Now more than ever, technology is influencing the way we do business, communicate, move through and around the world, access and manage our homes, receive and administer healthcare, make purchases, secure information, and protect our most valuable property. Morrison Foerster keeps pace with this rapidly evolving landscape across our internationally recognized corporate, finance, intellectual property, and litigation practices. MoFo Tech brings together our insights relating to fields such as blockchain and distributed ledger, cloud and as-a-service technologies, driverless cars, drones, fintech, computer hardware and software, the Internet of Things, semiconductors, and telecommunications. The MoFo Tech blog offers real-time, in-depth analyses of the trends and complex issues shaping the global technology industry.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Scott Llewellyn’s practice focuses on complex litigation in federal and state courts around the country, with an emphasis on patent and trade secret disputes. Over the past decade, he has worked on some of the most significant, high–profile IP cases involving technology for televisions, smartphones, and self–driving cars, relying on 40 years of experience with computer hardware and software. Scott also has significant experience with business divorce cases before courts and arbitrators, involving a mix of trade secret, patent, tort, and contract claims relating to technology development and implementation.Scott also has successfully tried general commercial arbitration and agency matters, briefed and argued various appeals in federal appellate court, and tried more than 20 cases for the Denver City Attorney’s office, most of them jury trials.Scott also has an active pro bono practice, having worked on a variety of criminal and immigration appeals, and having represented Colorado criminal defense and mental health organizations in high–profile suits against the state of Colorado for violations of the constitutional rights of defendants.At MoFo, Scott serves on the board of the Morrison & Foerster Foundation. In the broader legal community, he serves on the boards of the Colorado Lawyers Committee and Drop in the Bucket (a charity that builds wells and sanitation systems in sub–Saharan Africa).After law school, Scott clerked for the Honorable Clarence A. Brimmer, District of Wyoming, and the Honorable Diarmuid F. O’Scannlain, Ninth Circuit. He was also previously an adjunct professor at the Georgetown University Law Center.

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Scott Llewellyn’s practice involves complex litigation before state and federal courts around the country, with an emphasis on patent and trade secret disputes for high-tech companies, to which he brings more than 35 years of experience with computer hardware and software, in particular relating to the processing and transmission of audio, video, voice, and other types of data. Mr. Llewellyn has also tried commercial arbitration and agency matters; briefed and argued various appeals in federal appellate court; and tried more than 20 cases for the Denver city attorney’s office, most of them jury trials.

Scott F. Llewellyn

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MoFo Tech brings together legal insights and in-depth analyses on trends and complex issues shaping the global technology industry, covering fields such as blockchain and distributed ledger, cloud and SaaS technologies, driverless cars, drones, FinTech, computer hardware and software, the IoT, semiconductors, and telecommunications.

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Subject Matter Eligibility of AI Medical Treatments

Bipartisan Coalition Of State AGs Oppose Ten-Year AI Regulation Ban

Data Privacy at the Crossroads of AI and Life Sciences: U.S. and EU Perspectives

Patent-Eligibility Considerations & Prosecution Strategies for AI-Based Life Sciences Patent Applications

AI Transparency in Healthcare: Navigating a Changing Regulatory Landscape

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UPC – And it got up againHaving been sent down for the count by constitutional complaints in Germany, the road finally seems paved for the Unified Patent Court.  On July 9, 2021, the German Federal Constitutional Court (GFCC) announced that it had dismissed two applications for a preliminary injunction seeking to void the German Act of Approval of the Agreement on a Unified Patent Court (the “Bill”).  Based on these applications, the GFCC had (once again) asked Germany’s president to suspend the Bill’s ratification, the final major step before the UPC can come into existence.Germany – The ultimate battle ground The so-called “European Patent Package” is comprised of by two EU regulations and an international treaty, the Agreement on a Unified Patent Court (UPCA).  The two regulations pertain to the creation of the Unitary Patent (UP), a single patent having effect in all participating EU Member States.  Both regulations, which are based on the concept of “enhanced cooperation” (i.e., a framework allowing EU Member States to work closely together), passed in 2012 and were not challenged.  Even though these regulations have technically been in effect since 2013, they have remained pending until the UPCA’s ratification.The UPCA is the foundation of the corresponding Unified Patent Court (UPC), a court system for litigation over UPs with effect in all participating Member States.  25 of the EU Member States (all except for Spain, Croatia, and Poland) signed the UPCA in 2015.  To enter into force, however, it must be ratified by at least 13 Member States, including the three with the highest number of European patents (originally, Germany, France and UK).Everything seemed close to set when all 35 of the 631 members of the Second Chamber of the German Parliament (Bundestag) who were present on that day unanimously decided to pass the UPCA in 2017, making Germany the 13th state expected to ratify the UPCA.  That left only the UK’s ratification remaining for the UPC to take off.  (With BREXIT, the UK’s ratification is no longer necessary, as the UK has withdrawn from the UPCA.)The plot started to twist in 2017 when a first constitutional complaint put ratification on hold in Germany.  The GFCC held in November 2020 that, due to the UPCA’s transfer of sovereignty, a different majority for ratification was required by the German Basic Law (Grundgesetz).  The GFCC further held that that majority was not satisfied with only 35 parliamentarians present.  To warrant democratic legitimization, the UPCA therefore had to take at least another turn before the Bundestag.  Due to this formal deficit, the GFCC had no reason in the meantime to assess the UPCA’s conformity with substantial aspects with the Basic Law.  It did, however, suggest that there might be violations. The formal deficits were overcome in December 2020 when both the Bundestag and the German Federal Council (Bundesrat) approved the legislation with the necessary majority.  Complainants subsequently lodged two new preliminary complaints in order to again delay the UPCA’s ratification.  The complainants asserted that the UPCA violated a number of rights and principles:-        The individual’s right to democratic self-determination (as the power of the German Parliament would be undermined)-        The fundamental right to effective legal protection (due to a lack of independence of the UPC judges, whose six-year terms with the possibility of re-election permit potential indirect bias)-        The individual’s right to a lawful judge (as one of the central divisions was to be in London)-        An "eternity guarantee" regarding fundamental principles of the Basic Law (arising from UPCA’s unrestricted prioritization of Union Law, which might cause the GFCC to lose its position to warrant these principles)-        Irreconcilability of the UPCA with Union Law (since cooperation between the European Court of Justice and Member State Courts is impaired by a court that is separate from the courts of the Member States) and other democratic deficits as well as deficits in the rule of law (e.g., because the UPCA was enacted despite changes due to BREXIT)-        The principle of autonomy of Union Law which was violated because the UK is still a contracting partyThe GFCC held that the complainants failed to sufficiently substantiate their assertions.  It explained that individuals can allege a violation of their right to democratic self-determination, which requires a very stringent showing.  But they do not have the right to challenge a democratic parliamentary decision. As the complainants are unlikely to overcome this fundamental deficit and succeed with a further complaint on the merits, the field is open for the UPC.  Before starting to hear cases, the UPC will enter into an 8-12 month pilot phase.  During this phase, judges will be appointed and trained, the IT systems will be set up, and other pre-operational measures taken.  To start the pilot phase, two more Member States who have already ratified the UPCA will need to sign the Protocol on Provisional Application.  These procedural formalities are not likely to lead to further delays, as some Member States do not require a lengthy parliamentary ratification process but only a signature or a unilateral declaration to do so.The new arena – UPCThe dawn of the UPC should signal the end of the need for fragmented patent enforcement, due to its exclusive competence over traditional European Patents (EP) as well as UPs.  Its decisions and orders will be enforceable in any contracting EU Member State.  The court will be structured as a Court of First Instance (i.e., comprising local, regional, and central divisions, the latter seated in Paris and Munich), a Court of Appeal (in Luxemburg), and a Registry. Now that the UK has withdrawn from the UPCA in the context of BREXIT, it remains to be seen where the third seat of the central division (formerly London) will be located.  Italy is promoting Milan as a third venue, and other possible candidates are Amsterdam and Paris.  Pending this decision, responsibilities will likely be shared between Munich and Paris.Together with the UPCA, a transitional regime will come into effect, allowing for any EP granted to be transformed into a UP for uniform protection with equal effect.  Plaintiffs will be free to choose whether to commence proceedings based on UPs before the national court (i.e., in the traditional fragmented system) or the UPC.The fragmented patent landscape will persist for at least a while, however.  This is because a UP covers only the territories of those Member States that ratified the UPCA at the moment of registration of unitary effect, i.e., the registration of a UP or the transformation of an EP into a UP.  Up to now, 15 Member States have ratified the UCPA, and after the GFFC’s ruling, Germany has been given the green light do so as well.  Spain and Croatia are the only two Member States that are not yet participating in either the Unitary Patent System or the UPC, but they may do so at any time.  Thus, even with the UPC up and running, the patent landscape will remain segmented into different “layers” of Unitary Patents, each different in territorial scope.In the long run, the Unitary Patent System definitely has the potential to significantly reduce costs and increase efficiency and legal certainty of patent enforcement in Europe.

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Wolfgang advises clients on contentious and non-contentious matters involving their most valuable intellectual property assets in the digital, high-tech, life sciences, and pharmaceutical industries.

Wolfgang Schönig

Wolfgang Schönig is a partner of Morrison Foerster (International) LLP based in our German office in Berlin. His practice specialty is advising on IP aspects relative to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. Wolfgang is specialized in research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

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Green Light for UPC

Japan: Privacy Updates on Handling Personal Information in the “Digital Market”

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UPC – And it got up again
Having been sent down for the count by constitutional complaints in Germany, the road finally seems paved for the Unified Patent Court

Green Light for UPC

Intellectual Property

European Union

The German patent system has repeatedly proven to provide reliable and effective means to enforce patent rights against infringers. There are three key reasons why the German patent system is so attractive for patentees when seeking to enforce their rights in Europe:<ol><li>Injunction gap: Infringement and validity are heard by different branches of the judiciary (bifurcation). The infringement courts only stay the proceedings pending parallel nullity actions if they have a strong indication that the patent-in-suit is invalid. That is, unless the patent is obviously invalid, first instance proceedings can be completed in about 1.5 years. Parallel nullity actions usually take much longer. Among other disadvantages for the defendants, this gap may result in unfavorable settlements based on potentially invalid patents. </li><li>De facto automatic injunction: If infringement is found, the default remedy is an injunction. While infringement courts do have some discretion if and to what extent an injunction shall be granted, they almost never make use of it. This as well provides substantial leverage to patentees in settlement negotiations.</li><li>Preliminary injunctions: Preliminary injunctions are available, even in complex cases.</li></ol>RECENT DEVELOPMENTSAll three areas are subject to recent developments: <ul><li>On June 10, 2021, the Second Act on the Simplification and Modernisation of the Patent Act (Zweites Gesetzes zur Vereinfachung und Modernisierung des Patentrechts) (“Bill”) passed the German Parliament (Bundestag). Among other things, the Bill introduced: <ul><li>A rule pursuant to which the nullity court (Bundespatentgericht [Federal Patent Court]) “shall” provide to the litigants a first indicative assessment of the case (qualifizierter Hinweis) within six months after the nullity action has been filed. The rationale is to inform the litigants (and the infringement court) prior to the first instance decision on the preliminary reasoning of the nullity court. However, this provision alone will only have little impact unless funding and staffing of the nullity court will be significantly improved, which is a separate topic currently discussed in Germany.</li><li>A codification of a proportionality test providing courts an express basis for temporary or permanent suspension of the injunction against a fair compensation in addition to potential damages for past infringement. While it is unlikely that this rule will dramatically change the way injunctions are being granted in Germany, it may provide relief in certain edge cases as the case law evolves on this issue. Such edge cases may include unreasonably aggressive patent trolls, extreme cases of discrepancy between the value of the invention and the economic loss suffered by the defendant, or detriment to paramount interests of third parties like access to lifesaving medicines or access to vital infrastructure. It is unlikely, however, that the new law will have an impact on evolving case law on standard-essential patent (“SEP”) litigation.</li></ul></li></ul>The Bill will likely enter into law in the fall.<ul><li>With respect to preliminary injunctions, already in January of 2021, the Regional Court of Munich has challenged the long-standing practice of courts in Germany requiring the claimant of a preliminary injunctions to demonstrate sufficient prospects of validity of a patent-in-suit, e.g., by showing that the patent has survived inter partes opposition or revocation proceedings or is otherwise largely accepted by the industry as valid. (NB: there are exceptions from this rule, for instance, to protect pharma companies against generic entry, where no such “strength” of the patent has to be demonstrated.) Arguing that this practice discriminates against patentees of newly granted patents, the Munich court has asked the European Court of Justice (“CJEU”) to decide whether this is in line with European Law. The CJEU’s decision cannot be expected until the beginning of 2022.</li></ul>While the changes introduced by the Bill will likely strengthen the defendants’ position in German patent litigation proceedings, the CJEU referral has the potential to significantly strengthen the patentee’s position. Below, we will shed more light on the proportionality test introduced by the Bill.PROPORTIONALITY TESTNew § 139 para. 1 of the German Patent Act (Patentgesetz) now reads:“The [injunction] claim may be excluded to the extent that the claim due to the special circumstances of the individual case and the requirements of good faith would lead to disproportionate hardship for the infringer or third parties, not justified by the exclusive right. In this case the infringed party shall receive a reasonable monetary compensation. The claim for damages [. . .] remains unaffected.”The German legislator reiterates, in his explanatory statements underlying the Bill, that the new provision is a mere codification of what has been the law anyway. He stresses that the principle of proportionality is a cornerstone of the German Constitution and the German legal system in general and that judges must apply this principle regardless of whether it is expressly laid down in a statue or not. He also points to the European <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32004L0048R%2801%29">Directive 2004/48/EC</a> on the Enforcement of Intellectual Property Rights that also clearly calls for all judicial decisions to be proportionate.In addition, the legislator notes that the German Federal Court (Bundesgerichtshof – “GFC”) in its Heat Exchanger decision (Case No. X ZR 114/13) held that a grace period may be granted under exceptional circumstances in patent cases—but did not do so in the case at hand— namely, “if the economic consequences of immediate compliance with the injunction effect and disadvantage the infringer [. . .] beyond the disadvantages which would be caused by its grant as intended, to an extent which makes the unconditional injunction appear unreasonable.”However, the legislator complains that the lower infringement courts did not sufficiently pick up on this proportionality assessment established by GFC, warranting express codification. As a result, it is likely that this issue will be more prominently discussed between litigants in the future and that the courts will have to provide more detailed reasoning on this issue than in the past. The reasoning and further specification provided by the legislator in its explanatory statement that will be relevant in these discussions can be summarized as follows:<ol><li>Delaying or suspending an injunction must be the absolute exception. </li><li>The risk of being enjoined from the market, including all of its economic consequences, is inherent to the German patent system.</li><li>The right to an injunction does not require the plaintiff to actually practice the invention or that the defendant use the invention intentionally. </li><li>There is a presumption that the patentees’ interest prevails, and the burden on showing disproportionality is on the defendant. The plaintiff has the benefit of doubt.</li><li>Facts that speak in favor of the defendant can be:<ol><li>If the unconditioned grant of an injunction would result in extraordinary high costs or losses on the part of the infringer that are in stark disproportion to the value of the patent-in-suit. This may be the case in complex products where the patent‑in‑suit only has a subordinate role.</li><li>If the “design around” takes an unusually long time because of regulatory requirements, again in light of the actual value and relevance of the patent-in-suit.</li><li>If the defendant infringes despite having conducted customary freedom-to-operate (“FTO”) searches.</li><li>If the plaintiff has delayed bringing suit until a moment where defendant has made significant investments, but the plaintiff could have brought suit earlier. </li><li>If substantial third-party interests would be affected, e.g., cut off from lifesaving medicaments or essential infrastructure.</li><li>“Patent trolls”, i.e., patent accumulators with the sole purpose to generate royalty income for its shareholder, may not be entitled to an injunction (or even a compensation in addition to “regular” damages) if it can be shown that patents have been acquired specifically to use the threat of an injunction to extract unreasonably high license fees or any other type of bad faith.  (NB: the explanatory statements are quite clear that non-practicing entities (“NPEs”) are not generally disapproved or “evil”, and that also for NPEs there is a presumption for an entitlement to an unconditioned injunction.)</li><li>The impact of the patentee shall be as minimal as possible, and courts must carefully consider duration of the denial of an injunction (i.e., short grace period vs. permanent suspension). </li><li>Baseline for the compensation for the suspension of the injunction to be awarded on top of damages for past infringement should be what reasonable parties would have agreed to for such use. The compensation can be higher if the defendants did not perform a customary FTO search. It can be lower, if the plaintiff is denied the injunction for reasons of bad faith.</li></ol></li></ol>Although the legislator’s explanatory statement addresses NPE and third-party interests, the statement is unlikely to override the evolving case law on FRAND (fair, reasonable, and non-discriminatory) licensing. Especially in the SEP context, FRAND case law seeks to balance all involved interests and thus inherently reflects a proportionality assessment.

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Counsel

Robert advises companies from the technology and life sciences sectors on a wide range of commercial, intellectual property (IP) and regulatory matters. His clients range from multinational corporations to startups and scaleups.

Robert Grohmann

Robert Grohmann is counsel at Morrison Foerster’s German office in Berlin. As a member of the technology transactions group, he focuses on advising domestic and foreign companies and startups in all areas of technology and IP law, including patent and software licensing, employee inventions law, as well as know-how protection. Moreover, Mr. Grohmann’s expertise encompasses the judicial and extra-judicial representation in matters of trademark law, design law, and competition law.

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Recent Developments Regarding Patent Injunctions in Germany

Digital Compliance in Europe: Regulatory Alignment Post-Brexit

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The German patent system has repeatedly proven to provide reliable and effective means to enforce patent rights against infringers. There are three key reasons 

Recent Developments Regarding Patent Injunctions in Germany

After the presentation of a general “European Approach to Artificial Intelligence” by the EU Commission in March 2021, a detailed draft regulation aimed at safeguarding fundamental EU rights and user safety was published today (“Draft Regulation”). The Draft Regulation’s main provisions are the following:<ul><li>A binding regulation for AI Systems (defined below) that directly applies to Providers and Users (both defined below), importers, and distributors of AI Systems in the EU, regardless of their seat.</li><li>A blacklist of certain AI practices.</li><li>Fines of up to EUR 30 million or up to 6% of annual turnover, whichever is higher.</li><li>Transparency obligations and, for High-Risk AI Systems (defined below), registration and extensive compliance obligations.</li></ul>For detailed information please read our <a href="https://protect-us.mimecast.com/s/jgT3CR65kXU31MB7hNvWAF?domain=www2.mofo.com">client alert</a>.

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Christiane Stuetzle is a partner in Morrison Foerster's German office in Berlin and Co-Chair of the firm's Global Film & Entertainment Practice.

Christiane Stuetzle

Christiane Stuetzle is a partner of Morrison Foerster (International) LLP, based in the Berlin office. She is the Co-Chair of the Global Film & Entertainment Practice of Morrison & Foerster. She is a Certified Specialist for Copyright and Media Law & Arbitrator on the International Arbitration Panel of the IFTA (Independent Film & Television Alliance).

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With her enthusiasm for technology-driven issues, Patricia Ernst has built a recognized practice at the interface of compliance and technology.

Patricia C. Ernst

Patricia Ernst is a partner in Morrison Foerster’s Berlin office and a member of our Corporate Department. She advises German and international clients on all aspects of intellectual property law with an emphasis on copyright and media law matters. Her practice focusses on film, media and entertainment.

Patricia Ernst

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Draft EU Regulation for Artificial Intelligence Proposes Fines of up to 6% of Total Annual Turnover

Germany Adopts Administrative Trademark Cancellation Actions

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After the presentation of a general “European Approach to Artificial Intelligence” by the EU Commission in March 2021, a detailed draft regulation aimed at safe

Draft EU Regulation for Artificial Intelligence Proposes Fines of up to 6% of Total Annual Turnover

Artificial Intelligence

I. IntroductionOn November 26, the Dusseldorf Regional Court handed down a long awaited decision in the so-called automotive patent wars (case ID 4c O 17/19). The court referred heatedly debated questions in connection with the enforcement of standard essential patents (“SEPs”) to the Court of Justice of the European Union (“CJEU”). The detailed set of questions addresses two main issues: 1. Whether the entity selling a device (here a car) that includes a component that implements the technology protected  by the SEP would be in compliance with the FRAND procedure set out by the CJEU in Huawei v. ZTE if it were  to refer  the SEP holder to the upstream component supplier rather than making a fair reasonable and non- discriminatory  (“FRAND”) offer itself; and 2. Certain clarifications on the Huawai v. ZTE requirements regarding the timing of the steps in what is often referred to as the “FRAND dance.”Although the outcome of an order for reference cannot be foretold, the CJEU decision is expected to be the most influential decision on FRAND licensing since the 2015 Huawei v. ZTE ruling (case ID <a href="http://curia.europa.eu/juris/document/document.jsf;jsessionid=6331314A3F81E1AED9537BAA8E87A934?text=&docid=165911&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=17464359">C-170/13</a>). It may create a more predictable framework of licensing negotiations for both SEP holders and implementers. In addition, it may encourage national courts to finally take a clear stance on the FRAND compliance of an offer in certain cases.In this article we will give a short overview of the background of the current SEP battles and an outlook of the practical consequences of the CJEU ruling. II. Uncertainties following Huawei v. ZTEIn Huawei v. ZTE, the CJEU ruled that the SEP holder must first alert a party of its alleged infringement before bringing an action. If the alleged infringer expresses a willingness to take a license, the SEP holder must provide a written licensing offer on FRAND terms. Only if the alleged infringer continues to use the SEPs in question and fails to respond diligently to the SEP holder’s offer may the SEP holder seek an injunction. A diligent response may include a counter-offer on FRAND terms.This landmark decision did not curb litigation on FRAND considerably. For one thing, it left courts with significant leeway to interpret each party’s obligations, particularly as to timing. For example, it is unclear how swiftly the offeree must reply before it is deemed unwilling. As a result, SEP cases are often tactically protracted. Furthermore, the CJEU decision did not cover all aspects of SEP enforcement. Important questions such as the actual terms fulfilling the FRAND requirement remained open. Hence, it is difficult for the parties to assess what license terms and royalties are substantively FRAND.The European Commission (“EC”) tried to provide guidance on those issues with its 2017 communication “Setting out the EU approach to Standard Essential Patents” <a href="https://ec.europa.eu/docsroom/documents/26583">(available here)</a>. Because its initial guidance left open many issues, the EC recently announced that it will encourage industry-led initiatives and possibly enact reforms as part of its action plan on IP (available here).III. Automotive WarsMeanwhile, the connected cars battle in Germany took off. In the advent of 5G and the IoT, the car industry, among many others, increasingly implemented mobile communication technology. Thus, their products moved gradually from the area of classic automotive engineering toward the area of mobile communications. This pursuit for connectivity of automated and digitalized products naturally calls for interoperable technical solutions based on standards. This potentially gives SEP holders a whole new field to reap.Members of the Avanci patent pool, such as Nokia and Conversant, did not want to play by the long-established rules of the car industry and grant licenses at the component level. This is because final product licensing provides a much more attractive royalty base than component-level licensing, as the market value of the smallest salable patent practicing unit is far lower than one of the end products. Accordingly, they launched a wider litigation campaign against car makers, including Daimler, and Volkswagen and other OEMs.Nokia brought 10 proceedings against Daimler before German courts in Munich, Mannheim, and Dusseldorf. In turn, Daimler and four of its suppliers launched antitrust complaints against Nokia before the Commission’s Directorate-General for Competition, claiming that Nokia abused its dominant market position by not granting a license to the suppliers. One of the suppliers, Huawei, followed suit and brought an action before the Dusseldorf Regional Court, seeking to obligate Nokia to grant a license.The order for reference by the Dusseldorf court is the latest striking, yet not unexpected, event in the connected cars proceedings. In the present case, Nokia has offered a license only to Daimler and not to Daimler’s suppliers. Daimler, on the other hand, always wanted its suppliers to take a license and the suppliers have emphasized that they are, in fact, willing to do so. Positions/ ArgumentsNokia claims it is more efficient to only deal with OEMs like Daimler. They also argue that exhaustion dynamics would have unacceptable practical consequences. On the other side, OEMs argue that injunctions against them are not proportionate in light of Art. 3 of the Enforcement Directive (<a href="https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32004L0048R(01)&from=EN">2004/48/EC</a>). Because suppliers implement the SEP first, OEMs contend that suppliers should be first in line to receive a license. OEMs also invoke efficiency arguments, noting that there are fewer suppliers than OEMs.Controversy on WillingnessFor a long time, the SEP holder’s offer appeared to be the pivotal event. At least before the Dusseldorf courts—the forum that hears the most SEP cases in Germany—it was relatively safe to assume that the SEP holder’s offer signaled the start of the FRAND dance only if the offer was in fact FRAND. In other words, the implementer’s steps under Huawei v. ZTE did not matter, so long as the implementer did not reject any attempt to engage in negotiations and thus render it “unwilling.”On May 5, 2020, the German Federal Court of Justice (“GFCJ”) specified that the implementer must clearly and unequivocally declare its willingness to conclude a license agreement with the SEP holder on reasonable and non-discriminatory terms. The GFCJ further required that the implementer subsequently participate in the license agreement negotiations in a deliberate manner (case ID KZR 36/17). For support, the GFCJ referred to the High Court of England and Wales’ holding in Unwired Planet vs. Huawei that “a willing licensee must be one willing to take a FRAND license on whatever terms are in fact FRAND.”Applying these standards, the Munich Regional Court (case ID 7 O 8818/19) and the Mannheim Regional Court (case ID 2 O 34/19) recently held that an SEP implementer does not indicate its unconditional willingness to accept a FRAND license by referring the SEP holder to its suppliers.  To the contrary, such a referral indicates that the SEP implementer is “unwilling” regardless of whether the SEP holder’s offer was FRAND.The controversial nature of this issue is evident by the Federal Cartel Office’s involvement.  In the Mannheim proceedings, the Federal Cartel Office weighed in to encourage the Regional Courts to stay the proceedings and providing a set of questions for referral to the CJEU.  The Mannheim court did not follow these suggestions, however, and instead issued its ruling with little delay.  Its decision is the second grant of an injunction to Nokia prohibiting Daimler sales, if enforced.Against this backdrop, the Dusseldorf Courts’ decision to focus on the issue provides hope to OEMs that wish to refer SEP holders to suppliers IV. The questions referred to the CJEUThe Dusseldorf Regional Court’s referral to the CJEU suggests the possibility of a different approach to this question favoring OEMs.  Loosely translated, the referred questions are: A. Must the SEP holder prioritize licensing of suppliers? 1. Can a downstream company impede an action for injunctive relief for infringement of a standards-essential patent   for which the patentee has irrevocably undertaken to grant FRAND licenses on the basis that the SEP holder is abusing   its dominant market position under Art. 102 TFEU by refusing to grant an unrestricted FRAND license to the upstream supplier? a. If common practice in an end-product manufacturer’s sector is that a part supplier’s license clears the   manufacturer of infringement, does this support the defense against injunctive relief? b. Must the SEP holder prioritize licensing of all suppliers regardless of their level in the supply chain, or only the   one supplier immediately upstream of the distributor of the final product? Does this also depend on industry practice? 2. Does Art. 102 TFEU require that the supplier be granted its own unrestricted license for all types of use relevant under patent law on FRAND terms for products implementing the standard with the result that end-product manufacturers (and, as applicable, intermediaries) no longer need to take their own, separate licenses from the SEP holder to avoid patent infringement for using the respective parts per their intended use? 3. If the first question is answered in the negative: does Art. 102 TFEU impose particular qualitative, quantitative, and/or other requirements on the criteria by which a SEP holder must decide which potential infringers at different levels of the supply chain it can sue for injunctive relief?B. Clarifications of the Huawei v. ZTE requirements 1. Putting aside the SEP holder’s and implementer’s pre-litigation obligations (infringement notice, request for license, FRAND licensing offer; license offer to suppliers to be licensed on a priority basis), is it still possible to satisfy   obligations not previously met during the course of court action to the effect that the rights are preserved? 2. Should a license request only to be deemed substantial if a comprehensive assessment of all circumstances clearly and unequivocally shows the SEP user’s willingness and readiness to conclude a license agreement with the SEP holder under FRAND terms, irrespective of what those terms (which, due to the non-existence of an offer at that time are not foreseeable) might be? a. Does an infringer’s silence for several months after receiving an infringement notice indicate its disinterest in a license, so that - despite a verbally formulated request for a license - there is no such license and the SEP holder's injunction request must be granted? b. Can the terms of an SEP user’s counteroffer be interpreted to mean that it has not actually requested a license,  such that the SEP holder's injunction request should be granted regardless of whether its initial license offer was FRAND-compliant? c. Is such a conclusion unwarranted if the counteroffer’s license terms, which shall imply that the SEP user has actually not submitted a substantial license request, are either incompatible with high court precedents or otherwise facially non-FRAND?V.  Nokia’s ReactionThe decision of the CJEU could take up to two years. But for Nokia, time is of the essence. After injunctions obtained in Munich and Mannheim were not sufficient to force Daimler into a license deal, Nokia cannot afford to lose any time and needs another victory fast. In an attempt to prevent the case from actually being heard by the CJEU, Nokia thus appealed the Dusseldorf Court’s decision. This move is not only unusual but also not very likely to succeed, as the Dusseldorf Regional Court’s referral was orchestrated with the Dusseldorf Higher Regional Court, the very same Court which will now have to decide on the appeal. VI. OutlookThe referral offers a glimmer of hope to Daimler and other OEMs that their recent run of unfavorable outcomes before German courts may come to an end. But the outcome of the actual decision, how the national courts will implement it, and its actual benefit to SEP implementers remain to be seen. For example, the Munich Regional Court may be reluctant to rely on industry practices regardless of the CJEU’s ruling, in view of its prior decision that a car manufacturer may not rely on car industry’s licensing practices when implementing technology from the mobile communications sector.The CJEU’s ruling likely will have effects beyond SEP cases involving complex supply chains. Its clarification of issues could accelerate licensing discussions, minimize tactical delays during litigation, and reduce costs overall. Its ruling also may encourage national courts to rule on FRAND terms.Morrison & Foerster Associate Jacqueline Feigl contributed to the writing of this blog post.

Huawei v. ZTE revisited – German automotive patent wars to reshape SEP litigation in Europe

I. Introduction
On November 26, the Dusseldorf Regional Court handed down a long awaited decision in the so-called automotive patent wars (case ID 4c O 17/19). 

Huawei v. ZTE revisited – German automotive patent wars to reshape SEP litigation in Europe

Online platform operators have a rare cause to be cautiously optimistic at news from the European court. In a recently-published European Court of Justice (ECJ) opinion, Advocate General Henrik Saugmandsgaard Øe stated that, under the current EU legal regime, operators should not be directly liable for the illegal uploading of protected works by platform users. This addresses a recurrent issue over the last few years, whereby platform operators have repeatedly argued that they cannot be held responsible for the activities of platform users.BackgroundThe Federal Court of Justice in Germany originally referred questions to the ECJ in relation to cases involving a music producer who initiated proceedings when recordings, to which he asserted rights, were uploaded to YouTube without his consent; similarly, a second case in which a claimant sued when materials, to which it held exclusive rights, were uploaded without its consent by platform users to an online file-hosting and sharing platform.The Advocate General’s opinion on the current legal regimeThe Advocate General took the view that, where a platform user infringes the exclusive rights of a creator by uploading protected works, the platform operator should not be held directly liable. His rationale covered the following points:<ul><li>Platform operators provide an intermediary service that enables users to carry out a “communication to the public”. Platform operators do not usually carry out such acts themselves. Consequently, any liability arising from such communication should rest with the users uploading such content.</li><li>Once a platform user initiates an upload, the upload itself is an automatic process—i.e., the platform operator does not actively select or determine whether the content should be uploaded.</li><li>The liability of persons facilitating a third party’s illegal “communication to the public” (i.e., secondary liability) is governed by the national law of each Member State, not by the Copyright Directive (2001/29/EC). </li><li>An exemption under the E-commerce Directive (2000/31/EC) may apply to platform operators where they do not play an “active role” that provides them with “knowledge of, or control over” the information, when storing files on the request of platform users. This exemption does not apply where platform operators have knowledge of the illegal activity or information and do not remove or disable access to the content promptly. Therefore, once platform operators are put on notice about infringing activity, they should take steps to rectify the problem and not stay passive.</li><li>Rights holders of protected works may obtain injunctions against online platforms, without needing to show improper conduct by the platform operator. </li></ul>The Advocate General’s opinion is, however, not binding on the ECJ (although such opinions are very frequently followed) and a formal ECJ judgment will be delivered by the ECJ following the Court’s deliberations.The Digital Copyright DirectiveThe incoming Digital Copyright Directive ((EU) 2019/720) adds another level of nuance to this matter (given that it is not due to be implemented into national law in the EU until 7 June 2021, it was not applied to these cases). In accordance with the Digital Copyright Directive’s liability regime, platform operators must obtain authorisation from relevant right holders where a platform user uploads protected works. So, in theory, platform operators should no longer have to argue over whether they have any control over what content is uploaded to their platform. Operators will either have the right authorisation or not.Of course, the one wrinkle is the <a href="https://mofotech.mofo.com/topics/uk-declines-to-implement.html">UK’s decision not to implement the Digital Copyright Directive</a>. This means that platform operators with dual presences in the UK and the EU could find more freedom in operating out of UK. We will continue to monitor both the UK’s developments in this respect, as well as the final judgment by the ECJ, in case either have a notable impact on platform operators and how liability is allocated.Jai Mudhar, London Trainee Solicitor, contributed to the drafting of this alert.

Autodesk

HM Revenue and Customs

Home Office, Department for Communities and Local Government, Department of Health

Intel

ITworx

lastminute.com

NYSE-listed health tech company

One of UK's largest public EV charging networks

Phoenix Group

Telenor

UK Border Agency

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Senior Counsel

Alistair Maughan co-leads Morrison & Foerster's European Technology & Commercial Practice.

Alistair Maughan

Alistair advises on the deployment of new technology platforms involving, for example, the internet of things, AI and machine-learning, and blockchain and distributed ledger technology.

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Of Counsel

Mercedes Samavi is an associate based in the London office of Morrison & Foerster and a member of both the Technology Transactions Group and the Global Privacy Group.
Mercedes advises domestic and int

Mercedes Samavi

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Determining Liability For Illegal Uploads to Online Platforms: An ECJ Opinion Decides in Favour of Platform Operators

Determining Liability For Illegal Uploads to Online Platforms: An ECJ Opinion Decides in Favour of Platform Operators

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Online platform operators have a rare cause to be cautiously optimistic at news from the European court. In a recently-published European Court of Justice (ECJ)

Today, the Court of Justice of the European Union (“Court”) issued its judgement in the Schrems II‑case. The case relates to the validity of certain transfer mechanisms to legitimize international sharing of personal information from the EU to outside the EU. In short, the Court ruled that the Standard Contractual Clauses (“SCCs”) are valid, but that another widely used mechanism, the EU-U.S. Privacy Shield certification (“Privacy Shield”), is not.However the Court’s ruling is not as straightforward as it seems. The Court makes a number of sweeping observations relating to both the SCCs and Privacy Shield, which may very well have far wider implications to international data transfers out of the EU.  Read our <a href="https://www.mofo.com/resources/insights/200716-ruling-sccs-privacy-shield.html" target="_blank">client alert.</a>

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Few lawyers in the world have Miriam’s breadth and understanding of privacy and data security laws, obligations, and practices.

Few lawyers in the world have Miriam Wugmeister’s breadth and understanding of privacy and data security laws, obligations, and practices. 

Miriam H. Wugmeister | Privacy and Data Security Lawyer

Few lawyers in the world have Miriam Wugmeister's breadth and understanding of privacy and data security laws, obligations, and practices. In the words of her clients, she is “extremely practical and phenomenally smart. Just about one of the best privacy advisers there is” (Chambers USA). Co-chair of Morrison & Foerster’s market-leading Global Privacy and Data Security Group and ranked among the top in the profession by all major directories, Ms. Wugmeister is regularly called upon by some of the world’s largest and most complex multinational organizations to confront their most difficult U.S. and international privacy challenges. “Tremendous at helping you come up with practical solutions to real problems” (Chambers USA), she develops cutting-edge solutions for clients that marry legal compliance with business realities.

Miriam Wugmeister

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Managing Partner, Amsterdam and Brussels

Alex van der Wolk, co-chair of Morrison Foerster’s preeminent Global Privacy & Data Security practice and managing partner of the firm’s Amsterdam and Brussels offices, employs his nearly 20 years of experience to advise global companies on their most complex data strategies and compliance programs governing all aspects of information management. 

With more than a decade of experience, Mr. van der Wolk helps clients develop privacy strategies for digital transformations, industrial IoT, telematics, Big Data, commercial and marketing programs, a

Alex van der Wolk

Alex van der Wolk, co-chair of Morrison Foerster’s preeminent Global Privacy & Data Security practice and managing partner of the firm’s Brussels office, employs his nearly 20 years of experience to advise global companies on their most complex data strategies and compliance programs governing all aspects of information management.

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The Ruling on SCCs and Privacy Shield May Not Be As Straightforward As It Seems

Recent Decision Compelling Disclosure of Data Breach Incident Response Report Highlights the Importance of Preserving Privilege and Protecting Work Product

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Today, the Court of Justice of the European Union (“Court”) issued its judgement in the Schrems II‑case. The case relates to the validity of certain transfer me

The Ruling on SCCs and Privacy Shield May Not Be As Straightforward As It Seems

Privacy + Data Security

Despite the coronavirus pandemic, the process of implementing Brexit continues. One of the key Brexit issues for the tech sector is the extent to which the UK will either align or diverge its digital regulations with the EU.Both the UK and EU have set out their intentions for their post-Brexit relationship in matters relating to technology, digital, and telecoms issues. There are signs that both the UK and EU will seek early alignment in key tech/digital compliance areas: is this a sign of things to come?The UK government recently published its <a href="https://www.gov.uk/government/publications/our-approach-to-the-future-relationship-with-the-eu">draft working text</a> for a comprehensive free trade agreement between the UK and the EU (the “draft text”). As we explain below, the draft text covers (1) digital trade, recognising the importance of adopting frameworks that promote consumer confidence in digital services, (2) telecoms, and (3) audiovisual services. Intriguingly, the draft text aims to maintain regulatory alignment between the UK and the EU, insofar as possible, which could be a sign of the extent to which the UK plans to align with the EU (rather than forge its own path), both in these three areas and elsewhere, once the Brexit transition period is over.Digital Trade Net neutrality is a key feature in the draft text. In particular, the UK draft text sets out that both the UK and EU should “maintain or adopt appropriate measures to ensure that end-users in their territory are able to: (a)           access, distribute, and use services and applications of their choice available on the Internet, subject to reasonable, clear, transparent and non-discriminatory network management; (b)           connect devices of their choice to the Internet, provided that such devices do not harm the network; and (c)           have access to information on the network management practices of their Internet access service supplier”.The UK has already implemented the <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32015R2120">Open Internet Access Regulations</a> and plans to retain it as part of its domestic legislation post-Brexit. These regulations safeguard equal and non-discriminatory treatment of traffic in the provision of internet access services and protection of consumers’ rights. Critically, the regulations restrict the paid prioritisation of internet traffic and discrimination or interference by internet providers (i.e., blocking or slowing down internet).It is rare to see free trade agreements cover net neutrality as an area for discussion, but it appears in both the draft text and the European Commission’s draft agreement. Although the UK and EU negotiations are still ongoing, these provisions are an auspicious signal that the UK and EU plan to stay aligned on certain digital regulatory matters.TelecomsAs with digital services, the EU and UK appear keen to preserve the status quo for telecom services. The provisions of the draft text (which line up with the Commission’s draft agreement) seek to:<ul><li>ensure independence and powers of UK and EU telecom regulators;</li><li>minimise unnecessary formalities;</li><li>enable bilateral access to each other’s public telecoms networks and service and essential facilities; and</li><li>prevent anti-competitive practices. </li></ul>The prospective management of international mobile telecoms roaming between the EU and UK is a grey area, however. For now, EU regulations limit wholesale fees for roaming and prevent higher charges being passed to consumers. At the end of the transition period, EU mobile operators may be able to charge UK operators (and therefore UK consumers) a higher rate for roaming services. The draft text proposes to solve this by requiring that, within three years of entry into a trade agreement, the UK and EU should come back to the table to assess whether there is a need to regulate mobile roaming between the UK and EU.Audiovisual ServicesThis is one topic where the EU and UK could cease to be in step with each other. Currently, under the Audiovisual Media Services Directive, a broadcaster in the EU has to obtain a licence and comply with regulatory standards in only one EU member state; this then allows that broadcaster to offer its services in the other EU member states without any additional requirements (this is known as the “country of origin principle”). At the end of the transition period, a broadcaster that wants to broadcast to the EU but is licensed in the UK will no longer benefit from the country of origin principle. The draft text does not seek to negotiate a provision to mirror the country of origin principle, which could leave broadcasters having to seek dual licences for both the EU and the UK.

Digital Compliance in Europe: Regulatory Alignment Post-Brexit

Despite the coronavirus pandemic, the process of implementing Brexit continues. One of the key Brexit issues for the tech sector is the extent to which the UK w

Regulatory

The European Union is supposed to have the strongest data protection laws in the world. So why do privacy violations continue to make the headlines? I believe that the lack of material privacy compliance is not due to lack of enforcement, but is due to a fundamental flaw in our European data protection laws. Our laws are supposed to ensure people’s autonomy by providing choices about how their data is collected and used. In a world driven by artificial intelligence, we, however, can no longer understand what is happening to our data, and the concept of free choice is undermined by the very technology our laws aim to protect us against. The underlying logic of data-processing operations and the purposes for which they are used have now become so complex that they can only be described by means of intricate privacy policies that are simply not comprehensible to the average citizen. Further, the reality is that organizations find inscrutable ways of meeting information and consent requirements in a way that discourages individuals from specifying their true preferences, and, therefore, they often simply feel forced to click “OK” to obtain access to services.Our data protection laws have resulted in what Prof. Corien Prins and I have named mechanical proceduralism (read <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2784123" target="_blank">here</a>), whereby organizations go through the mechanics of notice and consent without any reflection on whether the relevant use of data is legitimate in the first place. In other words, the current preoccupation with what is legal is distracting us from asking what is legitimate to do with data. We even see this reflected in the highest EU court having to decide whether a pre-ticked box constitutes consent (surprise: it does not). Privacy legislation needs to regain its role of determining what is and what is not permissible. Instead of a legal system based on consent, we need to re-think the social contract for our digital society, by having the difficult discussion around where the red lines for data use should lie, rather than passing the responsibility for a fair digital society to individuals to make choices they cannot fully comprehend. Read our <a href="https://www.mofo.com/resources/insights/200521-eu-data-protection-laws.html">client alert</a>.