Recently a German court, in a SEP / FRAND matter involving Nokia and Mercedes maker Daimler Motors, issued an injunction against Daimler for its infringement of Nokia’s SEP. See press release issued by the court here in German (you may choose to automatically translate the press release in English).
Basically, Daimler had infringed Nokia’s patent EP2981103. This patent is related to Zadoff-Chu sequences. You might ask what is so great about Zadoff-Sequences: well they are the basic access signal in LTE. In particular, the patent uses ZC sequences in the preamble for random access (i.e. to connect the mobile unit to the base station) / PRACH signal. Those that are technically oriented may see TS 36.211 to see the use of the signal.
Florian Mueller, who broke out the news in his blog Foss Patents notes that Nokia may have to give a bond of € 7 Billion (yes – you-read-that-right) Billion – with the capital B.
Florian also points out the Court failed to follow an injunction roadmap as laid down in Huawei v. ZTE – with the patentee first making a FRAND offer, and the would be licensee would then have to give a counter offer (with reasoning as to why its offer was FRAND and not the licensors).
He also points out that the judgement was given despite the fact that Daimler’s component manufacturers approached Nokia to get a FRAND license – but were not licensed.
Whether or not Nokia is fined for obtaining an injunction against a willing licensee (suppliers included) as per Motorola Samsung cases remains to be seen. I would say that this is a shocking development. In the rest of the post, I will consider the implications for India.
For starters, I am thankful that this patent is not registered in India or else everyone from mobile phone manufacturers to car / truck makers would be under its domain.
And because it is not registered in India, this is evidence that my theory regarding illegality of portfolio licenses. This is a prime example of why each patent should be held to be consistent review and not all patents be licensed under portfolio terms. Just imagine, this is a key patent for Nokia – as it pertains to the very basic structure of the LTE uplink signal. All devices that use LTE, infringe the patent, and it is immaterial whether a person is in Europe, India, or the United States (as all use LTE, but see caveat below). But surprisingly it is not even filed here in India. And when it is licensed to anybody under a portfolio here in India, it is brazen violation of the law. What is the value of something that is not even registered here?
This also proves my theory about perversity of confidentiality clubs – this is the kind of information that is designed to be protected by the licensor. The inclusion of this patent here in a portfolio license for an India specific license is illegal.
Caveat – China is not covered because it was smart enough to develop its own LTE standard – called TDD LTE – and is somewhat different than the one is used elsewhere. And Chinese companies do not have to pay such absurd royalties to companies that are not from China. I wish we too had such a system! But anyhow, back to the post.
One can only wonder why this patent was not filed in India – perhaps it is clear that it is hit by Sections 3(m) and 3(n) (because it is presentation of structure of a signal) and also Section 3(k) and we may speculate that the person responsible took the call that it was not worth it to spend money here. Whether or not my speculation is correct about the person responsible, I believe that our law has moved to the opposite end of the spectrum given the recent Ferid Allani judgement.
Yesterday, the Delhi High Court issued its order against Xiaomi issuing the anti-anti suit injunction. See : The Court ordered:
I am of the view that a clear case, for grant of ad interim injunction, in terms of prayer (i) in para 33 of the present application, is made out.
Para 33(i) of InterDigital's application is:
“33. (i) Grant an injunction against the Defendant Nos. 1-8 in the present proceedings, restraining them from pursuing or enforcing the anti-suit injunction order dated September 23, 2020 passed by the Wuhan Intermediate People’s Court until the final disposal of the present proceedings;
The judgement is a bit dense and runs into 73 pages. Indeed the judge is fully aware of the issue and in para 80 remarks:
I am uncomfortably aware that, as an order deciding a prayer for ad interim relief, this order is considerably prolix. There was, however, no other option, as the injunction, of the enforcement of an order, passed by a court of foreign jurisdiction, in a foreign country, even for a day, is a serious matter.
What I see here is that Xiaomi should have pursued a different strategy / argument other than the one it used.
The Court here views the lis as follows:
64. ...The present ad interim injunction, being granted by this Court, does not, therefore, interfere with the proceedings before the Wuhan Court, in any respect. The plaintiffs are not seeking any injunction against the prosecution, by the defendants, of the FRAND rate fixation complaint, preferred by them before the Wuhan Court, and this Court is not passing any order, to that effect, either. The defendants would, therefore, be perfectly at liberty to prosecute the said proceedings and, at least at this stage, no interdiction, thereof, is being granted by this Court.
How did the Court reach the above conclusion: The Court saw that Xiaomi argued for necessity of maintaining comity of courts (para 71) and sets aside the argument in favour of public policy. The Court then goes on and undertakes a (US - First Re-statement of the law) analysis and determines that public policy trumps the comity principle.
The answer to the above question is more definitively answered in para 76: There is, in my view, another, and somewhat more serious, objection, to the order, dated 23rd September, 2020, of the Wuhan Court, which directly involves the principle of comity of courts.
By conditioning the continuance of the prosecution, by the plaintiffs, of the proceedings before this Court, with a penalty of about ₹ 1 crore per day, the Wuhan Court has effectively rendered it impossible for the plaintiff to continue to prosecute these proceedings. The inexorable sequitur is that this Court is also divested of the opportunity of adjudicating on the dispute, brought before it by the plaintiffs, which it has, otherwise, the jurisdiction to hear and decide.
Accordingly, the Indian Court sees the Wuhan judgement as being a direct impediment in its way in deciding the dispute.
In my view, what could have balanced Xiaomi's case is the fact that even if one takes the view that InterDigital succeeds in its patent infringement case against Xiaomi (see my previous post), the end result is that royalty would have to be paid to InterDigital. This royalty is a FRAND royalty and this issue is before the Wuhan Court before InterDigital sued Xiaomi here in India. Hence even arguing InterDigital's best case is it wins the patent infringement suit here - at maximum it will get a FRAND royalty as it itself prays for (The suits ask that Delhi High Court fix a FRAND royalty once infringement is proven).
Second, the number of patents in India owned by InterDigital are far less than InterDigital's patents in China. One has to see the list of patents disclosed here in India but that is behind the perverse confidentiality club shield.
The DHC judgement goes on to cite that Xiaomi did not inform this court at least half a dozen times about the Wuhan matter: here the question is did InterDigital inform the court about its investigation in China in 2013?
The DHC also ignores the stark reality in SEP / FRAND disputes that defendants are strategically litigated against in specific jurisdictions.
The DHC also ignores the public interest aspect: this was ignored in the earlier Micromax, iBall, etc. matters as well. It is the public interest that actually suffers in the absence of a market participant. Here, one big reason why our homegrown players got sidetracked and did not join the 4G bandwagon was because of the Ericsson litigation. Xiaomi was a beneficiary as it was the only one who brought in the 4G phones at the time when our domestic players were stuck to 3G.
If I were to put it bluntly, a patent infringement trial in India is an ordeal by trial. Patent litigation is by far the domain of the right holder, and that too one with deep pockets.
In a patent infringement case, we have seen that if a small independent elects to defend, he may win at law and lose his business anyway. If he capitulates and settles he sacrifices his independence, his competitive position, and probably some major part of his patent position as well. This outcome may occur even where the smaller party has the stronger patent position, or where the larger party is armed with patents of doubtful validity. The results to the competitive system, and to the independent, are the same. It is therefore essential to recognize that when a patent suit is decided, something more than the respective rights of the litigants is involved.
A patent infringement suit is predominantly a problem in public interest–it is in the public interest that the patent system finds its justification–and a problem in the relation between economic law and technology. The rights of the litigants are embraced within the public interest at issue and dependent upon it for the exceptional character of the rights contested.
For obvious reasons, InterDigital does not want the FRAND determination matters to be decided in China, given the manner in which it's conduct was investigated there last time.
Note: Although I have linked to just one article that diagrammatically illustrates the interest analysis approach, there are a large number of articles that discuss it. For example, one might look at: Roosevelt, Kermit III, "Brainerd Currie’s Contribution to Choice of Law: Looking Back, Looking Forward" (2015) available here or more specifically to an analysis of conflict of law and anti-trust by, James R. Ratner, Using Currie's Interest Analysis to Resolve Conflicts Between State Regulation and the Sherman Act, 30 Wm. & Mary L. Rev. 705 (1989) available here.
In Interest Analysis ("IA") approach, the first step is to determine whether there is a true conflict or not. Of course, here there is a true conflict between the Wuhan Court judgement and the matter before the Delhi High Court.
Next it is very important to look for what a legislator / judgement had in mind when issuing the said law / judgement. So we look at the Wuhan Court judgement and it is clear (from the extract as provided in the DHC judgement that - Para 1, sub-para 5 of the Wuhan Court judgement:
5. The Respondents InterDigital, Inc. and InterDigital Holdings, Inc. as well as the affiliates thereof shall not, during the trial of the present case, file lawsuits before any courts in either China or any other countries and regions requesting to adjudicate the royalty rate of the royalty disputes in terms of the 3G and 4G SEPs involved in the present case against the Applicant’s Xiaomi Communications Co., Ltd., Xiaomi Homecare commercial Co., Ltd., and Beijing Xiaomi Mobile Software Co., Ltd. as well as its affiliates;
This is obviously for the same 3G / 4G SEPs that InterDigital is agitating before the DHC.
Here the DHC should have looked at whether it was vindicating / enforcing an unconstitutional interest - or whether there was an express attempt to discriminate against a particular litigant - there is no fact that says InterDigital is being discriminated against. In fact, the very thing is that a court (in China) is looking into the matter is sufficient to show due process is being followed.
3. Then there needs to be a determination of whether this is a loss-allocating or conduct-regulating law / judgement. An example would suffice here: Conduct-regulating rules occur outside of the courtroom (DHC) before the lawsuit such as speed limiting rules and a place of tort has a more important interest in regulating the affair / judgement. Here the law of the place of the tort usually applies unless displacing it will advance the relevant substantive law purposes without impairing the smooth working of the multi-state system or producing great uncertainty for litigants. A Loss-allocation rule is after the event, while in a courtroom, regulates burden of injuries and parties’ common domicile has paramount interest in allocating losses.
In the present case, the Wuhan Court judgement is a conduct regulating judgement rather than a loss-allocating judgement and hence the Wuhan Court judgement should be given deference.
The DHC was confused (in my view) from the citations of IPCom v. Lenovo - (2019) EWHC 3030 (Pat): This is because these cases show territorial overreach rather than applicable principles of international patent litigation. In IPCom, Judge Hacon in para 24 notes: "…the less that an anti-anti-suit injunction granted in England would interfere with the foreign proceedings to which it is directed, the more likely it is that the court will exercise its discretion to grant such an injunction".
This DHC uses similar language and goes ahead and issues the order.
In a matter brought by Xiaomi against InterDigital, a Chinese court just (September 23, 2020) issued an anti-suit injunction against InterDigital from pursuing matters pending in the Delhi High Court. InterDigital also stands to be fined up to one million yuan per day if it were to violate the order. InterDigital has filed an anti anti-suit injunction application at the DHC on 29.09.2020.
Any pursuit of these matters by InterDigital before the DHC is likely to evoke a per day fine by Chinese courts. This means that the entire matter (FRAND adjudication) cannot be pursued not just injunctive relief because the same is intrinsically coupled to InterDigital's demands at the DHC. In my view, the Chinese courts decision is absolutely correct because Xiaomi had first approached Chinese courts for resolution of the matter.
Contrary to popular belief that InterDigital had filed suit in India first - it was Xiaomi that first filed the matter in Chinese courts: On June 3, 2020, Xiaomi had filed a complaint against InterDigital in the Wuhan Intermediate People's Court seeking a determination of the FRAND royalty terms payable for InterDigital's 3G and 4G SEPs. More importantly, this is a request to determine global royalty rates made before a Chinese court.
This means that InterDigital's India action was a response to the Xiaomi's court filing.
In addition, the India filing was a deliberate attempt by InterDigital to scuttle or at least severly dilute the matter before the Chinese courts. This is because Xiaomi's sales in India would be severely impacted given any adverse order from the Delhi High Court and the Chinese court decision would be significantly diluted if a decision issued from our DHC.
Another factor against InterDigital is that it is a pure R & D company and does no manufacturing - and hence there would be no impact on InterDigital. Public interest is also a factor in favour of the anti-suit injunction. ------------------------------------------------------------------------------------------------- InterDigital has also filed an anti- anti suit injunction before the Delhi High Court on 29.09.2020 as given in one of its regulatory filings. While it is clear that InterDigital is not averse to taking its chances before the Delhi High Court, the Chinese court will most certainly see this filing as a blatant disregard of its orders regardless of whatever has been put out by InterDigital.
This is because InterDigital has been careful to say in the filing that the Chinese court order pertains only to 3G / 4G and not H.265/ HEVC (video codecs). All I can say is that this is a stretched argument by any standard - that HEVC and 3G / 4G patents pertain to different end points.
The defendant is the same 'Xiaomi' and end result of InterDigital's actions whether for HEVC / H.265 patents or 3G / 4G patents will be the same - either Xiaomi gives them FRAND royalty (FRAND definition to be argued by InterDigital ) or Xiaomi faces an injunction. This is clearly in the teeth of the orders issued by the Wuhan People's Court. -------------------------------------------------------------------------------------------------
The matters pending before the Delhi High Court are: InterDigital had filed these matters on 29.07.2020 against Xiaomi and the first complaint (CS. COMM. 295/2020) alleges infringement of five of IDCC's patents related to 3G and/or 4G/LTE standards: Indian Patent Nos. 262910; 295912; 298719; 313036; and 320182.
The second complaint (CS. COMM. 296/2020) alleges infringement of three of IDCC's patents related to H.265/HEVC standards: Indian Patent Nos. 242248; 299448; and 308108.
In these proceedings, InterDigital is seeking compensatory and punitive damages for Xiaomi's infringement of the asserted patents as well as injunctive relief to prevent further infringement of the litigated patents in India, unless Xiaomi elects to take a license on terms determined to be FRAND by the Delhi High Court.
InterDigital said a court in Wuhan, China, issued an order that would prevent it from seeking an injunction against handset maker Xiaomi in India over the use of wireless technology for the 3G and 4G standards.
InterDigital faces a fine of as much as one million yuan ($147,000) per day if it violates the order, the company said in regulatory filing...
IDCC said the Chinese order limiting its actions in India was imposed without any prior notice to the company, nor did it have a chance to be heard IDCC said it filed a petition in the Delhi High Court...