Dutch appeals court sides with Nokia in microphone case involving the HTC One

In April Nokia won an injunction in the Netherlands barring STMicroelectronics from supplying to HTC any dual-membrane microphones that were meant to be built exclusively for Nokia. As I explained then, Nokia holds a patent on the differentiating aspect of this microphone technology in the United States, but the related European patent application had not been granted, which is why the Dutch court did not order a recall. Still, this dispute is relevant in the wider Nokia v. HTC context, especially since HTC rejects in no uncertain terms any allegations of making unauthorized use of Nokia's inventions.

Today the Gerechtshof Amsterdam threw out STMicro's appeal (appellate opinion in Dutch). As a result, the injunction ordered by the lower court remains in effect, and HTC cannot incorporate the relevant STMicroelectronics microphones into its flagship HTC One device.

This is Nokia's statement on the Dutch ruling:

"Today we heard from the Amsterdam Appeals Court that it rejected STMicroelectronics' appeal in the microphone case first brought in April. This means that ST may not supply the High Amplitude Audio Capture (HAAC) technology microphones to other parties than Nokia until March 1, 2014.

Nokia welcomes this decision, which recognises and reinforces the value of our continuing investment in innovation."

In other Nokia-HTC news, the Mannheim Regional Court, Germany's leading smartphone patent venue, today decided (as I predicted) to stay the Nokia v. HTC patent infringement action over EP0882347 on "a radio telephone". HTC was found to infringe, but the court strongly doubts that the patent-in-suit is valid. Nokia issued the following statement on today's Mannheim ruling:

"Nokia is pleased that the court has agreed that HTC has infringed another patent and we look forward to demonstrating its validity at a future date. HTC needs to end its unauthorized use of Nokia’s proprietary innovations."

HTC has already obtained various stays (including a couple of stays to which Nokia stipulated) of German Nokia patent cases. Since parallel nullity (invalidation) proceedings before the Federal Patent Court generally take much longer than infringement actions filed in Mannheim or Munich, HTC has nothing to fear from those patents in the near term. But in the event the Federal Patent Court upholds a patent at issue in a stayed action, an injunction can issue very shortly thereafter.

Yesterday a different civil chamber (panel) of the Mannheim Regional Court dismissed Nokia's second VP8-related patent infringement action against HTC. In my report on the second VP8 trial I explained that the make-it-or-break-it issue in this case is a single claim construction question that could be viewed differently on appeal or in different jurisdictions where the same European patent or any of its non-European equivalents might be asserted. In that post I also said that I've seen the order to reopen the proceedings in Nokia's first VP8 case after a finding of a likely infringement. Recently Nokia brought its third patent assertion against Google's VP8 video codec (part of the WebM Project) in an ITC complaint.

Nokia provided the following statement on the VP8 ruling:

"Nokia respectfully disagrees with the decision of the court and we will consider our options. This is only one case among 50 patents originally asserted against HTC, and Nokia has recently filed further cases. To date, HTC has been found to infringe Nokia patents and an injunction is already in effect in Germany as a result of those decisions. HTC needs to end its unauthorized use of Nokia's proprietary innovations."

In summary, Nokia won a case before a Dutch appeals court, narrowly lost a VP8-related one in Germany (which it may appeal and/or pursue in other jurisdictions), and one other Nokia case was stayed, which benefits HTC for the time being but could still result in an injunction if Nokia defends the patent before the Federal Patent Court of Germany.

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War of words between HTC and Nokia after Dutch and German court rulings -- and a new lawsuit

Judging by their public statements, tensions appear to be on the rise between Nokia and HTC. The Rechtbank Amsterdam (Amsterdam District Court) issued a preliminary injunction on Monday against STMicroelectronics, stopping the supply of microphones to HTC that were meant to be built exclusively for Nokia until March 2014. The ruling was published yesterday (in Dutch), the same day that a German court gave short shrift to a Nokia v. HTC lawsuit targeting Google Play with a patent. Unlike the German case, the Dutch litigation was not about patent infringement. The ruling says that Nokia's European patent application covering this type of microphone is still pending, though a patent has already issued in the United States. The fact that a patent application can't give rise to an injunction is the reason why the court rejected Nokia's additional request for a recall of any shipments violating the exclusivity clause in the Nokia-STMicro agreement. Actually, a court-determined breach of such a contract is infinitely more problematic conduct on STMicro's part than an act of incidental patent infringement would constitute. Whether HTC had knowledge of the circumstances under which STMicro supplied those microphones is unknown. It may or may not have been a good-faith purchaser, and maybe this will be clarified in some other litigation at some point.

After the German ruling, HTC sent a scathing statement to the media. Engadget quoted it in full (click on the "Show Full PR Text" button) and so will I, with comments below each paragraph:

"Today, the District Court of Mannheim dismissed a complaint by Nokia that HTC had infringed the German part of patent EP 1 581 016 (the '016 patent) entitled 'A Communication Network Terminal for Accessing Internet', and awarded HTC its legal costs. In an almost unprecedented move, the Court handed down its judgment immediately after the hearing, indicating that Nokia's infringement case was so poor that the court required no time to deliberate further after hearing Nokia's oral arguments. Nokia claims to have spent €45bn on R&D in the last 20 years, but this investment has apparently not been supported by effective patent prosecution."

As I explained yesterday, the court felt that there were three reasonable defenses against infringement, the second one of which it considered very strong because Nokia's infringement contentions were based on a claim construction substantially broader than the one the court deemed appropriate. If a court feels very strongly about a finding of non-infringement, it can dismiss a case right away. It doesn't happen too frequently, but a clear case isn't necessarily a "poor" case.

Even if this particular case was considered "poor", it was a case about one patent of approximately 40 patents Nokia has already asserted against HTC, and the 45 billion euros Nokia spent on R&D resulted in the grant of north of 10,000 patent families, not just one patent. Nokia made a similar point in its own statement, which I'll quote further below.

"As with all of Nokia's patents asserted against HTC in Germany, HTC believes that this patent is invalid and will be continuing with the invalidity actions pending before the German Federal Patents Court and the English Patents Court."

Nokia is also challenging both patents HTC (including its wholly-owned subsidiary S3 Graphics) is asserting against it. Invalidity is a defense that these types of litigants routinely raise. And most patents are not valid in the form in which the patent office granted them. They are either invalid in their entirety or they can only be salvaged through amendments that have a narrowing effect. Still, it's unrealistic to assume that all of Nokia's asserted patents are invalid. Many probably are, but some probably aren't.

"To date, of the 24 infringement actions that Nokia has brought against HTC in Germany, two (EP 1329982 and EP 1474750) have been stayed because of concerns over validity, and three (EP 0812120, EP 1312974 and EP1581016) have now been dismissed outright. Together these decisions cast serious doubt on the strength of Nokia's patent portfolio and we remain confident that it poses little threat to HTC. HTC is delighted with this decision."

HTC has so far done a great job defending itself (as it did against Apple). In recent years it's become a really sophisticated defendant against patent cases, effectively addressing substantive issues and seizing and creating opportunities for delay. But the problem it faces is that Nokia can fail to win countless patent cases and needs to win only one highly impactful one, or a few that are collectively very impactful. In an attempt to win impactful rulings plaintiffs sometimes propose rather ambitious claim constructions.

In its own statement, Nokia refers to the Mannheim case as well as the Dutch ruling:

"Nokia respectfully disagrees with yesterday's decision in Mannheim. But this was about just one of many Nokia patents in suit against HTC in Germany, the US and UK."

If Nokia agreed with the court, it would have withdrawn its complaint at the trial. The second sentence is similar to what I said further above: one can't judge Nokia's entire patent portfolio (or its investment in innovation over the last two decades) by the way in which one court (albeit a very patent-savvy court) adjudges one particular patent infringement allegation.

"In the last few weeks, Nokia has obtained two court injunctions relating to HTC products. The Mannheim Court ordered HTC to stop infringing Nokia's power saving patent, technology which gives Nokia smartphones longer standby times. The Amsterdam District Court has now stopped HTC from sourcing microphones it claimed as its own in the HTC One but which are exclusive to Nokia, built on our innovation. As a result, HTC has now confirmed to Nokia that it will stop using them."

You can read more about the power-saving patent injunction in this report on the ruling. It's a win for Nokia, though not a knockout blow. Non-standard-essential patents can be worked around, but workarounds frequently come with drawbacks.

"Rather than keeping score as if this were a football match, Nokia just wants to stop HTC from copying technologies that we have created over twenty years of market leading research and development. Though litigation is not Nokia's preferred option, it seems that HTC will only stop doing so when forced to by the courts."

I understand that Nokia isn't interested in its hit rate or drop-out rate as long as it achieves the desired outcome. I still think it's appropriate for HTC to count its defensive wins, though the conclusions it draws from these statistics go too far. Nokia used a football (soccer) analogy, and in low-scoring games it doesn't matter whether you try 10, 20 or 30 times before you score a goal: at the end of the day, you just have to score more than your rival.

Nokia has a patent portfolio of enormous breadth and depth and can always bring new assertions. For example, Nokia said in an earlier version of its statement that it most recently filed a patent infringement lawsuit against HTC in Mannheim, Germany over EP1579613 on a "method and apparatus for enabling a mobile station to adapt its revision level based on network protocol revision level". The patent is related to wireless standards, but hasn't been declared essential to any.

At some point these two companies will put their disagreements behind them and strike a license deal. It may take longer than Nokia originally hoped or thought (otherwise Nokia wouldn't have filed its latest infringement complaint against HTC almost a year after the original wave of assertions), but ultimately it will happen.

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