Category : German Patent Litigation

Nokia, one of the leading mobile communications suppliers, is further put under pressure in its patent fight against IPCom. Recently, the Finnish company was the losing party in a patent infringement suit before the German regional court LG Mannheim on the infringement of a particular GSM and UMTS standard essential patent held by the IPCom GmbH, Munich. The recent judgment could be a turning point in a whole range of infringement and invalidity proceedings which are currently pending before courts in Europe.

The dispute about the patent began in 2003, although IPCom GmbH was still not founded at this time. Nokia was negotiating with the German company Robert Bosch GmbH, a large automotive supplier, about the licensing of Bosch’s mobile communications patent portfolio that Bosch held to be essential for Nokia. Robert Bosch GmbH as well as Nokia made significant contributions to the standardization process on the first digital mobile communication system GSM, proceeded with ETSI, the European Telecommunications Standards Institute. Both companies committed to the ETSI’s FRAND-licensing regime. By committing to this regime, the companies declared that they were prepared to grant licenses for all standard essential patents under fair, reasonable, and non-discriminatory terms.

However, the licensing negotiations lasted until 2007 without any substantial result. They finally broke down as parties reached no agreement on the price tag for the license, which controversy ended in a litigation about whether a licensing contract has already been reached or not.  Nokia had offered about 35million EUR while Robert Bosch had demanded 153 million EUR for a simple license. In its judgment from 04/2007, sign 2 O 1/07, the LG Mannheim ruled that a licensing contract had not been reached.  Nokia appealed against this judgment. The decision of the Appeal court (Oberlandesgericht or “OLG”) Karlsruhe is still pending (6 U 68/08). Meanwhile, Robert Bosch GmbH searched and found a buyer for her mobile communications patent portfolio. IPCom GmbH, located in Munich (Germany), founded in 2007, was the buyer of the portfolio for a substantial – but still unknown – amount in May 2007.

From then on IPCom has been trying to assert the patents against Nokia via a number of patent actions. Initially with modest success. Nokia countered almost all of the claims with its own (counter)proceedings for patent invalidity while defending against the infringement claims with antitrust objections. Nokia argued that IPCom was obliged to license for antitrust reasons and would be thus excluded from the assertion of injunctions against any unlicensed user of the patents in dispute. (Nokia was not the only defendant in these patent infringement suits. IPCom was also suing Taiwanese HTC Corp. and the German T-Mobile GmbH for patent infringement.)

Up to now everything seemed to appear to run smoothly in favor of Nokia, although many of the of the proceedings are still pending. Early last year, the London High Court of Justice ruled that Nokia had not infringed two important IPCom GmbH patents because the patents were invalid (see Nokia Oyj v. IPCom GmbH, A3/2010/0454/0939/2678, High Court of Justice, Court of Appeal, London),  the German Patent Court, ruled in December 2010, that another patent was invalid. Another proceeding before the German Regional Court LG Mannheim (sign 7 O 182/08, regarding the European Patent EP 1 186 189) has been suspended until a decision of the German Patent Court about the validity of the patent claimed to be infringed is reached.

But now, the tide has turned. In a recent decision, the German Regional Court (landesgericht or “LG”) Mannheim provides a win for IPCom out on almost all contested points regarding the German part of the European Patent EP 1 841 268.  The patent concerns the access of a mobile communication device to the so called random access channel (RACH) in dependence of its (calculated) user class. This random access proceeding is also part of the ETSI UMTS Standard documents ETSI TS 122 011, Section 4.2, TS 125 321, TS 125 331, and must essentially be implemented to build a UMTS conform device, at least in the opinion of the IPCom GmbH as well as the court. The court’s ascertainment of the patent infringement seems a little strange.  Actually, the court only compared the standards specifications with the description of the patent claims. There is nothing said about the accordance between the patent claims with the embodiment of the standards specifications in the Nokia devices. However, that little inconsistency may be overcome by a simple re-wording.

What I really would like to criticize is the application of the antitrust objection as set out in the judgment of the Federal Supreme Court BGH, sign KZR 39/06 – Orange-Book-Standard (see our former blog entry). In short, all concerns about the applicability of the antitrust objection in patent infringement proceedings through formulating those excessive preconditions by the BGH in Orange-Book-Standard come true.

In Orange-Book-Standard the BGH tied the successful application of the antitrust objection to an escrow of a reasonable amount of licensing fees before the (future) licensee starts using the patent protected technology. The problem of this precondition was not the escrow itself. The (future) licensor has a fair interest in getting an appropriate remuneration for any use of its technology, be that with or without a licensing agreement. It would be unreasonable to let him run after his royalties. The problem is rather the right ascertainment of a reasonable royalty rate. Although, the BGH acknowledged the major difficulties of the (future) licensee in determining the reasonable royalty, he decided that the patent holder should be given the power to determine what is reasonable.

As mentioned in our earlier blog about the subject, there is no reason, let alone an antitrust reason, for a patent owner to distance himself from potentially excessive demands. And even this speculation could now be confirmed through the recent judgment. To illustrate that, we must go back to the initial licensing negotiations between Nokia and the former owner of the patent, Robert Bosch GmbH. These negotiations were held against the background of a few already closed licensing negotiations about the patent portfolio between Robert Bosch and other companies. Though the judgment LG Mannheim, 4/7/2007, sign 2 O 1/07, is anonymized and the counterparts are unknown we can read out that these former negotiations have undisputedly have a very much smaller outcome than IPCom GmbH’s claim for – allegedly – 12 billion (!) EUR.

As a matter of fact, IPCom GmbH’s demands must be acknowledged as excessive in the final analysis. That even follows on a closer examination of the UMTS standard and the massive amount of essential patents, which must be implemented and also licensed to buy and sell a standard conform product. By today the ETSI database identifies no less than 11.637 IPR disclosures related to the UMTS Standard. It would be really hard to imagine if all proprietors of these patents (about 30) could assert such high royalty demands.

For now nothing else remains than waiting in suspense. The German court has only decided about an injunction against Nokia. Nokia is obliged to stop selling all devices implementing the technology protected by IPCom GmbH’s patent. But the court will put its cards on the table about what is a reasonable royalty by answering the still pending question of the damages at the latest.

Stephan Dorn


Author: 7 years ago

The patent battle between Nokia  and German IP asset management firm IPCom illustrates well the lack of practical understanding as to what fair, reasonable and non-discriminatory (or FRAND) licensing terms practically means in Europe. IPEG blogged about this earlier. The conflict started at the end of 2006 when IPCom, a company founded by Bernhard Frohwitter and Christoph Schoeller, acquired the patent portfolio developed by Bosch in the late 80s and 90s for its mobile and in-car telephone systems. This portfolio has 160 patent families and 35 of them are allegedly “essential” to the GSM and UMTS communication standards. The acquisition of a license from IPCom is thus a necessity for all firms manufacturing and selling products conforming to the new technological norms. Meanwhile IPCom must accept to license these essential patents under FRAND conditions.

The negotiations between Nokia and IPCom turned sour very quickly, as the latter asked for 5% of Nokia’s mobile phone sales in all countries covered by its portfolio and for each year of use. This represents a cost of 600 million euros per year for Nokia, that is to say an astronomic total of 12 billion euros over 20 years. The Finnish company stopped negotiating with IPCom and accused the German firm of not honoring the FRAND commitment that previous patent holder Bosch made to the ETSI (European Telecommunications Standards Institute) as well as to all companies that participated to the establishment of the 2G/3G telecommunication standards. This accusation has been rejected by IPCom.  According to Frohwitter IPCom has always been dealing with potential licensees on FRAND terms, the amicable settlement found with Siemens AG, Motorola Inc., Philips Electronics and Alcatel-Lucent amongst others being an irrefutable proof of IPCom’s willingness to cooperate on a fair and reasonable basis. There is a wide divergence between the two firms on the meaning of FRAND and proceedings of patent infringement/invalidation are now in progress. Nokia took an advantage as the two most contentious patents have been recently invalidated in UK (see here). Regrettably for those (like me) who were hoping for some guidance, the meaning of a FRAND commitment has not been debated in court.

The best solution to find the meaning of FRAND is to delve deep into IT and legal resources. However the literature addressing this topic is already consequent and the opinion of specialists on this “hot” topic is diverging. It is difficult for a FRAND neophyte like to discern the truth from lies. Fortunately for beginners, Roger G. Brooks and Damien Gerardin recently published an excellent piece (download here) breaking all myths commonly held on this tricky subject. For some, the fact that both authors are partners have been representing chip manufacturing company Qualcomm Inc. in many FRAND-related issues in the past might call their impartiality into question. However the arguments developed in this paper are unbiased, simple and quite convincing (to a certain extent).

In a nutshell Gerardin and Brooks refute many commonly accepted statements, notably that in order to satisfy a “fair and reasonable” commitment, a patent holder “must set his royalty rate based on a mathematical proportion of all patents essential to the practice of a standard or that a patent holder is not entitled to seek injunctive relief against a standard implementer should they fail to agree on license terms. Both statements are not supported by economic or legal evidence and are in contradiction with the actual behavior patent owners in a standard-setting context. Numerical proportionality in the calculation of a royalty rate is not a sign of fairness, since it tends to ignore the real value of a specific patent in favor the average value of all patents used to comply with a technological standard. The statement that a FRAND commitment should be construed as a waiver of injunctive relief from the patentee is according to both authors equally as misleading, because this assertion is contradicted by hard facts found in the history of the IPR policy of many standard-setting organizations (or SSOs) such as the ETSI, as both authors demonstrate.

All things considered, the plain truth about FRAND commitments is that they are the result of a voluntary contract between essential patent holders and SSOs to negotiate in good faith about the terms and conditions of a licensing agreement. As Brooks and Gerardin observe, “fair and reasonable” are on their face flexible terms the specific content of which is substantially left to the negotiation between the parties. All economic interpretations of FRAND commitment proposed till now are thus restrictive limitations, whose validity cannot be verified against the IPR policy of SSOs.

The simple definition provided by Brooks and Gerardin is very compelling and hardly refutable. However in the very specific context of the IPCOM case, which does look like an ex-post hold up to me, it does not provide the helpful guidance one could have hoped. The balance between the two actors in the licensing negotiations is skewed from the beginning because IPCOM finds itself outside the telecom market. Nokia cannot use its own patent portfolio as a bargaining chip to negotiate the terms and conditions of a license (and above all the price of such a license), like it certainly does with other market players.  Indeed Nokia’s competitors de facto need those patents in order to operate on the market, whereas IPCOM simply does not. Given this initial distortion giving much leeway to IPCom, it is not surprising to see Nokia withdrawing from the negotiations. This case shows the importance of the context in which the negotiations are taking place and to my mind Brooks and Gerardin’s bare definition is hardly useful here, because it fails at taking this context into account.

In our opinion the concept of “FRAND terms of agreement” has been included to the SSOs’ IPR policies, so as to help negotiating parties to reach an agreement satisfying them both. We agree with Brooks and Gerardin that the meaning of such a concept cannot be too specific, but if you dry up its meaning, this concept will not fulfill its primary purpose, and this would be a failure as well.

Gregoire Marino, with courtesy of IPFINANCE (published as a May 2010 blog)

Author: 8 years ago

The German Supreme Court (BGH) in its recent Siemens application decision[1]will give software patent critics new ammunition to oppose IPRs for software patents. The decision regarding computer-implemented inventions seems to tear down all common (German) barriers for software patents. From the critics point of view it further monopolizes software and computer products. However the decision just settles the long-lasting dispute between the European Patent Office (EPO) and the German Supreme Court about the specific conditions of patentability of software thus leading to more predictability and certainty.

Up to now, the German Patent Office (DPMA) as well as the German Patent Court (BPatG) and the German Supreme Court (BGH) have been very cautious allowing patent protection for software patents. With respect to Article 52(2) under b EPC, and, of course, the corresponding Article 1(3) of the German Patent Act (PatG), the patentability of software was strictly limited by the technical nature of the whole invention. In a nutshell, computer programs were only patentable, if they have a (characterizing) technical function within the invention, i.e. the software programs must induce a technical effect outside the computer on which they are executed. Although this principle appears very straight, its application by the German Patent Office, the German Patent Court and the German Supreme Court resulted in a very confusing case-by-case assessment of the patentability of computer-implemented inventions. Many unexpected turns led to a situation in which even experts could not predict with sufficient certainty whether a computer implemented invention has a technical character and would pass the examination through the patent application process and the potentially following sequence of appeal before the German Patent Court and the German Supreme Court.

The practice of the European Patent Office (EPO) differs significantly. According to the Guidelines for Examination in the European Patent Office, Part C, Chapter IV, 2.3.6, computer implemented inventions must also have a technical nature. But contrary to the former German legal situation, this requirement was interpreted more loose. To meet the requirement of a technical nature it is sufficient that technical considerations led to the particular implementation of the invention in a software-hardware system. As a result, it was possible to get a patent for a computer-implemented invention via an application before the European Patent Office that never would be granted by the German Patent Office. So no surprise that the validity of those patents was highly contested before the German Patent Court and the German Supreme Court.

This divergence from EPO practice was undesirable and the German Supreme Court does now away with this. According to the recent decision the whole technical nature of a computer-implemented invention is no longer crucial for the patentability. It is sufficient that “the execution of a software program which implements the technical solution is specified by technical facts outside the computer on which it is executed or that the solution is precisely that the software is so implemented, that it orientates to the technical specification of the computer.” Therewith the presupposition of technical nature of the computer-implemented invention is actually put away. Considering the former (German) legal discussion on the presupposition of technical nature, the decision is really groundbreaking, yet its impact on the examination during the patent application process will be limited.

The main criticism of the new doctrine concerns the second clause of the sentence since any programmer regularly designs his programs to the particular computers for which the program is written. Taken in the literal sense of the words the new doctrine would therefore lead to an unlimited widening of patentability of computer programs. Admittedly, there is a potential wideness and abstractness of computer programs that could lead to an adverse effect to technical innovation, if there are no reasonable restrictions to the patentability of computer programs. But those restrictions should be the same as to common inventions: First, the computer implemented invention must be new and a result of an inventive step. There is no place for weak patents which only cover pseudo inventions. Second, the claims shall be reasonably restricted to a clear problem and its tangible solution. There is also no place for merely abstract descriptions and conceptual considerations of a general difficulty. Considering this, the German Supreme Court has acknowledged the problem of abstractness of the claim in question, and the Court expressively orders the former instance to take it also into consideration during the examination of the presuppositions novelty and inventive step.

In principle, it is a good thing that the presuppositions of novelty and inventive step are thus re-established and strengthened within the examination of patentability of computer-implemented inventions. The well-known interpretation of these categories allows a more precise evaluation of what is really patent-worthy than an obscure concept of technical nature which is hardly understandable even for patent professionals.

Stephan Dorn

[1] the patent relates to a process where, in the context of the patent application, structured documents (here in particular HTML or XML documents) are dynamically generated on a host computer which communicates with a client and is preferably configured in an “embedded system” architecture. Requirement data from the client is received at the host computer and request parameters are extracted there from. The request parameters are mapped by a control module onto a command set of an architecture-specific interface module of the host computer. The structured document is then generated dynamically, using at least one template document which contains service takers. The service takers are executed in a runtime environment of the interface module, with reference to the mapped request parameters, and define contents or structure of the structured document after they have been executed. The dynamically generated structured document is then transferred to the client, see for full analysis in English,

Author: 8 years ago

Netherlands’  The Hague District Court Orange-Book decision brings up again the discussion about the compulsory licensing defense and the role of antitrust in patent infringement proceedings. Opposing’s Germany highest court the Dutch Court denies the possibility of responding with a compulsory licensing defense in a patent infringement proceeding. How damaging is it that two major patent courts in Europe differ on such important issues? After all, we are supposed to have a harmonized European legal order in patent cases. Or maybe not? At the time of the German Orange-Book-Standard decision the German jurisprudence was engaged in thorough discussions in which major voices called for the ECJ (European Court of Justice) for a preliminary ruling to clarify whether a compulsory licensing defense base on antitrust antitrust law is admissible in patent infringement proceedings . Especially the danger of conflicting court decisions and a threat of a further blow to unified European patent law, as well as a possible revival of forum shopping was a major theme in discussions in Germany.

In general, regarding the German Orange-Book-Standard decision there was nothing new by admitting to object antitrust considerations against the alleged infringement of intellectual property rights. The ECJ has already done so in the striking decisions Magill TV-Guide, IMS Health and lastly Microsoft, although with regard to the latter not in a really direct speech. What is different between the mentioned cases and the German as well as the Dutch Orange-Book-Standard cases is that the former ECJ decisions deal with a total refusal to license IP that is essential to entry a secondary market. The German as well as the Dutch Orange-Book cases differ from this initial position this way that there was not the total refusal of a license by the patentee in question. The sticking point between the parties was the royalty rate for which the technology should be licensed, where there is a general willingness to license the IP on the licensor’s side.

Against this background it becomes clear why it is not easy to reach a concurrent view among courts in Europe on the issues dealt with in the Orange-Book-Standard decisions. The predominantly accepted guidelines of the ECJ regarding compulsory licensing by antitrust law are not readily applicable to these Standard cases, but are open to interpretation. We fail to see how -in the light of ECJ rulings- the recent Dutch judgement more adequately solves the problem than the German judgment. We have to judge the Orange-Book-Standard decisions by their practicability and impacts on prospective licensing behavior.

Applied to the particular Dutch Orange-Book case, the German as well as the Dutch solution would not differ in their results. In both cases the plaintiff would prevail and in fact, that is really noteworthy, for the same reason. Both solutions presuppose that the alleged infringer must have seriously submitted a license proposal to the patentee. SK Kassetten GmbH & Co. KG, the defendant in the recent Dutch proceedings, has never done so. Therefore in the particular case the antitrust law defense would not be applicable, not even under the German rule. Thus, we have to run through the next conditions of defending against an alleged patent infringement just theoretically.

While the Dutch court completely denies the existence of an antitrust law defense the German BGH stipulates further conditions to apply it, namely that the alleged infringer has behaved like a real licensee and paid or at least deposit in escrow a FRAND[1]-like hypothetical royalty. Nonetheless, even the Dutch court acknowledges the problems resulting from determining and agreeing on a FRAND-royalty term, and offers its solution of an interim injunction against the potential licensor, which could be initiated to have the patentee to conclude a FRAND licensing agreement or even replace the patentee’s signature under such agreement. The striking point remains the assessment of a reasonable royalty rate and in both solutions the responsibility of ascertaining what is “reasonable” is left to the court to decide. But in contrast to the Dutch solution, the German judgement sees the court’s responsibility only as the second best approach. The BGH gives more leeway to the parties and would consider the requirement of a presupposed offer to license by the potential licensee also fulfilled, if the potential licensee makes an offer to conclude a license agreement in which the potential licensor determines the amount of royalties according to its own “reasonable” discretion. What is done by this provision is nothing else than giving the power to determine the royalty rate to the licensor. Under this thinking, the licensor still can behave anti-competitive (or against antitrust rules). This is rather unconvincing. It is also not convincing, that the antitrust law defense can result in a compulsory license that is not limited in time. If the defendant in a patent infringement proceeding can actually prove all presupposes of the antitrust law defense the patentee would be completely precluded from asserting its patent. Therefore, the result has rightly lead to vehement criticism as it could potentially result in a completely unwanted and de facto permanent license.

In contrast, the solution of the District Court of The Hague appears more preferable since it permits an interim license agreement which could, at least temporarily, satisfy both the alleged infringer of the patent and the potential licensor until they agree to a mutually negotiated agreement. Faced with the impeding decision of the court the parties would be highly motivated to come to a mutual agreement. Thus, under the Dutch approach there remains a chance to solve the negotiation problem between the parties affected by it. And in this way we have the chance to avoid the introducing of a general price control regarding the licensing of IP, which everybody considers to be undesirable.

On the other hand, the conditions to get a license against the wishes of the patentee appear to be reached easier under the Dutch approach. The potential licensee only has to request the patentee for a FRAND license before he can apply for an interim injunction to get a temporary license granted by the court, provided that the parties can not agree on a license mutually. Compared with this, the presupposed FRAND offer by the potential licensee under the German antitrust law defense appears to be more difficult to fit. The potential licensee risks by any offer that the court would not follow its notion of a FRAND royalty term and thus he would jeopardize the antitrust law defense on the whole by underestimating what figure really fits the FRAND royalty rate. Otherwise, by exceeding a FRAND royalty rate the potential licensee could improve its chance to get a license but he risks paying too much for the license as the patentee has only to agree to the presupposed unconditional offer by the potential licensee. In fact, the Dutch Court is right in criticizing the legal uncertainty which is produced by this approach.

Hence both approaches finally emerge as not really practicable. What we really need are proper and reliable concepts in valuing IP to which the stakeholders as well as the courts could align. We admit, that in regular a fair royalty rates comes from mutual negotiations. Thus, it might be a solution to give up the general secretiveness of royalty rates by establishing a system of an open accessible royalty rate database. With it, royalty rates in question would be more comprehensible for both parties and would give less incentives to raise a controversy.

Stephan Dorn

[1] FRAND refers to “fair, reasonable and non-discriminatory”. Especially in the context of Standard Setting, IP proprietors the technology of which would be essentially used to implement a given standard are asked for a commitment to license their IP on fair reasonable and non-discriminatory basis. The concrete meaning of FRAND is heavily discussed and therefore a contentious issue again and again in proceedings regarding licensing and infringement of IP.

Author: 8 years ago

In a combined court case between Philips and SK Kassetten regarding CD- and DVD-technology (CD-R and DVD+R disks), the District Court of  The Hague (Netherlands) ruled in favor of Philips, in a case that may revive the discussion about essential patents and competition law defenses (i.e. license under FRAND[1] terms). In our earlier blog we reported on the Orange-Book decision of the German Federal Supreme Court (of 6 May 2009), in which it affirmed the option for the defendant to raise a competition or antitrust Read more

Author: 8 years ago

Part of any smart patent litigation strategy is to seek the right venue. This is true for Europe as well as for the US. Among practitioners it is known that Texas is a preferred venue for patent litigation in the US, as the judges are assumed to be patentee friendly and, important, not inclined to immediately bow to defendant’s strategies to unduly complicate and manipulate litigation by throwing in  litigation tactics with the (sole) intention to complicate the litigation, so as to gain time and to force the plaintiff to be “outlawyered”.  A preferred venue for NPE’s. Read more

Author: 8 years ago

Is “independent invention” a cure against trolls in that it can be argued that infringement cannot be established in case of an “independent invention”? No it is not. A  lot of confusion, misunderstandings, half-truths, nonsensical quasi-lawerly talk exists around the term “independent invention“. The term is often “spittered” about as means against patent infringement actions by NPEs or patent trolls, but has no basis in patent law and lacks a common understanding and agreement on what it means as it is often used in a nonsensical way. Read more

Author: 8 years ago

Finish_iStock_000006627709XSmallLately patent infringing issues arising from implementing standard compliant products are catching the news media, among which in Europe the decision in Orange-Book-Standard by the German Bundesgerichthof (BGH). In the US Nokia sued Apple for producing it top selling iPhone compliant with the telecommunication standards GSM, UMTS and the networking standard WIFI, alleging 10 Nokia patents infringed. While these patents have been licensed by 40 other companies, including all major vendors of mobile devices, only Apple has refused to agree to Nokia’s “appropriate” licensing terms. Highlighting its R&D costs, Nokia wants a fair reward for its IP. Read more

Author: 8 years ago

OldBooks_000002891011XSmallAs of 1st October we see a few but substantial changes in German patent procedural law. Let’s pick the most interesting. Considering the pre-eminent position of Germany as a favourable patent jurisdiction in Europe its no wonder the German Federal Court of Justice (Bundesgerichtshof, “BGH”) was flooded with patent invalidity cases (roughly 200 pending cases for 2009 with an estimated duration 4 to 5 years each). Many in and outside Germany agree this time frame must be lowered to let Germany prevail as a jurisdiction of choice. Read more

Author: 9 years ago

downtown stoplight 3 packThe recent German Federal Supreme Court ruling Orange-Book-Standard (BGH, 5/6/2009 – KZR 39/06) seems to be a strong attack on one of the core features of intellectual property rights: the provision of an injunctive relief in (patent) infringement proceedings. In the context of standardized technology the Federal Supreme Court concludes that an injunctive relief is exposed to the widely known “competition law defence” under special circumstances. It may result in Germany being a NPE walhalla. However, there is light at the end of the tunnel for industry. Read more

Author: 9 years ago