14 December 2005

Patent Ambushing

Patent speak is constantly enriched. By now we know what Patent Trolls or Patent Vultures are, don’t we? In fairytales of Hans Christian Andersen these ugly creatures are portrayed as friendly or mischievous dwarfs or as giants, that live in caves, or under bridges and scare and threaten innocent by passers. In patent world we use the term for owners of patents that have no business other than ownership of patents for the sole purpose of going after parties whom they believe use the patented technology. They threaten to sue unless licenses are paid. Intel called them once 'Patent Extortionists' and had to fight off a libel suit.

In the meantime patent terminology becomes more and more belligerent. What to think of “patent ambushing” ? Pretty hefty, don’t you think? A “patent ambush” involves the ability of a company to turn its patented technologies into (technical) standards by withholding information on their patent claims with respect to a proposed standard from competitors (as well as the standard setting bodies and their participants).

The idea is to do whatever you can to make your proprietary technology the “standard”. That helps when you have to go after those who (must) use the standard to collect license fees. The “ambush” is that parties who are discussing which standard to select are “lured” into accepting a technology that is held (via patents) by one party, who actively takes part in the standard discussions, remaining silent on his own proprietary position.

An example. Intel recently called for the Institute of Electrical and Electronics
Engineers (IEEE) to drop its Ultra Wide Band (UWB) wireless networking standard and adopt Intel's own Wi-Media standard. As part of the campaign for adoption, the chip giant has taken its own standard to the more commercially friendly European Computer Manufacturers Association (ECMA), whose members are manufacturers rather than engineers, which has just rubber-stamped the proposal. Under rules of some Standard Organizations (SSOs), parties, like in this example Intel, have to declare their patents that cover the Intel Wi-Media technology. Would they not do that while having a proprietary IPR on this technology, one would call such a practice “patent ambushing”. Clearly – no interest to be involved in a libel suit – this is just an example. Intel knows the rules of the game.

A party that had to learn the lesson the hard way, is Rambus. They failed to declare IPRs that were essential to the JDEC standard setting procedure.

In June 2005 the European Commission announced it would investigate the IPR policy of ETSI, the standard setting body for the telecommunications sector. Since then the Commission shows an increasing interest in IPR policies of standard setting bodies. Recently ETSI announced it would amend their existing IPR policy. On December 12 the EU Commission announced that they welcomed the ETSI policy change (to be published on the ETSI website by the end of January 2006).

I am not sure whether the EU Commission have already found out about Sisvel’s actions trying to squeeze out MP3 license fees (see my November 22/23 blogs), while their principal, Philips, was part of the standard setting process that led to the Audio MP3 standard (ISO/IEC 11172-3 part 3: Audio of March 1993).

Little doubt that the last word on this has not yet been said. Let's see.

08 December 2005

The Spider is Dead, Long Live the EPLA

European and US IP practitioners have eagerly awaited the Advocate General’s opinion in the Roche-Primus case. Today the AG, Philippe Léger, published his opinion in this important case (not yet available in English).

The case was referred by the Netherlands Supreme Court to the ECJ on December 19, 2003. Two years later we now have the opinion of the ECJ’s Advocate General.

The Dutch courts have long been favoured by patent owners for their willingness to provide judgments with EU cross-border effect. Plaintiffs confronted with multinational com­panies infringing their European patent could sue multiple defendants in one place - The Netherlands – to get an injunction against the defendants in each countries for which the European patent was granted.

Although the AG’s opinion is not binding on the Court, in most cases the ECJ will follow this. He summarises his conclusion as follows:

“145. Taking account of all these considerations, I therefore propose to the Court to respond to the preliminary questions referred by the Hoge Raad as follows:

Article 6(1) of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters, as modified by the Convention of 9 October 1978 on the accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland, the Convention of 25 October 1982 on the accession of the Hellenic Republic, the Convention of 26 May 1989 on the accession of the Kingdom of Spain and the Portuguese Republic and the Convention of 29 November 1996 on the accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden, should be interpreted so as not to apply in the case of proceedings for infringement of a European patent involving several companies, incorporated in different Contracting States, for acts committed on the territory of each of these States, even where these companies, belonging to the same group, acted in an identical or similar way, in accordance with a common policy conceived by one of these companies”

If the AG’s opinion is endorsed by the Court, than there is little doubt that the cross-border practice by the Dutch Courts is dead. All hopes would be then focused on the future of EPLA, the very promising initiative by some countries to come up with a workable enforcement alternative to the Community Patent, which is currently in an ailing condition too.

The AG, having summarized the most important articles of both the Brussels Convention and the European Patent Convention and their correct interpretation in § 1 - 28, the facts of the case in §§ 29 – 41, the referred questions and the scope of these questions §§ 42 – 60, the AG reaches the heart of the matter in § 61 and following.

The AG recognizes that, in protecting IP, cross-border aspects always play an important role, especially in the medical and pharmaceutical field. He touches upon the differences in enforcement of European patents under national laws and expresses hope that effective patent litigation will be conducted in several different countries (idle[?], one would think, if the ECJ follows his opinion).

The AG has several arguments in favor of a restrictive interpretation of art. 6 of the 1968 Brussels Convention.

Firstly there is the interpretation of “irreconcilable” decisions in the Kalfelis decision of the ECJ. The ECJ held In Kalfelis v.Schröder that the expression “matters relating to tort, delict or quasi-delict” has an autonomous meaning, covering all actions to seek the liability of a defendant which are not related to a “contract” within the meaning of art. 5 (1). The ECJ held that, as an exception to the general rule of art. 2, art. 5 (3) of the Brussels Convention has to be interpreted in a narrow way and that the court with jurisdiction over an action, in so far as it is based on tort, does not have jurisdiction over a non-tortious action. The Kalfelis decision established that, for art. 6 (1) to apply, there must “exist between the various actions brought by the same plaintiff against different defendants a connection of such a kind that it is expedient to determine the actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings”.

The “connection” between the infringing acts in the Roche-Primus case was allegedly the fact that it concerned one European patent in relation to one single product which was marketed in the same or similar way by all nine Roche companies. However, AG Léger is of the opinion that the requirement of “connectivity”, introduced in Kalfelis (which went further than the text of article 6, which does not require any such “connection”) underscores the importance and “useful effect” of article 2 Brussels Convention which is the “cornerstone” of the jurisdiction arrangement of the 1968 Treaty.

Secondly, art. 22 para. 3 Brussels Convention also refers to that same “connectivity” (to prevent two similar cases against similar parties from being adjudicated by more than one court within the EU). In the so-called Tatry case, the ECJ stressed that article 21, together with article 22 on related actions, is in the interests of the proper administration of justice within the Community, to prevent parallel proceedings before the courts of different Contracting States and to avoid conflicts between decisions which might result therefrom. Those rules are meant to preclude, as much as possible, the possibility of a situation arising such as that referred to in article 27(3), that is to say the non-recognition of a judgment on account of its irreconcilability with a judgment given in a dispute between the same parties in the State in which recognition is sought. The ECJ further held in Tatry that, in light of the wording of article 21 of the Convention and the objective set out above, that article must be understood as requiring, as a condition of the obligation of the second court seized declining jurisdiction, that the parties to the two actions be identical.

The effect of a broad interpretation of article 6 means that reliance on this article becomes the exception rather than the rule. Article 22 however would have not such a consequence per se. Connected claims pending before different courts in separate jurisdictions would only result in a Judge having the discretion to refer the proceedings, rather than an obligation.

The AG is of the opinion that if one follows the Court’s approach in Kalfelis – as he suggests – article 6 would not be applicable in the absence of the necessary “connectivity” in infringement cases related to European Patents. The AG follows therefore the reasoning advocated by both Roche and the UK Government.

Dutch cross-border effect may be dead, but the need for an effective and harmonized enforcement regime in Europe is greater than ever. This latest sign that EU-wide enforcement is still a long way off, is hopefully the last and most powerful sign to the EU Commission and Member States to be more supportive in finding a way to make EPLA work. This is by far the best solution for the creation of a patent enforceable across all EU Member States.

Certainly EPLA has recieved powerful support of leading EU Patent Judges. A resolution, adopted at the Judges' Forum held in San Servolo, Venice - October 14-16, 2005, strongly backs the EPLA initiative.

01 December 2005

What’s so damned complex about Drafting Beer?

Ask the Judge in The Hague. Heineken sued Philips over a contraption called “the beer tender”. Basically it is a small tap one can use to draft a nice glass of beer from an even smaller vat. So nothing special for heavy users so far. But….once lawyers get involved it certainly becomes a mess. What happened? Heineken developed the Home Beertender.

Quite a consumer hit.

Philips, in good Eindhoven innovative tradition launched its own version of a tap: Philips Perfect Draft, a cooperation between Philips and various breweries competing with Heineken. Heineken, not amused, did what most companies do when they loose market share, avoid competition and bring in the lawyers!

So Heineken sued Philips and Inbev. In good drinking tradition, the court case started on a Friday. Lawyers from both sides argued their case.

Today, the District Court of The Hague issued its judgement. Heineken lost. Not because their patents were no good, but because…..“these cases, for various reasons, are extremely complicated, even when considering that this court, having exclusive jurisdiction in patent cases, is not afraid of extensive patent cases in summary injunction proceedings”.

So what can be so complicated about drafting beer? It looks like the lawyers as well as the judges had one too many…….or is it just that lawyers have this one unique ability, namely to make anything simple, like drafting beer, "extremely complicated".

23 November 2005

Mp3 – Audio MPEG Inc. interesting development in the US

An interesting development in the US courts. Audio MPEG (Sisvel’s US affiliate) sued Creative Labs earlier this year, over the same patents we’ve been threatened with. Last week, the District Court found that Audio MPEG lacked standing by itself to sue, i.e. the patent owners are “essential parties” to the suit.

Therefore, unless Philips, France Telecom, IRT, and Telediffusion de France are added to the case as plaintiffs within 15 days (of Nov. 18), the case will be dismissed.

The reason for this holding is that the judge examined the agreement between the patent owners and Audio MPEG, and found that the patent owners retained “substantial” interests in the patents. The opinion reveals some interesting facts about the relationship between the patent owners (i.e. Philips) and Audio MPEG/Sisvel.

Some highlights:

  • although Audio MPEG is a subsidiary of Sisvel, the master agreement is between the patent holders and Audio MPEG. Audio MPEG has granted a sublicense to Sisvel for the European patents.

  • The agreement requires that Audio MPEG “consult” with the patent owners prior to beginning any “legal proceeding.” While this doesn’t say whether Philips can stop any action, it belies Philips’ repeated contentions that it has no influence over Sisvel.

  • The agreement gives Sisvel almost no discretion over royalty rates, to whom it may license, etc. It appears that Sisvel simply cannot refuse a license to anyone, nor can it make changes to the agreement unless they are “nonsubstantial.” However, the patent owners apparently can “renounce” their claims with respect to certain third parties, in which case Sisvel must reduce the royalty rates by some formula. Presumably all 4 patent owners could renounce, but we don’t know the details.

It will be interesting to see whether the patent owners actually join the lawsuit. While to some degree this is merely a formality, this forces Philips to formally be in a position where they are likely suing customers, if they want to proceed in the United States.

On a related note, the case between Audio MPEG and Thomson was dismissed last week, by stipulation of the parties. Thus something has been settled. However, the case was dismissed without prejudice, allowing for a future lawsuit, which leads me to wonder whether there was really a cash settlement. It’s hard to draw any conclusions; Thomson SA, the parent company, was dismissed earlier for lack of personal jurisdiction – there might have been other problems with the case against its US affiliates.

MP3 continue...

More mp3

Apart from companies that decided, for different reasons, to take a license from Sisvel (some of them not because they really believed they needed one, but to avoid further harassment by Sisvel) other big names in the mp3 world have decided to take off the gloves. Apple, Creative Labs, SanDisk, Sony Ericsson, to name a few.

Sisvel acts as His Master’s Voice of Philips & Co. They own no patents nor do they have any assets to speak of. Sisvel simply acts as a decoy for the real right owners who, by using Sisvel as their agent, stay out of the loop when confronted with counterclaims from the companies they assert their licensed rights against. Sisvel does so in a unusual manner. Unusual in its aggressiveness and methods. First shoot then talk, we don’t take prisoners.

Legal battles are going on, despite licensing successes by Sisvel. In Germany, UK and Netherlands, several court cases are pending as they are in the US. Unlike what Sisvel tries to make us believe in press releases and on their website, things are not looking pretty for them. The first decision by a German Court (in Mannheim) was all but favorable to Sisvel. They requested an injunction based on a complete misrepresentation of the ISO/IEC standard (the industry standard that covers most mp3 players) but the court is not yet convinced they have a case. The judge wants the parties to provide more detailed information to the court on the invalidity arguments that are being brought (by Thomson of France) in a case before the German Bundespatentgericht (the only court in Germany can invalidate a patent in Germany). The fate of the Thomson case remains uncertain as Thomson recently announced to take a license. Gossip goes that that was because management no longer wants the legal hassling on this issue, which takes lot of resources from the company.

In the UK CreativeLabs have initiated a court proceeding against Sisvel, basically requesting the court to dismiss the ludicrous reasoning that anyone having a mp3 player or functionality must use the patents of Philips & Co, as they are “essential patents” to the ISO/IEC standard 11172-3 (part 3- audio) of March 1993. Wrong, as is shown in a letter from the ISO/IEC Director of the “Standards Department of ISO Central Secretariat” of August 2001. The ISO repeats its mantra, declarations of patents are not being checked by the ISO nor their applicability to the standard. Any claim to the contrary, like the Sisvel claim in various courts, is therefore ill-founded.

To be continued

22 November 2005

MP3 war in Europe - patents revisited

You want to tap into the vast market for mp3, right? Intoxicated by the success of Apple's iTunes and the irresistible iPod, your company either produces or sells mp3 decoding audio equipment. Then be aware!

You must have encountered Sisvel by now. Sisvel has offices in Italy as well we in the US, and call themselves "a company working in the field of technological innovations". Well, so much for innovation. The truth is that Sisvel actually has nothing to do with innovation, unless you call the art of patent trolls "innovative". They are simply a licensing vehicle, used by companies like Philips and France Telecom, to enforce patents these companies have on mp2 and mp3 audio technologies. They use unprecedented and aggressive methods of extorting money from users of mp3 players and mp3 enabled mobile phones. They have been able to get big companies on their knees, like Thomson of France (a powerful player themselves in the mp3 world), Samsung, and the like.

Their tactics are aggressive. A popular tool for Sisvel is using so called Border Detention Orders or BDO's against those parties that import mp3 enabled devices into Europe. Customs, now particularly known for their patent expertise, can be simply persuaded to seize any product labeled "mp3". Sisvel, backed by Philips and other mp3 patent holders, base themselves on a made up story that the patents they represent (the Philips & Co patents) are in fact part of the the mp3 audio codecs standard, governed by a 1994 ISO/IEC standard.

At the IFA 2005, held in Berlin, many smaller Chinese manufacturers of audio equipment did not even dare to enter the EU market, scared off by the demands for royalties and upfront payments. The demands are so excessive that many decide not to even try to enter the market. Talking about IP as a means not to innovate but to stifle innovation and market access, something the EU says it promotes. Well take a second look!