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19-08-09 Continental Reply ISO Antisuit Injunction Motion
19-08-09 Continental Reply ISO Antisuit Injunction Motion
1 TABLE OF CONTENTS
Page
2
I. INTRODUCTION ..................................................................................................................1
3
II. CONTINENTAL’S MOTION FOR ANTI-SUIT INJUNCTION VIS-À-VIS THE
4 GERMAN ACTIONS SHOULD BE GRANTED. ................................................................3
6 B. The Parties and Issues are the Same in This Case and Nokia’s German
Actions. ......................................................................................................................4
7
1. CAS is functionally the “same party” as the Intervening Continental
8 Affiliates in Nokia’s German Actions. ...........................................................4
12 2. The Huawei v. ZTE framework does not eliminate the threat to U.S.
policy. ...........................................................................................................10
13
D. Nokia Overstates Any Impact the Anti-Suit Injunction Would Have on
14 Comity. .....................................................................................................................12
1 TABLE OF AUTHORITIES
2 Page(s)
Cases
3
Am. Acad. of Sci. v. Novell Inc.
4 No. C-91-4300 EFL, 1992 WL 313101 (N.D. Cal. July 9, 1992) ................................................6
5
E.J. Gallo Winery v. Andina Licores S.A.
6 446 F.3d 984 (9th Cir. 2006) ..................................................................................................3, 12
7 FTC v. Qualcomm
No. 17-CV-00220-LHK, 2019 WL 2206013 (N.D. Cal. May 21, 2019) .............................10, 11
8
Gilbane Fed. v. United Infrastructure Projects Fzco
9 Case No. 14-cv-03254-VC, 2014 WL 4950011 (N.D. Cal. Sep. 24, 2014) .................................4
10
Huawei Techs., Co. v. Samsung Elecs. Co.
11 No. 3:16-CV-02787-WHO, 2018 WL 3037924 (N.D. Cal. June 19, 2018) ........3, 4, 7, 9, 10, 11
22 Statutes
23 Clayton Act § 12 ..............................................................................................................................15
24
25
26
27
28
1 I. INTRODUCTION
2 This action is intended to result in a binding, worldwide license covering all Continental
3 affiliates, whereby Continental will pay a FRAND royalty rate for a license to all of Nokia’s
4 SEPs, in addition to all other SEPs being licensed by Avanci. Because of principles of patent
5 exhaustion, Daimler will have the benefit of that license vis-à-vis products supplied by the
6 Continental Group. Yet rather than seize on the opportunity to have this tribunal fully resolve the
7 parties’ dispute, Nokia (and now Sharp as well) is instead seeking to proceed with piecemeal
8 patent infringement lawsuits against Continental’s customer, aided by the threat of one or more
9 injunctions, in the hopes of coercing a license at supra-FRAND rates before this case is resolved.
10 Continental’s motion should be granted in order to facilitate the most efficient resolution of the
11 parties’ dispute, free of the coercive behavior by Nokia and Sharp which is contrary to U.S. policy.
12 In its opposition, Nokia feigns ignorance of the global scope of the resolution sought by
13 Continental, and instead attempts to draw technical distinctions between the plaintiff here—
14 Continental Automotive Systems, Inc. (“CAS” or “Continental”)—and the two affiliates named by
15 Daimler in the third-party notices in the German Actions (together, the “Intervening Continental
16 Affiliates”). But these distinctions are irrelevant. U.S. courts approach this inquiry in a functional
17 rather than formalistic sense, treating corporate affiliates as the “same” for purposes of issuing an
18 anti-suit injunction. And Nokia is well-aware that Continental, both in the parties’ negotiations
19 and through its filing of the present action, is seeking a global license which would cover sales by
20 and through all affiliates in the Continental Group. Indeed, Nokia and Avanci’s own practice is to
21 enter into global licenses covering all of the licensee’s corporate affiliates. It also makes perfect
22 sense that CAS would be the entity to file this lawsuit for the purposes of obtaining such a license,
23 because it is the head of the Continental Group’s global telematics business unit, and thus is
24 responsible for the development, commercialization, manufacture, and sale of the allegedly
25 infringing products. Under the Ninth Circuit’s functional inquiry, granting CAS an exhaustive
26 SEP license covering all affiliates in the Continental Group will clearly resolve the German
27 Actions, notwithstanding any distinction between the entities directly involved in the proceedings.
28 Nokia’s opposition also disingenuously claims that the German Actions are “first-filed.”
1 Not only is this distinction irrelevant under Ninth Circuit law, but Nokia also fails to acknowledge
2 that it filed the German Actions only after Daimler, Continental, and others filed complaints with
3 the European Commission based on Nokia’s refusal to license component suppliers, and further
4 that Nokia’s requests for injunctive relief were filed almost simultaneous with this action. Nor is
5 Nokia correct when it speculates that Continental is seeking an anti-suit injunction because it is
6 “displeased with how the foreign cases are proceeding.” Continental filed its motion because this
7 action is the only viable means for fully resolving its global FRAND dispute with Defendants (i.e.,
8 by adjudicating a worldwide FRAND license), and because Nokia’s pursuit of injunctive relief in
9 the German Actions subverts this Court’s ability to resolve the more all-encompassing issues
10 presented in this action free from coercive behavior which threatens the status quo.
11 Nokia has gone to great lengths to undermine this Court’s ability to rule on the substantive
25 injunction should be granted. Continental further notes that it is willing to forego any oral
26 argument on its motion in order to obtain as expeditious a ruling as possible, especially given the
27 acute risk that Nokia, Sharp, and possibly others will continue to employ abusive tactics in other
28 jurisdictions while this motion remains pending.
4 Although Nokia tries to claim the mantle of having the “first-filed” actions, the reality is
5 that Nokia’s patent infringement lawsuits against Daimler in Germany were filed in retaliation for
6 the fact that Daimler, Continental AG, and others filed several complaints with the European
7 Commission beginning in November 2018, based on the fact that Nokia was failing and refusing
8 to offer direct licenses to component suppliers. (Dkt. 32-22, ¶¶ 2-4.) Nokia filed the 10
9 infringement actions against Daimler over two months after Continental AG’s complaint to the
10 European Commission. (See id.) Moreover, Nokia’s requests for injunctive relief were submitted
11 almost simultaneous with Continental’s filing of this lawsuit. (Dkt. 32 at 11.)
12 In addition, Nokia’s arguments regarding its actions being “first-filed” are inconsistent
13 with Ninth Circuit law. In E.J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 994 (9th Cir.
14 2006) (“Gallo”), the Ninth Circuit held that the fact the foreign suit was filed first “makes no
15 difference as to the propriety of an anti-suit injunction.” This is particularly true when the actions
16 are between private parties and do not directly involve a governmental interest or a matter of
17 international law. See id. Following Gallo, courts in this district have recognized that “it is the
18 issues and the actions that drive the analysis of this factor, not the timing of specific claims.”
19 Huawei Techs., Co. v. Samsung Elecs. Co., No. 3:16-CV-02787-WHO, 2018 WL 3037924, at *2
20 (N.D. Cal. June 19, 2018) (“Huawei”) (denying reconsideration of anti-suit injunction) (emphasis
21 in original). Nokia cites no case law stating that anti-suit injunctions against earlier-filed actions
22 are limited to requests involving forum selection or arbitration clauses. Indeed, Nokia’s argument
23 “flips the analysis on its head.” Id. at *3. The Ninth Circuit uses the first-filed analysis not as a
24 factor against an anti-suit injunction, but rather to weigh in favor of an anti-suit injunction where a
25 defendant’s subsequent filing of a foreign action “raises the concern that [it] is attempting to evade
26 the rightful authority of the district court[.]” Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 887
27 (9th Cir. 2012) (“Microsoft”), quoting Applied Med. Distribution Corp. v. Surgical Co. BV, 587
28 F.3d 909, 921 (9th Cir. 2009). As in Huawei, an anti-suit injunction is proper against Nokia’s
1 infringement actions because Continental’s claims in the U.S. litigation “will ultimately determine
2 the propriety of injunctive relief for [Nokia’s] SEPs.” Id. at *3.
3 B. The Parties and Issues are the Same in This Case and Nokia’s German Actions.
7 Affiliates, Nokia applies the “sameness” requirement far too narrowly. The Ninth Circuit dictates
8 that these threshold questions should be approached functionally, “not in a technical or formal
9 sense, but in the sense that all the issues in the foreign action . . . can be resolved in the local
10 action.” Microsoft, 696 F.3d at 882-83. Perfect identity of the parties is not required for an anti-
11 suit injunction. Instead, courts have held that “[w]here parties to the two actions are affiliated or
12 substantially similar, such that their interests are represented by one another, courts have found the
13 first requirement is met.” Int’l Equity Inv. v. Opportunity Equity Partners Ltd., 441 F. Supp. 2d
14 552, 562 (S.D.N.Y. 2006) aff’d, 246 F. App’x 73 (2d Cir. 2007); Gilbane Fed. v. United
15 Infrastructure Projects Fzco, Case No. 14-cv-03254-VC, 2014 WL 4950011, at *3 (N.D. Cal. Sep.
16 24, 2014) (parties under common control are “treated as the same if they are affiliated such that
17 their interests can be represented by one another”). Notably, Nokia does not cite to any cases
18 where a court found an anti-suit injunction was improper because the party seeking the anti-suit
19 injunction was not identical to the party in the foreign action. If a party seeking an anti-suit
20 injunction attests that it can and does represent the interests of its corporate affiliate in the foreign
21 proceeding (as CAS does here), then such representations should be believed.
22 The interests of the Intervening Continental Affiliates are well represented by CAS in this
23 action. CAS is an indirect corporate subsidiary of Continental Automotive GmbH, and is the
24 global headquarters for the Continental Group’s telematics business. (Decl. of Brian Droessler,
25 ¶¶ 2, 5-6.) CAS is responsible for the Continental Group’s research and development efforts
26 related to the telematics control units (TCUs) at issue in the German Actions. (Id., ¶ 6.)
27 Employees of CAS are primarily responsible for developing the hardware and software for each of
28 the TCU platforms developed and sold by the Continental Group, including development of the
1 specific TCUs sold to Daimler. (Id.) Employees of CAS regularly travel to Daimler to discuss the
2 architecture of TCUs and address Daimler’s technical requirements. (Id., ¶ 10.) CAS employees
3 also oversee production of TCUs designed by CAS through affiliates in the Continental Group,
4 including Continental Automotive Hungary Kft., for certain TCUs supplied to Daimler. (Id.,
5 ¶ 11.) In bidding on TCU projects for Daimler, CAS employees work in conjunction with
6 employees from Continental Automotive GmbH, which serves as a local customer interface in
7 Germany and provides some local engineering support. (Id., ¶ 12.) In some cases, CAS makes
8 sales directly to Daimler’s U.S. subsidiary, and in other cases the sale to Daimler may take place
9 through another Continental affiliate (such as the two Intervening Continental Affiliates). (Id.,
10 ¶ 13.) Regardless of the contracting formalities, CAS is the entity ultimately responsible for
11 designing, developing, overseeing, manufacturing, and selling the TCUs to Daimler. (Id.)
12 Daimler’s decision to send third-party notices to the Intervening Continental Affiliates rather than
13 CAS does not mean that CAS does not fully represent their interests in the German Actions.
14 Indeed, under German law, the Daimler entity in Germany could only send third-party notices to
15 the entities who directly supplied the TCUs.1 (Supp. Decl. of Frank-Erich Hufnagel, ¶ 9.)
16 Nokia’s attempt to draw distinctions between the Continental entities also ignores the
17 practical realities of SEP licensing, where it is common for companies to negotiate a single license
18 covering a global SEP portfolio and sales by the licensee’s worldwide affiliates. (Dkt. 97, ¶ 134;
19 see also Supp. Decl. of Matthew W. Holder, ¶ 2, Ex. 1, p. 10 (Nokia-approved publication from
20 the European Committee For Standardization, acknowledging that “[g]lobal portfolio licensing is
21 a common practice” and “[a] global portfolio license provides a license to all of the SEP owner’s
22 relevant SEPs around the world, so enabling a licensee to manufacture and sell its products or
23 services anywhere in the world”).) Nokia certainly knows that Continental is seeking a global
24
1
25 It should also be noted that the Intervening Continental Affiliates represented to the German
court that the U.S. complaint was filed with the intent of seeking a FRAND license to Nokia’s
26 global SEP portfolio, for the benefit of the entire Continental Group. (Dkt. 32-28, p. 6 (“[O]n 10
May, 2019, Intervening Party filed a complaint in the District Court of the Northern District of
27 California . . . The main purpose of these proceedings is to obtain a court ruling that Continental,
28 in its role as a supplier, is also entitled to a FRAND license to actually standard essential patents
from the defendants and that the court determines the FRAND terms of such a license.”).)
-5- Case No. 5:19-cv-02520-LHK
REPLY IN SUPPORT OF MOTION FOR ANTI-SUIT INJUNCTION
Case 5:19-cv-02520-LHK Document 128 Filed 08/09/19 Page 9 of 19
1 license for all of its affiliates, and thus its attempt to feign ignorance is disingenuous at best. In
2 the licensing model proposed to Continental (wherein
4 to mean
5 (Id., ¶ 3, Ex. 2.) Similarly, Avanci’s model license broadly defines “affiliate”
6 to mean “another Entity which controls, is controlled by, or is under common control with such
7 first Entity.” (Id., ¶ 4, Ex. 3, p. 54.) Because CAS in the present action represents the interests of
8 the Intervening Continental Affiliates in the German Actions, the parties are sufficiently similar to
9 satisfy the threshold requirements to grant an anti-suit injunction.
10 With respect to the relationship between the Continental Group and Daimler, federal courts
11 recognize under the “customer suit exception” doctrine that manufacturers of allegedly infringing
12 products are the real party-in-interest when their customers are sued for infringement, and on that
13 basis enjoin patentees from litigating first-filed lawsuits against customers when there is a separate
14 proceeding involving the manufacturer. (Dkt. 32 at 16-17.) In its opposition, Nokia relies on the
15 absence of cases applying the customer suit exception in the context of a foreign anti-suit
16 injunction. However, the fact this is a case of first impression is not dispositive, nor can Nokia
17 point to any case wherein application of the customer suit exception doctrine was rejected in the
18 context of a motion for anti-suit injunction. To the contrary, precisely the same policy rationale
19 underlying the customer suit exception supports issuance of an anti-suit injunction in this case.
20 Rather than pointing to any cases which demonstrate that the customer suit exception
21 doctrine is inapplicable to requests for an anti-suit injunction (because no such cases exist), Nokia
22 cites to Am. Acad. of Sci. v. Novell Inc., No. C-91-4300 EFL, 1992 WL 313101 (N.D. Cal. July 9,
23 1992), for the proposition that a patentee may have a separate interest in litigating against a
24 customer. But Novell is inapposite. In Novell, the court found the customer suit exception was
25 inapplicable because the separate interests at issue there meant that “judicial economy would not
26 be served by staying the claims against [the customer],” given that the “[manufacturer’s] action
27 will [] have little, if any, effect on issues to be litigated in the action against [the customer].” Id. at
28 *3. Here, in contrast, Nokia’s claims against Daimler are based on the inclusion of TCUs made by
1 Continental and other manufacturers which implement the 2G, 3G, and/or 4G standards, and thus
2 the FRAND license obtained by Continental as a result of this litigation will necessarily resolve all
3 disputes between Nokia and Daimler vis-à-vis Continental products.2 (Dkt. 32-25, pp. 7-8.) As
4 the Federal Circuit recently noted, the customer suit exception is “designed to facilitate just,
5 convenient, efficient, and less expensive determination.” In re Nintendo of AM., Inc., 756 F.3d
6 1363, 1365 (Fed. Cir. 2014). The anti-suit injunction sought by Continental in this motion
7 accomplishes these same objectives by allowing Continental to obtain a single ruling that resolves
8 all current and future SEP infringement actions by Nokia and/or any other Avanci members
9 against Continental’s customers, based on the customer’s use of Continental’s TCUs.
10 2. This lawsuit will resolve Nokia’s German Actions.
11 Nokia attempts to identify formalistic differences between the German Actions and this
12 case, but courts evaluating anti-suit injunction motions must focus on whether “all the issues in the
13 foreign action . . . can be resolved in the local action.’” Microsoft, 696 F.3d at 882-83 (“[W]hether
14 the issues are the same and the first action dispositive of the action to be enjoined are interrelated
15 requirements.”). Nokia’s argument rests mainly on the unsupported, erroneous contention that
16 “Daimler has taken the position that Continental US does not supply it with TCUs.” (Dkt. 102, p.
17 13.) Yet as discussed earlier, CAS is ultimately responsible for providing Daimler with the TCUs
18 at the heart of Nokia’s complaints, and a FRAND license to CAS would cover sales made by all
19 affiliates of the Continental Group, including the Intervening Continental Affiliates. Accordingly,
20 if CAS prevails in this action and the Court sets the FRAND terms and conditions for a license
21 between Continental and Nokia, Nokia’s SEPs would be exhausted by Continental’s licensed sales
22 to Daimler. As in Microsoft and Huawei, “[t]he contractual umbrella over the patent claims”
23 controls the dispute between Nokia, Continental, and Daimler. Microsoft, 696 F.3d at 883;
24 Huawei, 2018 WL 1784065, at *7-9. This action will resolve Continental’s claims against Nokia,
25 and therefore is dispositive of the German Actions insofar as Continental’s products are at issue.
26 Nokia also argues that an anti-suit injunction is not appropriate because Daimler also uses
27
28
2
Indeed, Nokia’s own executive essentially concedes that Nokia’s interest in litigating against
Daimler is based on Nokia’s policy of licensing OEMs rather than suppliers. (Dkt. 101-6, ¶ 6.)
-7- Case No. 5:19-cv-02520-LHK
REPLY IN SUPPORT OF MOTION FOR ANTI-SUIT INJUNCTION
Case 5:19-cv-02520-LHK Document 128 Filed 08/09/19 Page 11 of 19
1 TCUs supplied by other Tier-1 suppliers. Although it is true that Continental is not Daimler’s
2 only supplier, the purpose of Continental’s lawsuit is to confirm that suppliers like it are entitled to
3 a license, and set the FRAND terms and conditions for such a license. It would be perverse, to say
4 the least, if Nokia could avoid an anti-suit injunction in a lawsuit brought by a component supplier
5 willing to take a license on FRAND terms, and thereby perpetuate its illegal strategy of only
6 licensing OEMs rather than component suppliers, by relying on the existence of other component
7 suppliers which Nokia also refuses to license! The practical reality is that by setting the FRAND
8 terms and conditions of a license for one TCU supplier (Continental), a decision in this case will
9 effectively reduce or eliminate the disputes between Daimler and Nokia regarding other TCU
10 suppliers, as all parties involved could then rely on this Court’s ruling as to whether component
11 suppliers are entitled to a FRAND license, as well as on the adjudicated royalty rates in forming
12 new licenses. Alternatively, Daimler could simply use licensed Continental TCUs to avoid claims
13 of infringement and avoid the threat of injunction from Nokia. To the extent the Court still has
14 reservations with the scope of the anti-suit injunction requested by Continental, at a minimum it
15 could more narrowly tailor an injunction to stop Nokia from pursuing its infringement actions
16 based on the inclusion of any Continental TCUs in Daimler’s automobiles, and likewise prohibit
17 Nokia from seeking injunctive relief against any such automobiles.
18 C. Nokia’s German Actions Implicate Several Unterweser Factors.
20 The threat of devastating injunctive relief in Nokia’s German Actions is clearly designed to
21 force Daimler into a license agreement before this Court has the opportunity to adjudicate whether
22 Nokia’s FRAND commitments obligate it to grant a license to Continental, as well as the terms
23 and conditions of such a license. Nokia relies heavily on the notion that there is not a per se bar
24 on injunctions involving SEPs, but courts in the Ninth Circuit have recognized the great harm
25 caused by SEP owners seeking injunctions before a court can adjudicate FRAND issues. See
26 Microsoft, 696 F.3d at 886 (upholding an anti-suit injunction preventing enforcement of a German
27 injunction upon a finding that the German litigation was vexatious and oppressive, and prejudiced
28 equitable considerations, “by compromising the court’s ability to reach a just result in the case
1 before it free of external pressure on Microsoft to enter into a ‘holdup’ settlement before the
2 litigation is complete.”). In so doing, the Ninth Circuit relied on the district court’s finding that
3 “‘Motorola’s commitments to the ITU involved approximately 100 Motorola-owned patents, yet
4 Motorola invoked the German Action implicating only two . . . of these patents and sought
5 injunctive relief in Germany before this court could adjudicate that precise issue,’ i.e., the
6 propriety of injunctive relief for infringement of standard-essential patents.” Id. Microsoft’s
7 rationale is equally applicable here, where Nokia has filed suit in three different German courts
8 based on the claimed infringement of 10 alleged SEPs (out of a portfolio which Nokia says
9 contains hundreds of SEPs) in order to obtain a catastrophic injunction which would remove
10 Daimler automobiles from the market just because they contain a TCU which practices the cellular
11 standards. (Dkt. 32-22 at ¶¶ 6, 10, 17, 22, 27, 32, 38, 42, 47, 52, 57.)
12 Nokia itself has previously recognized that the effects of an injunction on those who
13 practice cellular SEPs “could be devastating and irreparable,” because “the possibility of an
14 injunction could substantially distort royalty negotiations, as patent holders may seek
15 unreasonable royalties through the mere threat of lawsuits and injunctions thus practically holding
16 hostage the entire revenue stream and profits of the target company’s relevant business.” (Dkt.
17 32-3 at ¶ 34.) Nokia’s past statements recognized the exact scenario it seeks to exploit in this
18 case: “Manufacturers, unable to risk being excluded from the market of standard-compliant
19 products, could be forced to pay a price reflecting the value not of a patent itself, but of an entire
20 standard—not just a monopoly royalty, but a super-monopoly royalty.” Id. Continental’s motion
21 for anti-suit injunction is intended to enable this Court to resolve the parties’ FRAND dispute
22 while sparing Continental and its customers the effects of Nokia’s illegal coercion.
23 Nor is the timing of the actions dispositive of whether a request for an anti-suit injunction
24 implicates the Unterweser factors. In Huawei, the district court granted a motion for anti-suit
25 injunction preventing Huawei from enforcing injunctions in China, even though the injunctions
26 were obtained in actions filed contemporaneously with Huawei’s U.S. litigation, and two months
27 before Samsung filed its counter-claims alleging Huawei had breached its FRAND obligation.
28 See 2018 WL 1784065, at *2-3. In granting the anti-suit injunction, the district court found that
1 “the policy that is undermined is this court’s ability to determine the propriety of injunctive relief
2 in the first instance.” Id. at *10. The district court found that Huawei’s requested injunctions
3 would interfere with equitable considerations because “in the absence of an antisuit injunction,
4 Samsung faces the risk of significant harm, not just in China, but with impacts percolating around
5 the world,” seeing as how the injunctions “would likely force [Samsung] to accept Huawei’s
6 licensing terms, before any court has an opportunity to adjudicate the parties’ breach of contract
7 claims.” Id. For the reasons stated above, the same equitable considerations which justified an
8 anti-suit injunction in Huawei are equally applicable here.
9 Finally, Nokia also argues that the existence of the European Commission investigation
10 somehow undercuts Continental’s argument that important U.S. policies are at stake. But that
11 makes no sense. The fact that Nokia’s refusal to license Continental is contrary to European
12 policy does not mean it is not also contrary to U.S. policy, as the two are not mutually exclusive
13 (indeed, the European Commission was also investigating Motorola at the time the anti-suit
14 injunction was issued in Microsoft). (Supp. Holder Decl., ¶ 6, Ex. 5, pp. 2-3.) As emphasized in
15 Continental’s motion, U.S. courts have made clear that SEP owners “cannot refuse a license to a
16 manufacturer who commits to paying the RAND rate,” Microsoft Corp. v. Motorola, Inc., 795
17 F.3d 1024, 1031 (9th Cir. 2015) (“Microsoft II”), and cannot limit their licensing practices to the
18 OEM level simply because “it [is] far more lucrative.” FTC v. Qualcomm, No. 17-CV-00220-
19 LHK, 2019 WL 2206013, at *75-81 (N.D. Cal. May 21, 2019); see also Microsoft, 696 F.3d at
20 876 (“SSOs . . . requir[e] members who hold IP rights in standard-essential patents to agree to
21 license those patents to all comers on [FRAND] terms.”).
22 2. The Huawei v. ZTE framework does not eliminate the threat to U.S. policy.
23 Nokia’s opposition repeatedly argues that because the German courts will evaluate Nokia’s
24 offers under the Huawei v. ZTE framework, there is no risk that Daimler will be forced to accept a
25 non-FRAND license. Contrary to Nokia’s self-serving contention, the analysis to be undertaken
26 by the German courts in no way ensures that Daimler’s license will be FRAND, nor does it rectify
27 the inappropriateness of Nokia’s pursuit of injunctive relief. See Huawei, 2018 WL 3037924, at
28 *2 (entering an anti-suit injunction despite the fact that “[t]he Shenzhen court addressed the
1 FRAND issue as a prerequisite to Huawei’s request for injunctive relief against Samsung”).
2 To begin with, it is important to clarify the nature of the “FRAND” analysis under the
3 Huawei v. ZTE framework. In the German Actions, the German courts will not determine an
4 actual FRAND royalty rate for Nokia’s portfolio of SEPs. (Supp. Hufnagel Decl., ¶ 12.) Indeed,
5 the amount of damages is usually determined in a second, subsequent proceeding. (See id.)
6 Rather, the German courts will merely make a singular assessment of whether there is a basis for
7 concluding that Nokia’s demanded terms are FRAND vis-à-vis Daimler. (See id.) Historically,
8 German courts undertaking this analysis rely on purported “comparable” licenses (which heavily
9 favors the patent owners), rather than conducting the type of rigorous, comprehensive economic
10 analyses which have been undertaken by U.S. courts. (See id., ¶ 13) In so doing, the German
11 courts will not have the benefit of any party-conducted discovery (e.g., document productions,
12 depositions, interrogatory responses, etc.). (See id., ¶¶ 3-4.) Indeed, there will very likely not be
13 any live evidence or cross-examination in connection with the FRAND analysis. (See id., ¶¶ 5-6.)
14 Instead, the German courts will address the issue based on Nokia’s own self-serving presentation,
15 viewed in light of whatever arguments the defendants can muster based on the limited evidence
16 available in the public domain. (See id., ¶¶ 3-6.)
17 Given the above, Nokia’s contention that “under no circumstances will Daimler be ‘forced’
18 (in the German proceedings) to accept a license proposal on anything other than truly FRAND
19 terms” is highly disingenuous. As Nokia’s past statements clearly demonstrate, even the threat of
20 an injunction is significant enough to force manufacturers to accept non-FRAND royalty rates.
21 (Dkt. 32-3 at ¶ 34.) Nor is the fact that Daimler could always accept the offer made by Nokia if it
22 needs to avoid an injunction relevant to the inquiry. Such a license would not be necessary if
23 Nokia were willing to grant an exhaustive FRAND license to Continental in the first instance, as
24 required by Nokia’s commitments to ETSI and other standard-setting organizations. This Court
25 itself has previously recognized that licensors like Nokia (and Nokia specifically) target OEMs
26 rather than the component suppliers in order to extract supra-FRAND royalties. See FTC v.
27 Qualcomm, 2019 WL 2206013, at *79 (“Thus, other SEP holders like Nokia and Ericsson have
28 followed Qualcomm’s lead and refuse to license modem chip suppliers because it is more lucrative
1 to license only OEMs.”). The fact that OEMs may acquiesce to demanded rates in order to avoid
2 an injunction does not make those rates FRAND.
3 In bringing this action to obtain an adjudication of the FRAND terms and conditions of a
4 license with Nokia, either directly or via Avanci, Continental has demonstrated that it is a willing
5 licensee. Even Nokia recognizes that “using the threat of injunctions against a willing licensee to
6 gain leverage in its demand for excessive royalty rates” is exactly the type of hold-up that the
7 “voluntary FRAND contracts were designed to preclude.” (Dkt. 32-3 at ¶ 79.) Nokia should not
8 be permitted to circumvent a willing licensee like Continental by refusing to offer it a direct
9 license, and instead targeting its downstream customers with injunctions.
10 D. Nokia Overstates Any Impact the Anti-Suit Injunction Would Have on Comity.
11 The final element of an anti-suit injunction analysis is to assess whether the injunction’s
12 “impact on comity is tolerable.” Microsoft, 696 F.3d at 881, citing Gallo, 446 F.3d at 991.
13 Defendants misleadingly claim Microsoft states that an anti-suit injunction “should issue only” if
14 the case meets a three-part test, but Microsoft does not include any such limitations. (Dkt. 102 at
15 p. 9.) Rather, the Microsoft court affirmed that a court need only “estimate whether any such
16 interference is so great as to be intolerable.” 696 F.3d at 886; see also Kaepa, Inc. v. Achilles
17 Corp., 76 F.3d 624, 627 (5th Cir. 1996) (“We decline, however, to require a district court to
18 genuflect before a vague and omnipotent notion of comity every time that it must decide whether
19 to enjoin a foreign action.”). Indeed, the Ninth Circuit has recognized that this is a “flexible, fact-
20 and context-specific inquiry,” not the rigid formula set forth by Nokia. 696 F.3d at 886.
21 The Ninth Circuit recognizes that where a private party is in a commercial dispute with
22 another private party, and the cause of action “deals with enforcing a contract and giving effect to
23 substantive rights,” issuing an anti-suit injunction “in no way breaches norms of comity.” Gallo,
24 446 F.3d at 994; see also Kaepa, 76 F.3d at 627 (where the case involved a “private party engaged
25 in a contractual dispute with another private party,” the court “cannot conclude that the district
26 court’s grant of an antisuit injunction in any way trampled on notions of comity”). At the heart of
27 Continental’s claims against Nokia is Continental’s contention that it is a third-party beneficiary of
28 Nokia’s commitments to license its SEPs on FRAND terms and conditions, and Continental’s
1 request that the district court enforce Nokia’s obligations in that regard. Moreover, Continental’s
2 action is not seeking to subvert the European patents at issue in Nokia’s German Actions. To the
3 contrary, Continental filed this action in order to obtain a license from Nokia, wherein it will pay
4 FRAND royalty rates to Nokia for the right to practice all of Nokia’s SEPs. If Nokia were truly
5 interested in obtaining FRAND compensation from Continental, it would welcome this outcome,
6 not argue that Continental’s action undermines comity because Nokia instead finds it more
7 beneficial to harass Continental’s customers with threats of a devastating injunction.
8 To the extent Nokia claims the impact on comity of Continental’s motion being granted
27 strip a U.S. court of its inherent authority to issue an anti-suit injunction when the requisite test has
28 been met (and doing so after falsely representing to this Court that it merely wanted more time to
1 oppose this motion on the merits, when it actually planned to subvert this Court’s ability to decide
2 Continental’s motion by taking secret steps in Germany), it is Nokia’s own actions which risk a
3 material impact on comity. Nokia cannot be permitted to create for itself a comity problem
4 through its own misleading and inappropriate behavior.3
5 III. AN ANTI-SUIT INJUNCTION SHOULD ISSUE AGAINST ALL DEFENDANTS.
6 Defendants are incorrect that Continental must demonstrate the traditional preliminary
7 injunction factors in order to obtain an anti-suit injunction prohibiting them from filing similar
8 infringement cases in the future. Once the test for an anti-suit injunction is met, courts may use
9 their inherent power to craft an appropriately broad remedy—including one that enjoins a party
10 from filing similar cases in the future. (Supp. Holder Decl., ¶ 5, Ex. 4 (entering an anti-suit
11 injunction requiring that Ericsson “will not initiate, anywhere in the world, any litigation,
12 administrative action, or analogous proceeding alleging (non-)infringement . . . of any Ericsson
13 patent(s) that Ericsson contends is essential to the 2G, 3G, and/or 4G standards.”).) To narrowly
14 construe this Court’s power to craft an appropriate anti-suit injunction would be an invitation for
15 Defendants to engage in gamesmanship, wherein Defendants could continually file individual
16 lawsuits against Continental or its customers, in turn forcing Continental to bear the burden of
17 filing numerous, seriatim motions for anti-suit injunctions.
18 Continental’s concerns in this regard are not merely theoretical. As the patent pool at the
19 center of Defendants’ unlawful conspiracy to direct their licensing activities to OEMs rather than
20 component suppliers like Continental, Avanci is in a unique position to coordinate a litigation
21 campaign to harass OEMs to take a non-FRAND license. Indeed, Avanci’s own Master Licensing
22 Agreement incentivizes its members to engage in a campaign of litigation to force implementers to
23
3
Nokia has not properly served the German injunction on CAS, and so it remains ineffective.
24
Service of documents through the Central Authority via Article 5 of the Hague Convention can
25 only be requested by the respective authority or judicial officer, not a German attorney-at-law, and
no such service has occurred with respect to the German order. (Supp. Holder Decl., ¶ 7, Ex. 6,
26 Art. 3 (request for service must be forwarded by “authority or judicial officer competent under the
law of the State in which the documents originate”) and ¶ 8, Ex. 7 (identifying proper Germany
27 forwarding authorities).) CAS itself has not opposed the injunction in Germany because the order
28 has not been served; if and when the order is served, CAS will take all appropriate measures in
Germany to oppose the order.
-14- Case No. 5:19-cv-02520-LHK
REPLY IN SUPPORT OF MOTION FOR ANTI-SUIT INJUNCTION
Case 5:19-cv-02520-LHK Document 128 Filed 08/09/19 Page 18 of 19
1 take an Avanci license, specifically by promising to reimburse the litigation costs incurred by a
2 member who sues a purported unwilling licensee for the benefit of Avanci. (See Supp. Holder
3 Dec., ¶ 4, Ex. 3, § 5.1.2.) This threat came to fruition recently when Avanci member Sharp
4 (recently added as a defendant in this case) also filed five patent infringement actions against
5 Daimler in Germany, and informed Daimler that “a FRAND-license to Sharp’s SEP patent
6 portfolio . . . remains available to Daimler through Avanci.” (Dkt. 82-1, p. 3 (emphasis added);
7 Supp. Hufnagel Decl., ¶ 2.) Sharp’s lawsuits are evidence of the immediate, substantial threat that
8 Avanci will encourage or direct its members to engage in a concerted litigation campaign in an
9 effort to force Continental’s OEM customers to take a non-FRAND license through Avanci.
10 IV. THIS COURT HAS JURISDICTION OVER DEFENDANTS.
11 The conclusory personal jurisdiction and venue arguments advanced by some of the