Nokia-Daimler settlement leaves questions unanswered
Daimler’s tricky position made a deal likely but big issues over SEP licensing roll-on, says Tom Furnival of Mewburn Ellis.
Last week saw the end of a long-running legal dispute between Nokia and Daimler that could have had huge ramifications for the automotive company as well as sending shudders through the wider industry.
A key question arose: could it be true that a fair, reasonable and non-discriminatory (FRAND) licensing rate for a standards-essential patent (SEP), when the technology was implemented in an automotive vehicle, should be determined on the value of the entire vehicle?
Daimler’s position was that this is not the case, and instead, the licensing rate should be based on a component value level (eg a module for installation in the vehicle). On the other hand, Nokia insisted their preference to license to the end-stage manufacturer of a product, as they do in the telecommunications sector.
The associated SEPs relate to technology that allows in-car navigation and entertainment systems to connect to the internet and which underpin semi-autonomous driving capabilities, both key offerings to a premium and luxury car manufacturer such as Daimler.
After a series of losses for Daimler before the German courts, in which the automotive manufacturer was repeatedly found to have infringed patents owned by Nokia, the Higher Regional Court of Düsseldorf referred Nokia’s case to the Court of Justice of the European Union (CJEU).
This referral, made at the behest of Daimler, asked the CJEU to clarify whether Nokia was abusing its position per article 102 of the Treaty on the Functioning of the European Union and whether SEP owners have the right to choose which company in a supply chain to sue for an injunction.
A player in the supply chain market, Continental, had made public statements that in its view components sold to end-stage manufacturers should be fully licensed and so it was inappropriate (in the automotive sector) for Nokia to insist that Daimler take a licence.
This contrasts with the approach taken in the telecommunications sector, where it is indeed the value of the end-product which is used when licensing terms are negotiated. This highlighted possibly one of the key questions in the CJEU referral: “Do customary trading practices also play a decisive role when deciding who should take a license in the supply chain?”, and a question that may remain unanswered.
These questions were and still are, of significant interest to those dealing in the FRAND sphere as they will allow legal professionals to better advise their clients on the necessity of taking a licence or what the terms of a license would be considered appropriate in this sector. Indeed a number of other automotive manufacturers (eg, the Volkswagen Group, Volvo, and BMW) have already agreed terms with Nokia to use its patented technology.
However, for Daimler, the risk was huge. Nokia had already secured several injunctions against it, with the multi-billion euro bond the only thing stopping Nokia from setting it into action. The automotive manufacturer could have been in a position of being unable to make and sell its vehicles in Europe’s largest economy.
It is unclear at the moment whether the referral will go ahead, although the referral is still listed as a case in progress per the CJEU’s official register. The prevailing opinion appears to be that the CJEU cannot continue of its own motion, and so the uncertainty around this area will persist for a while longer.
However, it’s noted that Continental are in a similar battle against Nokia and this may present a further opportunity for the CJEU to provide guidance on these topics.
Tom Furnival is a senior associate at Mewburn Ellis. He can be contacted at: tom.furnival@mewburn.com
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