Nokia vs IPCom, ongoing UMTS patent litigation in Germany

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


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