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24 June 2020PatentsSarah Morgan

Germany’s Cartel Office weighs in on Nokia/Daimler SEP dispute

The Federal Cartel Office of Germany has stepped into a standard-essential patent (SEP) licensing dispute between  Nokia and  Daimler, urging a court to ask the Court of Justice of the European Union (CJEU) to clarify fundamental questions.

Last week, the Federal Cartel Office sent its opinion to the Mannheim Regional Court, a German court where a series of lawsuits involving Finnish telecoms company Nokia and German carmaker Daimler are docketed.

Nokia had filed suits in Germany accusing Daimler of infringing its telecom SEPs. In response, Mercedez-Benz owner Daimler claimed that Nokia had failed to offer a licence on fair, reasonable, and non-discriminatory (FRAND) terms.

Now, the Federal Cartel Office has asked the Mannheim court to suspend one of the suits filed by Nokia and refer a series of fundamental questions on the licensing obligations of SEPs.

The court heard the case on May 19 and it was expected to hand down the decision yesterday, June 23. However, two weeks ago, the court postponed issuing the ruling until August 4, even before it had received the letter from the Federal Cartel Office.

The Federal Cartel Office said it had provided a “neutral comment” as an amicus curiae.

“In our view, the case has raised general antitrust issues which are relevant beyond the scope of this particular case. The providers’ practice of licensing network standards is gaining even more relevance in the light of the development of the Internet of Things,” said a spokesperson from the office.

The office said it’s important for markets and market players to have incentives to invest in the development of standards, but it is also important that these markets be kept as open and competitive as possible, with as many market players as possible having access to the standards.

They added: “In this context of conflicting interests it has to be clarified which criteria a provider of patents that are essential for a standard has to observe in order to ensure the protection of his investments and technologies in legal disputes.”

According to Constantin Kurtz, partner at Klaka, it’s very interesting and unusual that the Federal Cartel Office is addressing an amicus curiae letter to a first instance court. He added that it’s even more unusual that the office is asking a first instance court to refer a matter to the CJEU.

“While a first instance court may refer questions to the CJEU pursuant to article 267 TFEU, the German Federal Court of Justice (BGH) prefers to decide by itself which questions should be referred to the CJEU,” he said. “Thus, the comity between the German courts usually requires that the lower courts do not refer questions to the CJEU but wait until the BGH does it in possible (further) appeal proceedings. The Federal Cartel Office is well aware of these customs.”

Kurtz believes that the Federal Cartel Office’s approach to a first instance court may well be some form of a reaction to a recent development of FRAND case law in Sisvel v Haier. More details on that decision can be found  here.

He concluded: In summary, the amicus curiae briefs filed by the Federal Cartel Office in the Nokia v Daimler cases show that the office does not seem to agree to the way the German courts are handling the FRAND defence.”

Questions for the CJEU

Daimler said it would welcome an EU judicial clarification, as it would “answer the questions on the licensing obligation of SEPs fundamentally and throughout Europe”.

According to  Foss Patents, the Federal Cartel Office has proposed to ask the CJEU to issue its opinion on a series of legal questions, including whether an SEP owner is free to choose the target of an infringement action, no matter its position in the supply chain, and whether the SEP owner is free to offer a licence only to a particular of the supply chain.

Kurtz added that Nokia’s economic reasoning for its strategy to only grant licences to the end-product manufacturer is that the prices for mobile phones and for cars are much higher than for the chipsets, meaning that much higher licence rates can be generated.

“This is an unfair strategy and an abuse of a dominant position as the economic value of the invention protected by a telecommunication patent lies within the chipset and not within the car,” he said.

“In other words the value which the car manufacturer is adding is created by him and there is no reason why Nokia should participate in this accomplishment. The chipset works in a smartphone, in a cheap car and in an expensive car in the same way which shows that the product advantages created by the car manufacturer have nothing to do with Nokia’s merit.”

A Nokia spokesperson told WIPR that it was unfortunate that the Federal Cartel Office did not seek out its views as the inventors before expressing its opinion to the Mannheim Regional Court.

“These are complex topics and we believe that a balanced system requires that the perspectives of both implementers and innovators are heard before forming views,” they said.

In April last year, Daimler escalated its dispute with Nokia, requesting the European Commission open an antitrust investigation into the telecoms company. Continental subsequently joined the complaint.

Daimler’s supplier Continental claimed that the office had expressed “considerable doubts about the legality of Nokia’s licensing practice”.

“As justification for its unusual intervention at this stage of the proceedings, the Federal Cartel Office refers to the particular economic and legal significance as well as the urgency of the questions,” said a spokesperson for Continental.

Continental believes its position has been confirmed. The spokesperson added: “It encourages us to unwaveringly continue our commitment to non-discriminatory and direct access for suppliers to licences for standardised key technologies to be able to push ahead with digitisation in the interests of a sustainable Europe.”

The EU outlook

Daimler agreed to enter mediation in December in the European Commission dispute, after Nokia suspended its litigation against the companies for allegedly infringing the IP. However, the first round of negotiations ended without an agreement.

In April this year, WIPR reported that the European Commission had sought information from German carmaker Daimler and its supplier Continental on the lack of a breakthrough in patent talks with Nokia.

The European Commission has not yet initiated formal proceedings.

Looking at the wider picture, Keith Mallinson, industry analyst and founder of WiseHarbor, said that at the most fundamental level, cellular connectivity including 4G and 5G is “significantly enhancing value” in cars for both manufacturers and consumers, with capabilities such as infotainment, safety and autonomous driving.

"Licensing payment demands for SEPs are very modest in comparison. At $15 per car, the total cost to license all the 2G, 3G and 4G SEPs from Avanci— including Nokia’s—is relatively low, at around the price of one car wash,” he added.

Nokia is a member of patent pool Avanci, which is focused on licensing SEPs for internet of things applications.

“Proclamations of patent holdup and excessive royalty demands for smartphones, cars and IoT are scaremongering with no proof of such allegations or of harms to manufacturers or consumers,” said Mallinson.

Kurtz is not involved in any of the Nokia and Daimler matters. Klaka partner Wolfgang Straub represented Haier in its dispute with Sisvel.

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