported and commented since, and in a first step I pointed--via LinkedIn--to a great summary by Michael Burdon of Simmons & Simmons. Some others had to--or have yet to--correct the conclusions to which they originally jumped.

It's a landmark ruling. Probably the worst that ever happened to InterDigital in any litigation, and arguably one of the most significant setbacks for standard-essential patent (SEP) licensors in general (though nowhere near as bad for them as Microsoft v. Motorola was back in the day). In the short term, a major implementer with a much better licensing track record than Lenovo stands to benefit hugely: OPPO. This may also help Apple against the Optis/Unwired group, where a UK ruling is likely imminent and some of the same players are involved, though the fact patterns may be very different. In the mid term, it very much depends on what the appeals court will decide, but it will be hard for InterDigital to get Justice Mellor's determinations on the credibility of experts--where InterDigital's experts performed poorly--overturned. The UK is now a less attractive venue for SEP enforcement. This InterDigital v. Lenovo decision actually invites a lot more SEP enforcement litigation, but in other jurisdictions, as I'll discuss further below.

It's not all bad for InterDigital, a company that has recently been very good at renewing major agreements (or at least agreeing on a path toward renewal) and has a lot of potential, but the bad far outweighs the good here:

• The $138.7M lump-sum payment for an absurdly long period (2007-2023) comes down to a per-unit royalty of $0.175, which is only marginally more than Lenovo's best offer of $0.16, and just a little over a third of the $0.498 per-unit royalty InterDigital was seeking.

  Without a doubt, this is the key measure, and there is no explaining away InterDigital's (and its experts') defeat. InterDigital itself conceded defeat by announcing its appeal.

• The court totally rejected InterDigital's headline rates ("program rates") as comparables because discounts of up to 85% (Samsung) made those numbers pretty meaningless.

• The court found neither party in compliance with its FRAND licensing obligations: InterDigital was categorized as an unwilling licensor (for consistently making supra-FRAND demands) and Lenovo an unwilling licensee (which is unsurprising). The ruling notes that both parties can be unwilling at the same time. The problem for InterDigital is that this is unprofitable: it can stick that finding of Lenovo's unwillingness to its office walls, but it's not getting any compensation for it. InterDigital had some pretty good conduct-based arguments in this case. But if you have a strong case based on the implementer's behavior, you have to enforce in jurisdictions like Germany (Sisvel v. Haier) where conduct is given a lot of weight. Justice Mellor simply declined to let InterDigital's criticism of Lenovo's behavior result in an increase of what would be seen as the objective market value of the patent license in question.

• The part that SEP holders will, of course, appreciate is neither new nor spectacular: a willing licensee can't just hide behind statutes of limitation (for the recovery of damages for past infringement) but will make a release payment to fairly compensate for all past use (which in this case may also entail a post-judgment award of interest). I'm not aware of any case law to the contrary in any of the jurisdictions that focus on the willingness of licensees. But it is useful clarification that will be cited elsewhere.

• Where InterDigital's expert witness on comparables clearly lost all credibility with the court was when he pointed to 20 license agreements outside the top 20 most important ones. The license agreements Lenovo focused on accounted for roughly 98% of all units, and the ones InterDigital's expert focused on amount to roughly 2% of the business. Such selectivity is ridiculous.

  In a jurisdiction where a court mostly delegates these factual findings to an expert witness, the decision might have been different. An economic expert might have independently developed a middle-ground scenario. Justice Mellor notes that InterDigital--which didn't want to undermine the extreme positions its experts were taking--failed to present a more conservative set of numbers. A court-appointed expert might have come up with some new analysis. But when there's a battle between experts and a judge has to make the decision, it's risky to take extreme positions that are easily rejected because they're irrationally selective.

What I consider to be the most important passage is the final sentence of para. 516:

"However, it is important to keep in mind that these volume discounts were ‘applied’ to InterDigital’s ‘program rates’ which were paid only by the smallest and least sophisticated licensees."

Justice Mellor goes on to clarify that he's not faulting InterDigital for being pragmatic and business-oriented in the sense of offering huge incentives to the Samsungs of the world in order to strike deals with them rather than having to engage in protracted multi-jurisdictional litigation, during the course of which InterDigital's cash flow would be adversely impacted and shareholders would get nervous. This is not a moral question. It is, however, relevant to the "ND" part of FRAND.

I would describe Justice Mellor's position as follows:

• You can't build comparables by squeezing the weak

• if at the same time you cave to the big hold-outs.

That is not fair, and it ends up distorting competition. It makes the rich richer at the expense of the poor.

InterDigital has only one revenue source: licensing. Apple and Samsung each account for roughly one quarter of InterDigital's income. It's easy to see why InterDigital would rather litigate against someone like Lenovo, and avoid litigation against Apple and Samsung through huge concessions. They're within their rights to make that choice, but is that still going to be the right strategy going forward? If more courts adopt Justice Mellor's position that InterDigital's "program rates" have nothing to do with market realities and fair valuation, then it just won't work as even the little guys will end up paying relatively low per-unit royalties.

Should a long-term hold-out like Lenovo benefit from rates that were agreed upon with willing licensees (companies that renewed their agreements in time, or shortly after expiration of the previous one)? That is a very valid question. But an injunction is a prospective remedy, and that's the context in which those UK FRAND determinations are made, so it becomes just a numbers game. There are no signs of the UK adopting the behavior-centric Sisvel v. Haier approach. If you want that one, you have to go to Germany. The current problem there is that the Federal Patent Court puts out those premature opinions after six months, but the solution is simply to assert enough patents that something will stick.

Courts rarely intend to invite more litigation, and Justice Mellor is no exception. But if one thinks it through, what should a SEP holder like InterDigital do when facing such situations as with Lenovo?

The UK now looks rather unattractive. It took about a year since trial, and now InterDigital needs to appeal, which will take a lot of time and is not too likely to move the dial. I'm not blaming Justice Mellor, who clearly says in his decision that he also had other matters to adjudicate during that period. But is it really a good idea to hold a multi-week trial with expert witnesses and then have a judge write a book (225 pages) about the case? In the meantime, it could have obtained injunctions in such jurisdictions as Germany, Brazil, or Colombia--and pretty soon, the Unified Patent Court, of course. The amount of collateral required to enforce German injunctions can be high, especially against large-scale implementers, but after two rounds of litigation (regional court and higher regional court), that problem goes away.

The idea of a "one-stop shop" solution--a jurisdiction that sets a global FRAND rate and will enjoin the infringer unless that one is accepted--used to be appealing. After InterDigital v. Lenovo, it's clear that this can backfire. The other jurisdiction that sets global FRAND rates even without the consent of both parties is China, and the judges there will definitely take note--as they absolutely should--of the UK findings. Short of a successful appeal, InterDigital can hardly expect to get more than 17 cents per unit from any Chinese device maker seeking a FRAND determination in its jurisdiction.

InterDigital is going to lose against OPPO. It won't get leverage in Germany because OPPO left the market; it is facing an uphill battle in the UK; and in the meantime, the decision may just be made in China.

OPPO may also benefit from this in its UK litigation with Nokia, but just like in Optis v. Apple, the facts may be very different, so it's too early to tell. I believe Nokia is a more courageous SEP holder than InterDigital, so I doubt that they grant discounts on the order of 85% to licensees like Samsung and Apple. They're probably a lot more consistent. But OPPO is also a much more sophisticated and licensing-oriented adversary than Lenovo.

The UK judiciary was eager to attract SEP injunction cases. Now that they get more of them, they start to realize that those complex cases place an enormous burden on the judges (and, by the way, with very little benefit to UK taxpayers). By taking a long time to decide those cases, and then setting relatively low per-unit royalties, they are now actively discouraging such filings. I'm not saying that it's their strategy, but it's the net effect of what's happening.

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InterDigital announces arbitration agreement with Samsung, renewal with Panasonic, video codec license deal with LG

This morning, publicly-traded patent licensing firm InterDigital (NASDAQ:IDCC) announced license agreements with three major East Asian companies:

• The most important one of those press releases involves consumer electronics giant Samsung--a company whose licensing department is known to be tough, but definitely effective. It was no secret that the previous license agreement was set to expire on December 31. Ten years ago, InterDigital brought infringement lawsuits against Samsung. This time around, it's a renewal with final terms to be decided by binding arbitration. InterDigital CEO Liren Chen commented on this suboptimal but apparently acceptable solution:

  "While we always prefer to conclude our license agreements through amicable good faith negotiation, independent binding arbitration provides an effective mechanism for resolving licensing disputes. I welcome Samsung’s willingness to enter into a new license with us and their commitment to work through the remaining issues in arbitration."

  An InterDigital filing with the Securities and Exchange Commission is more specific, though it still doesn't answer my most important questions:

  "On January 1, 2023, InterDigital, Inc. (the 'Company') and Samsung Electronics Co. Ltd. ('Samsung') agreed to have a panel of arbitrators establish the royalties to be paid by Samsung for a worldwide license to certain of the Company’s patents from and after January 1, 2023, as well as any other terms to a patent license agreement on which the parties are unable to agree. The determination by the panel will be in the form of a patent license agreement and will be final, binding and non-appealable, subject to certain limited exceptions. The parties have agreed to conduct the arbitration in a diligent manner. The Company expects the arbitration to conclude within approximately 18 months.

  "Each of the parties has also agreed not to initiate certain claims against the other party during the arbitration. Any licenses under our joint licensing program with Sony relating to digital televisions and standalone computer display monitors will not be included in the scope of the arbitration."

  Arbitration is inherently opaque. We'll likely never find out what parameters the parties gave the arbitrators. What we may be able to deduce from InterDigital's quarterly financial reports is whether Samsung continues to make some payments in the meantime. It's possible that the parties agreed on a certain amount that Samsung will pay per quarter while still reserving its rights to take the position in arbitration that the royalty rate should actually be lower.

  Ten years ago, Samsung also agreed with Nokia on arbitration to determine the royalty amount, though it was unclear what subset of patents was subject to arbitration. Third parties who believe to know the terms of the deal mostly suspect that the arbitration result fell short of Nokia's expectations--but again, this depends on the parameters, which can favor one side or the other, or provide a level playing field.

  At some point some news of a Nokia-Samsung renewal or, failing that, infringement litigation should also surface, but I don't know when that agreement expires.

• Panasonic renewed its DTV and HEVC patent licenses with InterDigital. Unlike the scope of the InterDigital-Samsung arbitration, the Panasonic deals also involve some Sony patents, as InterDigital's Chief Licensing Officer Eeva Hakoranta said that the DTV deal was signed under a "joint digital TV licensing program which continues to deliver considerable value to InterDigital, [its] partner Sony, and to [its] licensees."

• The announcement of InterDigital's HEVC and VVC video codec patent license agreements with LG Electronics sounds like a new license (covering LG's TVs and PCs) rather than a renewal, but this may be due to the fact that the Korean company exited the smartphone business, which according to a February 2018 press release had a license to InterDigital's patents. It could be that the only reason the new deal is not called a "renewal" is that it no longer involves cellular SEPs.

In the summer, InterDigital announced a license agreement with Amazon, and in early October a renewal (by seven years) of its license deal with Apple. InterDigital is, however, embroiled in litigation with a couple of companies. The more important one of them is OPPO, which fights hard when sued but prefers to reach license agreements on reasonable terms, such as very recently with Huawei. InterDigital is now also waiting for a UK court ruling in its SEP dispute with Lenovo.

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Huawei, Qualcomm, InterDigital agree that licensing level must not serve as pretext for driving down standard-essential patent royalties: IAM Connect 2022 panel

IAM just hosted the last one of its IAM Connect 2022 panels. It was chaired by Paul Lin, Xiaomi's long-time head of IP who founded Eagle Forest LLC, an IP-specialized consulting firm. The panelists were Huawei's Head of IP Alan Fan, Qualcomm's Senior VP and General Manager (for the licensing division named QTL) John Han, and InterDigital's chief licensing officer Eeva Hakoranta.

It was a great panel that easily met and arguably exceeded expectations, which were obviously high given the background of the panelists. I've seen webinars with several times more listeners that weren't even half as good.

The focus was on what were the key developments in IP licensing in the telecommunications sector this year, and what may be the key trends and issues in 2023. Huawei and Qualcomm agreed that renewing existing licenses in the smartphone market and upgrading them to 5G is less likely to require enforcement action than when some implementers took licenses for the first time.

To a greater extent than envisioned, the debate was about the licensing level, where the three companies agreed that

• one can license chipset and module makers (Huawei explicitly said so; Qualcomm said so with respect to IoT modules; and InterDigital did not appear to disagree), but

• an alleged obligation to extend component-level licenses (Qualcomm and InterDigital dispute that there is such a duty under the ETSI FRAND pledge, while Huawei doesn't rule it out) must not be a vehicle for bringing down standard-essential patent (SEP) royalties under a smallest salable patent-practicing unit (SSPPU) valuation approach.

Huawei's Chief IP Officer Alan Fan made an argument about consistent pricing across the supply chain that is not only in the interest of licensors but equally of licensees: the ND (non-discrimination) part of FRAND. It is true that a device maker A with a supplier X could be at a competitive disadvantage if its competitor B benefited from a lower royalty rate because of a deal between a given patent holder and its supplier Y.

It is a legitimate objective in its own right to oppose price erosion, but with the ND-part-of-FRAND argument, one simply stands on higher ground and takes a position that is in the public interest.

Qualcomm's John Han very much emphasized use-based pricing. Mr. Han rejected an SSPPU royalty base and stressed a key distinction:

Price differentiation isn't price discrimination.

More than three years ago I organized a Brussels conference on component-level licensing (I haven't organized a conference ever since and have no intentions of doing so, though that one was clearly a success as I'm sure any participant--including officials from four directorates-general of the European Commission--could confirm). At that conference, an economist with otherwise very implementer-friendly positions also acknowledged that use-based pricing is economically reasonable. There was, however, a little bit of a misunderstanding because he called "price discrimination" what Qualcomm's panelist today sought to distinguish from "price differentiation." Semantics matters here because one is a potential antitrust violation while the other is the very opposite: it is recognized, not only but especially in the EU, that applying the same price to different transactions may constitute discrimination.

The three companies from which today's panelists hailed have distinct business models. InterDigital is, as Mrs. Hakoranta acknowledges, a research firm that generates the entirety of its revenues from licensing; Qualcomm has a licensing arm (Mr. Han's division) as well as a chipset business; and when the moderator said that it would have been nice to hear the views of an implementer, Huawei's Mr. Fan was quick to point out in no uncertain terms that Huawei is a major implementer and large-scale licensee. Mr. Fan jokingly said that if Mr. Lin wanted him to talk about the topic from a licensee's perspective, he'd be happy to do so anytime.

Huawei's mix of licensor and licensee interests gives that company a very balanced perspective. They need licenses for their own products, but they also know what it feels like when a patent holder faces hold-out tactics by an unwilling licensee. Case in point, tomorrow morning the Munich I Regional Court's Seventh Civil Chamber--which until recently was chaired by Presiding Judge Dr. Matthias Zigann, who has since been promoted to the appeals court--will hold a Huawei v. AVM FRAND hearing. AVM is a German WiFi router maker and competes with Netgear, a U.S. company against which Huawei has already obtained a default judgment in Germany.

Shortly after Huawei's landmark patent cross-license agreement with OPPO was announced last week, it also became known that Huawei recently renewed its license agreement with Samsung, which is now a 5G license. A few years ago, Huawei and Samsung settled litigation and signed a 4G license agreement. This time around, no litigation proved necessary.

Interestingly, it has now been discovered that Samsung transferred certain U.S. patents to Huawei.

Mr. Fan's statements today were balanced and principled. InterDigital's positions are also very consistent, though their license deals are obviously one-way streets.

Qualcomm made a number of good points. However, one need not "buy" Qualcomm's distinction of smartphone patent licensing (where they license only at the end-product level) from other categories where Qualcomm is prepared to license module makers. What makes sense for Qualcomm to do--and I'm not taking a position here on whether it raises antitrust concerns--is unique to that company with its particular business model and competitive strategy. While Qualcomm does at this point prefer to license four major IoT module makers over dealing directly with myriad small device makers, Qualcomm stressed again today that licensing at the component level is a voluntary choice. What if Qualcomm decides to compete aggressively in the narrowband IoT chipset market? There is no guarantee that they will still license module makers.

For now, however, Qualcomm has those four IoT module makers under license, and Mr. Han specifically mentioned Quectel.

Mr. Fan explained from Huawei's perspective that apart from FRAND considerations, it is simply efficient for a patent holder to license a company that knocks at its doors requesting a license. At the same time he made it clear that a licensing offer that does not allow audits could not be considered FRAND because some control is needed to avoid double-dipping.

The overall growth of 5G (now more than half of all cellular gadgets) and component-level licensing were not the only topics of discussion. Another topic that the panelists touched on was whether there could be a smartphone patent pool. By coincidence, Sisvel had announced a 5G multimode pool for consumer electronics devices (smartphones etc.) earlier today. Qualcomm essentially argued that there are only a few major handset makers, and if a company already has a bilateral relationship with a handset maker (and given that they hold SEPs of their own and like to cross-license, plus they like to license implementation patents that I believe Mr. Han meant to imply aren't implemented at the chipset level anyway), it will now just negotiate a renewal that upgrades that license to 5G. In my opinion, that does not apply to those cellular SEP holders who do rely on pools in order to reduce transaction costs--such as the ones that have joined and may in the near future join Sisvel's 5G MM licensing program.

My takeaway is that in 2023 we're going to see a diversity of approaches to the licensing level (with Huawei being extremely flexible and Qualcomm making different choices depending on industry segment characteristics); and the kinds of companies who were represented on the panel will license bilaterally, while others will benefit from their participation in pools.

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After its billion-dollar patent license deal with InterDigital, Apple can expect to pay several times more to Ericsson and Nokia

Yesterday, InterDigital (IDCC) issued a press release according to which it had just "entered into a patent license agreement with a major technology company." It wasn't hard to figure that most likely this was Apple, as InterDigital's previous license deal with Apple was set to expire on Friday. Any residual doubt was eliminated by the licensing firm's simultaneous SEC filing:

"On September 30, 2022, InterDigital, Inc. (the 'Company') renewed a patent license agreement with Apple, Inc. The Company expects to recognize approximately $134 million in revenue each year over the seven-year term of the license, which commenced on October 1, 2022."

So much for all that secrecy. By the way, Apple doesn't like it at all when a comma is inserted between Apple and Inc., which happens all the time and was one of 271 typos and similar errors in last year's Epic Games v. Apple judgment in the Northern District of California.

That's approximately $940 million for a seven-year deal. Independently of the agreement with Apple that affects revenues only from the fourth quarter onwards, InterDigital reported better Q3 figures than projected. Its stock price soared by almost 20%. To put those numbers into perspective, the volume of the Apple contract corresponds to twho thirds of InterDigital's market capitalization. In other words, if it weren't for antitrust and other reasons, Apple might just have bought the entire company.

The circumstances of that deal are fundamentally different from the situation Apple is facing with Ericsson (pending litigation) on the one hand, and with Nokia (license agreement presumably expired) on the other.

Let's try to look at the deal--which was agreed on the very last day of the previous license agreement--from the perspective of InterDigital's management. They determined that a billion in the hand is better than two or three in the bush.

Not only do Ericsson and Nokia have far larger and more diversified patent portfolios than InterDigital but they also aren't nearly as dependent on Apple as InterDigital. Apple's royalty payments don't even remotely account for a quarter of Ericsson's or Nokia's total revenues, nor for two thirds of either company's market capitalization (Ericsson: $20B; Nokia: $25B).

Again, let's look at the billion-dollar deal through InterDigital's management's lens. Earlier this year, IDCC was trading at up to $74.27 per share, which was not too far below its all-time high of a few years ago (which was well over $90). Even a few months ago the stock price was still between $60 and $70. Then it plummeted to a 52-week (and five-year) low of $40.23.

Against that backdrop, the license agreement with Apple--again, we're talking about a quarter of InterDigital's total income--was about to expire. There were only two alternatives:

• to take Apple's last offer, or

• to go to court.

We know the specifics of the first scenario by now. What would have happened in the other event?

1. Apple would have ceased its royalty payments. That fact alone would have reduced InterDigital's revenues and cash flow--temporarily--by about 25%, and IDCC would have had to report--temporary--losses.

2. Those--temporary--losses would have been exacerbated by litigation expenses, and Apple might have challenged dozens of IDCC patents through IPR petitions with the USPTO's PTAB and/or nullity actions in Germany, and/or declaratory judgment complaints in jurisdictions like the UK, and/or might have brought a FRAND rate-setting action in the U.S., all of which would further drive up litigation costs.

3. InterDigital's stock price would have taken a further hit, which in turn would have affected executive compensation. As a result, key players might even have left.

4. I'm pretty sure InterDigital would have won some German patent injunctions within about a year. But Apple would have appealed, and in order to enforce provisionally (i.e., during an appeal), InterDigital would have had to provide collateral, possibly on the order of $5-10 billion. That would have been a multiple of IDCC's market capitalization and, therefore, hard to make work.

5. So, in order to be able to actually enforce, IDCC would have had to prevail in a German appeals court. At that point, you can enforce without security. But that takes another year, and in the meantime there is a risk of bad news from the nullity (or opposition) proceedings.

The asymmetry here is unbelievable, which is why I want to mention it again: what Apple agreed to pay under a seven-year license deal is two thirds of InterDigital's current market capitalization, and that one is already 20% higher than it was then they signed the deal.

OPPO is being sued by InterDigital, and I doubt that OPPO would accept to pay anywhere near the per-unit amount that the most profitable company in the industry--with the highest-priced products--pays. OPPO will presumably argue that it should only pay a fraction of the per-unit royalty InterDigital gets from Apple.

The economics underlying the InterDigital-Apple deal are also fundamentally different from when a company like Ericsson or Nokia has to deal with Apple. Ericsson has now been litigating for about a year (counting from the original filings in the Netherlands and the Eastern District of Texas). Ericsson has done pretty well in terms of case management decisions (virtually all of which went against Apple) and claim construction. The only risk to Ericsson that InterDigital wouldn't have had to fear consists in Apple's countersuits, one of which will go to trial in Mannheim in two weeks from today.

It would make a lot of sense for Apple and Ericsson to settle ahead of the Texas FRAND trial in December, but if they don't, Ericsson has the financial strength to keep litigating for another year or two.

Nokia will announce its Q3 figures on the 20th. Should the license agreement with Apple have expired on June 30 (as many observers assume), the impact will be visible. That's why I believe we'll either hear about a renewal of the Nokia-Apple license agreement or about renewed litigation (it would be their third patent dispute) soon.

Another factor here is that Nokia has now repeatedly prevailed on certain patents in particular German courts. It can score some predictable wins over Apple if need be. And a company like Nokia or Ericsson could enforce an injunction even during an appeal, though it would take some financial engineering to make it work.

This game isn't entirely meritocratic. Sometimes might makes right. Especially when Apple is involved. But what enabled Apple to avoid a dispute with InterDigital won't impress Ericsson or Nokia.

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Apple can't sell iPhone 14 in Colombia while Ericsson's preliminary injunction over 5G patent is in force--and could soon get into similar trouble in Germany, other jurisdictions

A few hours ago, some Colombian websites such as this one (El Colombiano) reported that Apple finds itself unable to sell the iPhone 14--which it introduced yesterday--in the Latin American country, the reason being a preliminary injunction over a 5G standard-essential patent (SEP) that Ericsson has already been enforcing for about two months against the iPhone 12 and iPhone 13.

Apple sought emergency relief from a Colombian court (even invoking Article 8 of the Universal Declaration of Human Rights), but the sales and import ban was upheld as constitutional.

The following screenshot shows that Apple displays a notice on the Colombian version of the iPhone 14 page according to which it "temporarily cannot offer devices with 5G technology in Colombia due to an order by a Colombian court, a decision that Apple is appealing" (that's my translation of the Spanish sentence right below the "iPhone 14 Pro" headline; click on the image to enlarge):

While the iPhone 14 obviously wasn't on the table when Ericsson obtained the preliminary injunction in question, what the Colombian court barred Apple from doing was to sell 5G devices without the prerequisite SEP license from Ericsson. And the iPhone 14 is, equally obviously, a 5G product line.

Apple could solve the problem anytime by accepting Ericsson's license offer, but apparently wants to keep fighting for a low-ball rate. Apple's Colombian situation has certain parallels with OPPO's decision to temporarily (but indefinitely) withdraw from the German market due to various injunctions obtained by Nokia in Mannheim and Munich (which OPPO may still be able to overturn).

Could Apple find itself unable to sell the iPhone 14 in other markets, including (but not limited to) Germany?

Yes, there is considerable risk. I'll explain.

Different jurisdictions apply different standards to the sense of urgency that is required in order for a plaintiff to obtain a preliminary injunction. Some (like the U.S.) perform a multifactorial analysis of a PI motion, with the focus really being on irreparable harm to the plaintiff and the balance of hardships suffered by the parties if the decision goes one way or the other. Other jurisdictions (such as Germany and some other continental European jurisdictions) focus on only two questions and order a PI only if they are both answered with "yes":

1. Is it urgent?

2. Is the plaintiff likely to prevail on the merits?

Some German courts have a pretty strict one-month rule: counting from the day on which a party has become aware of an actual or impending violation, it has to seek a PI within about a month. Otherwise the assumption is that there doesn't seem to be a rush and the court shouldn't have to prioritize the matter; instead, the plaintiff should seek a permanent injunction in a (slower) regular proceeding.

Ericsson is already suing Apple in Germany. In fact, the first clash between the two parties in a Munich courtroom is slated for next Wednesday, and there'll be multiple other hearings in Munich, Mannheim, and Dusseldorf over the course of the next few months.

When that litigation campaign started in January, even the most recently released ones of the accused products (such as the iPhone 13) weren't sufficiently new to satisfy the urgency requirement. Now Apple has officially introduced the iPhone 14 and (unsurprisingly) described it as a 5G-capable product.

A similar situation already occurred 11 years ago when Samsung (unsuccessfully) sought a preliminary injunction in France against the iPhone 4S.

In April, the European Court of Justice resolved a request for a preliminary ruling (which originated from Munich) in plaintiff's favor and stressed that preliminary injunctions over patents must be reasonably available. The specific issue was whether an asserted patent would have had to previously survive an adversarial proceeding involving materially identical invalidity contentions. That used to be an important question in Germany, but the ECJ opinion made it clear that PIs over patents are a key enforcement mechanism under the European Union's Intellectual Property Rights Enforcement Directive (IPRED).

What could Ericsson do now--and when would it have to act? By the way, it's not just about Ericsson: the patent community's operating assumption is that Apple's patent license agreement with Nokia expired a couple of months ago, and InterDigital's CEO confirmed that Apple's agreement with his company will expire in about three weeks from today. So there are other potential plaintiffs. In InterDigital's case, the clock wouldn't start ticking while a license agreement is in place, so InterDigital would have until the end of October to bring a PI motion.

For Ericsson as well as other potential plaintiffs, the question would then be whether to first obtain an actual iPhone 14 and then file a PI request, or whether to file now.

For cases involving SEPs, I believe Apple's announcement of the impending launch of 5G-capable devices would be a sufficient basis for going to court. There hasn't been a SEP PI in Germany so far (at least to my knowledge), but even the FRAND part could be resolved. I would consider it a perfectly reasonable interpretation of the ECJ's decision in the aforementioned case (Phoenix v. Harting) that preliminary injunctions are meant to be available wherever permanent injunctions would be. If the standard for validity determinations shouldn't be more exacting in PI cases than in full-blown main proceedings according to the EU's top court, the same should apply to FRAND.

In Ericsson v. Apple, the courts in Munich, Mannheim, and Dusseldorf already have a pretty well-developed FRAND record before them, owing to the cases that were filed in January. The parties must already have exchanged several pleadings on that issue. In fact, the first German Ericsson v. Apple SEP case will go to trial in two months from today (in Mannheim).

Based on the state of play in those already-pending cases, Ericsson by now also has a pretty good idea of where Apple's invalidity arguments are least likely to persuade the courts.

I don't know whether Ericsson will try to force a quick settlement by getting the iPhone 14 banned at the earliest opportunity; I just wanted to explain that it would be an option. And even if Ericsson decided not to do so, Nokia might. Nokia already has various patents that German courts have deemed standard-essential and likely valid. A renewed Nokia v. Apple patent litigation campaign could result in a first-round knockout within a couple of months.

Apple is spending a lot of money on SEP devaluation efforts (so much that Apple doesn't even want to disclose those amounts to the USITC), but its 5G licenses will undoubtedly cost a lot more than its 4G licenses because the case law in various key jurisdictions favors SEP holders and hold-out tactics that enabled Apple to squeeze SEP licensors just like any other of its suppliers in the past won't work this time around.

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SHOCKING: Nokia patents, other lawsuits force OPPO, OnePlus out of German market--first smartphone maker in history to exit major market over patent enforcement

The history of phones has been linked to patents ever since Alexander Graham Bell patented the telephone in 1876. One of humanity's dreams materialized. Fast forward 146 years, and nothing short of a nightmare has come true: a very significant phone maker has actually exited--not merely threatened to exit--one of the largest markets in the world--Germany--as a result of patent assertions.

I became aware of this shortly after yesterday's post on two standard-essential patent (SEP) injunctions Nokia had just obtained against OPPO from the Munich I Regional Court. Previously, the Mannheim Regional Court had granted Nokia a non-SEP injunction in June as well as a a SEP injunction (over two patents from the same family) in July.

Nokia may win one or more additional injunctions on Tuesday. OPPO has its own countersuits pending, but those are taking longer.

While U.S. and UK courts would hear extensive testimony from expert witnesses in such cases, and German courts appoint their own experts in cases of far lesser significance (such as construction law disputes over only a few thousand euros), neither the Mannheim court nor the one in Munich appointed an economic expert to analyze whether the parties' positions were fair, reasonable, and non-discriminatory (FRAND). In all three SEP cases, the decisions were based on the judges' own determination that Nokia had discharged its FRAND licensing obligations and OPPO was an unwilling licensee.

I'm now going to report and comment on the situation in multiple parts:

1. Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

2. Hard evidence of OPPO and OnePlus having left the German market

3. Other patent assertions against OPPO in Germany

4. Why OPPO's calculus may simply make economic sense

5. Implications for Apple, Samsung, and Xiaomi

6. Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

7. Tactical implications for Nokia-OPPO licensing negotiations

8. German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

Market shares: OPPO 10%, OnePlus 2-3%, and (soon to follow?) Vivo 8%

According to Canalys, OPPO's worldwide market share was 10% in the first quarter of 2022--slightly down from 11% year-on-year. And there's another 8% for Vivo, which is not an OPPO affiliate, but like OPPO belongs to BBK Electronics Corporation of Guangzhou, China, and is also being sued by Nokia in Germany. Vivo hasn't exited the German market (here's a German Vivo product page) as there is no injunction in place yet, but given that OPPO has made the determination that it was prudent to leave the German market and to reject Nokia's royalty demands, it seems likely that--faced with the enforcement of an injunction--Vivo, too, would independently reach that conclusion when running the numbers.

So, in the short term we're talking about the exit of smartphone brands accounting for more than 10% of the market (OPPO + OnePlus), and in the mid term we may be talking about more than 10% (OPPO + OnePlus + Vivo). Vivo has much less of a market presence in Germany than OPPO.

When phones accounting for 10% or more of unit sales in a large market--and an even higher percentage of the low- and mid-range segments--become unavailable, it cannot be denied that there is an impact on consumer choice and possibly even a very significant output restriction in these times of chipset shortages. That, of course, does not mean to blame patent holders or the patent system. I'm talking about the practical consequences of this. This is plainly massive.

Hard evidence of OPPO and OnePlus having left the German market

I had mentioned in several previous posts the possibility of OPPO determining that it was too costly to stay in the German market, and then I ran a Twitter search to see whether someone else had also reported on yesterday's Nokia v. OPPO injunctions #3 and #4. I found this tweet by OPPOblog's Dominik Lux and another one that pointed me to this Go2Android.de article. Yesterday, Caschys Blog also reported on this development.

I've also verified the situation myself. OPPO's German website contains the following note (click on the image to enlarge):

That note translates as follows:

"Currently, no product information is available on our website.

"Q: Can I continue to use OPPO products without limitation, receive support, and receive future updates?

"A: Yes, you continue to be able to use your OPPO products without limitation, receive support, and of course you will receive all future updates."

The removal of product information is key because German patent injunctions typically enjoin a defendant not only from making and selling the products that have been held to infringe, but also from advertising them.

As for the availability of future over-the-air (OTA) software updates, Nokia can't do anything about that unless and until it enforces a patent on a technique that is essential to Android. Cellular standards are implemented at the hardware level, not in Android itself. The WiFi non-SEP over which Nokia won its first German injunction against OPPO can be worked around, but even that one may be implemented at the chipset level.

The German OnePlus store delivers the following when one clicks on the "Phone" category (click on the image to enlarge or read the text below the image):

"Uh-oh! Nothing is found.

"Try searching with different filters."

Some OnePlus accessories are still available. They are not among the accused products (for now).

German injunctions are binding only on the defendants, not on third parties. Therefore, resellers still have OPPO and OnePlus products in stock--though it's unclear for how much longer that will be the case. The largest one of those resellers is Deutsche Telekom (T-Mobile), which carries five OPPO and six OnePlus products as you can see in the following screenshot (click on the image to enlarge):

In the part on tactical implications for the Nokia-OPPO licensing negotiations I'll discuss what the parties' options with a view to OPPO's resellers are.

Other patent assertions against OPPO in Germany

While Nokia is the only patent holder with a German injunction in force against OPPO and OnePlus at this stage, there are other patent cases pending against OPPO and OnePlus in German courts:

• In December, U.S.-based patent licensing firm InterDigital announced patent infringement complaints in Germany, the UK, and India.

• Another patent licensing firm from the U.S., VoiceAge EVS, is also suing OPPO in Germany. Just this week, OPPO achieved the (appealable) invalidation of one VoiceAge patent shortly after another Chinese smartphone maker--Xiaomi--had settled shortly before a pair of Munich injunctions would potentially have come down.

• There may be even more than meets the eye, as German lawsuits are not publicly listed. One has to contact the press offices of the courts in order to find out, and I haven't recently inquired about cases that other parties than Nokia, InterDigital, and VoiceAge EVS have filed against OPPO.

• Furthermore, it is impossible to find out from the outside what other patent holders may have threatened OPPO with patent assertions in Germany that could happen--or could have happened--in the near term.

Why OPPO's calculus may simply make economic sense

The totality of the injunctions that have come down, as well as other pending and threatened cases, faces OPPO with the choice of

• taking global portfolio licenses on the patent holders' offered terms, thereby reducing margins and/or (as a result of price increases) the company's competitiveness in the rest of the world, or

• forgoing potential profits in Germany, possibly even in the long run, in favor of maintaining the company's margins and competitiveness in the markets where it generates the bulk of its sales.

It's what chess players call a gambit. Economically, it's an "op cost" (opportunity cost) analysis of two alternative scenarios.

According to the BITKOM industry association (of which Nokia is a member, too), the annual sales volume of smartphones in Germany is approximately 20 million devices with an average price of approximately 550 euros (US$560). The median would be more interesting to know, as Apple with its sky-high prices is not representative of the rest of the market. It is a safe assumption that OPPO's average price--even with OnePlus included--is significantly lower. That would mean a quantity of roughly 2 million units, at an average price of maybe 400 euros (US$407). If we assume a margin of maybe 10%, that would mean annual profits of approximately 80 million (euros or U.S. dollars).

On Thursday, InterDigital discussed OPPO's global sales volume in a conference call with investors, and an estimate of 200 million units was mentioned (I knew that the number was well over 100 million units per year). That means OPPO generates maybe about 1% of its global sales in the German market.

If we now compare those 80 million euros/dollars in annual profits from Germany to the impact of paying elevated patent royalties on the other 200 million units, the simplest way to look at it is that even if OPPO expected to save only about 40 cents in patent royalties on a per-unit basis, it would make sense to just leave--and even in the long run, stay out of--the German market. The difference between Nokia's and OPPO's positions may be a lot greater than that--and then there are various other patent holders, including the ones already suing OPPO in Germany. In the total of all the patent holders seeking leverage in Germany now or later, the per-unit cost increase could amount to several euros/dollars.

If OPPO assumed that it can get a substantially better deal in a matter of weeks or months, then it would pay off big-time to forgo some German sales, especially during the slow summer season.

OPPO may never really lose 100% of its German sales. Resellers and even consumers may buy products in other European countries, such as Austria or Poland.

Obviously, the question is then whether Nokia will get leverage over OPPO--or OPPO over Nokia, as it's a two-way dispute--in other jurisdictions, as cases are pending in many countries. I'll talk more about the tactical options both parties have from here on out further below.

Implications for Apple, Samsung, and Xiaomi

For Apple and Samsung, and probably even for Xiaomi, the calculus would be rather different if faced with a similar situation.

Apple--which has yet to renew its Ericsson, Nokia, and InterDigital license agreements, two of which have expired and the last one of which is about to expire--has far higher profit margins than OPPO, and doesn't target similarly price-sensitive customer groups as OPPO does especially (but not only) in Asia.

For instance, Apple generates only 0.2% of its worldwide sales in Colombia, but the cost of not being able to sell its 5G iPhones and iPads there is already substantial compared to the license fees Ericsson is seeking. Exiting the German market wouldn't be an option for Apple.

Samsung (which also has to renew the core part of its Nokia license rather soon) and Xiaomi are somewhere between Apple and OPPO in terms of per-unit prices, profitability, and market shares in affluent vs. developing countries.

Comparison to previous market impact of other patent enforcement (particularly--but not only--in Germany) and Apple's about-face in the UK

OPPO's withdrawal from the German market is of an unprecedented scope and scale. So far there had only been

• sales bans that temporarily affected limited parts of a given smartphone maker's line-up,

• temporary removals of features, and

• cases in which companies publicly or privately said they were contemplating exiting a market as an alternative to caving to a patent holder's demands, but in none of those cases did it actually happen when push came to shove.

The most recent case of a temporary exit from the German market concerning some--not all-- of a smartphone maker's products became known six months ago and involved HMD. That was due to the enforcement of patent injunctions by VoiceAge EVS.

The previous incident resulted from Qualcomm's enforcement of a patent injunction against Apple. That one, too, affected only some products: the iPhone 7 and 8, which were already the low-end iPhones at that time. While Apple was temporarily unable to sell them directly in its Apple Stores or online, those devices remained widely available through resellers. The problem was solved by Apple incorporating Qualcomm--not Intel--chips into the iPhone 7 and 8 for the German market. Had Apple and Qualcomm not worked it out, the appeals court would have lifted the injunction anyway: that's precisely what it did at a time when it no longer mattered.

In early 2012, Motorola (while in the process of being acquired by Google) was enforcing a Mannheim SEP injunction against Apple. As a result, Apple was unable to sell the iPhone 3G, the iPhone 3GS, and the iPhone 4 (but not the iPhone 4S), and all 3G/UMTS-capable iPads in Germany. But what was really going on was that Apple iteratively offered Motorola better terms until the appeals court--the Karlsruhe Higher Regional Court--deemed Apple's offer reasonable enough to stay the enforcement of the injunction.

What lasted more than a year was the impact of Motorola's push notification patent injunction. Apple had to disable that feature until the appeals court lifted it in 2013.

IPCom enforced a patent injunction against HTC in Germany before that, and a motion for contempt-of-court sanctions was brought, but there was no market impact.

Last year, Apple's outside counsel told a UK judge that her client might exit the British market if the court set too high a global royalty rate, but ultimately agreed to accept the UK court's determination, and the related trial took place a couple of months ago. (By the way, FOSS Patents was referenced on multiple occasions during that trial.)

Experienced licensing negotiators have witnessed countless situations in which companies said that if they were going to lose a case in a given jurisdiction, they'd rather leave that market than settle on a worldwide basis. Generally, no one ever took such statements too seriously. But with OPPO in Germany it appears that a point has been reached where a significant player has determined that pulling out is preferable over backing down.

Tactical implications for Nokia-OPPO licensing negotiations

Nokia and OPPO can hardly know what the other side's intentions are:

• Given that the current situation is unprecedented, Nokia may assume that OPPO is bluffing and not going to stay out of the German market for too long after the slow summer is over and OPPO's products that are currently in its resellers' warehouses have been sold.

  But if Nokia miscalculates in this regard, and OPPO actually does pay the price of staying out of the German market (also with a view to other pending patent cases), then the point will come at which Nokia is the more vulnerable side in Germany. OPPO's own enforcement of true 5G patents is likely to lead to injunctions against Nokia's mobile base stations.

• It would be reasonable for OPPO to assume that Nokia will want to turn the page on that dispute and focus on bigger fish to fry: Apple and Samsung--companies that, unlike OPPO, could not afford to pull out of Germany only to avoid taking a patent license on Nokia's preferred terms.

  But there's another side to this. Nokia knows that whatever deal it reaches with OPPO will be referenced in potential disputes with Apple and Samsung as a comparable license agreement. Nokia can argue that OPPO's average selling price is far lower than Apple's, and significantly lower than Samsung's. But the headline royalty rate is going to be part of the discussion.

  And this works both ways: OPPO won't be interested in weakning its position vis-à-vis other SEP holders (such as InterDigital).

With a view to Nokia's potential future disputes (Apple, Samsung etc.), there's also an upside and a downside from continued litigation with OPPO:

• With favorable decisions like yesterday, Nokia grows its selection of "surefire" patents it can assert against the likes of Apple and Samsung.

• But there could also be setbacks and losses. For instance, OPPO--maybe not least because the Nokia dispute forced it out of the German market for now--didn't take a license from VoiceAge EVS (unlike Xiaomi, which didn't take its chances), and defeated one VoiceAge patent in the Federal Patent Court (whose decision is now going to be appealed).

• Another risk factor for Nokia is that the appeals courts--with the Munich Higher Regional Court being a huge question mark since the new judge presiding over its patent-specialized division has virtually no track record in patent infringement jurisprudence--could overturn some of those first-round wins for technical reasons and/or disagree with the lower courts on FRAND-related questions.

What's unclear is how big a part of OPPO's problem some other German lawsuits (InterDigital, VoiceAge EVS, and any potentially unknown or yet-to-be-filed ones) are. The aggregate of the bid-ask differences between OPPO and those other patent holders could be comparable to, or greater than, the one in the Nokia case. In that case, settling with Nokia would at best solve half the problem fro OPPO. However, against InterDigital and VoiceAge EVS, OPPO can't countersue as those companies aren't selling products in Germany: their revenue model is patent licensing.

Then there are all those other jurisdictions in which Nokia and OPPO are currently embroiled in litigation. Simultaneously with the German cases, Nokia brought complaints in London, Paris, and Barcelona. OPPO sought a declaratory judgment in the Netherlands, where Nokia responded with non-compulsory counterclaims. In China, OPPO is seeking a FRAND determination, and Nokia brought infringement claims. Nokia is suing in India and Indonesia. In the latter jurisdiction, OPPO has so far defended itself, though Nokia could refile. Nokia also sued in Russia, but withdrew there over the Ukrainian situation--but then brought cases in Sweden and Finland.

Nokia may be able to obtain injunctions in some other jurisdictions, but it remains to be seen what the courts in those countries will say about Nokia's and OPPO's FRAND compliance. Divergent decisions are possible.

There are also tactical decisions to be made by Nokia in Germany. It's possible that resellers like Deutsche Telekom and MediaMarkt will just buy OPPO products in other countries within the EU's single market, such as Austria or Poland. Nokia wouldn't want to sue the carriers as they are its network infrastructure customers. What Nokia could consider is a petition for border seizures by customs authorities (here's a German-language article (PDF) by the Bardehle Pagenberg firm on that topic).

We may not see an immediate settlement during the summer, but the closer we get to the Christmas Selling Season, the more likely it is that a deal will happen. Otherwise, OPPO would have nothing left to lose in Germany, but could at some point enforce injunctions against Nokia in Germany.

Should there be no settlement in the near term, we'd likely also see the parties file cases with the Unified Patent Court (UPC) in order to obtain EU-wide injunctions.

German patent injunction reform: collective failure by Apple, Google, Nvidia, Deutsche Telekom, SAP, automotive industry

It's been almost exactly a year since a German patent "reform" bill entered into force. While OPPO wasn't visible in the lobbying efforts related to that piece of legislation, companies like Apple, Google, Nvidia, Deutsche Telekom, SAP, and the German automotive industry had completely false hopes that a modified injunction statute (§ 139 of the German Patent Act) would lead to a departure from Germany's near-automatic injunction regime.

I've commented on that monumental lobbying failure on various occasions, such as earlier this year when two Dusseldorf judges made it clear that patent holders would continue to obtain injunctions in virtually every case where they prevail on the technical merits. More recently, there have been court rulings--also from Dusseldorf--that clarified that the situation was still the same as before. German judges have pointed out in their decisions as well as in public speeches that the language that got inserted into § 139 last year merely codifies the prior case law, under which a plaintiff either has to make stupid mistakes or seek a sales ban on, say, the printing of bank notes or a COVID vaccine in order to be denied an injunction. It's not even clear whether a proportionality defense could succeed in a single case in which a defendant wouldn't be entitled to a compulsory license anyway.

A few months ago, even ip2innovate, a lobbying front for the likes of Google, Nvidia, Daimler, and SAP--conceded in light of an injunction against car maker Ford that the legislative amendment hasn't really lived up to those companies' expectations. Well, I already predicted it in early 2000 right here on this blog. They just wouldn't believe me then. They now know that I was right with my predictions, and they were strategically on the wrong track.

OPPO's exit from the German market illustrates it again. Being exposed to German patent litigation is a vulnerability that some may prefer to avoid regardless of the opportunity costs from not serving such a large and otherwise lucrative market.

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InterDigital announces patent license agreement with Amazon and confirms Apple agreement will expire by end of this quarter, Samsung next

I just listened to large parts of patent licensing and research firm InterDigital's investor conference call for Q2 and looked at its related SEC filings.

InterDigital CEO Liren Chen mentioned a new license agreement with Amazon. I'll try to find out more about its scope. What was said on the call is that it's a multi-year, worldwide license agreement "covering a range of Amazon’s consumer electronic devices."

It was confirmed that InterDigital's license agreement with Apple--which was apparently last renewed in 2016 (see this Reuters article)--will expire by the end of this quarter, and that the agreement with Samsung will expire by the end of the following quarter (i.e., by the end of the year). Apple has been a licensee to InterDigital's patents since the launch of the first iPhone in 2007Samsung has been an InterDigital license for about 25 years.

There are currently two significant patent assertion efforts by InterDigital: they sued OPPO in late December (according to InterDigital, the annual device volume there amounts to approximately 200 million units including OPPO's affiliates), and they are awaiting a UK ruling in a Lenovo FRAND case.

The last major litigation that was settled (almost precisely a year ago) targeted Xiaomi.

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Apple under pressure: lost patent appeal against Optis--and Optis v. Apple FRAND injunction trial is underway in England & Wales High Court of Justice

Patent licensing firm Optis, which is part of a group that also includes PanOptis and Unwired Planet, is inching closer to the major liquidity moment that a royalty payment (including back-royalties) from Apple will represent. Yesterday, the England & Wales Court of Appeal (Lord Justices Arnold, Phillips, and Birss) affirmed an Optis win over a cellular standard-essential patent (SEP): EP2229744 on a "method and arrangement in a wireless communication network". Apple appealed the June 25, 2021 judgment by the High Court of Justice according to which that patent is valid and standard-essential, but in vain.

In the UK, a single SEP that is held to be valid and infringed is all the owner of a SEP portfolio needs to seek a "FRAND injunction": an injunction that becomes enforceable unless the implementer takes a license at the royalty rate determined by the High Court of Justice to be FRAND. And that license will have to be a global portfolio license even though the technical merits are established only with a view to a UK patent (typically, the UK part of a patent granted by the European Patent Office) and the injunction bans the accused product(s) only from the UK market. That is the law of the land there since Unwired Planet v. Huawei.

The aforementioned FRAND determination is made subsequently to a FRAND trial. And the Optis v. Apple FRAND trial started yesterday before Mr. Justice Marucs Smith. It is obviously no coincidence that the appeals court rendered its opinion on the same day, though time wasn't of the essence as Optis has prevailed on two other patents: EP2187549 and EP2690810, both on a "radio communication device and response signal spreading method (they from the same family, of which EP'744--the patent underlying yesterday's appellate decision--is not a member). A March 15, 2022 judgment by the High Court of Justice considered those patents valid in an amended form, and still standard-essential.

So Optis has overfulfilled the requirements for a UK FRAND trial, though it didn't win across the board (with the unique exception of VoiceAge EVS, I'm not aware of any SEP holder that wins each and every case). There was one case in which a former LG patent asserted by Optis was declared invalid (November 25, 2021 judgment), and another in which Optis prevailed in the High Court of Justice (October 16, 2020 judgment over EP1230818 on a "method for improving handovers between mobile communication systems"), but the appeals court overturned the decision in a November 10, 2021 decision.

Here's an overview of the six (A-F) UK parts of the Optis v. Apple dispute:

• Trial A (EP'818): Optis won in High Court but Apple's appeal succeeded

• Trial B (EP'744): Optis won both rounds

• Trial C: former LG patent deemed invalid

• Trial D (EP'549 and EP'810): valid in amended form, and infringed; Apple can still pursue an appeal

• Trial E: the FRAND injunction trial that started yesterday

• Trial F: Optis was denied an unqualified injunction (September 27, 2021 judgment), which would have been an extraordinary remedy in a UK SEP case, where a conditional FRAND injunction is now the norm

Optis has also won a U.S. retrial against Apple, with a $300 million damages award, and Judge Rodney Gilstrap of the United States District Court for the Eastern District of Texas affirmed that decision last month. But in the U.S. it's hard to actually get to the point of enforcing a damages award against a deep-pocketed defendant--and even more so against Apple, which according to Qualcomm has a history of coercing "low-ball agreements" with SEP holders. What Apple (and its allies) just failed to achieve, however, was the reinstatement of a 2013 U.S. government SEP policy position. And in U.S. SEP cases it's increasingly going to have to respond to allegations of hypocrisy given how its positions on App Store access fees contradict its own arguments for bringing down SEP royalties. Apple has already lost a fair amount of credibility in the 5G SEP dispute with Ericsson. I don't know if Optis will try to make any App Store-related arguments in its dispute with Apple. UK patent judges may be aware of the issues, even more so now that their country's antitrust agency, the Competition & Markets Authority (CMA), announced a market investigation into Apple's (and Google's, but primarily Apple's) strangehold on mobile browsers and cloud gaming.

By originally threatening to leave the UK market if the High Court of Justice were to set a royalty rate Apple wouldn't want to pay (a position from which Apple backtracked), Apple made itself no friends in the UK patent judiciary. The decisions there will still be fair and correct, but Apple can't expect

Apple unlikely to benefit from protracted UK litigation with Optis

The current FRAND trial will last weeks; a subsequent decision may take many months; and Apple hasn't exhausted all appeals yet. But the Optis v. Apple dispute has reached a stage at which Apple might want to settle, and here's why I think so:

As a litigation watcher who already followed Unwired v. Huawei (not every step of the way, but I did watch the entire UK Supreme Court hearing), I believe Apple is unlikely to achieve much on appeal--other than delaying the inevitable, of course. Not only is it going to be hard for Apple to get a better deal with Optis (which is not known for leaving money on the table, let's put it that way) but there is a clear and present danger of further case law--be it the High Court's FRAND determination or any further appellate decisions--cementing the principles governing SEP cases in London and exposing Apple as an unwilling licensee. That could prove costly in other cases targeting Apple, which might be brought by companies with much larger portfolios (and thus far greater royalty amounts at stake), such as Nokia and InterDigital. (As I just mentioned InterDigital, they recently had a FRAND trial against Lenovo, and a decision will come down soon.)

Lord Justice Colin Birss--before being promoted to the Court of Appeal--wrote the original Unwired v. Huawei opinion, which got affirmed by the Court of Appeal and the UK Supreme Court. He is now serving on the Court of Appeal, and would presumably be particularly influential if any new FRAND case goes up there. Since the Unwired v. Huawei/Conversant v. ZTE pair of caes that reached the UK Supreme Court, no actual FRAND determination has been made in London. In a scenario in which InterDigital and Lenovo settle, Optis v. Apple could be the first such decision since that seminal pair of cases to be appealed.

Even the UK Supreme Court--which like the top courts of other jurisdictions doesn't have an obligation to hear each and every appeal--would be unlikely to come to Apple's aid. I remember all too well how Lord Justice Kitchin gave a speech at Munich's Ludwig Maximilian University in early 2019 which was essentially just a defense of his own Unwired v. Huawei appellate opinion. By the time of that speech, he had been promoted the UK Supreme Court. He wasn't a member of the five-judge panel that heard the final appeal (it would have been awkward--and maybe not even permissible--for him to deal with the same case again at a different level of the judiciary), but he might have lobbied his Supreme Court colleagues, and he almost certainly would hear an Optis-Apple case. His views on SEP enforcement are fundamentally at odds with Apple's.

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