Context: There’s a major dispute between research and licensing firm InterDigital and streaming giant Amazon causing interjurisdictional friction. We reported on the last development, an order by the Unified Patent Court (UPC), earlier today.
What’s new:
- Today, Mr Justice Meade of the High Court of Justice for England & Wales (EWHC) is holding a case management conference in Amazon v. InterDigital. The most important revelation was made a few minutes ago by Thomas Hinchcliffe KC, speaking for Amazon at the hearing. He said that InterDigital was seeking US$200 million per year from Amazon in video streaming patent royalties. This disclosure was not allowed, but as Mr Justice Richard Meade noted, it was “too late”. [UPDATE: InterDigital later contradicted the number.]
- We do not know what exactly Mr Justice Meade discussed with the parties regarding the UPC. We received our video access link well into the hearing (we are grateful nonetheless) and didn’t notice it immediately, but it appears that no conclusion was reached and the UPC-UK conflict is still unresolved.
- Mr Justice Meade made a case management decision. There will not be a determination of abusive conduct with respect to patents where market dominance needs to be established first. In this regard, Amazon’s preferred way forward was not accommodated by the UK court.
Direct impact:
- Now the cat is out of the bag. Of course, one must take such representations with a grain of salt. For example, Nokia once claimed that IPCom was seeking €12B, a number that was disputed.
- It remains to be seen whether Amazon will be sanctioned for having made the number public. There could also be contract law implications as this almost certainly constitutes a breach of a non-disclosure agreement (NDA).
- It is important to consider that InterDigital is free to ask for any royalty for patents with respect to which there is neither a FRAND pledge (contract law) nor a dominant market position (antitrust law).
- Given that the number has been made public, first by Amazon’s counsel and now by ip fray, no court has to redact it anymore in future situations.
Bifurcated trial and abuse of dominant market position
It was previously known that there would be two trials, with the first being scheduled for September. Amazon would have wanted the first trial to potentially result in a finding of abuse of a dominant market position by InterDigital, but with respect to patents that are not subject to a FRAND (fair, reasonable and non-discriminatory) licensing pledge, some of them not even by any stretch of the imagination, the first question to resolve will be whether there is a dominant market position.
Amazon now, unlike in the Nokia case, advances a patent-by-patent market definition (which is an extremely aggressive theory to say the least).
InterDigital raised a couple of concerns. One was about the effort to present economic evidence, but the other one was that for a firm with a licensing business model it would be highly prejudicial to be found by a court to have engaged in abusive conduct when that finding rests on an assumption of dominance that might not be confirmed in a second trial.
Amazons proposed trial structure, which could have led to an innocent company being declared (even if only conditionally) guilty, was rejected.
UPDATE: Court concerned over live reporting
Author’s explanation:
All of the above went live within approximately 20 minutes of the revelation of the (alleged) $200M amount. From the beginning I cautioned about taking the number at face value. The only edit I made to the above later was the one sentence marked as an update (about InterDigital contracting the number). So everyone can see that the reporting was an article (albeit a short one, but not a “tweet”), and it cautioned against the dependability of the $200M figure.
Later, when InterDigital’s counsel spoke, he mentioned the fact that I have already reported. Mr Justice Meade said that there should be no “live tweeting” from hearings. We were unaware of that rule. Whether or not there was such a rule before, we will respect the court’s preference for waiting with reporting until a formal break or end of a hearing.
Nothing would have prevented InterDigital’s counsel from making a point of order and asking for the opportunity to contradict the number immediately. At any rate, we made it clear from the first version of the article that the number was stated by just one party’s counsel and not necessarily dependable.
Mr Justice Meade told counsel for the parties that as they might imagine, he doesn’t always agree with ip fray. The same was previously indicated by another EWHC judge at a U.S. event, without mentioning (but uniquely describing) ip fray. I totally respect them and their disagreements with me. Let there be no doubt that they are brilliant in their own right. I just disagree with UK SEP case law starting with Unwired, and I actually (as I made clear again earlier today) disagree with any extraterritorial overreach. I prefer the U.S. approach — that’s all.
I’d finally like to ask everyone to consider that when a revelation like that happens, time is of the essence for media outlets. I published immediately because I wanted the first-mover advantage, which is one of the reasons for which this website has become as popular as it now is. For lack of awareness of a restriction, I had to assume that others might publish it sooner if I waited. Given that the information was already read by a number of people when this issue came up in the hearing, taking it down wouldn’t have helped anyone anymore.