Nokia's litigation strategy: The right approach

As far as the 'smart phone wars' are concerned, the fewer lawsuits filed the better. That’s the view of Richard Vary, director of litigation at communications and IT company Nokia.

Despite Vary’s view, Nokia has itself been no stranger to smart phone litigation in the past. Although its cases have arguably not been as high profile as the Apple and Samsung disputes, the Finland-headquartered company has, in recent years, asserted patents against businesses including Apple and smart phone maker HTC. It has agreed licensing deals with both.

However, many of the lawsuits preceded Microsoft’s acquisition of Nokia’s devices and services (mobile phone) division, a deal that was announced in 2013 before closing a year later. As part of the deal, Microsoft paid for a non-exclusive licence to use Nokia’s patent portfolio—around 10,000 patent families.

Today the company, which no longer manufactures phones, is split into three different arms: Nokia Technologies (technology development) Nokia Networks (network infrastructure business) and Here, a mapping and location-based service.

Despite the lawsuits relating to Nokia’s smart phones, the development of which has been taken over by Microsoft, Vary tells WIPR that litigation has “never been Nokia’s preferred option” and that it has previously signed around 60 licensing agreements with other companies.

“Few companies have needed us to resort to litigation. There have been a few implementers [of patents] who have not taken a licence willingly, perhaps because the current climate gives them a belief that they are unlikely to be injuncted. Regrettably, in those few cases litigation has become necessary,” he says.

But despite being one of the major players in the technology, and formerly the mobile phone, industry, Vary says the widespread and seemingly continuous disputes between smart phone companies have shown that Nokia has been right in its view.

“The smart phone wars have taught me that our view of litigation as a necessary but not preferred option is the right one,” Vary says.

“Across the broad spectrum of cases, statistically the patentee usually loses.”

This is not because there are no good inventions, Vary says. On the contrary, he adds, today’s devices are “beyond anything we could have thought possible” just a few years ago. But, he says, there is [rightly] a heavy burden in the patent system to prove entitlement to the monopoly right that patents are meant to provide.

“In the smart phone wars, we’ve seen companies tearing apart each other’s patents and then holding up the rates of invalidity as evidence that technology is not advancing, or as criticism of our patent examiners. It is neither: it is simply the statistical result of the very high burden we have placed before the patentee.”

Vary says that Nokia, instead of filing multiple lawsuits, would rather use arbitration to resolve patent disputes.

“Unlike litigation this tends to be confidential in nature and does not attract the same level of media attention,” he says.

Nokia’s patents, Vary explains, have been accumulated following the investment of more than €50 billion ($55 billion) in research and development over the past two decades.

Where to go

For a company with so many patents, and possibly plenty of scope to allege infringement, it is perhaps surprising that Nokia is not as keen on enforcing patents in the courts as some other companies.

But, when the need to enforce patents does arise, Vary notes the importance of establishing a different strategy for national and cross-border litigation.

The main difference is how you select your team, Vary says.

Patentees that approach cross-border litigation as if it were an “extension of their national system” and try to run it centrally from head office, tend to do badly, he says, adding that sometimes the “instincts and strategies are often entirely wrong” when considering litigation strategies in other countries.

Instead, the best approach is to “let go of your own opinions, hire good litigators in other jurisdictions and integrate them into your team”, he explains.

"Law makers should be focused on making it easier and not more difficult for patent owners to assert their patents and collect royalties."

He adds: “We have been careful to build up an in-house litigation team with members on the ground in the UK, Germany, US and China. We work as one team on the cross-border cases, but each works directly with the local counsel in their area.”

For Vary, Germany is an attractive destination for cases, based on the speed with which decisions are reached. A Mannheim or Dusseldorf court can, according to Vary, reach a “well-reasoned and careful decision” in nine to 12 months.

“In the mobile industry that is very important,” he says. “With product lifecycles around a year, in many countries products accused of infringement could be off the market before a decision is reached.”

He adds that he is hopeful that the Unified Patent Court, which he says will “inevitably” be used by the company and which will have one of its divisions in Germany (Munich), will match that speed.

But for Vary there are problems elsewhere, including in the US. Despite the US having “traditionally been the focus” of patent litigation in the mobile industry, it faces “significant problems” today.

He explains: “Injunctive relief is circumscribed, and it is rare now for an infringer in our industry to be ordered to cease. I hope that the US will soon remember the importance of encouraging and rewarding innovation for its economy and that the pendulum will start to swing back to the middle.

“Today, it is the implementers rather than the innovators who have the lobbying budgets and so the upper hand. For many, this makes the US an unattractive jurisdiction,” he adds.

It is this focus on the current patent climate in the US that brings Vary on to the subject of one of the most talked about issues on US shores: non-practising entities (NPEs).

These companies are politely referred to by some as “patent assertion entities” and more bullishly as “patent trolls” by others.

“People who ask about NPEs usually mean the few who buy patents and assert them aggressively, often very speculatively,” says Vary, adding that Nokia has been targeted by them both in the US and Europe.

“We always take whatever steps we need to defend ourselves, especially against some of the more extreme tactics such as products being seized from the shelves of retailers, the filing of criminal actions and employees being sued personally for infringement,” Vary says.

Legislation has been proposed in the US, as some politicians look to introduce methods of clamping down on NPEs’ abusive litigation and aggressive practices so that they cannot assert their patents as easily.

One of the proposals, the Innovation Act, was re-introduced to Congress in February this year after previous attempts to pass it in 2014 had stalled.

The bill, re-introduced by Bob Goodlatte, chairman of the House Judiciary Committee, suggests changes including a requirement for plaintiffs to send a letter to the alleged infringer disclosing further details of the patent in question and how it was infringed.

Under the bill, legal costs would be shifted in certain cases, meaning a claimant that loses a case would have to pay the defendant’s fees. As it stands, fees are shifted only in exceptional cases.

But Vary believes law makers should be focused on making it easier and not more difficult for patent owners to assert their patents and collect royalties.

“Although it may seem counterintuitive, if we do that the original inventors are more likely to retain and license their patents themselves, with less need to sell, and no market for purchasers who would use aggressive tactics.”

Explaining the need for a simplified system, Vary says it is becoming “increasingly difficult” for the patent owners to collect fair royalties either by licensing or using the courts.

“Without injunctions a company cannot stop an unlicensed infringer from using its inventions and cannot realistically sue for a royalty on every patent in its portfolio. So selling patents has become more attractive. Purchasers, unsurprisingly, are those who have the financial means and the willingness to be more active.

“When regulators and the courts attempt to curtail assertion by speculative litigants, the unfortunate effect is to make patent litigation harder still for patent owners, which actually compounds the problem. It further drives patent owners to sell their patents on the secondary market,” he says.

Vary raises interesting questions. Are US law makers going about patent reform in the wrong way, and could provisions designed to make it harder for NPEs make things more difficult for all patent owners?

In the age of multiple smart phone lawsuits it is refreshing to hear from someone who sees arbitration as a viable alternative to litigation. The question is whether that philosophy will last in this increasingly litigious environment.