Nokia v. Daimler: (anti-)anti suit injunctions and the Brussels I regime in global FRAND litigation

This decision is potentially quite important for the developing global landscape, so I’d like to reflect on it in a bit more detail here, particularly how the issues might play out in a European context under the Brussels I regime. A ‘Notice of letter to court’ filed by Nokia that contains the decision and an English translation thereof has been made available by Florian Mueller of FOSS Patents here.

The proceedings between Nokia, Daimler and Continental

Nokia holds a portfolio of Standard Essential Patents (SEPs) relating to communication standards. Roughly three years ago, it notified Stuttgart-based car manufacturer Daimler that it practised at least some of these standards. Connectivity to these standards is incorporated in Daimler’s cars through so-called Telematics Control Units (TCUs), which it sources from suppliers, including Continental.

The dispute has gathered quite some attention and is the latest demonstration of the automotive industry’s increasing vulnerability to patent suits [the German Verband der Automobilinindustrie released a position paper on FRAND patents, see here]. A major point of contention in these proceedings is who should be licensed to Nokia’s patents: Nokia seeks a licence from Daimler, whereas Daimler and Continental contend that it is more appropriate for Nokia to license its telecommunications patents to the TCU suppliers directly.

Negotiations between the parties were apparently unsuccessful as Nokia filed ten infringement actions against Daimler in Germany earlier this year [see here], following which Continental US filed suit against Nokia in the Northern District of California, where it asks for a global FRAND-licence from the Finnish telecoms giant. It subsequently requested the District Court to stop Nokia from proceeding with the German suits against Daimler, stating that they are “an attempt to force Daimler and other OEMs to accept non-FRAND licenses before this Court has an opportunity to adjudicate the case on the merits” [see Continental’s motion for an anti-suit injunction to the District Court here, as well as Nokia’s response brief here, with big thanks to Florian Mueller for uploading them].

Nokia then requested the Munich Regional Court to order Continental US to withdraw the anti-suit injunction motion and the Munich Regional Court granted this requested ex parte: hence, the anti-anti suit injunction. Continental US may request to have the injunction lifted and so far has stated in the US proceedings that it is not yet in force as it was not properly served with the order.

Comment

FOSS Patents notes that Continental US’s motion for the anti-suit injunction suffers from various problems and I would agree. Several of Daimler’s suppliers were joined in the German proceedings because Daimler invoked indemnity against them, but Continental US was not among them. That suggests that Continental US is not the entity actually supplying Daimler with the TCU’s. In addition, the motion seems overbroad as Nokia contends that some of the German cases involve models that don’t comprise Continental TCU’s. It is thus doubtful whether the anti-suit injunction would have been granted by the District Court or, so long as Continental US does not comply with the Munich injunction, will be granted.

However, I don’t agree with FOSS’s suggestion that “there would actually be valid policy reasons” for the District Court to enjoin the German proceedings. That would mean that any party sued for infringement of a SEP before a German court could file a new suit in the US, where FRAND-case law might be more favourable to it, and through an anti-suit injunction block the German proceedings. It seems correct, as the Munich Regional Court finds at 2 a) bb), that this would deprive the patentee “of their right of action in Germany“. That is all the more so if it were not just open to the implementer to do this, but also to their supplier, as is the case here.

It is true that the setting of a global FRAND-rate might be frustrated if one of the parties files parallel litigation that seeks to interfere with the FRAND-dispute. Indeed, Mr Justice Henry Carr considered such claims potentially vexatious and having the effect of undermining or frustrating the performance of a judgment given by the English court, so that an anti-suit injunction might be appropriate in these cases [see Conversant Wireless v. Huawei, [2018] EWHC 2549 (Ch), par. 24].

But in that case, the Chinese proceedings were brought after the UK court accepted jurisdiction to set a global FRAND rate and were targeted directly at withdrawal of these proceedings (ZTE sought an injunction that apparently included bringing the English proceedings and reliance on any license settled by the English court). Conversely, in this case Nokia brought infringement suits against Daimler first and the latter’s supplier Continental US then sought to block these proceedings, preferring a global FRAND-determination in another forum. That seems quite far removed from the situation in Conversant v. Huawei.

Rushing to the courthouse in global FRAND-litigation  (Meme credit: Cheezburger)

In a recent paper, Jorge Contreras considers the English courts’ willingness to determine a global FRAND-rate sobering, fearing a race to the courthouse that will first seize jurisdiction and prohibit parties from filing actions in other jurisdictions [here, draft paper also available here]. But global litigation in general, and patent litigation in particular, always involves some element of getting there first. More importantly, within the EU anti-suit injunctions are incompatible with the Brussels I Regulation (cf. the ECJ decision in Turner v. Grovit). Rather, the later-seized court could stay the proceedings on the basis of Article 30(1) of the (recast) Brussels I Regulation. The stay could be partial, with validity and infringement claims being heard and settled by the later-seized court, since its findings in this respect will influence the FRAND-rate set by the first-seized court (cf. [2018] EWCA Civ 2344, par. 82). At the same time, if the implementer has acted in accordance with its obligations under Huawei/ZTE, the injunction could be stayed pending the decision of the first-seized court on the global FRAND-rate.

In the absence of a transnational patent court such as the UPC [or a global FRAND rate-setting tribunal as advocated by Contreras here], this would seem a reasonable way to proceed for EU courts. Foreign courts, such as U.S. courts, are of course not bound by the Brussels I regime but one would expect them to grant anti-suit injunctions only in exceptional cases. 

Indeed, as far as I am aware U.S. courts have only granted anti-suit injunctions in global FRAND-disputes on two occasions: Microsoft Corp. v. Motorola, Inc. and TCL v. Ericsson [a helpful discussion of these cases by Contreras and Eixenberger can be found here]. In the first case, German infringement suits were initiated well after the US court was seized to set a global FRAND-rate and raised concerns with the court of vexatious litigation; in the second case, both parties had apparently indicated a desire that the U.S. action should be a global resolution of their SEP claims. I doubt that under these precedents, the District Court would have granted Continental US’s motion for an anti-suit injunction, but I can see why counsel for Nokia would rather be safe than sorry.

As a final observation, it would be interesting to see what happens if the patents asserted in parallel were non-SEP’s. That would make the case for an anti-suit injunction or a stay much weaker, and the District Court for the Central District of California in TCL v. Ericsson refused to grant the injunction for parallel enforcement of non-SEP’s. At the same time, any injunction might force an implementer to settle so as a practical matter, the non-SEP injunction might well moot the FRAND-dispute in its wake.