On Tuesday, the Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) entered a second patent infringement judgment in Nokia's favor against OPPO. The previous one was based on a non-standard-essential patent; this week's decision related to a 4G/5G SEP. The law firm of Arnold Ruess celebrated the Tuesday win with a LinkedIn post that also gives credit to Nokia's other law firm working on the OPPO cases, Bird & Bird. The lead patent attorney defending the patent-in-suit against validity challenges is David Molnia of df-mp, who by the way is qualified to represent inventors before the EPO, German patent office, and the USPTO. This year, Managing IP magazine named Nokia's chief litigation counsel Dr. Clemens Heusch the European In-House Leader of the Year. There's no question about the skills and expertise of Nokia's in-house and outside counsel, but let's now focus on the outcome-determinative FRAND issues in the case.
As I explained earlier this week, it will now be interesting to watch whether the appeals court--the Karlsruhe Higher Regional Court--will stay one or both of those injunctions. The legal standard for that is likelihood of success on the merits (theoretically, irreparable harm could also play a role in German injunction-stay decisions, but only if a company is on the verge of going out of business).
In a scenario in which the appeals court allows enforcement, it remains to be seen whether OPPO and its OnePlus subsidiary will take a global portfolio license on the terms proposed by Nokia or accept to take a hit in their German business, given that they sel much larger unit volumes in other geographies.
Meanwhile I've been able to obtain a few select passages from the FRAND part of the Mannheim judgment. I'll quote them now, and comment on each one:
"The plaintiff … complied … with its negotiation obligations … . In contrast, the defendants proved not to be willing to license."
COMMENT: While it is an unresolved question in Germany post-Sisvel v. Haier whether an injunction would issue if both the patentee and the implementer have discharged their FRAND obligations, it is settled law that unwilling licensees are enjoined regardless of the licensor's conduct (other than merely requiring proper notice). By declaring OPPO an unwilling licensee and Nokia FRAND-compliant, the court went beyond the call of duty, possibly with the intent to make the decision appeal-proof. Nevertheless I think anything can happen one level up, as it would not be the first time for the Karlsruhe Higher Regional Court to reverse the Mannheim Regional Court on a SEP enforcement question.
"However, when OPPO's conduct is viewed as a whole, the Chamber is convinced that its criticisms [of Nokia's proposed terms] are used for [litigation] tactical reasons in order to delay the proceedings, but OPPO does not seek to bring about the quickest and most comprehensive resolution of the disputed issues."
In a similar vein:
"OPPO does not seriously intend to conclude a license agreement with NOKIA, but only superficially states this, and actually wants to delay the conclusion of a license agreement."
COMMENT: This is typical of the German judiciary's approach to FRAND, which takes all aspects of an implementer's conduct together and then arrives at a willingness--and so far, virtually always an unwillingness--conclusion. Without knowing the terms the two parties proposed, I can take note of what the court said but not form an opinion as to whether it's right. What I do know, however, is that the public part of a Nokia v. OPPO/OPPO v. Nokia FRAND hearing in Munich a few months ago didn't sound like it was all that clear-cut.
"Neither the arbitration offer of June 11, 2021 nor the counteroffer of June 11, 2021 [both by OPPO] are FRAND."
COMMENT: Those offers were made a few weeks prior to the expiration of a three-year license agreement, within a few days of which Nokia went to court. As I don't have access to the full text of the judgment, I don't know whether those were merely OPPO's last offers prior to the outbreak of litigation or the final offers based on which the court made its decision. And without knowing what OPPO offered, one can't opine. What additionally complicates an assessment is that somehow all implementers in the Mannheim and Munich cases I've seen post-Sisvel v. Haier (and even starting shortly before) have been deemed unwilling. In some cases I could see why, but not always. That's why I wrote in January that the biggest patent enforcement question of 2022 was whether the Mannheim and/or Munich courts would identify any willing licensees this year. After the first half of the year, a lot of defendants are still waiting...
"In view of OPPO's substantially increased sales figures, any blanket license for the cellular portfolio on which the counteroffer is based is clearly not FRAND."
COMMENT: Now this gives us some clue as to what may result in an unwillingness finding in Mannheim. This is important for other implementers to take into consideration in comparable situations. It's pretty common for parties to agree on fixed royalty amounts, such as $100 million per calendar quarter. It's convenient: the implementer doesn't have to send royalty reports, and the licensor doesn't have to perform plausibility checks or even audits. And the licensor has some predictable recurring revenue. Also, either party can then interpret that agreement slightly differently in the ND part of a FRAND analysis. But what the parties to a SEP licensing negotiation agree upon is one thing, and what the courts of law will have to make of official offers when performing a FRAND analysis is another. The above passage suggests that Nokia pointed to OPPO's fast growth and refused a lump-sum deal as it feared it might in the end receive too low a royalty on a per-unit basis. The Mannheim court then held that Nokia was within its rights to refuse to enter into an agreement on that basis, which in turn contributed to an overall conclusion of OPPO being an unwilling licensee.
This means it's definitely safer--or maybe even the only safe choice--for implementers in Germany to make per-unit offers with a view to litigation, even though an agreement may ultimately still be based on fixed amounts. There's nothing wrong with making one type of offer for the purpose of the official FRAND analysis and still agree on something else--in this case, something simpler--in the end.
