VoiceAge EVS scores unprecedented winning streak against HMD's Nokia-branded phones: 6 out of 6 German standard-essential patent cases resulted in injunctions--but holdout continues

At a time when policy makers on both sides of the Atlantic are weighing SEP policy statements and initiatives, this post here is going to tell a tale of caution. The TL;DR version is that no matter how much concern may be voiced about hold-up, I've now come across an extreme case of hold-out that needs to be considered before weakening SEP enforcement.

The hit rate of standard-essential patent (SEP) assertions is normally not too high (often just about 10%-20%), which is why I applauded InterDigital last year for its "hole-in-one" in a UK dispute with Lenovo. The second InterDigital v. Lenovo case resulted in an invalidity finding, but one win is enough to be entitled to a UK FRAND trial. Not only is it remarkable when a SEP holder prevails on the merits of the first asserted patent but even more so when it wins more than two cases in a row--just like the maximum number of serial Super Bowl or UEFA Champions League wins in recent history has been three (New England Patriots, Real Madrid).

Today I was in a Munich courtroom and listened to the announcement of the sixth VoiceAge EVS v. HMD injunction in Germany in a row. A 100% hit rate for the U.S.-based licensing firm and its outside counsel, the Wildanger firm that was named German Patent Law Firm of the Year 2021 by Juve Patents and obtained a high-profile injunction for IP Bridge against Ford Motor Company--the news of which sent the car maker's stock price down by 3% on Friday.

As far as I've been able to research this, every single VoiceAge EVS patent that has been asserted to date (from five different patent families) has been upheld (whether in the original or an amended form)--and has been found to be truly essential to the Enhanced Voice Services (EVS) standard. To expect a similar performance of LTE or WiFi SEP holders would be an apples-to-bananas comparison. Each field of technology is different, and codec patents generally tend to be more sophisticated than the average protocol patent. But even in codecs, this spotless track record is, to the best of my knowledge, unprecedented. This is the information I've been able to obtain from the press offices of the Munich and Mannheim courts:

• Mannheim Regional Court (Seventh Civil Chamber under Presiding Judge Dr. Peter Tochtermann)

  • July 23, 2021: injunction in case no. 7 O 116/19 over EP2707687 on a "transform-domain codebook in a CELP coder and decoder"

  • September 10, 2021: injunction in case no. 7 O 32/20 over EP1509903 on a "method and device for efficient frame erasure concealment in linear predictive based speech codecs" (encoding-side claims; see April 1, 2022 decision for decoding-side claims)

  • March 1, 2022: injunction in case no. 7 O 33/20 over EP2162880 on a "method and device for estimating the tonality of a sound signal"

  • April 1, 2022: injunction in case no. 7 O 90/21 over EP1509903 on a "method and device for efficient frame erasure concealment in linear predictive based speech codecs" (decoding-side claims; see September 10, 2021 decision for encoding-side claims)

• Munich I Regional Court (Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann)

  • August 19, 2021: injunction in case no. 7 O 15350/19 over EP3132443 on "methods, encoder and decoder for linear predictive encoding and decoding of sound signals upon transition between frames having different sampling rates"

  • TODAY, May 25, 2022: injunction in case no. 7 O 14091/19 over EP2102619 on a "method and device for coding transition frames in speech signals"

Most SEP disputes simply don't last enough for even the most successful plaintiff to sustain such a series against a single defendant. At some point the parties would normally settle. HMD, however, is an outlier. VoiceAge EVS claims to have licensed more than half of the smartphone market. I can see just based on information from German courts that VoiceAge EVS#s disputes with Apple, Lenovo/Motorola, and TCL settled ahead of trial. HMD is still holding out--even after two contempt fines that the Mannheim Regional Court levied (in late 2021 and early 2022).

What makes this even more counterintuitive is the fact that HMD is the company that makes today's Nokia-branded phones. Nokia is an investor in HMD (as are Google and Qualcomm), but doesn't have a controlling interest. Nokia itself has a rather different philosophy than HMD when it comes to patent licensing.

Standard-setting organizations recommend EVS support. Various major carriers around the globe demand it. In order for a call between two persons to get the benefit of EVS, the end-user devices and at least one carrier must support it. If someone with an iPhone calls my Google Pixel, it's going to be an EVS call (on 4G and especially 5G). But if I called someone with a non-compliant phone, the devices would have to fall back to a lower-quality codec. The result is a quality degradation--and potentially an environmental impact (carbon footprint).

In the German patent law community, the Mannheim court's contempt orders (though officially sealed) have been widely read. Patent infringement disputes rarely reach that stage. I found nothing surprising there. I remember from various Mannheim cases that device claims (more formally called "apparatus claims"--but I say "device claims" because the word "device" is found more often in the relevant claims than "apparatus") are infringed by simply selling a device that is equipped to perform a certain functionality unless there's the equivalent of a brick wall between the user and the relevant functionality. That analogy was used by then-Mannheim now-Karlsruhe judge Andreas Voss ("Voß" in German). Here, HMD failed to dissuade Judge Voss's successor (and former deputy), Presiding Judge Dr. Peter Tochtermann, from ordering contempt sanctions by arguing that the EVS codec on the devices in questions wasn't going to be activated for calls initiated or received in Germany. The practice of German courts is actually pretty clear that even if the infringement occurs after exporting the product, the infringing act is the sale. HMD appealed the fines, but the one to review the decisions will be...Judge Voss.

In Brazil, the injunction was lifted and not lifted at the same time. There is a per diem of approximately US$20K. It's not being collected by the court for now, but should VoiceAge ultimately prevail (and all it would take would be for the Brazilian court to take similar views as the German judges), it will apply retroactively.

There is criticism of EVS license fees, and it's not limited to VoiceAge EVS. IAM reported on it. I believe the problem has a psychological component: some major EVS patent holders like Huawei also hold cellular SEPs, and then they obviously license entire portfolios (no "piecemeal"). But there are some, like VoiceAge EVS, whose portfolios are EVS only--no wireless protocol patents. One can't just extrapolate from the number of patent families in an EVS portfolio to a total wireless portfolio involving 4G (and/or 5G) plus technologies like EVS. If all those patents were worth about the same, the 6-out-of-6 hit rate that VoiceAge EVS now has in Germany would also be the norm for other SEP disputes--but it's not. And that's because in other fields of technology there are numerous overdeclarations--and higher invalidation rates.

I'd like to get full circle back to the first paragraph. VoiceAge EVS v. HMD is an example of SEP enforcement not being nearly as easy some would have policy makers believe. If HMD was publicly traded like Ford, the Street might get nervous--and lose confidence in a company that displays such brinkmanship. Here, there is a company with a battle-tested portfolio, with more than half of the smartphone market licensed (including the likes of Apple, anything but a soft target), yet the dispute hasn't ceased to be.

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App developers must know that any alleged ambiguity in the Epic Games v. Apple injunction favors Apple, not them: there won't be IAP alternatives, not even in WebView

This is a follow-up to my previous post on this topic: "No, the Epic v. Apple injunction absolutely positively DOESN'T allow developers to incorporate 'buttons' for alternative IN-APP payment mechanisms".

The original version of that post said Daring Fireball's John Gruber was "right for the wrong reasons." He did state reasons on Twitter that didn't convince me because it sounded like Apple's app review practices were going to inform the interpretation of the Epic v. Apple injunction. But John also referred at some point to Apple telling him that the ruling is unambiguous, such as in this tweet, though I disagree with the pages referenced there as that's the Sherman Act--not California UCL--analysis.

It's regrettable (to put it mildly) that The Verge's Nilay Patel just keeps digging himself an ever bigger hole instead of acting responsibly and admitting his error. The man is actually a lawyer by training (and journalist by vocation), so it shouldn't be hard for him to figure out that his analysis was fundamentally flawed because he focused myopically on the wording of the injunction while ignoring the underlying Rule 52 order. And a few hours ago the intellectual bankruptcy of his argument became even more obvious in the following tweet:

This is my whole argument! It’s ambiguous and crucially *not up to Apple to interpret*

— nilay patel (@reckless) September 13, 2021

So let me set the record straight on this:

Nilay Patel himself says his "whole argument" is that the wording is allegedly "ambiguous." I don't even agree because the ruling is clear enough if one reads the relevant parts of the 185-page Rule 52 order. But if we assume--only arguendo--that Nilay Patel is right and it is ambiguous, it means he loses the argument anyway.

Under controlling Ninth Circuit law, Apple will only be held in contempt of court if it "(1) [] violate[s] the court order, (2) beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of the order, (4) by clear and convincing evidence." In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993)

By coincidence, that case was also an antitrust case as its caption shows. And the same appeals court--the one with which Epic filed its appeal yesterday--clarified that the standard involves "disobedience to a specific and definite court order." (id.)

The bottom line is that any alleged ambiguity would favor Apple, not developers.

I am a developer, and a complainant against Apple in another App Store context. I wish I had better news for the wider developer community. But someone has to counter all that disinformation out there. It hurts me to see people fantasizing and theorizing about out-of-this-world crap that's simply not going to help anyone.

The question is not whether a developer's interpretation of the injunction is somewhat reasonable. It's whether Apple's interpretation is so unreasonable as to constitute disobedience to a specific and definite court order.

That threshold is very high.

Apple may have political reasons (in light of legislative and regulatory proceedings in various jurisdictions) to make concessions to developers. But in legal terms, Apple is free to interpret the injunction in its favor, provided that its interpretation is reasonable.

For the reasons I explained in my previous post, it's not just one reasonable interpretation, but the only one, to understand that the court explicitly did not enable alternative IAP mechanisms. It's all just about informing users of alternative platforms, such as that the same in-game item or currency might be available at a lower cost on, say, a Samsung phone via the Galaxy Store.

WebView (i.e., opening web pages within an app) is not going to be the answer. Any purchases made in a WebView would reasonably be considered in-app purchases and, therefore, wouldn't have to be condoned by Apple under a reasonable (in my view, even the only reasonable) interpretation of the order.

As I cover competition and IP cases across various jurisdictions, I'd just like to point out in closing that the Ninth Circuit standard for civil contempt is consistent with what I see everywhere else: it's par for the course that an injunction is interpreted in defendant's favor and that the evidentiary standard for a violation is also exacting. It's that ancient concept of "in dubio pro reo."

Apple won't even have to approve linking out to websites that merely sell digital items consumed in an iOS app. The clear purpose of the injunction is to have some competitive constraint on Apple by making customers aware of lower prices on other platforms. That platform may be the World Wide Web, but then whatever you purchase there must also be consumable there. For example, a game must be playable as a browser game. If all you get in the browser is the in-game shop, but not the actual game, it won't qualify under a--in my view, the only or at least the most--reasonable interpretation of the order.

In other contexts than anti-steering, the order mentions Apple's argument that it allows "cross-wallet" and "cross-purchases." Cross-wallet means that Fortnite gamers could buy V-Bucks (the virtual in-game currency) on another platform, such as a Windows PC, and then use those virtual bucks on iOS. Sony and Nintendo don't allow that--they insist that whatever you consume on their platforms has been purchased on their platforms (earning them their commission). Apple does. Cross-purchases are the same for digital items such as a powerful weapon. Here, too, Apple is more flexible than some others.

What if Apple now disallowed cross-wallet and cross-purchases?

It would minimize the practical impact of the injunction because game makers could point users to other platforms on which they may find the same offerings at a lower cost, but those purchases couldn't be consumed on iOS.

It wouldn't be a violation of the order (considering the exacting standard I outlined above).

It would be politically problematic, and Apple couldn't do so with respect to "reader" apps under its recent Japanese settlement that has worldwide effect but doesn't cover games.

In legal terms, any modification of Apple's IAP-related terms that disadvantages developers over the status quo would potentially serve as an indication of Apple's market power and the absence of sufficient competitive constraints, meaning that future antitrust decisions could--but, to be clear, won't necessarily--have different outcomes under the Sherman Act, even in the same district.

Apple will now have to decide whether to appeal an injunction and seek a stay of its enforcement. That would be the most obvious thing to do. What sometimes happens is that parties don't try to get a jury verdict overturned because it largely favors them, and in order to do away with the remainder they'd have to argue that the jury made a decision that no reasonable jury could have made (while defending their victory against the other party's claims that the jury was unreasonable). Here, we're talking about a bench trial, so the standard is different, making it easier to "have your cake and eat it."

The injunction won't take effect for about three months, and I guess Apple will appeal it and seek a stay, which may very well be granted.

Assuming that--sooner or later--the current injunction does become enforceable, this post and the previous one hopefully helped many developers understand that most of them won't really benefit to any non-negligible extent. Should Apple play hardball and disallow cross-wallet/cross-purchase, developers may even be worse off than before.

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May 7 hearing at Federal Patent Court of Germany critical for Google's Motorola: injunction looms large

While Motorola Solutions (the non-handset part of the former Motorola) has taken an Android- and Chrome-related patent license from Microsoft, Google's (and soon Lenovo's) Motorola Mobility has not. In my post on the Microsoft deal with Motorola Solutions I mentioned a preliminary injunction hearing that took place in Munich on Thursday. Friday and Monday were bank holidays in Germany, and today I found out that Judge Dr. Zigann of the Munich I Regional Court has scheduled an announcement on a Microsoft motion for a German preliminary injunction against various Motorola Mobility products (including but not necessarily limited to the Moto X, the Moto G, and the Razr product line) for June 12, 2014.

As a result of this scheduling order, and in light of how the hearing (which lasted four hours) on Thursday went, Google's Motorola Mobility faces a fairly high risk of a preliminary injunction coming down in June unless the Bundespatentgericht (Federal Patent Court of Germany) invalidates Microsoft's EP1304891 on "communicating multi-part messages between cellular devices using a standardized interface" in its entirety, including not only its granted form but also both of Microsoft's proposed sets of amended claims. This is one possible outcome, but it's also quite possible that the patent will survive in the form of the second set of amended claims, and in that case a preliminary injunction is very likely. In fact, the Munich I Regional Court indicated rather clearly on Thursday that it believes that the patent is valid in the form of Microsoft's second set of amended claims. Even if the Federal Patent Court rejected the proposed amendments, it would still be possible (and there is an important precedent in Germany, Olanzapin, under which an injunction can issue if the basis on which the Federal Patent Court invalidates a patent is deemed erroneous).

The procedural sitaution is a bit complicated, but it's similar in some ways (except that bifurcation -- separate proceedings concerning infringement and nullity -- is a German peculiarity) to what would happen in the U.S. if a court finds that an alleged workaround does not fall within the scope of an original ruling on the merits but may or may not constitute an infringement. If you are interested in how patent enforcement works in different jurisdictions, then I recommend that you read on (and in that case I also recommend very strongly Professor Thomas Cotter's Comparative Patent Remedies blog).

Microsoft originally won a permanent injunction over this patent in May 2012 from the same court, even the same chamber (division), but with three different judges on the panel at the time. It immediately enforced the injunction, as a result of which Motorola Mobility was unable to sell any Android devices in Germany for four months. And about a year ago, the appeals court (the Munich Higher Regional Court) affirmed the injunction and, like the court below, was unconvinced of Motorola Mobility's claim that the patent would ultimately be invalidated.

After those four months during which Motorola Mobility was unable to sell Android phones in Germany, Motorola announced (see the "update" section in this post) in October 2012 that it was again distributing such devices (particularly the Razr HD) in Germany.

While this patent was found by two courts to read on the way the Android operating system provides certain text messaging-related functionality to apps, it's not a standard-essential patent, so it can be worked around. The question is, however, whether it can be worked around without requiring a rewrite (as well as recompliation and redeployment) of all Android apps capable of receiving or sending text messages (SMS).

It turned out at the Thursday hearing that Microsoft disagreed with Motorola Mobility's position that it had worked around the patent. Microsoft did what every prevailing patent plaintiff would do in that case: it brought a motion for contempt sanctions. Those proceedings were not public, which is why I found out only on Thursday. Microsoft's contempt motion was granted in part and denied in part: contempt fines were imposed on Google's Motorola Mobility for offering infringing devices, but not for actually selling them. The conclusion was that the modified software on those devices was what would be defined in the U.S. as "more than colorably different" from the original ruling on the merits: the fact that an infringement had been identified based on a previous version of the software does not necessarily mean that the new version infringes as well. But, just like in the U.S., the question of whether the modified products still infringe (i.e., infringe in a different way than before) does not have to be reached.

Within a month of finding out that the original injunction was not enforceable against the modified Motorola Mobility products, Microsoft concluded that it needed a new ruling on the merits, and in order to obtain one as quickly as possible, it brought the preliminary injunction motion that was heard on Thursday.

At the outset of the hearing, Judge Dr. Zigann indicated the court's inclination at the time (the court's positions can obviously change during and after a hearing), according to which the purported workaround is still considered to constitute an infringement, and not just of the original form of the patent but also based on Microsoft's second set of proposed amended claims, a basis on which the court tends to believe the patent is valid. The Federal Patent Court of Germany had communicated to the parties a preliminary position on validity in advance of the May 7 hearing, and that preliminary ruling was negative with respect to the originally-granted claims as well as a first set of amended claims. But the second set of amended claims raises different issues.

If the Federal Patent Court upholds the patent in the form of the second set of amended claims, I believe a preliminary injunction will come down in June. At least there was no indication during the hearing that Google's Motorola Mobility was making any headway with its non-infringement and invalidity contentions. The court also expressed the preliminary opinion that Microsoft's preliminary injunction motion was timely because it was reasonable to initially move for contempt sanctions and to request a new ruling on the merits only after it turned out that modified products have to be adjudged.

The key battleground here is validity. The Federal Patent Court almost always announces a decision at the end of a nullity hearing, but it typically takes several months before the detailed written ruling becomes available. So the Munich I Regional Court will know about the basic outcome of the May 7 Federal Patent Court hearing when making its June 12 decision, but it won't have the benefit of the detailed written ruling. If the patent survives at least in an amended form, a preliminary injunction is rather likely. If the Federal Patent Court rejected even the second set of amendments, despite the fact that both infringement courts (regional court and higher regional court, comparable to a district court and regional circuit court in the U.S.) were unconvinced of invalidity, then Microsoft would appeal the Federal Patent Court ruling to the Federal Court of Justice and the Munich I Regional Court could still issue an injunction if it believed that the Federal Court of Justice would, as it frequently does, reverse the Federal Patent Court's decision. In the Olanzapin case mentioned further above, the Dusseldorf Higher Regional Court granted a preliminary injunction after a negative ruling by the Federal Patent Court because it believed that the nullity decision was clearly erroneous. And a few months later, the Federal Court of Justice agreed (with the Dusseldorf court, not with the Federal Patent Court).

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