Avanci announces patent pool for ATSC 3.0 (aka NextGenTV) broadcasting standard that is ubiquitous in U.S. and South Korea: initial licensors hold more than 70% of SEPs

From the position of strength of its standard-essential patent (SEP) pool for connected vehicles--though Charles River Associates may not acknowledge the full extent of it--the Avanci brand is expanding into new segments of the patent licensing business. The Avanci Aftermarket pool launched last month and covers connected devices that are not pre-installed in cars. That is obviously an adjacent business area. The new patent pool announced today is named Avanci Broadcast and defined as "a patent licensing platform for the ATSC 3.0 broadcasting standard".

Standard: The Advanced Television Systems Committee (ATSC) standards were developed in the U.S., but have also been adopted in its neighbor countries (Mexico, Canada), and in South Korea. In other parts of the world, such competing standards as DVB and ISDB are more popular, though ATSC 3.0 may be adopted in several additional countries. In 2009, the U.S. made a complete switchover from analog (NTSC) to digital (ATSC) broadcasting of terrestrial TV programming. The latest version, ATSC 3.0, is also referred to as NextGen TV, but not mandatory, though it is technologically superior.

Avanci's press release describes the benefits of ATSC 3.0 over its predecessor version as follows:

"... ATSC 3.0 enables 4K / UHD broadcast with higher frame rates, better color and sound, and other technical improvements over the previous standard. It also works hand-in-hand with content delivered over the internet for services such as customized advertising, on-demand and premium content, and interactivity."

Licensors: The initial group of Avanci Broadcast licensors includes

• South Korean consumer electronics powerhouses Samsung and LG Electronics;

• Japanese consumer electronics icons Sharp and Panasonic;

• ONE Media, a subsidiary of Sinclair Broadcast Group, which according to a recent press release "owns, operates and/or provides services to 185 television stations in 86 markets, owns multiple national networks including Tennis Channel and Stadium; has TV stations affiliated with all the major broadcast networks and owns and/or operates 21 regional sports network brands"; and

• South Korean research firm ETRI and U.S. licensing firm Sun Patent Trust.

Avanci estimates that those patent holders "represent more than 70% of all patent families containing ATSC 3.0 declared essential patents," with "the addition of several more licensors in the coming months" apparently being in sight.

It is unusual for a licensor to issue its own press release on the creation of a patent pool, but that is what ONE Media did today. ONE Media's press release touts the technical benefits of ATSC 3.0 in detail and quotes its Executive Vice President Jerald Fritz:

"The ability to offer this remarkable technology to consumer equipment manufacturers in a simple, all-encompassing license, should ease the process of deploying new receiver products to consumers worldwide. We congratulate Avanci for helping shepherd several leading international organizations toward this common goal."

Licensees: Not only does the pool start with broad coverage of the relevant patent landscape but also with an impressive group of initial licensees. Three of those licenses--Samsung, LG, and Sharp--are also licensors, while Sony is mentioned only in its role as a licensee. According to the press release, those companies are "collectively responsible for the vast majority of ATSC 3.0 televisions sold to date." To be clear, the vast majority of TV sets doesn't mean that most of the licensing work is already done. It could be that some lower-cost TV makers will be harder to convince, and TV sets are not the only type of device to implement the ATSC 3.0 standard. Think of set-top boxes, for instance.

Pricing: The base per-unit royalty rates per TV or set-top box are stated on the Avanci Broadcast webpage. The price matrix there incentivizes signing up early, with the lowest rates applying to license agreements signed by May 31, 2023 ($2.10 per unit for 2022-2025, $2.40 for 2026-2028). Those who sign up after May 31, 2023, but still within six months of shipping their first ATSC 3.0 product, get a rate of $2.75 through 2028, which is less than the $3.00 per unit (through 2028) that all those who sign up after May 31, 2023 and more than 6 months after shipping their first ATSC 3.0 product.

Management: Besides Avanci founder, the press release also quotes the executive in charge of Avanci Broadcast, who is none other than Ilkka Rahnasto of Nokia fame.

Two pools: MPEG LA, which has been a top-notch patent pool administrator for a long time, was first to launch an ATSC 3.0 patent pool. There's limited overlap with respect to licensors (ONE Media, Panasonic, Sun Patent Trust). Pool administrators operating in good faith can always find solutions to avoid duplicative royalties (be they due to previously existing pools or to bilateral licenses). Whether that is much of a practical issue here is unclear: MPEG LA's list of ATSC 3.0 patent licensees is "To Be Supplied" according to the firm's website.

In general, a single pool for a given standard is in the best position to reach a high market penetration (such as Avanci's connected vehicle pool). Fragmentation can lead to frictional losses and reduced transactional efficiencies. But this is a case-by-case question. When a new pool launches with the momentum that Avanci Broadcast apparently has, then there must have been an opportunity that some market actors thought was best addressed by means of a new pool that has the potential to bring everyone together.

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Fifth Circuit denies Continental's SECOND petition for rehearing en banc of its failed 'antitrust' case against Avanci, Nokia, others over automotive patent licensing

A couple of weeks ago, Continental brought--which is rather unusual--a second petition for rehearing en banc, desperately trying to revive its "antitrust" action against patent pool firm Avanci and some of its licensors (Nokia, Sharp, Optis). A prior rehearing petition had resulted in a modification of the panel opinion but the same outcome: there is no such thing as a case here.

There were signs of the renewed petition being viewed unfavorably by the United States Court of Appeals for the Fifth Circuit. First, Conti's request for two additional weeks was denied. Second, the Fifth Circuit treated the tireless, tiresome tire company as a nuisance by not even ruling on its modified request for more time (other than denying it as moot--but only after the deadline Conti sought to get extended). Third, unlike in the case of the first petition, the defendants weren't invited to respond.

On Friday (July 22), the renewed petition was formally thrown out "[b]ecause no member of the panel or judge in regular active service requested that the court be polled on rehearing en banc":

https://www.documentcloud.org/documents/22118637-22-07-22-order-denying-contis-2nd-petition-for-rehearing

Two amicus briefs had been filed again, but they didn't cure the deficiencies of the petition.

Apart from a similarly non-promising case in Delaware state court against Nokia, the only thing left for Conti to do in its U.S. litigation campaign against Avanci and its key licensors is to file a petition for writ of certiorari with the Supreme Court. But this case is doomed either way--while the Fifth Circuit panel's original holding that Conti lacked Article III standing went a bit far, the modified opinion affirmed the district court. Under the affirmed decision, Conti lacked antitrust standing and failed to plead Sherman Act claims. The panel opinion 2.0 didn't mention standing explicitly, but whatever the panel meant: Conti is still at least two steps away from even being allowed to begin discovery. And how can Conti tell the Supreme Court that there is a circuit split when the modified panel opinion is unpublished and non-precedential?

A smart company in Conti's place would try to preserve its credibility with the top U.S. court with a view to cases it could actually win, and which might be even more important (for example, there could be legal issues that are relevant to its core business of making rubber tires). Having watched that "case" for three years now (and having voiced skeptical opinions at all stages, though recently I've mostly been bored and annoyed by it), I guess Conti will file for cert and employ the same tactics I've seen from them lately, which means they'll take some sentences out of context. If one looks at the whole picture, Conti's complaint is utterly deficient as a matter of law, and even if--in an alternative universe--they got discovery, Conti could never establish any wrongdoing here.

Conti and its counsel should be grateful to the Fifth Circuit not imposing abuse-of-procedure sanctions.

While Conti is living in the past and appears unwilling to recognize its error, things are moving fast in the real world. Avanci announced that the window for its early-bird licensing terms is closing. Car makers have until August 31 to take a 4G license on the same terms as the very first licensee, BMW. Come September 1, the rate will go up by a third. I'd be surprised if this didn't result in the remainder of the automotive industry taking licenses. No automaker has so far had a benefit from choosing litigation over licensing. Tesla (obvious given near-simultaneous dismissals, though never officially confirmed), Daimler, Ford, and (with respect to an upgrade from 3G to 4G for its volume brands) Volkswagen all ended up taking the one-stop license rather than deal with roughly four dozen individual patent holders. At the moment, a number of standard-essential patent (SEP) assertions by Avanci licensors against Stellantis (Fiat Chrysler, Opel etc.) and Nissan are pending in Munich, but the rational thing would now be for those companies to take the license ahead of the rate increase.

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Continental bothers Fifth Circuit again with petition for rehearing en banc and makes false representation of practical effects of Avanci patent pool agreement

The United States Court of Appeals for the Fifth Circuit has done everything it possibly could to make automotive supplier Continental realize that its "antitrust" complaint against the Avanci patent pool and some of its licensors (Nokia, Sharp, Optis) is not going to be revived. The court didn't even formally deny Conti's motion for an extension of time to file another petition for rehearing en banc. The deadline was yesterday. Conti's counsel--instead of giving up a strategically lost position--worked over a long weekend (Monday was Independence Day) and filed its second petition for rehearing in the same case, even at risk of being sanctioned for abuse of procedure.

So here's the new petition, on which I'll share a couple of observations further below:

https://www.documentcloud.org/documents/22080066-22-07-05-continentals-renewed-petition-for-rehearing-en-banc

The fundamental problem is still the same: Conti is wasting the judges' time as it won't win regardless of the "issues" the tireless, tiresome tire company purports to raise. While the panel didn't explicitly affirm the district court's holding that Conti lacked antitrust standing, it didn't reverse that part either. A lack of standing could also have been the basis--or part of the reason--for concluding that Conti had failed to state claims. All that the revised panel opinion said that was that "Continental failed to state claims under Sections 1 and 2 of the Sherman Act"--as opposed to saying there's no Article III standing (which is not specific to antitrust but broader) like in the first version. It's not definitively clear whether the district court was affirmed all the way or only with respect to the final part of its analysis. Therefore, Conti's interpretation is not necessarily right, and Conti would have to show in a hypothetical continuation of the process that it had antitrust standing.

Even the lack of Article III standing (the panel's original holding) could come up again, though it's less likely, given that the panel itself withdrew its original decision. At least antitrust standing continues to be a serious issue not addressed by Conti's petition. With a view to antitrust standing it's also important to keep in mind that Conti is simply not the right plaintiff.

The panel opinion 2.0 merely affirms the district court without further analysis, so the district court's decision (almost two years old by now) is all that Conti can attack. Just like after the first panel opinion, what Conti does is to take particular statements out of context--so they look really broad--and to suggest that if those statements were reversed or narrowed, Conti would all of a sudden have a case. Not so. For instance, Conti's petition ignores footnote 15 of the district court's judgment. The context is that Conti says the relevant patent holders defrauded the standard-setting process by making FRAND promises they never intended to keep in the first place, thereby excluding other technologies belonging to right holders who would have complied with FRAND. The district court found that a Section 2 monopolization claim requires an allegation of harm to the competitive process itself, not just to competitors. The district court indeed held that even if some other companies' technologies had not been included in the standard, that would not be anticompetitive unless the competitive process itself was harmed (which is simply settled antitrust law). But it also expressed doubts in a footnote about whether Conti--even if one applied a different legal standard or assumed that Conti had shown harm to the competitive process--had even made a sufficient pleading as to the exclusion of competitors:

"The Court is also skeptical that such exclusion has been properly alleged. Plaintiff only includes conclusory allegations that alternatives were presented and rejected by the SSOs for the 3G and 4G standards and that if there were no alternatives to a given technology, the SSOs would have been obligated to abandon those parts of the standard. [...]. There is no indication of what these potential alternatives were, that they were alternatives to any of Defendants’ SEPs, or that they were excluded because of Defendants’ allegedly fraudulent FRAND declarations. Even if the SSOs had known that the Licensor Defendants did not intend to comply with their FRAND obligations, the SSOs may nevertheless have adopted the Licensor Defendants’ SEPs and chosen to insure compliance based on the Licensor Defendants’ contractually binding FRAND commitments, which are enforceable regardless of any alleged deception by the Licensor Defendants."

So Conti's Section 2 claim is defective in more than one way. Conti makes it sound like the district court is fine with just any deception of an SSO, but in reality, the district court just explained that it takes more than Conti's pleadings to make it an antitrust issue. One major issue with the alleged "fraud" is that it's not about a violation of SSO rules (such as failing to disclose an essential patent): the accusation is that patent holders like Nokia never intended to comply with FRAND when they made a FRAND promise. That notion is absurd.

Conti points to three recent cases in which the Fifth Circuit granted rehearing en banc of unpublished decisions. Still, the fact that the decision was designated as unpublished and non-precedential makes it most likely that the petition will be rejected. Last time the court asked the defendants for a reply; that may not even happen this time around.

Conti's Section 1 argument is that despite the Avanci patent pool agreement explicitly allowing contributors to grant bilateral licenses (to car makers, suppliers, anybody), licenses at the component level were not "fully" and "realistically" available to Conti--and they blame Avanci for it. The petition misrepresents the situation: it's not just that the Avanci agreement doesn't preclude patent holders from engaging in bilateral licensing, but Avanci licensors have granted bilateral licenses on various occasions. Nokia granted one to Daimler last year, and shortly thereafter announced that a second (unnamed) car maker had taken a direct license, too. Sharp and Conversant granted component-level licenses to Huawei.

Those real-world bilateral licenses belie, inter alia, the following passage from Conti's renewed petition:

"Moreover, a provision in the Avanci agreement that merely pays lip service to the possibility of individual licenses cannot defeat a § 1 claim if the provision has no practical effect."

The fact that patent pools can increase efficiency in licensing doesn't make them or their contributors antitrust offenders. There may very well be patent holders who tell a licensee that they prefer to license their patents through the Avanci pool. But that doesn't amount to a conspiracy any more than some car makers' decision to conclude a pool license rather than negotiate with (and potentially face litigation from) approximately 50 different patent holders. Licensors and licensees alike just want to reduce transaction costs.

The most likely next step is that the Fifth Circuit will reject this petition (the worst-case scenario for Conti being that the court will additionally impose sanctions for abuse of procedure). It's pretty clear that Conti is hell-bent to exhaust all appeals, so we'll probably see them file a cert petition with the Supreme Court in a matter of months...

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Fifth Circuit treats Conti as nuisance, doesn't dignify motion for extension of time with prompt decision: Continental v. Avanci 'antitrust' case over automotive patent licensing is dead end

The reasonable and rational thing for automotive supplier Continental to do now would be to recognize that its meritless "antitrust" action against Avanci and some of its licensors (Nokia, Sharp, Optis) is--and always has been--an error. Conti has not convinced, and never will convince, a U.S. judge that it has standing and actionable claims under the Sherman Act. It's over (as the Fifth Circuit issued a revised panel opinion that throws out the case, just on a different, more case-specific basis). The sooner Conti comes to its senses, the better.

This here is a brief follow-up to a Thursday post, Continental and its counsel risk abuse-of-procedure sanctions from weary Fifth Circuit if they file another petition for rehearing. As I mentioned, the court gave flatly denied Conti's request for a 30-day extension to file another petition for rehearing en banc--and as I explained, the Fifth Circuit's published rules make it very clear that the number one problem of abuse of procedure faced by the court are all those en banc petitions, given that the fewest cases (less than 1%) are heard by the full court (and of the few that do make it there, a large percentage get there because of a judge, not a party, making the proposal). Conti and/or its counsel may get sanctioned, and in the present case there really would be a basis for that, as a decision designated as unpublished and non-precedential can hardly satisfy the criteria for a rehearing. Moreover, even if one disagreed with the district court and at least one of the panel judges (Circuit Judge Ho) on the question of antitrust standing for lack of injury, it is fair to say, at a minimum, that Conti cannot point to a pressing problem such as on the infringement litigation front.

The denial of Conti's motion for an extension of time was already a clear sign that the appeals court has had enough of this. Unfazed, Conti just brought another motion for an extension: as counsel for Avanci and its codefendants had told Conti's counsel they wouldn't oppose a 14-day extension, Conti thought the Fifth Circuit might grant a new motion.

But there's just radio silence from the court.

The judges left for a long weekend, right after which (as Monday is Independence Day) there is the statutory deadline for a rehearing petition. Unless there was just a logistical reason and the court informed Conti by telephone that the two-week extension would be granted (whic hI doubt), this leaves Conti and its lawyers with only two choices:

1. Act like grown-ups, enjoy the weekend, and give up a strategically lost position. If all else fails, find a good psychotherapist to help you overcome the trauma.

   Or:

2. Go into crunch mode and produce another rehearing petition, which won't have any effect other than, potentially, sanctions and the embarrassment that goes with them.

There are strong reasons in favor of the first option. One of them is that former Chief Judge Stewart, who denied the first motion for an extension, doesn't have reading-comprehension problems, unlike Conti, which didn't even observe the court's clear instructions when filing its first rehearing petition (they had to refile in order to add some missing--but mandatory--elements). Judge Stewart saw that Avanci and its co-defendants wouldn't have opposed a 14-day extension. He could have granted a 14-day extension right away had he been so inclined.

Conti must know when it is not wanted. This here is such a case. The court is already treating Conti as a nuisance. Can't blame the judges, really.

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Continental and its counsel risk abuse-of-procedure sanctions from weary Fifth Circuit if they file another petition for rehearing: Continental v. Avanci et al.

Automotive supplier Continental's unreasonableness is getting worse by the day.

I started the headline of yesterday's Continental v. Avanci et al. post by describing Conti as impervious to reason. Meanwhile, Circuit Judge Stewart--a member of the panel that has already twice determined that Conti has no case--has denied Conti's motion for a 30-day extension for its second petition for rehearing. The court announced that the mandate would issue on July 13. So what did Conti do? They brought a new unopposed motion seeking a 14-day extension. The previous motion had already said that Avanci and its co-defendants (Nokia, Sharp, Optis) wouldn't oppose a two-week extension.

While Judge Stewart's order ("[Conti's] opposed motion for an extension of 30 days, or, to and including August 4, 2022, to file its petition for rehearing/petition for rehearing en banc is DENIED.") didn't specifically address the possibility of a 14-day extension, Conti should finally see the writing on the wall: the appeals court is tired of the tire maker.

It's worth recalling that Conti didn't even manage to file its original petition for rehearing in accordance with the Fifth Circuit's published rules. Some elements, such as a statement of facts, were missing, and Conti had to refile.

People at Conti have to pull the plug on this. While Conti apparently didn't care to read the Fifth Circuit Rules (PDF) before filing the first (and failed) petition, I have taken a look at those rules. What I found shows that Conti and its counsel are taking a risk. They should accept the panel decision 2.0 as the final resolution of the case by the Fifth Circuit. Otherwise they may be sanctioned for manifest abuse of procedure:

"35.1 Caution. Counsel are reminded that in every case the duty of counsel is fully discharged without filing a petition for rehearing en banc unless the case meets the rigid standards of FED. R. APP. P. 35(a). As is noted in FED. R. APP. P. 35, en banc hearing or rehearing is not favored. Among the reasons is that each request for en banc consideration must be studied by every active judge of the court and is a serious call on limited judicial resources. Counsel have a duty to the court commensurate with that owed their clients to read with attention and observe with restraint the standards of FED. R. APP. P. 35(b)(1). The court takes the view that, given the extraordinary nature of petitions for en banc consideration, it is fully justified in imposing sanctions on its own initiative under, inter alia, FED. R. APP. P. 38 and 28 U.S.C. § 1927, upon the person who signed the petitions, the represented party, or both, for manifest abuse of the procedure." (original in italics; emphases added)

Let's start with "the rigid standards" of Fed. R. App. P. 35(a), which envisions only two circumstances under which an en banc may be appropriate:

1. en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or

2. the proceeding involves a question of exceptional importance.

If Conti and its counsel know that their petition doesn't meet at least one of those criteria, they have to refrain from bringing yet another rehearing petition lest they be potentially sanctioned.

The first criterion cannot possibly be fulfilled: an unpublished and non-precedential decision is inherently not capable of endangering the uniformity of the Fifth Circuit's decisions. Also, the panel opinion 2.0 is limited to only the Sherman Act Section 1 and 2 claims, i.e., couldn't be more narrowly case-specific at this stage.

Whatever Conti may say in its petition can't reasonably meet the second criterion either. Yes, to those Conti guys and their counsel the case may be of exceptional importance. But at this stage we're talking about an unpublished and non-precedential decision, which weighs against its importance--and a narrow decision on the specific defects of Conti's complaint. Furthermore, while the panel withdrew its holdings on Article III standing and didn't take a position on the district court's conclusion that Conti lacked antitrust standing, this here is still a case of no injury. Conti is not being sued over cellular standard-essential patents by any Avanci licensors (Avanci itself couldn't sue for lack of owning those patents). Conti is not being sued by a customer for indemnification. There is simply no harm that Conti has established, other than that it was denied a license it never really needed.

In light of all of that, this case falls far short of the exceptional and important case that warrants a rehearing en banc. Conti is not going to get that rehearing. There's no realistic upside, but a potential downside of being sanctioned.

If Conti and/or its lawyers signing the petition get sanctioned, they can't blame the Fifth Circuit for not having made it clear beforehand that this could happen. Here's another passage from the Fifth Circuit Rules:

"THE MOST ABUSED PREROGATIVE - PETITIONS FOR REHEARING EN BANC ARE THE MOST ABUSED PREROGATIVE OF APPELLATE ADVOCATES IN THE FIFTH CIRCUIT. FEWER THAN 1% OF THE CASES DECIDED BY THE COURT ON THE MERITS ARE REHEARD EN BANC; AND FREQUENTLY THOSE REHEARINGS GRANTED RESULT FROM A REQUEST FOR EN BANC RECONSIDERATION BY A JUDGE OF THE COURT RATHER THAN A PETITION BY THE PARTIES." (emphasis in original)

"The most abused prerogative"--for which we may now see one of the clearest cases ever of a manifest abuse of procedure. Conti and its counsel must finally understand that the Fifth Circuit also has other appeals, motions, and petitions to decide. It's utterly unreasonable and disrespectful for Conti to seek the attention of every active judge--all 26 of whom are listed on the appeals court's website--for a second time.

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BREAKING: Fifth Circuit panel modifies Continental v. Avanci et al. decision but once again dismisses Conti's patent-related antitrust claims

BREAKING NEWS

At the beginning of last week, the Fifth Circuit panel that threw out Continental's appeal of the dismissal of its antitrust complaint against Avanci and some of its licensors (Nokia, Sharp, Optis) reacted to Conti's petition for rehearing en banc by taking charge of the case again, and announced a revised opinion. The new version of the decision just appeared on the docket, and the basic outcome is the same--Conti's case is still thrown out, just on a different basis as I'll discuss further below:

The original (February 2022) panel opinion held that Conti lacked basic Article III standing for lack of injury (as its customers--the automakers--have access to an Avanci license). That line of reasoning was supported by two of the three panel judges (former Chief Judge Stewart, and Judge Engelhardt), while Judge Ho would have affirmed the district court ruling, according to which Conti had Article III standing, but no antitrust standing and no Sherman Act claims (neither under Section 1 nor Section 2). However, Judge Ho didn't "dissent-dissent" but contented himself with a footnote voicing his different preference.

The new consensus--and now it's a truly unanimous panel decision--is that Conti fails at the third hurdle: it failed to state Section 1 or Section 2 Sherman Act claims. In that regard, the panel now affirms the district court. The revised opinion doesn't explain this further, so the district court's reasons are affirmed as they stand.

What the panel decision 2.0 does not address specifically is whether the district court rightly found that Conti lacked antitrust standing. It would have been better to have not only a castle, but a castle with a moat around it, by explicitly affirming both parts of the district court's judgment.

The panel has designated the opinion as unpublished and non-precedential, meaning that this particular litigation has been resolved (again), but others won't be able to really get mileage out of it. This ups the ante for any attempt by Conti--which I guess the automotive supplier is going to make nonetheless--to have the decision reviewed by the full court or by the Supreme Court. It's a means of minimizing the decision's impact on the development of SEP case law. Conti's amici would find it extremely hard to argue that an unpublished, non-precedential decision is of transcendental importance and absolutely needs to be reviewed by ever more judges, all the way up to the Supreme Court.

Fifth Circuit rule 47.5.4 says that unpublished opinions such as this one "are not precedent, except under the doctrine of res judicata, collateral estoppel or law of the case (or similarly to show double jeopardy, notice, sanctionable conduct, entitlement to attorney’s fees, or the like)." In other words, only under narrow circumstances--all of which are closely related to the case, or to any attempt to relitigate the issues between the same parties--is the decision of any relevance.

While it may be cited, the revised opinion itself doesn't contain anything worth citing: all of the substance is now in the judgment by Judge Barbara M. Lynn of the United States District Court for the Northern District of Texas.

Given that the Fifth Circuit has downgraded the importance of the decision, it's conceivable that the panel just agreed on whatever it was able to build a quick unanimous consensus around. The finding of no Article III standing was a 2-1 decision even though there was no formal dissent. Knowing from Judge Ho's footnote that he'd have affirmed the district court's finding of no antitrust standing, it appears more likely than not that one of the other two panel judges would have joined him, but they didn't have to address that part.

The problem with Conti's case is that there are multiple bases on which it can be tossed even prior to any discovery--and if discovery had been conducted, I can't imagine the case would have survived summary judgment. The Fifth Circuit panel had three grounds of pre-discovery dismissal to choose from: Article III standing (the basis of the original panel opinion), antitrust standing (not explicitly addressed today, but clearly doubtful), and Sherman Act claims (it would have been enough for Conti to have either a Section 1 or a Section 2 claim, but according to the affirmed part of the district court's judgment, it has neither).

While I suspect Conti of being hell-bent to keep pushing until all appeals have been exhausted, I would encourage Conti to think really hard about the risk-opportunity ratio. The chances of getting any further review are unbelievably slim, while the risk of annoying one of the most important appeals courts in the United States and potentially the Supreme Court--by seeking a review of an unpublished, non-precedential opinion--is real. This isn't the first U.S. case to which Conti is party, and it won't be the last. Seeking review after review after review when a case has such glaring deficencies is disrespectful to the judiciary.

Psychologists say there are five stages of grief: denial, anger, bargaining, depression, acceptance. It seems Conti never got past the first three stages. It should leapfrog the fourth stage and finally reach the point of acceptance. Those legal fees are a sunk cost.

As a litigation watcher with a focus on U.S. cases, I can sense that all judges so far have been underwhelmed. Judge Lucy H. Koh (then in the Northern District of California, now on the Ninth Circuit) denied Conti a temporary restraining order and granted a motion to transfer the case to Texas. Judge Lynn in the Northern District of Texas disposed of the case at the earliest possible stage and on two independent grounds, though either one of them would have been enough. And now the Fifth Circuit panel has issued a revised opinion of the lowest profile (unpublished and non-precedential). Conti should face a simple fact: no judge really thinks this case deserves to go forward. Different judges may have different perspectives on the legal basis of a dismissal, but they all concur that Conti's complaint isn't deserving of discovery, much less of proceeding to trial.

Conti is still suing Nokia in the Delaware Chancery court, a state court of equity. That case hasn't made any progress. It was removed from the state court to federal court, and then remanded to the state court. It's another Conti case that isn't going to make an impact, and the only question is how--not whether--it will be tossed.

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Quinn Emanuel scores huge EU win as German managing partner gets mixed press: Daimler's defeats hurt firm's reputation in standard-essential patent litigation in Germany

The most important court ruling of the week--at least for the tech sector, if not beyond--was Qualcomm's successful appeal of a European Commission antitrust decision. The San Diego chipmaker was represented by Quinn Emanuel's Brussel's office, a couple of whose partners already had a very good reputation before that landmark victory, but now they're really a go-to firm for appealing DG COMP decisions. It's a highly specialized field in which Jean-François Bellis is arguably still the number one (I heard that the European Commission's lawyers fear him more than anybody, and they'll meet him again in the ECJ in the International Skating Union case on July 11).

QE is now undoubtedly playing in that league, the European Champions League, and was right to celebrate its enormous achievement--it's not just that they won, but also how--on social media with this banner:

There's not only light but also shadow when it comes to QE's German offices. They just opened another one in Berlin, which suggests they're still growing in Germany. However, next time a major business publication wants to write about them or their managing partner, they should seek out advice from professional public relations consultants...

On June 10, Wirtschaftswoche, the German equivalent of Bloomberg Businessweek (previously BusinessWeek), published a fair but thoroughly-researched article on Dr. Marcus Grosch, who built and still chairs QE's German offices. The headline, With Maybach and Karate, refers to his car (an upgraded S-Class that is basically Mercedes's answer to Rolls-Royce), in which he has a chauffeur drive him to courthouses, and his favorite sport, in which he won a regional championship in his youth.

Marcus Grosch has often been mentioned on this blog--in the early 2010s for his very effective work on Googlorola's behalf (Google and Motorola, the latter of which temporarily belonged to the former), but in less positive contexts in recent years: two serious cases raising the question of wrongful enforcement (one of them targeting Apple, the other one against a cigarette paper manufacturer), and because Daimler--relying on QE Germany to defend it--was slapped with four German patent injunctions within only 11 weeks (ultimately, Daimler took an Avanci license, so in retrospect it would have been way smarter for the Mercedes maker never to spend a single cent on litigation with Avanci licensors).

The Wirtschaftswoche article, too, mentions the four injunctions against Daimler in 11 weeks. As I revealed information from the highly secretive Nokia-Daimler mediation talks in 2020 (which drove the mediator crazy), it's obvious that I had sources--more sources than Nokia thought at the time--among the joint defense group. Never once during the Nokia v. Daimler dispute did I hear that any member of the joint defense group was enthusiastic about the work QE was doing. Instead, some members of that group were questioning Daimler's choice, given that QE Germany previously had a track record only in enforcing--not defending against--SEPs. At least two members of the joint defense group were constantly concerned that there was a conflict of interest, not so much because of QE having worked for Nokia in the U.S. on some occasions, but due to some of QE Germany's recent clients like Qualcomm and BlackBerry being interested in strong SEP enforcement.

Even when it comes to SEP enforcement, QE needs to excel in order to justify premium prices. The Wirtschaftswoche article says Dr. Grosch charges €1,200 (US$1,250) per hour, while even senior partners of large and reputable firms practicing patent law in Germany bill less than $1k. Talking about results, the champions of SEP enforcement campaigns in Germany have recently been certain Wildanger partners, with Arnold Ruess also having impressed me a great deal. And a "hidden champion" in that field is Dr. Christof Augenstein of Kather Augenstein--one of the largest and most sophisticated net licensors, Ericsson, relies on him and his team again and again, but as they typically win settlements early on, there haven't recently been any German patent injunctions involving Ericsson patents. Bird & Bird's Christian Harmsen consistently delivers results for Nokia as well as Huawei. I could name others, but wanted to just focus on the most prominent players in cellular SEP enforcement.

If QE's clients feel they get their money's worth, that's OK, but what I consider incompetent--even downright stupid--is when in-house litigators fail to insist on QE bringing patent attorneys along. QE is free to recommend whatever QE believes--in good faith, I'm sure--works best. In-house counsel, however, shouldn't take unnecessary risks. Samsung was smart; for them it was non-negotiable (and while they use QE in the U.S. all the time, they've actually relied on other firms in Germany, apart from a couple of Apple cases about a decade ago).

The Wirtschaftswoche article also mentions QE Germany's principle of not teaming up with patent attorneys. Dr. Grosch told the reporter that attorneys at law are just as capable of explaining technology to a court as patent attorneys. An unnamed lawyer told Wirtschaftswoche, rather diplomatically, that "there is the risk of failing to identify an argument." I don't even want to get into what else the article says, but let me just explain it from my vantage point as a litigation watcher:

• In German patent infringement proceedings, patent attorneys are usually just listening--not delivering oral argument--when it comes to the infringement contentions. They typically come into play only when validity (with a view to a requested stay pending a parallel nullity or opposition proceeding) is discussed. One may indeed be led to believe that patent attorneys aren't critically needed if one looks at the infringement proceedings. But patent attorneys have certain advantages in the nullity or opposition proceedings. That's where some (nullity) or all (opposition) decision-makers have a technical background. It's where technical considerations such as whether an alternative solution might result in degradations or improvements--or whether it would work at all--gain importance (while the infringement courts are usually just interested in cases of clear non-novelty, not in the inventive step). Patent attorneys--identifiable by their partly blue robes--have the psychological advantage of sharing an engineering background with technical judges and patent examiners.

• Dr. Grosch told Wirtschaftswoche that a plaintiff's or defendant's own engineers are in the best position to explain the technology at issue to litigation counsel. In some cases that's simply not true: for example, if a downstream customer gets sued (such as Daimler over cellular SEPs), only the suppliers have the relevant technical knowledge. But even in cases where it is true that engineers can better explain the technology at issue, patent attorneys have the advantage of understanding both the technology at issue and patent law. They look at the question from both angles, not just one--and they, too, get briefed by a client's engineers.

• Top-notch patent attorneys involved in German patent litigation are all highly specialized. If a party or its litigation counsel asked an expert in telecommunications whether he or she would help them in a case over a medical device, he or she would refer them to a colleague in order to stay in his or her lane. They wouldn't claim to be generalists. It's simply not realistic to assume that highly specialized patent attorneys with a full engineering background (often a Ph.D. in a technical field) couldn't make contributions.

• I heard about something that further illustrates why patent attorneys are not just dispensable in patent litigation. I know about one Munich-based patent attorney--who often helps Samsung with its German cases--who was advising a company that had sold some of its patents without retaining the right to practice those inventions. He then teamed up for a significant period with that company's engineers, and they jointly developed a workaround that ultimately even represented an improvement over the patented invention. Another example is that an in-house counsel I know very well once visited a patent attorney firm in Munich and noticed that there were LEDs on the wall of a storage room, shining extremely bright. The patent attorney then explained that they had set up that installation because of a photovoltaics patent infringement case and needed to conduct an experiment. I strongly doubt that QE Germany has ever done anything remotely similar.

When I see QE appear in a German patent case and they don't bring patent attorneys along, I know that their clients have simply elected to put themselves at a disadvantage. QE is to the best of my knowledge the only firm not to bring patent attorneys along to German patent infringement trials--and not even to nullity and opposition hearings. Their clients accept this and have to live with the results. They should ask themselves one question:

If that is the right approach, why has no other German patent litigation firm adopted it in all those years? It must give anyone in his right mind pause that after more than a decade of QE Germany doing this, no one else has even concluded that this is worth trying.

Samsung insisted on the involvement of Zimmermann & Partner, and QE accepted it--maybe begrudgingly, but still. Daimler didn't insist, but then they also wasted tens of millions on litigation instead of taking an Avanci license right away. Qualcomm didn't insist either, but I attribute it to the fact that they rarely ever have to litigate as most licensees also buy their chips. A long time ago, Qualcomm was represented by Bardehle against Nokia, and Bardehle is the leading German firm with both attorneys at law and patent attorneys on board. But Bardehle would have been conflicted against Apple. Qualcomm doesn't need my help to compare how things went in those disputes.

What about Google? They have an in-house litigator who was a QE associate. He also contributed his ideas to proposed legislation that didn't really move the needle for German patent injunctions. I would also encourage Google to think very hard about why no other German patent litigation firm than QE deems the involvement of patent attorneys unnecessary.

If clients decided to pay QE's premium rates and have patent attorneys involved in addition, it would have obvious implications for litigation economics, and some in-house counsel might find it harder to internally justify the total cost of being represented by QE Germany. But as Dr. Grosch rightly told Wirtschaftswoche, clients are well advised to focus on quality rather than price.

He should, however, have given himself that same advice when it comes to public relations. The former PR chief of his (current or former) client Daimler founded one of the leading firms specializing in crisis communications, litigation PR, and also advised executives such as a former Daimler CEO with respect to their personal PR needs. Presumably, a firm of that kind would have told Dr. Grosch a couple of things:

• Don't show up for an interview with two watches--an Audemars Piguet (which may have cost as much as, if not more than, a German patent judge earns in a year) plus a smartwatch.

• Given QE's hourly rates and per-partner profits, it must have made sense for him to hire a chauffeur to drive him to the courts. This way he doesn't waste a minute. But PR professionals would have cautioned him against the risk of how that would be perceived should it ever be reported in the media.

The only client heaping praise on Dr. Grosch in the Wirtschaftswoche article is IPCom founder Bernhard "Bernie" Frohwitter, whose own law firm earned an estimated ten million euros in fees per year while IPCom never got leverage over Nokia during all those years. Mr. Frohwitter describes Dr. Grosch as a bird of paradise, meaning a dazzling personality, who delivers--and says he loves that combination. Wirtschaftswoche also quotes the heiress to the cigarette paper company I mentioned further above. QE even sued her and her husband personally, trying to hold them responsible for patent infringement and hoping to scare them into a settlement. She now says she would recommend Dr. Grosch, which may be attributable to the Stockholm syndrome as well as to her desire to criticize the German patent enforcement framework.

I'm not surprised that a QE client like Daimler wouldn't speak out, as they tend to be very low-key (and it remains to be seen whether they will use QE Germany next time). However, the key point here is that QE Germany should have obtained professional PR advice, and PR pros would have tried very hard to find at least one client (other than Mr. Frohwitter) who would have volunteered to speak with Wirtschaftswoche and say complimentary things.

Then, PR consultants may be just as superfluous as patent attorneys in the world according to Dr. Grosch.

Toward the end, the Wirtschaftswoche article raises the question of where things will go from here. Ten years on I'm still impressed by his great work on Motorola's behalf, and how he snatched victory from the jaws of defeat when a German injunction against Google Maps was imminent. He's extremely smart, and he fights hard. At the same time, QE Germany has grown, and he may have to act as lead counsel in far more cases than back in the Motorola days.

While this is about boxing and not karate, I believe he's facing a Rocky III type of situation. Without a doubt, he has the potential to become the undisputed champion again, but such outcomes as the four injunctions against Daimler during the course of 11 weeks must give him pause. If he finally decided to involve patent attorneys, that would be a good sign.

I don't want to mention specific patent attorney firms now, but the firms that companies like Apple, Samsung, Huawei, Nokia, and Ericsson rely on in their German patent cases are an excellent pool to begin with.

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Fifth Circuit gives short shrift to Continental's request for permission to file reply brief calling for rehearing of Avanci, Nokia antitrust case

On Thursday, Continental had the chuzpe to file a proposed reply brief in support of its petition for rehearing en banc (full-court review) of the dismissal of its "antitrust" case against the Avanci patent pool and some of its licensors, most notably Nokia. The procedural rules of the United States Court of Appeal for the Fifth Circuit do not envision reply briefs in connection with a petition for rehearing, as Avanci, Nokia, Sharp, and Optis pointed out in their prompt opposition to Conti's motion for leave (request for permission) to file a reply brief.

Conti's reply brief has been rejected. Circuit Judge Carl E. Stewart, a member of the panel who held that Conti didn't even have basic Article III standing (thus never had to address antitrust standing, much less antitrust pleading standards), just entered the following order:

IT IS ORDERED that Appellant’s opposed motion for leave to file a reply to the petition for rehearing en banc is DENIED.

It's too early to tell what this means for the petition itself. I don't think the petition is a whole lot better than the motion for leave to file a reply brief was. But the appeals court will certainly give the petition more thought, while Conti's desire to file a reply brief was just ridiculous.

Conti may have expected the denial of its motion to file a reply brief. In that case, Conti would have decided to bring a long-shot motion anyway. But such behavior comes across as desperate, and doesn't generate goodwill. Conti has to just sit back, relax, and wait for the Fifth Circuit's decision on the actual petition. If the appellate judges and their clerks quickly realize that Conti's amici are notoriously interested in the devaluation of standard-essential patents (SEPs), the focus will be on the merits of the petition, and in that regard it falls far short, not because one couldn't ask questions or raise issues (that's almost always possible), but because Conti's case is doomed one way or the other. It's a dead lawsuit walking.

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Continental's reply brief in support of petition for rehearing of SEP antitrust case not contemplated by Fifth Circuit rules, and wrong at any rate, Avanci and licensors tell appeals court

Continental continues to keep U.S. courts busy with its attempts to force companies like Nokia to extend them an exhaustive component-level license to standard-essential patents (SEPs). It would have been as reasonable as it would have been realistic for Conti to recognize that its U.S. antitrust case against Avanci and its licensors is lightyears from making the slightest commercial impact after a Fifth Circuit panel identified a third independent reason for dimissing Conti's complaint. And even if--which goes beyond stretching the imagination--Conti overcame all three reasons for dismissal at this stage, I strongly doubt it could prove its conspiracy theories even if permitted to conduct discovery. So the rational and respectful thing would be to give up. Instead, Conti filed a petition for a rehearing and then, toward the end of last week, even a motion for leave to file a proposed reply to the recent response by Avanci, Nokia, Sharp, and Optis to the rehearing petition.

But appeals courts don't consider rehearing petitions a motion that requires or warrants extensive briefing: many such petitions are resolved just based on the petition alone. By asking Avanci and its licensors to respond to Conti's petition (which I attribute to all the brouhaha by Conti's amici rather than the actual issues), the Fifth Circuit has apparently emboldened Conti to try something the appeals court's rule don't even provide for: a reply in support of a rehearing petition.

A few days ago I explained two reasons for which Conti's proposed reply brief makes no sense: Conti is trying to revive a federal antitrust case through an argument that is solely about (state) contract law, even though the district court declined to exercise supplemental jurisdiction over those claims after the federal claims had been dismissed; and the Fifth Circuit panel opinion said that even if Conti had contractual rights (which it failed to show), it wouldn't make a difference in the end.

The second one of those points is also made by Avanci, Nokia, Optis, and Sharp, who on Friday filed an opposition to Conti's motion:

https://www.documentcloud.org/documents/22058588-22-06-10-avanci-opposition-to-conti-motion-to-reply-iso-rehearing-petition

Avanci and its co-defendants point out that the Fifth Circuit rule governing rehearing petitions doesn't even contemplate a reply brief. The above filing then explains that the appeals court simply doesn't need a reply to understand the scope of the petition on the one hand and the points made in the defendants' response on the other hand.

This case is a waste of time anyway, but at least I have hope that Conti can resist the urge to make yet another filing with the Fifth Circuit at this procedural stage, such as a reply brief in support of its motion for leave to file a reply in support of its rehearing petition...

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Avanci, Nokia explain why Fifth Circuit would waste its time granting Continental's petition for rehearing: issue raised by Conti can't change outcome

The United States Court of Appeals for the Fifth Circuit is one of the nation's busiest federal appeals courts. If every appellant seeking to revive a fatally flawed complaint were to get a full-court review of a well-considered panel decision, the resolution of numerous other cases would also be delayed. At some point there must be closure. Continental's "antitrust" action against the Avanci patent pool and several of its licensors (Nokia, Sharp, Optis) is just a waste of time. Presumably owing to an entire echo chamber of amicus briefs orchestrated by those constantly advancing a notorious agenda of devaluing standard-essential patents (SEPs), the Fifth Circuit invited Avanci to reply to Conti's petition.

I'll keep this post brief because I already explained the logic of the Fifth Circuit decision--and the various other grounds on which Conti's complaint is never going to succeed--three months ago. Let me show you Avanci's reply, and then I'll share a couple of quick observations:

https://www.documentcloud.org/documents/22053999-22-06-06-avanci-et-al-response-to-conti-petition

Conti's petition and the amicus briefs supporting it make a fuss about the Fifth Circuit panel allegedly having held that most implementers of standards aren't intended third-party beneficiaries under the FRAND pledges of standard-setting organizations. Not only do Conti's petition and the amicus briefs blow things out of proportion but the truth is that it doesn't even matter:

Avanci and its licensors explain in their reply that Conti's petition "is academic; resolution of the issue that it presents could not alter the outcome in this case." Starting near the bottom of page 11 of the panel opinion at issue, there is a passage that makes it clear the dismissal of Conti's case is independent of whether or not it's an intended third-party beneficiary:

"But assuming Continental is contractually entitled to a license on FRAND terms as a third-party beneficiary, the pleadings reflect that it has suffered no cognizable injury. Put another way, even if Continental has rights under FRAND contracts, the contracts have not been breached because the SEP holders have fulfilled their obligations to the SSOs with respect to Continental."

Simply put, Conti's petition for rehearing tells the Fifth Circuit that it may be able to get over the first hurdle, but (now quoting Avanci's reply) "pleaded no facts plausibly suggesting that"

• "[Conti] needs to conclude direct licenses to manufacture and sell its components to OEMs"

• "a patent owner has ever sued, threatened to sue, or is likely to sue Continental for infringement of the relevant patents"

• "[Conti's] failure to conclude direct licenses from Avanci or its members impeded sales of its components to any OEM"

• "[Conti's] lack of direct licenses has prevented it from pursuing any other business opportunity"

All that is left then is the hypothetical scenario of indemnification, but speculative injury doesn't count.

The above deficiencies have been understood by the district court and by all three judges on the Fifth Circuit panel. This may be slightly oversimplified, but essentially all judges who have looked at Conti's complaint so far have identified the same shortcomings, and the only question is whether the fact that Conti can sell its telematics control units (TCUs) to car makers, many of whom already have an Avanci license, means that Conti has no antitrust standing or no standing whatsoever (Article III standing).

Conti refuses to face certain realities. In late April, Conti's SEP exec Michael Schloegl ("Schlögl" in German) spoke at a Frankfurt conference and asserted that Ford was not going to take an Avanci license anytime soon. That prediction didn't age well: a few weeks later, Ford did take that license. Conti was a third-party intervenor in certain cases brought by Avanci licensors against Ford. But to date no Avanci licensor has sued Conti itself over the alleged infringement of SEPs by its TCUs. Conti may not be grateful to Avanci for what it's doing, but it has no reason to complain.

In their reply, Avanci and its licensors state in no uncertain terms that the Fifth Circuit panel opinion cannot be interpreted as "a bright-line rule automatically denying third-party beneficiary status to all component suppliers." That should give Conti and especially its amici comfort. The sky isn't falling.

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Fifth Circuit says automotive suppliers can't complain if patent holders license only car makers: Continental lacks standing against Avanci pool, Nokia, others

Even Apple's and Tesla's amicus briefs didn't help: Continental, which is generally known for making tires but also in the telematics control unit (TCU) business, just suffered a defeat in an appeals court that has intercontinental implications for the car industry's debate over the appropriate licensing level(s) of standard-essential patents (SEPs). On Monday, the United States Court of Appeals for the Fifth Circuit handed down its Continental v. Avanci et al. opinion following an early October hearing. As opposed to "Conti" getting the dismissal of its case against the Avanci patent pool and some of its key members (most famously Nokia) reversed, or at least a chance to amend its complaint once again, the automotive supplier is actually in a worse position now than before the appeal. It's technically even one step further away from winning (which it was never really close to), and policy makers and courts around the globe may adopt the Fifth Circuit's reasoning that SEP holders may choose to license only end-product makers, at least as long as they don't cause any direct injury through patent enforcement against suppliers they deny a license.

Short of someone actually trying to prevent Conti from making TCUs, there's no antitrust standing, as the United States District Court for the Northern District of Texas already held in 2020--but the Fifth Circuit went beyond and found that Conti even lacks basic Article III standing because it is at best an incidental beneficiary of SEP holders' FRAND commitments and, therefore, in no position to enforce such rights:

"No evidence suggests that Patent-Holder Defendants and SSOs intended to require redundant licensing of third parties up the chain, which is unnecessary to effectuate the purpose of the FRAND commitments and reduce patent hold-up. [...] Continental does not appear to be an intended beneficiary contractually entitled to a license on FRAND terms. And as an incidental beneficiary, it would have no right to enforce the FRAND contracts between the Patent-Holder Defendants and the SSOs."

Pure pragmatism: if it works, it works. If it ain't broke, don't fix it. It's also an effects-based approach. What is the FRAND pledge about? Enabling the making and distribution of standard-conformant products. Does it matter what happens upstream? Not as long as what comes out at the bottom is a licensed standard-conformant product (and the upstream is left alone).

Yesterday's appellate decision is a ringing endorsement of the "access to all" position taken by companies like Qualcomm, Ericsson, and Nokia (all of which are among Avanci's 49 licensors): major SEP holders who decline to license chipmakers and other suppliers argue that if the end-product maker has a license, the supply chain is all set and should shut up. The product can be made, license fees can be paid, customers get what they want.

Like the Ninth Circuit in FTC v. Qualcomm, the Fifth Circuit has effectively determined that SEP holders are free to choose the licensing model that best suits them, and others can't impose their preferences on them. The cases and reasons are different, but the shared philosophical foundation is that patents are property and others can't just force patent owners to do business on any particular terms only because they are the implementers' preferred terms.

The Avanci pool, which Conti chose to attack, simply can't offer component-level licenses unless its licensors authorize it to. It doesn't preclude them from entering into bilateral licenses at any level of the supply chain, and such deals have indeed happened. In the end, all that Conti can accuse Avanci of is that it has (after years of hard work) established a successful licensing model, which obviously does nothing to discredit end-product-level licensing, but Conti can't fault Avanci for not granting a license the actual patent holders have never authorized it to grant. What does Conti want Avanci to do? Should Avanci not offer a pool license that some of Conti's own customers have meanwile embraced, only because Conti has a different vision?

MPEG LA, a pool administrator that is actually different from Marconi (the company behind Avanci) in various ways, supported Avanci with an amicus brief because it was rightly concerned about the damage that a decision in Conti's favor could have done to the patent pool business at large. MPEG LA must be relieved. High fives in the patent pool industry for he Fifth Circuit opinion.

At a time when Avanci is working on a 5G SEP pool, it clearly has momentum on multiple fronts:

• LG joined its 3G/4G pools,

• Daimler took its license,

• Volkswagen told a U.S. court that it's close to settling a dispute with Avanci licensor Acer over the fact that VW's license covers only 3G--not 4G--for most of its connected cars, and

• it has now not only fended off Conti's appeal but even improved its legal and political position.

By contrast, Conti's legal department has wasted many millions on a U.S. litigation campaign that it mismanaged from the start. The basis on which the Fifth Circuit decided potentially spells doom for a later-filed Continental v. Nokia case in Delaware. Not only has Clueless Conti been throwing good money after bad for years, trying to salvage a case that was fundamentally flawed from the start (I already raised serious doubts in 2019), but its Fifth Circuit appeal has even been counterproductive: if Conti had simply accepted the district court ruling, that would not only have been cheaper but also a less devastating outcome than yesterday's Fifth Circuit decision. Normally, if a party loses in district court, files an appeal, and the appeal fails to defibrillate the case, it's merely been an unproductive exercise. Here, it's even proved counterproductive because

• the legal basis of the decision has upped the ante with a view to Conti's own Nokia case and any case Conti or other suppliers might have planned to bring (it's like someone just put an extra moat around a castle when Conti couldn't even overcome the castle walls before there was the moat), and

• one of the most influential and reputable U.S. appeals courts has adopted the purely pragmatic reasoning of the "access to all" camp, which makes this not only a legal but also a political defeat for Conti and, by extension, its amici curiae, above all Apple and Tesla.

In 2019, Conti was even seeking an antisuit injunction in this U.S. case that would have barred Nokia from enforcing German SEP injunctions against Daimler. The Munich I Regional Court entered an anti-antisuit injunction to thwart that attempt to torpedo Nokia v. Daimler, which the Munich Higher Regional Court affirmed--and by now anti-antisuit injunctions are routinely granted in Munich and slowly but surely expanding to other jurisdictions. So if there's one positive thing to say about Conti's various failures in patent litigation and patent policy, it's that some of its actions have led to decisions of transcendental importance, just that not Conti but its targets, above all Nokia, have benefited--and will continue to benefit--on the bottom line.

What can Conti do now? It has the right to seek a rehearing en banc (full-court review). But none of the three judges on the panel thought Conti had a case. One of them, Judge Ho, would have resolved the case at the level of Sherman Act claims instead of standing, but the outcome would have been identical and that's why he didn't even bother to write a dissent or concurrence (it's just a footnote, literally). Can Conti get the Supreme Court interested? If Apple and Tesla aren't tired of losing by supporting Conti, they might try, but they'd have to convince the Supreme Court that a question of Article III standing in a narrow set of cases in which there has been zero cognizable injury (just conspiracy theories and, at best, premonition) is worthy of the top U.S. court's attention. Frankly, it would be one of the worst and weakest stories ever for a cert petition.

After that bird's-eye view, let me show you the ruling and discuss the legal logic in more detail (below the document):

22-02-28 Continental v. Ava... by Florian Mueller

I have to take a step back because with all that was going on, I didn't even find the time to write about the October 7, 2021 appellate hearing in New Orleans (which by the way got postponed because of a hurricane's landfall).

In 2019, the case started in the Northern District of California, but Judge Koh (now sitting on the Ninth Circuit) exercised her discretion to grant a motion to transfer the matter to the Northern District of Texas. In September 2020, a Rule 12 motion by defendants succeeded, i.e., the pleading deficiencies were considered so fundamental that the case could be resolved even far ahead of a summary judgment.

The case also involves claims under state law, but the federal court wasn't going to deal with them if the related federal antitrust claims failed. Now, for there to be an actional--meritorious or not, but at least actionable--Sherman Act case, there are three initial requirements:

1. Article III standing (without it, you won't get your day in court)

2. Antitrust standing (a more specific requirement on top of Article III standing)

3. a Sherman Act Section 1 and/or Section 2 claim

It's an AND combination: if any one of the three is missing, it's game over. And the earliest game-over scenario is the first one, but Judge Barbara Lynn (the Chief Judge of the Northern District of Texas, the largest city of which is Dallas) wasn't going to be all that strict. So she said that Conti had just about managed to plead an injury in the form of being denied what Conti would consider a FRAND license to certain SEPs, and considered this sufficient--though she didn't seem overwhelmed either--to concede that Conti had Article III standing. We now know that the Fifth Circuit disagrees and would have cut the whole story short at that point. But Judge Lynn then went on to address antitrust standing, which Conti lacked in her opinion because the alleged injury (denial of a license) is no antitrust injury, and Conti wasn't the correct plaintiff either (as it's not a car maker). In order to get this part reversed, Conti would have had to persuade the appeals court that it had suffered an antitrust injury and was the correct plaintiff--questions the Fifth Circuit's relatively short (just 14 pages) opinion didn't even (have to) reach.

But even if the Fifth Circuit had agreed with Judge Lynn on basic Article III standing and had reversed her (for which I saw no indication at the hearing) on antitrust-specific standing, Conti would still have had to overcome the dismissal of its Sherman Act claims. Judge Lynn held that there was no Section 1 claim because the Avanci agreement does not preclude licensors from entering into bilateral license agreements with suppliers, and without such restriction, there is no unreasonable restraint of trade. The Section 2 claims were thrown out because even if Conti was right (which the judge seemed to doubt anyway) that the actual patent holders had made fraudulent FRAND declarations at the time of participating in standardization, the competitive process itself wouldn't have been harmed--and the absence of such harm was also fatal for Conti's claims of a conspiracy to create a monopoly. (By the way, the DOJ's Business Review Letter relating to Avanci's future 5G program was clearly a blow to any conspiracy theory.)

It would have been dispositive to just hold that Conti lacked antitrust standing. Judge Lynn went beyond the call of duty by reaching the Sherman Act claims nonetheless, which she may have done not only to make her decision appeal-proof but also because she thought those claims were just blatantly meritless.

Conti probably knew that it might not be able to solve all those problems in one fell swoop. Its Plan B was to be granted leave to amend its complaint again, which is a possibility when deficiencies don't appear incurable and would have been a way for the Fifth Circuit to duck certain questions if it had wanted to. After the hearing, I was pretty certain that Conti was going to lose, but there was some residual doubt that maybe they'd be granted another bite at the apple if they were lucky, especially since Judge Stewart (the most senior judge and only Democrat on the panel) appeared cautiously receptive to the idea, unlike the two Trump appointees (Judges Ho and Engelhardt).

It then took the Fifth Circuit almost five months to converge on a decision. Judge Stewart wrote the opinion, which is fully supported by Judge Engelhardt and which Judge Ho can live with, though he'd have been the only one of the three to even reach any antitrust-specific questions (with Conti ultimately losing anyway).

The technical effect here is that the district court's judgment is vacated as the appeals court overruled the lower court on the question of Article III standing, and remanded to Dallas with the direction to dismiss the case for lack of Article III standing. It's not a "right for the wrong reasons" holding if one thinks it through, as the Fifth Circuit didn't conclude that the reasons for which Judge Lynn dismissed the case were wrong per se: it's that she reached the right result but unnecessarily reached questions she didn't have to. It's more like a "could have been even more right (and at an even earlier stage of analysis)" type of affirmance of the outcome, though it does say "the district court erred" because it even reached questions it never had to reach. It's like Conti's case shouldn't survive for a second according to the Fifth Circuit's reasoning, but the district court gave Conti a second and a half, which is too long for that kind of claim.

Avanci and its co-defendants would have been just fine with affirmance of Judge Lynn's decision, but the Fifth Circuit said the proper first step of the analysis was to determine whether it had jurisdiction in the first place. Conti's Article III theories of injury came down to the potential pass-through of supra-FRAND royalties. Take Daimler, for instance: that company took a car-level license from Nokia, and then one from Avanci. Conti couldn't--and presumably still can't--point to a single case of actually having had to indemnify a company like Daimler after it took that kind of license. All they said is that it might happen, but conjectural injury doesn't count here.

The other point--and the one that also seemed more important to the district judge-- was the refusal of exhaustive component-level licenses requested by Conti. The legal question here is whether patents holder who declined to extend such a license denied Conti property to which it was entitled. Being denied property one is entitled to would be a cognizable injury in fact, but that's not the case here in the Fifth Circuit's opinion:

Unlike Microsoft in its dispute with Motorola (over WiFi and video codec SEPs) and Broadcom in its Qualcomm case, Conti is not another one of those "parties that must adopt a standard in order to conduct their business." Microsoft was a member of the standard-setting organizations in question; Broadcom was a direct competitor of Qualcomm. And "crucially, it does not need SEP licenses from Defendants-Appellees to operate; Avanci and Patent-Holder Defendants license the OEMs that incorporate Continental’s products."

What follows then is the passage I quoted further above: FRAND works even if Conti doesn't get the license it demands. That reasoning stands on an additional pillar: even if Conti was an intended third-party beneficiary,

"the contracts have not been breached because the SEP holders have fulfilled their obligations to the SSOs with respect to Continental. The supplier acknowledges that Avanci and Patent-Holder Defendants are 'actively licensing the SEPs to the OEMs[,]' which means that they are making SEP licenses available to Continental on FRAND terms. As it does not need to personally own SEP licenses to operate its business, it has not been denied property to which it was entitled. And absent a 'denial of property to which a plaintiff is entitled,' Continental did not suffer an injury in fact."

What sets Conti's claims apart from cases in which parties were denied something they were entitled to and, therefore, had Article III standing, Conti can't demonstrate injury because even without the license it seeks, Conti "receive[s] the benefit of a right conferred by contract even if the contractual right [continues to be] 'denied' directly." As Conti's customers get licensed, there is no problem to be solved here, the Fifth Circuit effectively says.

The Fifth Circuit doesn't take a definitive position on whether OEMs might have standing if they disagreed with Avanci's license terms, or maybe even standardization bodies. But Conti is neither a car maker nor a standard-setting organization.

The appellate decision also involves some technicalities, such as why certain submissions made by Conti would not be considered. For example, a complaint cannot be cured by an opposition to a motion to dismiss. Another example is that Conti itself claimed at some point that its complaint didn't have to be amended. Conti has no one to blame but itself. Both its strategy and its execution were inadequate.

With Ericsson being an Avanci licensor (and a longstanding proponent of end-product-level licensing) and Apple having unsuccessfully supported Conti, and given that Apple and Ericsson disagree on the royalty base (end product vs. smallest salable patent-practicing unit) for cellular SEPs implemented by smartphones and other products, this case here is a proxy war between Apple and Ericsson on issues that are adjacent to, and slightly overlap with, the ones in dispute between the two, and Ericsson has prevailed. Apple is not a big fan of the Fifth Circuit and would rather give the Federal Circuit appellate jurisdiction over the U.S. part of its FRAND dispute with Ericsson. Whether that will happen depends on Judge Gilstrap, who can easily just sever Apple's patent-specific declaratory judgment claims from the FRAND issues.

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

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

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

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

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

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

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

Continental and Thales remain on the losing track

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

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

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

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

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

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

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

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

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

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

Possibly the most important breakthrough for Avanci to date

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

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

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

Ramifications for Ericsson v. Apple

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

Wirtschaftswoche's recent patent coverage

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

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

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

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

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

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