Dr. Tilmann Büttner Dr. Heike Wollgast Dr. Holger Folz Law 2016/Case...2 Euro Law Conference 2016 Dr. Tilmann Büttner Dr. Heike Wollgast Dr. Holger Folz Case Study - Patent Litigation

2 Euro Law Conference 2016

Dr. Tilmann Büttner Dr. Heike Wollgast Dr. Holger Folz

Case Study - Patent Litigation

Judge l RC Düsseldorf Senior Legal Officer l WIPO Attorney at Law l Partner


Members of the Panel

Dr. Tilmann Büttner

Judge, Patent Chamber, Regional Court Düsseldorf

Dr. Heike Wollgast

Senior Legal Officer, WIPO Arbitration and Mediation Center

Dipl.-Ing. Jochen Meyer

Chief IP Counsel, Vodafone GmbH

Dr. Holger Folz

Attorney at Law, Hoffmann Eitle

cannot attend due to a sudden serious illness in his family.

The “HD-Voice” case

(Düsseldorf Regional Court, file number 4a O 73/14)

Outlining a comprehensive litigation

on a standard essential patent

Dr. Tilmann Büttner, Düsseldorf Regional Court

I. General Setting

• Enforcement of six patents allegedly essential for “HD-voice” in 3G mobiles according to AMR-WB standard

• Claimant: German Company (“GmbH”) being an affiliate of Delaware LLC (“claim vehicle”?)

• Defendant: Major German mobile phone provider

• Intervenor: German affiliate of a Taiwanese mobile phone OEM

• Parallel litigation against another provider before the Mannheim Regional Court (same standard, same OEM)

• Decision of first instance delivered by Düsseldorf Regional Court on March 31, 2016

II.1. A closer view on – the claimant

• Company registered in Germany, one single

manager, no employees

• Established by transformation of a “company

on stock” shortly before the claim was filed

• Business: administration of licenses of

German parts of patents being essential for

the AMR-WB standard

• Registered as owner of the litigated patents

shortly before the claim was filed

II.2. A closer view on – the patent claim

A pitch analysis device for producing an optimal set of pitch codebook parameters in response to a wideband signal, comprising:

a) at least two signal paths associated to respective sets of pitch codebook parameters, wherein:

i. each signal path comprises a pitch prediction error calculating device (307, 308) for calculating a pitch prediction error of a pitch codevector from a pitch codebook search device (301) an

ii. at least one of said two paths comprises a filter (305) for filtering the pitch codevector before supplying said pitch codevector to the pitch prediction error calculating device of said one path; and

b) a selector (309) for comparing the pitch prediction errors calculated in said at least two signal paths, for choosing the signal path having the lowest calculated pitch prediction error, and for selecting the set of pitch codebook parameters associated to the chosen path.

II.3. A closer view on – the standard

• “Adaptive Multi-Rate Wideband” (AMR-WB)

• Coding and Decoding wideband audio-signals

• Differentiating between voiced and unvoiced phonetics

• Method to transport a wideband audio-signal, mainly human speech, with considerably lower amount of data

• Part of 3GPP

• “Freeze” in April 2001

• Numerous cellphone OEMs have licensed the patented technology, amongst which the patent too

II.4. A closer view on – FRAND aspects

• Statement of claim filed on July 23, 2014, court fee paid on July 29, 2014; served to defendant on August 15, 2014

• Defendant was not given a warning before claim was filed; but received e-mail with the statement of claim on July 31, 2014 together with invitation to ask for a license

• No answer of the defendant, reminding letter of claimant on December 9, 2015

• First answer of defendant on January 12, 2015, expressing willingness to take license

• First offer for license agreement by claimant on April 22, 2015

• Intervenor (cell phone OEM) knew about claim from August 2014 on, declared on December 9, 2014, to be ready to take license under the condition that infringement was be found by courts

• Claimant offered license agreement to intervenor on January 12, 2015 and again on March 25, 2015; counter-offers by intervenor on February 23 and April 2, 2015 (royalties to be settled by arbitration panel) and on March 6, 2015 (fixed license sum)

III. Case management

• Six patents, one claim: divided into six proceedings on the

basis of a statement of claim of nearly 400 pages (plus

exhibits)

• Case assigned to the 4a division of the Düsseldorf Regional

Court consisting of one presiding judge and three assisting

judges

• Time to prepare the principle oral hearing: about 2 months

• Time to prepare the written reasons of the decision: another 2

months after composition of the division was changed

• In principal oral hearing: about 15 lawyers, 5 patent atorneys,

40 to 60 listeners, amongst which presumably representatives

in the parallel Mannheim litigation

• Duration of the principal oral hearing: 11 hours including lunch

break

IV.1. The decision - infringement

Defendant’s position: not sure, whether all types of mobile phones complied with the standard, standard was not within the patents’ scope

• When selling mobile phones indicating that they comply with standard, defendant needs to set out in detail why this is in fact not the case

• “in response to a wideband signal” (when coding): prior filtering is within the patent’s scope

• “two signal paths”: do not necessarily have to be realized as hardware

• “prediction error calculating device”: can be realized as software, claimant had delivered source code accordingly

• “choosing the signal path having the lowest calculated pitch prediction error”: it is sufficient to choose the best signal which automatically means the choice of the best signal path

IV.2. The decision - patentability

• In general: infringement court will only stay proceedings if there is sufficient likelihood that patent will be found null for lack of patentability

• As for mobile phone patents: There is no generally high likelihood for a lack of patentability in this field of technology (even iv there is a high number of mobile phone patents to be found null)

• One objection: priority doubtful, therefore not taken into account

• Two further objections: no immediate and clear disclosure of coding of a wideband-signal

IV.3. The decision - FRAND

• Claimant has indicated alleged infringement in due time; no need

to indicate before filing the claim as opinion of the ECJ’s Attorney

General was given later (November 11, 2014)

• Defendant has delayed its declaration of willingness to take a

license; 5 months were to long

• Unclear, whether offer by defendant was sufficient (willingness to

“settle claims”) whereas claimant had made sufficient offer

• Worldwide pool license appears to be FRAND

• Claimant has also indicated the main aspects of computing a

certain royalty rate; that is sufficient as there is not only one single

and fixed amount of royalties that can be found to be FRAND

• It has been insufficient to offer a license under which the royalties

are subject to a decision of an arbitration panel (as intervenor

(OEM) had suggested)

V.1. Appeal proceedings –

stay of enforcement• Decisions of first instance can be enforced even if

appealed against

• Under the condition that a security is deposited (here: 2 milion EUR)

• Appellant may, however, file motion to stay enforcement with or without security deposited by him

• secs. 719, 707 ZPO provide for stay of enforcement by the discretion of the court of appeal

• In practice: either obvious aspects that will lead to setting aside the decision of first instance or irreparable damages threatening the appellant

• Such a motion to the Düsseldorf Higher Regional Court had been successful in a FRAND constellation in January 2016

V.2. Appeal proceedings –

examination on “obvious errors”• Here: only applicable if there were “obious errors” in the

decision of first instance

• Interim decision by the Düsseldorf Higher Regional Court issued on May 9, 2016

• FRAND aspects: with regard to SEPs certain steps have to be taken one by one in order to avoid FRAND defense

a. indication of alleged infringement

b. offer by the patent owner after alleged infringer has declared willingness to take license

c. alleged infringer does not react to offer

d. alleged infringer does not give counter-offer within short period of time

e. alleged infringer does not warrant security for royalties

Thank you for your attention –

looking forward to a vivid discussion!

[email protected]


Remarks from a Lawyer

Remarks from a lawyerwho was not involved in this litigation

1 “FRAND Order”

Claimant did not inform Respondent of infringement prior to starting court action, as requested by ECJ (in Huawei vs. ZTE) in order to allow the parties to negotiate without undue pressure.

RC: (1) “transitional period”, i.e. prior to ECJ Judgment:Claimant could not have know the “FRAND order”

(2) error can be – and has been – healed since

(a) Claimant could have withdrawn and restarted the action: unnecessary formality

(b) Respondent reacted behind schedule anyway

HRC: No transitional period according to ECJ case law, but healing possible



1 “FRAND Order”

Claimant did not offer license on FRAND terms prior to starting court action, as requested by ECJ in order to allow the parties to negotiate without undue pressure

RC: (1) “transitional period”, i.e. prior to ECJ Judgment

(2) Respondent did not express its willingness to conclude a licensing agreement on FRAND terms in time=> This heals all subsequent errors of Claimant

(3) Respondent had sufficient time to react

(4) Offer was FRAND anyway => negotiations without pressure could not have had a different result

HRC: No obvious error on the part of the RC



1 “FRAND Order”: ECJ, 16 July 2015, C-170/13 - Huawei vs. ZTE

1. Prior to court proceedings, proprietor of the SEP in question has to alert the alleged infringer of the infringement by designating that SEP and specifying the way in which has been infringed. (para 61)

2. After the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, the proprietor of the SEP must to present to that alleged infringer a specific, written offer of a license on FRAND terms, specifying, in particular the amount of the royalty and the way in which that royalty is to be calculated. (para 63)

3. Alleged infringer must diligently respond to that offer in accordance with recognized commercial practices in the field and the good faith. This includes that there are no delaying tactics. (para 65)



1 “FRAND Order”: ECJ, 16 July 2015, C-170/13 - Huawei vs. ZTE

4. Should the alleged infringer not accept the offer, it must submit to the proprietor of the SEP promptly and in writing a specific counter-offer that corresponds to FRAND terms. (para 66)

5. If the proprietor of the SEP does not accept this counter-offer, the alleged infringer must provide appropriate security, for example a providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, the number of past acts of use of the SEP, and the alleged infringer must be able to render accounts in respect of those acts of use. (para 67)

6. The alleged infringer cannot be criticized either for challenging, in parallel to the negotiations, the validity of those patents and/or the essential nature of those patents to the standard in which they are included and/or their actual use, or for reserving the right to do so in the future. (para 69)



2 FRAND anyway

RC/HRC: Claimant offered FRAND terms

• because other large companies took licenses from Claimant on the same terms (after judgment in parallel proceedings at RC Mannheim)

• and large companies have sufficient funds to proceed against anti-competitive pricing.

Question:

• judgment against mobile network provider – and major supplier of mobile phones - covers nearly all of the sales of this provider (all mobile phones with HD Voice)

• Nearly the entire sales business is in danger

Threat of immediate execution of the injunctive order is significant also for large companies.

• Consequently: Are those license terms agreed upon under these conditions sufficient evidence for FRAND terms?



2 FRAND anyway

In other words:

• Is an injunctive order an unreasonable threat if the entire business is in danger?

• because it leads to excessive license fees?

• i.e. to license fees higher than what rational parties would agree on?

• e.g. in mediation proceedings before courts or WIPO?

• Can an injunctive order at times be not proportional?

• May courts check this? (They will probably be allowed to do so under UPC)

• Must courts check this?

• At least under special circumstances?



3 “Injunctive Order”:Unreasonable under special circumstances?

Suing mobile network operators instead of manufacturers of mobile phones and networks

• Does it matter?

• RC/HRC:

• Acknowledge that this puts pressure on manufacturers

• Claimant uses these actions as “a lever against manufacturers”

• However, Claimant grants license on FRAND terms

No disadvantage for Respondent

• Is this true ?

• or are the RC and HRC underestimating the pressure of threat of execution of injunctive order?




“Patent Ambush” ?

Facts:

• Technology (HD voice codec) was entered into the ETSI standardization procedure by an ETSI member which was not the inventor nor did it hold the relevant IP rights – and did not reveal this

• Codec was anonymously tested and found slightly better than the next

• Freeze of the standard

• Third party declared it held IP rights to the codec and signs FRAND commitment

too late to change standard to the second best codec, which is not IPR protected?




“Patent Ambush” ?

RC/HRC: Late revelation did not matter since claimant was willing to grant license on FRAND terms

If it is a “patent ambush”, it would be healed by an offer of a license on FRAND terms

Is this true?



3 “Injunctive Order”: Unreasonable Threat under Special Circumstances?

Claimant “Non-Practising Entities - NPE”

• Does it matter?

• RC/HRC: No reason to treat “patent exploitation companies” differently than companies acting on the product market.

• ECJ: Does not address this issue

• Potential relevant differences:

• NPE (rightly) wants to achieve royalties

• Why does it request injunction?

• Only to use it as a crowbar to achieve higher than reasonable license terms?

• Or is it simply asserting its rightsjust as any other patentee and to protect other licensees?



Remarks from a Lawyerwho was not involved in this litigation

Side remark: Respondents lodged complaints with the European Commission; no results yet

Comments

by Judge Büttner

since I might have misinterpreted the two decisions or because he has other remarks

or by Heike Wollgast

who is not unfamiliar with the problems involved in agreeing on FRAND terms and how to solve patent disputes out of court

or immediately by the audience


Thank you very much for your attention!

Please feel free to ask questions!

Holger [email protected]

Mediation and Arbitration in Patent Disputes,

including SEP

Heike Wollgast, WIPO Arbitration and Mediation Center

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Top 10 PCT Applicants in 2015

31

Top Ten Priorities in Choice of IP Dispute

Resolution Contract Clause

WIPO Center International Survey of Dispute Resolution in Technology Transactions (2014)

0

10

20

30

40

50

60

70

80

90

100

% o

f R

esp

on

de

nts

International Contracts

Domestic Contracts

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WIPO Arbitration and Mediation Center

Facilitates the resolution of commercial disputes between

private parties involving IP and technology, through procedures

other than court litigation (alternative dispute resolution: ADR)

WIPO Center Offices in Geneva and Singapore (WIPO

External Offices also in Beijing, Moscow, Tokyo, Rio de

Janeiro and Singapore)

ADR of IP disputes benefits from a specialized ADR provider

WIPO list of +1,500 neutrals from numerous countries in all regions, specialized in different areas of IP and IT - able to deliver informed results efficiently

International neutrality

Not-for-profit

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ADR Options under the WIPO Rules

Expedited

Arbitration

Arbitration

WIPO Contract Clause/

Submission Agreement

Expert

Determination

Determination

(Negotiation)

Mediation

AwardSettlement

Party Agreement

Outcome

Procedure

First Step

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Mediation, Arbitration, Expert

Determination

Mediation: informal consensual process in which a neutral intermediary, the mediator, assists the parties in reaching a settlement of their dispute, based on the parties’ respective interests. The mediator cannot impose a decision. The settlement agreement has force of contract. Mediation leaves open available court or agreed arbitration options.

Arbitration: consensual procedure in which the parties submit their dispute to one or more chosen arbitrators, for a binding and final decision (award) based on the parties’ rights and obligations and enforceable internationally. Arbitration normally forecloses court options.

Expert Determination: consensual procedure in which the parties submit a specific matter (e.g., technical question) to one or more experts who make a determination on the matter, which can be binding unless the parties have agreed otherwise.

35

WIPO Model Clauses –Mediation followed by Expedited Arbitration

"Any dispute, controversy or claim arising under, out of or relating to this contract and

any subsequent amendments of this contract, including, without limitation, its formation,

validity, binding effect, interpretation, performance, breach or termination, as well as

non-contractual claims, shall be submitted to mediation in accordance with the

WIPO Mediation Rules. The place of mediation shall be [specify place]. The language

to be used in the mediation shall be [specify language]”

If, and to the extent that, any such dispute, controversy or claim has not been settled pursuant to the mediation within [60][90] days of the commencement of the mediation, it shall, upon the filing of a Request for Arbitration by either party, be referred to and finally determined by arbitration in accordance with the WIPO Expedited Arbitration Rules. Alternatively, if, before the expiration of the said period of [60][90] days, either party fails to participate or to continue to participate in the mediation, the dispute, controversy or claim shall, upon the filing of a Request for Arbitration by the other party, be referred to and finally determined by arbitration in accordance with the WIPO Expedited Arbitration Rules. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute, controversy or claim referred to arbitration shall be decided in accordance with [specify jurisdiction] law."

www.wipo.int/amc/en/clauses/index.html

http://www.wipo.int/amc/en/clauses/index.html

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Dispute Areas in WIPO Mediation and

Arbitration Cases

COMMERCIAL

Construction

Distribution

Energy

Franchising

Insurance

Marketing

Sports

Transport

PATENTS

Cross-licensing

Infringements

Licenses

Ownership

Patent Pools

R&D / Tech Transfer

Royalty Payment

COPYRIGHT

Art

Broadcasting

Entertainment

Film and Media

Infringements

TV FormatsICT

Mobile Apps

Outsourcing

Systems Integration

Software Development

Software Licensing

Telecommunications

TRADEMARKS

Coexistence

Infringements

Licenses

Oppositions

Revocations

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WIPO Patent ADR Experience

92 % of WIPO patent cases are international

Contractual: Patent licenses and cross-licenses

WIPO Model Clauses


Non-contractual: Patent infringement

Requested remedies included: injunctive relief, damages,

royalty payments, declaration of non-performance,

declaration of infringement, declaration of unenforceability

of a patent against a licensee (including validity matters)

Amounts in dispute from USD 50,000 to USD 1 billion


Cases under WIPO Rules:

Nationality of Parties

38

39

Settlement in WIPO Cases

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FRAND/SEP Disputes: Routes to ADR

Consensus needed; can be difficult to achieve in the

FRAND-typical pre-licensing context

Referral to ADR under SSO IPR policies

DVB, VITA, Blue-Ray Disc Association, Open Mobile

Alliance

Reference in settlement with competition authority (e.g.,

FTC Order in Google and Motorola: WIPO Center listed

as “qualified arbitral institution”)

ADR submission agreement by the parties

Unilateral Request for Mediation (Art. 4 WIPO Mediation

Rules)

WIPO ADR for FRAND/SEP Disputes

WIPO list of neutrals for disputes involving patent standards

(non-exclusive)

WIPO Center collaboration with SSOs including ETSI, IEEE

Tailored WIPO ADR model submission agreements

Developed in consultation with patent arbitration experts

and telecom in-house counsel; based on WIPO Center

experience in complex patent cases

41

WIPO ADR for FRAND/SEP Disputes

42

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WIPO ADR Model Submission Agreements

for FRAND/SEP Disputes

Mediation and (Expedited) Arbitration

Parties can shape the procedure, e.g.

Scope

Appointment procedure

Model procedural schedule

Applicable law and place of arbitration: agreed by parties

Confidentiality under WIPO Rules: Protection of confidential

information; possibility to appoint a confidentiality advisor

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Further Information

WIPO ADR for SEP/FRAND Disputes, including model submission agreements:http://www.wipo.int/amc/en/center/specific-sectors/ict/frand/

WIPO procedures, neutrals and case examples: http://www.wipo.int/amc/en/

WIPO Rules: http://www.wipo.int/amc/en/rules/newrules.html

Contact information, general queries and case filing: [email protected]

http://www.wipo.int/amc/en/center/specific-sectors/ict/frand/

http://www.wipo.int/amc/en/

http://www.wipo.int/amc/en/rules/newrules.html

mailto:[email protected]

Documents

Dr. Tilmann Büttner Dr. Heike Wollgast Dr. Holger Folz Law 2016/Case...2 Euro Law Conference 2016 Dr. Tilmann Büttner Dr. Heike Wollgast Dr. Holger Folz Case Study - Patent Litigation