FOSS PATENTS: Patent exhaustion and possible EU intervention at issue in German Samsung v. Apple SEP lawsuit
The dispute between Apple and Samsung is a good example of how much faster patent holders can enforce their rights in Germany than in the United States. This earth-spanning patent war started with Apple’s first federal lawsuit, filed in April 2011, in response to which Samsung retaliated in several countries including Germany. By the standards of the Northern District of California, Apple v. Samsung went to trial (in August 2012) after a relatively short period of time. On December 6, the court will hold a hearing on injunctive relief, and a ruling may or may not come down this year. By contrast, Samsung filed two waves of Mannheim lawsuits against Apple, one in April 2011 and the other in December 2011. The first wave was adjudged — and appealed — earlier this year. Rulings on the second wave will come down on December 7 (smiley input method) and January 25 (two standard-essential patents and a non-standard-essential screen-to-speech patent).
By Mannheim standards, this is just an average — not record — speed. In fact, one of these cases even got slowed down a bit by a change in the composition of the judicial panel. A trial was already held on September 14, but a retrial was needed and took place on Friday.
The patent-in-suit is EP1720373 on a “method and apparatus for reporting inter-frequency measurement using RACH message in a communication system”. It has been declared essential to 3G (UMTS).
In my report on the first trial I already mentioned that the infringement question is in the court’s discretion. There’s a gray area. Infringement wasn’t rediscussed on Friday.
Apple’s challenge to the validity of this patent was addressed once again, but only as far as Apple’s reliance on a Nortel change request to UMTS is concerned. In this context, Judge Andreas Voss (“Voß” in German), by now clearly the world’s most experienced judge when it comes to wireless patents, expressed his regrets over how little attention used to be paid to these specifications of industry standards in patent examinations. Standardization-related documents frequently serve as prior art references in litigation.
The discussion on Friday focused, for the most part, on Samsung’s rebuttal of Apple’s Qualcomm-related patent exhaustion defense and on the question of a possible European Commission opinion on the FRAND antitrust issues in this litigation.
Patent exhaustion is a complicated question. The answer hinges on the scope of a license agreement as well as the technical details of how an accused device actually practices the claimed invention. There was no discussion of contractual details (which wouldn’t have taken place in open court anywy). Samsung primarily counters Apple’s exhaustion defense by arguing that there are “many parts involved in between the antenna and the [Qualcomm] baseband chipset” to perform the patented interfrequency measurement, and that the relevant measurement is actually performed mostly by the transceiver chip. Apple essentially argues that the baseband chipset does what’s important. But the court indicated that Apple’s exhaustion theory might fail if Samsung showed that the received signal strength indicator (RSSI) value is provided by the transceiver to the baseband chip, which would call into question that the baseband chip is the sole measurement unit in the accused devices.
Samsung has to surmount certain hurdles here, but all in all it’s far from unlikely that the court may identify an infringement of a non-exhausted patent. And if the case then isn’t stayed because of doubts about the validity of the patent (there appears to be reasonable doubt, but it could fall short of the standards of German infringement proceedings), Samsung would win an enforceable German injunction against all Apple products implementing 3G (UMTS). The history of Apple’s dispute with Motorola shows that this wouldn’t be the end of the story, but if the appeals court didn’t stay enforcement on any other grounds, Apple would then have to enter into the so-called Orange Book procedure and agree to take a license from Samsung on FRAND terms, the determination of which terms would most likely require a follow-on lawsuit.
At the first trial, the court and the parties already discussed Apple’s motion to stay the case (if an injunction resulted from it otherwise) for the duration of the European Commission’s antitrust investigation of Samsung’s use of standard-essential patents, including the patent-in-suit, against Apple. In order to enable the court to determine whether there would be a risk of inconsistent decisions on the antitrust issues in this case (with the European Commission potentially reaching different conclusions from those of the Mannheim court), Apple proposed that the court write to the Commission to request its input. The court appeared to give this serious consideration at the first trial but didn’t give any such indication on Friday.
According to its counsel, Samsung wrote a letter to the European Commission the week before the retrial (i.e., the week before last) to officially inform the Commission of this proceeding. Judge Voss noted that there wasn’t much time between the letter and the retrial for the Commission to make a decision, and Apple said that Samsung’s letter didn’t change the facts. According to Apple, the Commission had been informed of this litigation all along, which is what I would also have assumed, but Samsung’s letter did not ask the Commission to send a statement to the Mannheim court.
Wolrad Prinz zu Waldeck of Freshfields Bruckhaus Deringer, who presented Apple’s antitrust arguments, mentioned that the Commission does not routinely intervene in such litigations. Since 2006 it has intervened in only four cases.
Judge Voss mentioned that the German antitrust authority (Bundeskartellamt) only intervenes in cases before the country’s highest court in such matters, the Federal Court of Justice, and not at the stage of a proceeding in a regional court. I still think there’s a possibility of some European Commission input to the court in this case. The key issue is that an injunction in Samsung’s favor (which would be preliminarily enforceable against a bond or deposit) would immediately create facts. The ruling is scheduled for January M;25, 2013 as I mentioned, and for practical reasons, enforcement could begin as early as mid-February.
The window of opportunity for Brussels to give meaning to FRAND is, therefore, closing long before any proceedings in the Federal Court of Justice. If the purpose of an intervention is to make a statement on general, high-level issues, it certainly makes sense for antitrust regulators to make their submissions only to the final appeals court. But in this case, there is an ongoing investigation involving, among others, this particular patent-in-suit and this particular litigation in which Samsung is seeking injunctive relief over it. By sending a signal to the Mannheim court that Samsung’s pursuit of injunctive relief after a totally unFRANDly 2.4% royalty demand is likely to be deemed an EU antitrust violation, the Commission could ensure that no commercial facts are created before the underlying key issues have been fully evaluated by Europe’s top antitrust regulator.