Context: Automotive industry players and lobbyists have made, and continue to make, various attempts to advocate lower standard-essential patent (SEP) royalties. A recent letter by the Alliance for Automotive Innovation emitted more noise than signal (July 12, 2024 ip fray article). On Monday, the England & Wales High Court (EWHC) dismissed Tesla’s FRAND claims against the Avanci licensing platform and InterDigital (July 15, 2024 LinkedIn post by ip fray; a subsequent article will discuss the logic of that decision and why an appeal is unlikely to succeed). And in 2022, telecommunications control unit (TCU) and (more famously) tire maker Continental gave up its U.S. federal lawsuit against Avanci and several of its licensors, among them Nokia. But at that stage it had already brought a lawsuit against Nokia over parly the same issues in Delaware state court.
What’s new: This morning, Nokia issued its second-quarter (and first half-year) 2022 earnings report (PDF). In the “Litigations and proceedings” section, Nokia lists ongoing disputes with Amazon, HP and Verifone, but most interestingly states the following: “.Continental also brought breach of contract and FRAND-related claims against Nokia in 2021. Continental has now withdrawn that action.”
Direct impact: In order to understand whether this was more of a withdrawal or more of a settlement (which could mean that Continental would now be licensed to Nokia’s patents), ip fray reached out to Nokia. A Nokia spokesperson was reluctant to comment, but did confirm to ip fray that the company’s licensing practices in the automotive industry remain unchanged. By “licensing practices” Nokia must mean its parallel pursuit of collective licensing, at the end-product level, through Avanci as well as bilateral licenses (such as, rather recently, with an unnamed Chinese car maker).
Wider ramifications: A few years ago, Nokia also faced two related challenges to its automotive SEP licensing model in Germany as one of its cases against Daimler was referred, by the Dusseldorf Regional Court, to the European Court of Justice (ECJ), and a third-party counterclaim by Huawei was severed from the Daimler case and withdrawn at some point. Not long thereafter, Nokia and Huawei renewed a patent cross-license agreement.
The procedural history of Continental’s 2019-2024 dispute with Avanci and Nokia is like a U.S. litigation odyssey, but without a glorious outcome. “Conti” first sued in the Northern District of California, hoping to piggyback on favorable case law from FTC v. Qualcomm, which was later partly reversed and partly (the question of component-level licensing) mooted by the Ninth Circuit. Judge Lucy H. Koh declined to enter a temporary restraining order against Nokia and instead granted a motion to transfer the case to the Northern District of Texas. In Dallas, the federal lawsuit was dismissed by then-Chief Judge Barbara Lynn, who concluded that Conti had established Article III standing but not antitrust standing, and had issues with the plausibility of its antitrust claims. The Fifth Circuit affirmed. First the panel wanted to go even beyond Judge Lynn’s decision, but then contented itself with a straightforward and minimalistic affirmance. Conti could have tried a Supreme Court petition, but gave up in 2022.
In 2021, during the appellate proceedings before the Fifth Circuit, Conti filed the Delaware state action (contract law) that has now, finally, ceased to be. Avanci was not a formal, but very much a de facto, defendant. A motion by Nokia to refer the case to federal court (United States District Court for the Northern District of Delaware) first resulted in a removal, but it was then sent back. Conti’s complaint overcame some initial challenges in state court, but apparently it wasn’t likely to succeed, given that Conti would normally have clutched to this last straw of its major waste of money on U.S. litigation.
What Conti was trying to achieve in the Delaware Chancery Court, apart from a fishing expedition (discovery), boiled down to a patent exhaustion argument concerning Qualcomm chips and to a component-level licensing claim under U.S. contract law. Contract law is state law in the United States.
Conti has never been sued by an Avanci licensor (which was also a major part of the reason why the federal lawsuit went nowhere). The license that Avanci is authorized by its licensors to grant to car makers comes with “have-made rights” that provide, by extension, TCU suppliers like Conti with legal certainty as far as they make products for an Avanci-licensed customer. What those licensors do not allow Avanci to do is to grant an exhaustive component-level license to the likes of Conti. That is not Avanci’s fault: Avanci does not own the patents in question.
Since 2019, Conti will have spent and, in fact, wasted a double-digit million-dollar amount on this U.S. litigation campaign, for nothing. There would have been other alternatives that would not have been certain to succeed, but which would have been more likely to work, such as filing a Dusseldorf action similar to the one that Huawei brought. Conti had also lodged an EU antitrust complaint with the European Commission’s Directorate-General for Competition (DG COMP) that never led to a formal investigation of Nokia’s licensing practices. The EC urged everyone to engage in mediation, an effort that also failed.
Conti is not (or at least not officially) involved with an effort to obtain cartel clearance for Automotive Licensing Negotiation Groups (ALNGs). It is also unlikely that Conti has any hand in recent developments in China.
So far, there have been two litigation campaigns taking aim at the Avanci model: Conti’s two U.S. cases, both of which are history, and Tesla’s UK action, which was dismissed on a basis that Tesla will find very difficult to overcome on appeal. Meanwhile, car makers that have adopted 5G and are not from China have so far taken the Avanci 5G license. There has not been any 5G patent enforcement action in connection with the Avanci pool.