After writing an introductory post on SEP licensing and discussing the steps of SEP licensing negotiation in view of the German case Haier v. Sisvel, I am back to report another latest – und sehrinteressant (a very interesting) – case on SEP-FRAND licensing between Nokia and Daimler decided by one of the patent courts in Germany, i.e. Landgericht Mannheim (Mannheim Regional Court).
Before we discuss issues pertaining to the aforesaid case, let’s first revise the basics of SEP licensing arrangement. As per the customary rule in any SEP case, a SEP holder would license the technology to a supplier in the chain and not directly to the implementer or the original equipment manufacturer (OEM like Daimler). Consequently, the implementer would buy the products from the suppliers. This practice is actively followed in patent licensing for conventional inventions. However, with the active growth of interoperability of IoT (Internet of Things) in almost all the fields of technology today, the SEP holder wishes to shift its licensing practice from a supplier to an OEM. Such licensing arrangement gives a better ROI (Return-Over-Investment) to the SEP holder; however, it may have repercussions such as disinterest of OEMs, thick licensing arrangements with all OEMs and un-FRANDLY practices.
The SEP holder with IoT patents has a greater thrust for better realisation of their ROI because connected cars use smart technologies to build real-time operations successful during the drive. Accordingly, SEP holders of such inventions would want to license their technology directly to OEMs like Daimler and charge royalty on the sale value of the final product, as it naturally gives them a better return. This type of licensing program by Nokia has already been accepted by many carmakers like BMW, Audi, Volkswagen, Porsche, etc. On the other hand, OEMs require that licensors should license the technology to suppliers of OEMs (like Continental in this case) and then the OEM would pay it to the suppliers, as per the general manufacturing and supply chain models. This is where the dispute of Nokia v. Daimler originated before the German Patent court, where Nokia was the SEP holder (licensor) for the granted patent EP2981103 and Daimler used the technology for their popular Mercedes cars without authorisation. The technology covered by the patent is “allocation of preamble sequences for an access procedure in a mobile communication system,” i.e. cellular connective technology to enable connectivity to vehicles.The court has issued an injunction against Daimler on the use of Nokia’s patent without authorisation.
As per the EU law on competition and the landmark decisions of CJEU on SEP licensing issues like Orange book case and Huawei v. ZTE, it has become clear that the SEP holder and the implementer should follow FRAND licensing practices. However, both the aforesaid cases point to two opposite approaches, i.e., while one focuses on the offer made by the SEP holder, the other relies on the conduct of the implementer. In the present case, it appears that the Mannheim court has sided with the Orange Book decision favouring the SEP holder. The court found that Daimler, being an implementer, failed to make a licensing offer on FRAND terms. Particularly, the court reasoned that Daimler was not willing to take the license. The decision would allow Nokia to impose a countrywide ban on sale of Daimler’s car.
However, in order to enforce this decision, Nokia would be disbursing a whooping sum of EUR 7 billions as collateral, as per the German law. Accordingly, in case the injunction is overturned in the appeal proceedings, there are chances that Daimler would have already suffered huge damages due to the ban on sales and the collateral money would be use to set-off the damages. Nevertheless, imposing a ban on the sale of the cars might not be Nokia’s intention but this decision could be used to pressurise Daimler in obtaining a license. In fact, imposition of ban on the sale of a car might not be economically correct for the car industry in Germany.
On the other hand, Daimler’s plea to nullify Nokia’s subject patent is pending before the Federal Patent Court (Bundespatentgericht), Germany. Any positive decision in favour of Daimler against the validity of Nokia’s patent would overturn Daimler’s position in this case. However, the chances of holding the patent invalid stands slim. The infringement court would have already stayed the proceedings if they had found a high likelihood of revocation of the subject patent. Nevertheless, the decision on nullification does not seem to coming anytime soon
While I just completed writing this short post, I have heard that the UK Supreme Court‘s decision in Unwired Planet v. Huawei came out this morning (August 26, 2020). In my classmate’s words, “The appeal stands dismissed. The court agreed with the lower court’s decisions. This is the case I presented for the competition law seminar and has important implications for SEP litigation.” Thank you Rita for this valuable information.
It looks like the year 2020 is all about SEP litigation in Europe, one after the other from the Sisvel v. Haier’s case to Nokia v. Daimler and now the UK Supreme Court’s decision (soon I will update you on the same).