Opinion
Whether or not one takes Amazon’s $200M/year claim at face value, their representations in the Unified Patent Court (UPC) and the UK are consistent: their idea and InterDigital’s of a reasonable royalty for those video patents are worlds apart. Amazon may have been described as arrogant but wouldn’t engage in such brinkmanship as risking a €50M (maximum initial) fine in the UPC if the stakes weren’t high. The law firms advising Amazon (Sheppard Mullin, Hogan Lovells, Hoyng Rokh Monegier) are undoubtedly sophisticated and on the more conservative (for the avoidance of doubt, not in political terms) side of the spectrum.
So what did they do when they saw that there was a gap no negotiator could bridge? Maybe a factor of ten (which is like their UPC counsel made it sound in November)? They evaluated all their options. They knew that InterDigital would sooner or later win injunctions in the UPC, Germany, and possibly elsewhere. Then they would be faced with the choice of taking a global license on terms that those courts would either consider to be “maybe at the upper end of the FRAND (fair, reasonable and non-discriminatory licensing) range, but justifiable” or not even care to evaluate on purely behavioral grounds. So they sought refuge in the UK.
The same UK in which they had previously (against Nokia, where the gap was ultimately bridged through a “patent agreement”) made some headway, with an outlier judge, on the question of whether even non-standard-essential patents (“non-SEPs”) should be included in a FRAND determination. To be analytically precise, there are not only SEPs and non-SEPs in play here, but there is also a category of patent claims (on encoding, while the International Telecommunication Union (ITU) pledge focuses on decoding) and there are standards (which use patented techniques but where neither InterDigital nor its predecessor-in-title ever participated in standardization) where there is no FRAND pledge, though a FRAND pledge is not a requirement for a compulsory license. It’s just that the hurdle is very high to prove that a non-SEP confers market power, and it has to be done on a patent-by-patent as opposed to portfolio basis.
The UK looked like a jurisdiction that could help them secure a worldwide license, potentially even to non-SEPs, on either their preferred terms or at least on terms much closer to Amazon’s perspective than what the UPC or German courts would condone. But InterDigital became the first SEP holder to defend its right to enforce each patent in a court of competent jurisdiction, which is normally just one jurisdiction, the exception being the UPC during the transitional period under the UPC Agreement.
In the world that Amazon imagined, the outcome would have been great. It is now, however, increasingly unlikely to work out, and Amazon is antagonizing the UPC, a court in which it will have to defend itself, and maybe will one day even want to enforce, for a long time to come. The UPC cannot possibly capitulate to usurpation no matter how much Amazon argues that it should. And Presiding Judge Prof. Tochtermann made the right move by getting the European Commission interested in this snafu.
Amazon should have applied the 20-80 rule: optimize for where most of the money is
The estimated revenue distribution for Amazon’s subscription services is this:
| Region | Estimated Share of Prime Revenue | Key Markets / Context |
| United States | ~75% – 80% | 180M+ members (out of 220M-250M); higher annual fee ($139) compared to other regions. |
| Europe (EU + UK) | ~10% – 15% | Led by Germany ($41B total net sales) and the UK ($38B total net sales). |
| Rest of World | ~5% – 10% | Includes Japan, India (high growth), and other emerging markets. |
Amazon should have considered the EU strategically lost. It should have focused on defending its cost structure in the U.S. market (and maybe also in the UK). That’s where it generates 75-80% of the relevant revenues, and an even higher share of its profits.
The solution would have been the very opposite of what they are doing. They should have sought a U.S. antisuit injunction against any SEP enforcement anywhere in the world where Amazon would be coerced into a global license. In other words, just like the Munich I Regional Court’s 21st Civil Chamber’s Presiding Judge Dr. Hubertus Schacht advised implementers to carve out Germany from their UK FRAND actions, Amazon should have asked a U.S. court for help to the same effect: “Make sure that what we will pay in the U.S. will be determined in the U.S., and that we will not have to pay royalties in the U.S. market only because a judge in Mannheim or Munich thinks they may be FRAND or we didn’t behave in a certain way.”
They had the solution in their backyard:
It was in the Western District of Washington, their home district, where Judge James L. Robart entered an antisuit injunction for Microsoft against Motorola Mobility’s Mannheim SEP injunctions (by coincidence, video codec SEPs) in 2012.
Of course, if they had done 100% the same as Microsoft, it would have led to anti-antisuit injunctions (AASIs) from Europe and greatly increased the risk of being deemed unwilling (though it remains to be seen whether the UPC would consider Amazon a willing licensee if it still didn’t back down after a huge fine).
But they wouldn’t have needed the same as Microsoft. They could have said: “InterDigital can sue, InterDigital can enforce, but the U.S. must be carved out from any license that a European court forces us to take in order to avoid an injunction there.”
It would have been narrowly-tailored in one way, but very impactful in economic terms. The carve-out would have covered 80% of the business in this case.
Of course, this would have been limited to SEPs. With the U.S. approach of recent decades, centered around the FRAND pledge, there would have been a risk. But they could have made an argument in the U.S. based on market power. And it would even have been sufficient to convince a U.S. court that foreign courts simply should not present Amazon with the choice of taking a license to U.S. patents set by foreign courts or being enjoined.
The UPC and the German courts would have found it much harder to grant AASIs against a carve-out from a coerced global license. They could have tried, but in the end the U.S. wields the bigger stick (if this escalated to a trade conflict) and U.S. federal judges have far greater powers than continental European judges.
In the UK it would have been hard because of the Unwired stupidity, but the U.S. was always going to be the grand prize. In the long run, the U.S. has far better prospects than Europe. The gap has been widening for a while and keeps widening as we speak. The probability of a turnaround is practically zero, short of extraterrestrials landing on Earth or a European company suddenly making the greatest invention in history, because the (realistic) window of opportunity closed more than 20 years ago for Europe to position itself for leadership in the fast-moving Digital Era.
Maybe even the courts in some emerging markets such as Brazil and India would have granted antisuit injunctions to protect their jurisdiction. But again, just protecting the U.S. market would have been a huge win.
In the EU, and wherever the courts would not have granted antisuit relief to carve out their patents from a coerced global license, Amazon could then have raised its prices accordingly. That always comes with a potential loss of market share. But its competitors would face the same problem there sooner or later. The problem would have been only temporary with this strategy, and small in the global scheme of things.
Microsoft made the right move in 2012. Amazon could have adapted it to the AASI era, could have emphasized comity, and could have been consistent (thereby exposing continental Europe’s, including the Europena Commission’s, hypocrisy concerning global licenses). Instead, Amazon tried to fight fire with fire. And it’s now likely to suffer the consequences.