Nokia launched its standard-essential patent (SEP) assertion campaign against Daimler almost two years ago in hopes of gaining so much leverage that it could force Daimler to take a costly license either from Nokia itself or from the Avanci group. It took almost a year and a half before Nokia obtained its first injunction against Daimler, which was in fact its first German SEP injunction ever. On Friday, that one imploded as the Karlsruhe Higher Regional Court's Sixth Civil Senate (Presiding Judge: Andreas Voss, "Voß" in German) allowed Daimler to prevent the enforcement by providing security to the amount of 75 million euros. The injunction was not enforced for even one day.
This blog has mentioned Judge Voss many times, but that was almost a decade ago, when he was the presiding judge of the Mannheim Regional Court's Seventh Civil Chamber. A few years ago he became an appellate judge, and with so many disputes being settled relatively early on, I haven't been to that appeals court even once. But Judge Voss's order to stay the enforcement of that Nokia v. Daimler injunction from Mannheim is an extremely important one, not only with a view to that particular dispute but also with a view to many other SEP cases.
Those German appeals courts have generally given Nokia a hard time. The former handset maker was about to lose an interlocutory appeal in Dusseldorf and just withdrew its meritless appeal. That was apparently after Friday's Karlsruhe decision that is the main focus of this post. Previously, the Munich Higher Regional Court raised the security amount in another Nokia v. Daimler case, making any enforcement less likely. And in a Nokia v. Lenovo case (also in Munich), the patent-in-suit turned out to be likely invalid.
Some of those decisions, such as the one in the Lenovo case, are disappointing only for Nokia. But Friday's Karlsruhe ruling is of transcendental importance as it re-enables what used to be a reliable safe-harbor defense strategy in German SEP cases for a long time: a FRAND licensing offer (by the implementer) that does not specify a particular royalty amount, leaving its determination--unless the parties reach an agreement anyway--to a court of law. That approach is often referred to as an "Art. 315 offer" as Art. 315 of the German Civil Code provides this kind of mechanism, which is found in many contexts and not just SEP litigation.
For a long time, an Art. 315 offer used to be a surefire way for an implementer to avoid being enjoined. But more recently, some German courts, particularly the Munich I Regional Court and Mannheim Regional Court, have found each and every implementer of a standard to be an unwilling licensee, allegedly in line with the Federal Court of Justice's Sisvel v. Haier SEP ruling, which could actually be interpreted more narrowly given the special circumstances of that case.
Until the European Court of Justice handed down its Huawei v. ZTE decision, Germany had a more SEP holder-friendly doctrine named Orange-Book-Standard in place. But even under Orange-Book-Standard, an Art. 315 offer was sufficient (unless some terms were attached to it that a court would have found to be too disadvantageous for the patentee to have to accept).
So, more recently, implementers were actually worse off under Huawei v. ZTE, due to Sivel v. Haier, than they used to be, for example, a decade ago under Orange-Book-Standard. That's what I call a setback!
At least some judges in Dusseldorf have continued to apply Huawei v. ZTE the wayo the German courts used to in the first few years after the ECJ ruling. But in Mannhein and Munich, the SEP litigation situation has recently been a mess of unbelievable proportions. Just so there's no misunderstanding, it's one thing that I disagree with the positions taken by the judges on FRAND questions and another that they're very good at what they're doing (case in point, the Munich court's preliminary reference to the ECJ is clear, concise, and compelling, though its effects could be disastrous)--they're just too patentee-friendly.
The Munich Higher Regional Court has a motion for an enforcement stay in a Nokia v. Daimler case pending, and is aware of where the key issues in that case are. It hasn't decided on the merits of the case yet; so far it has merely ruled on the security amount. I'm somewhat optimistic that the Munich appeals court, too, will conclude that defendants to SEP assertions shouldn't be in a fundamentally weaker position post-Sisvel v. Haier than they used to be pre-Huawei v. ZTE. At least in Karlsruhe, and therefore in Mannheim (the patent infringement court below), the problem has now been solved, not only for Daimler, but for everyone else as well.
Judge Voss's decision spans 23 pages because it summarizes the case and addresses a number of questions that could potentially have given rise to a stay. Clearly, the court below can't complain that Judge Voss wasn't deferential. He didn't want to just substitute his opinion for that of the lower court--a court on which he himself served so many years. At this stage, it's about a motion for a stay, not yet about a final appellate opinion. After the appellate hearing (in a year or so), Judge Voss may very well conclude that multiple aspects of the Mannheim Nokia v. Daimler judgment need to be overruled. But for now, Judge Voss wanted to order a stay only if he identified clear legal error, and the Mannheim court's determination that even an Art. 315 offer didn't establish Daimler's willingness to take a FRAND license was categorized as clearly erroneous. On that basis, the court granted Daimler a stay.
While the injunction is stayed, Nokia is still allowed to enforce its claim for an accounting. If Nokia does so, Daimler has to provide a whole lot of documentation enabling Nokia to quantify its damages claim. That's a major administrative burden on Daimler, yet better than not being able to sell its Mercedes cars.
I may very well talk about this Karlsruhe decision again in the near term, and possibly translate some passages. One tidbit is worth sharing: when calculating the collateral Daimler as to provide, the appeals court mentions the possibility that it could take five years until a final decision--and in that context, the possibility of having to await the ECJ's decision on component-level licensing (as a result of the preliminary reference from Dusseldorf) is mentioned. I found that part very interesting. Nokia will not be amused.
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