Samsung counsel doubts EU regulator’s speed and resolve concerning standard-essential patents
Today I attended two Samsung v. Apple patent trials in a row in Mannheim, Germany. Last December, Samsung brought four new patent assertions in that court. It’s now trial season for those claims. A month ago, a trial was held on a standard-essential patent assertion. Another trial (involving a non-standard-essential patent on speech output of screen content) was originally scheduled for September 28 but pushed back to November 23. Today’s two trials involved an SEP (EP1679803 on a “method for configuring gain factors for uplink service in radio telecommunication system”) and a non-SEP (EP1215867 on an “emoticon input method for mobile terminal”).
The SEP trial was the lengthier and far more interesting one. The smiley patent lawsuit is not a serious threat to Apple. I’ll tell that story in a few paragraphs at the end. Before we get there, let’s focus on FRAND.
For its new SEP enforcement effort in Germany, Samsung is working with the same two patent attorneys as before (Dr. Joel Naegerl and Dr. Christian Ginzel of Zimmermann & Partner) but two new litigators: Axel Verhauwen of the IP-specialized firm of Krieger Mes and, for the competition issues relating to SEPs, Dr. Wolfgang Kellenter of Hengeler Mueller, a top-notch German business law firm. Mr. Verhauwen and Dr. Kellenter also represent SEP monetizer IPCom against Nokia and HTC.
Dr. Kellenter argued on Samsung’s behalf against Apple’s request for a stay of Samsung’s new SEP cases (in the event that Samsung would otherwise win an injunction) pending resolution of an ongoing EU antitrust investigation. In my report on last month’s trial over another SEP Samsung is asserting against Apple in Germany, I mentioned that the Mannheim Regional Court may defer to the European Commission on the issue of injunctive relief. An outright stay seems unlikely, but a letter from the Mannheim court to the EU’s top antitrust regulator with a request for information on the target date and substance of a potential Commission ruling on the Samsung SEP case is fairly possible — and that answer could impact the outcome of the case, or trigger a stay. For the details of this procedural possibility, please check out the post I just linked to.
Prior to today’s trial, Apple had filed several official statements by the European Commission on current SEP enforcement cases involving Samsung and Google subsidiary Motorola Mobility, as well as the decision on the Google-Motorola merger and different speeches by European Commission Vice President Joaquín Almunia. While the launch of a formal investigation of Samsung’s conduct doesn’t mean that there is definitive proof of wrongdoing, the pursuit of injunctive relief over SEPs is at issue.
Dr. Kellenter disagreed with Apple’s perspective on the possibility of a near-term Statement of Objections (SO), a preliminary ruling that the Commission has to issue before ordering sanctions. Apple obviously couldn’t specify when an SO might issue against Samsung, but it said that this might happen soon. Considering that the Commission launched this investigation at its own initiative and after only a few months of preliminary investigations, it’s possible that rapid progress will be made. But Dr. Kellenter said (more than once) that Samsung had information “from Brussels” (the primary seat of the European Commission) that this would “take years”. He also said there are indications that the European Commission actually hopes to avoid the need to provide a more specific definition of FRAND by encouraging industry players to reach an agreement through discussions among the members of standard-setting organizations.
Apple’s lead counsel in its defensive cases against Samsung, Dr. Frank-Erich Hufnagel of Freshfields Bruckhaus Deringer, requested clarification whether Samsung claimed to have this information, particularly the prediction that it would take years for a Statement of Objections to issue, from the Commission itself. Dr. Kellenter then clarified that he was referring to unofficial (and unnamed) Brussels sources.
Less than a month ago, Vice President Almunia stated in no uncertain terms that he’s determined to solve the SEP problem one way or the other:
“The fact that we have received many complaints related to standards-essential patents also shows that there is a great need for guidance. I want to tell you that I am willing to provide clarity to the market through our enforcement.Having said that, I am also convinced that the industry needs to do its homework too. I expect the leading companies in the sector not to misuse their intellectual property rights.
It is high time they look for negotiated solutions – I am tempted to call them ‘peace talks’ – that would put an end to the patent wars.”
Others before Dr. Kellenter have made the mistake of underestimating the European Commission’s resolve and agility in times of need. A Statement of Objections requires a fair amount of legal work and a vote by the commissioners, but if a solid legal theory based on a robust body of evidence is in place, swift action is possible and has happened before, contrary to a stereotype of a huge bureaucracy that takes its time and always looks for the path of least resistance.
Without a doubt, the Commission is not only watching the aforementioned negotiations (which are important and necessary but far more likely to help avoid future problems than to settle any presently-ongoing disputes). The EU’s top competition agency is also aware of the fact that an actual enforcement of injunctive relief over SEPs could force settlements on anticompetitive terms and set a dangerous precedent for future FRAND cases. By the way, Samsung explicitly stated today that the iPhone 5 is also being targeted in this German SEP action.
The FRAND debate was the most interesting discussion today. Let me add only a couple of things about the infringement part.
Claim construction looks relatively favorable to Samsung. The key disputed issue is whether a “gain factor”, a particular kind of number that is sent over a UMTS network, is sent over the radio waves as a straightforward number (a sequence of bits) or whether the network sends to the handset only some bits and pieces that the handset will put together to arrive at the number. Samsung argues that UMTS networks do send the number but simply in a more efficient form. For Apple, Dr. Hufnagel took a pragmatic position: he conceded that this is a matter of line drawing. The question is whether the sequence of operations the handset has to perform in order to calculate the number (though the language of the patent claims suggests straightforward transmission) does or does not fall within the scope of the transmission required by the patent. He explained why he believes the line should be drawn in a way that clears Apple of infringement of this claim limitation, but he didn’t try to deny some correlation between the numbers transferred over the network and the number to be transmitted according to the patent. At last month’s Samsung v. Apple SEP trial in Mannheim, Dr. Hufnagel also conceded in a somewhat similar context that the outcome would be in the court’s discretion. This approach makes a whole lot of sense with a patent-specialized court: it would be a waste of time to make indefensible arguments to Judge Voss, who has adjudged far more wireless SEPs than any other judge in the world, and his knowledgeable colleagues. But most of the time, litigators insist that their proposed claim construction is the only correct choice. I see it all the time — and I like it when someone doesn’t throw in the kitchen sink but focuses on winnable points, even if it involves tactically wise concessions.
Even if Samsung prevails on claim construction (which I consider more likely than not), it still faces another hurdle: since this entire SEP consists of method claims, it’s not sufficient for Samsung to show that Apple’s devices are equipped to handle a certain situation if it arises — instead, Samsung has the burden of proof on whether that situation (in this case, it’s about whether different numbers of a certain type are transferred to a given handset) actually does arise in Germany. The court appears to agree with Apple that Samsung’s factual representations fall short of what would constitute reliable evidence. There could also be a claim construction-based way to lower this hurdle for Samsung, and maybe Samsung is right and the situation covered by the patent does arise in Germany — but if the outcome of the case hinges on this question, the court will have to appoint an expert. As a result, there would be a need for further pleadings, one or more hearings, and considerable delay. During such delay, the European Commission might actually hand down a Statement of Objections or at least make so much headway that the Mannheim court will stay the case rather than grant an immediately enforceable injunction.
I have a strong feeling that Samsung is unlikely to win this case quickly. A decision on the next step, or (less likely) a final ruling, has been scheduled for January 25, 2013.
Smiley patent lawsuit is commercially irrelevant — victory would be symbolic at bestThe smiley input method patent would affect only those of Apple’s German customers who use Asian on-screen keyboards. The problem with Asian character sets is that smileys can’t be entered with only a couple of keystrokes such as “:-)” but consist of several symbols, each of which requires multiple keystrokes. So it’s more convenient to enter a special smiley input mode and select them from a list of on-screen choices.
Judge Andreas Voss (“Voß” in German), who has already presided over ten or more Apple-Samsung trials, rightfully doubts that many German customers actually bought an iPhone or an iPad because of a more convenient way to enter smileys if an Asian keyboard layout is used. But this fact would not stand in the way of injunctive relief under German patent law. If Samsung proved infringement (the easier part) and overcame the court’s skepticism regarding the validity of this patent (the much harder part), it could claim to have proven Apple’s infringement of one more of its patents (besides the two on which it prevailed in Korea and one over which it is entitled to a modest amount of money in the Netherlands) and it would win an injunction — not an impactful one, but still, an injunction in a formal sense.
It would be child’s play for Apple to work around this patent without losing consumer appeal in Germany. PR is the only respect in which Samsung could get mileage out of such a win: “Look, they infringe our stuff. We have patents that we can enforce against them. We’ll get a cross-license on favorable terms when all is said and done.”
A decision will be made on December 7, and based on how the trial went, this case is very likely to be stayed pending a parallel nullity (invalidation) proceeding. Samsung’s counsel in this particular action, Dr. Johannes Bukow of Quinn Emanuel, sought to narrow the scpe of the patent to a scenario in which one enters two or more smileys in a row, in a transparent effort to set the patent apart from Apple’s prior art references. If Samsung prevailed on the basis of such a narrow construction, a workaround would just have to ensure that users return to the standard character set upon entering a smiley. And again, it’s only an issue if you buy the device in Germany but use Asian character sets.