IPCom's famous 100A patent has expired and the non-practising entity will have to change its business model. The NPE has kept the European mobile communications industry on its toes for over a decade - and it looks set to carry on making history.
19 February 2020 by Mathieu Klos
Bernhard Frohwitter doesn’t give up. He has spent the past 13 years submerged in intensive and nerve-racking litigation before European patent courts, concerning the 100A patent.
The lawyer, who is also a qualified mechanical engineer and founded his own IP law firm, is best known as a shareholder of a small empire of non-practising entities (NPEs) that exploit mobile phone patents formerly owned by Robert Bosch and Hitachi.
Even now, Frohwitter’s peers report that he continues to defend the validity of those patents, now owned by his NPEs IPCom and Fipa.
2007: IPCom purchases over 160 patent families from Robert Bosch, 30 were relevant to standards 2, 3 and 4G. IPCom now owns over 200 patent families, of which 35 are SEPs.
Frohwitter and his small non-practising entity IPCom sued mobile phone giant Nokia in 2008 for an alleged €12 billion in damages. Suddenly, fear of the evil patent troll began to ripple through the mobile phone industry and Europe’s patent community.
Many companies had already had painful encounters with patent trolls in the US in the early 2000s. The main aim of such trolls is to exploit weak patents and make quick money. European companies feared that the phenomenon would eventually cross the Atlantic, into Europe. Then, in early 2007, that threat began to materialise in the shape of IPCom.
But success did not come quickly for the NPE. For 13 years, it had to fight its way through the various instances of German, French and UK patent courts. There were also lawsuits in the US. While IPCom did see some success, it suffered just as many defeats. In the end, the NPE ran out of time.
IPCom never landed the final victory, which would have led to a major licensing deal with the mobile phone industry. Now the patents from IPCom’s central patent family, labelled with the number 100 (the so-called 100 patents), are expiring. This includes what is probably IPCom’s best-known property right, bearing the number 100A.
Patent 100A comes from the portfolio bought by the NPE from Robert Bosch in 2007. The patent has seen almost one and a half decades of litigation, 13 crucial years which have seen significant developments in the law on standard essential patents and FRAND. This is as well as a change in the European attitude towards NPEs.
2008: IPCom sues Nokia allegedly for €12bn and HTC in Mannheim.
The early days of the battle for the 100 patents were still dominated by the troll discussion. In 2008, Europe was still feeling the effects of troll lawsuits in the US. IPCom was one of the first NPEs to go to court in Europe, mostly at the Mannheim Regional Court.
At the first oral hearings in the SEP lawsuit between IPCom and Nokia emotions were running high. At that time, FRAND already played a central role, but it was mainly about the licence fee. “They only want to pay a ridiculous $12.5 million,” Bernhard Frohwitter was incredulous. Opposite him stood an equally experienced and unyielding litigator in Wolfgang von Meibom, senior partner of Nokia’s go-to law firm Bird & Bird.
Von Meibom pointed out that this is exactly the same amount that Samsung pays to IPCom. “But Nokia generates 1.7 times more revenue, so we’re willing to pay that.” Von Meibom then offered IPCom €35 million.
2009: Mannheim Regional Court awards IPCom an injunction against HTC. Karlsruhe Higher Regional Court suspends the injunction shortly after.
“Not enough,” said Frohwitter. IPCom calculated that the usual rate is five percent of the market value. This would mean Nokia would have to pay around €600 million per year. Extrapolated over a service life of 20 years, this would result in €12 billion. “Such a sum is not demanded by a market player, but by a troll,” von Meibom fumed.
Even as the trial began, the two companies only doubled down. They only came to agreement once Nokia’s mobile phone business went downhill and was sold to Microsoft. The parties ended the proceedings a few years ago. When exactly, and under what conditions, is not known.
IPCom had long since started to focus on new targets. In 2008, the NPE sued HTC in Mannheim. Then in 2009, the IPCom landed probably its greatest success against the mobile phone manufacturer. But this was quickly followed by its most serious defeat.
In 2009, the Regional Court Mannheim issued an injunction against HTC for infringing a 100 patent. IPCom immediately enforced the decision. However, some time late the Higher Regional Court in Karlsruhe suspended it until the main hearing concluded.
2009: IPCom sues Deutsche Telekom subsidary T-Mobile as well as Vodafone at Düsseldorf Regional Court. The NPE attacks O2 and a number of Saturn and Media Markt stores.
“The time was simply not yet ripe for NPE lawsuits,” says one of the lawyers involved at the time. “The troll discussion was still very current. Today, the court would probably not be so quick to grant the injunction. The suspension was dramatic for IPCom; a settlement with HTC was a long way off.”
Meanwhile, the Federal Patent Court destroyed a series of mobile phone patents, including the first generation of the 100 family. In response, IPCom successfully registered divisional applications at the European Patent Office, including the famous 100A patent (EP 18 41 268).
At the turn of the decade, IPCom entered a golden age. In 2012, the NPE struck a major blow to market leader Apple. In Mannheim, IPCom sued the tech giant for €1.6 billion in damages. The suit put the small NPE front and centre in the media.
2012: IPCom sues Apple for €1.6bn at Mannheim Regional Court. In the following year Deutsche Telekom settles with IPCom for at least €100m.
According to insiders, the damages IPCom won from Nokia five years earlier were probably also around the €1.6 billion mark. The €100 million that Deutsche Telekom paid to IPCom in 2013 seems rather meagre in comparison. But the surprising settlement with Germany’s largest telecommunications provider is the greatest success in IPCom’s history.
Quite quickly – much too quickly, some experts believe – Deutsche Telekom’s executive board gave in. If sources close to the parties are to be believed, the final sum was much more than €100 million. Some even intimated it reached as much as €400 million. However, the parties have never officially confirmed this.
JUVE Patent research shows IPCom never achieved another success like that against Deutsche Telekom. The NPE’s following years were calmer. In the media, the smartphone wars between Apple, Google and Samsung pushed IPCom to the sidelines. IPCom’s cases dragged on.
As the NPE had to make its way through the various instances of German patent courts, the battle for the 100 patents became a test of patience for Bernhard Frohwitter. Success did not return until 2019.
2018: The UK Court of Appeal upholds the 100A patent and finds it essential to the UMTS standard. A year later the German Federal Patent Court dismisses a nullity suit brought by Apple and HTC against the 100A patent.
Last October, the German Federal Patent Court declared the 100A patent valid (case ID: 6 Ni 34/17). Apple and HTC have already unsuccessfully filed an opposition against the patent with the European Patent Office. The parties then brought a nullity suit in Germany.
It’s still unclear whether Apple and HTC will appeal. The court has been slow to issue the written judgment. This has a knock-on effect for various infringement proceedings, including some at the Federal Court of Justice against MediaSaturn (case ID: 6 U 76/15), which are currently suspended. In any case, IPCom is no longer entitled to an injunction. The NPE can now only claim damages.
With the expiry of the 100 patents in mind, Bernhard Frohwitter and IPCom’s newly-appointed managing director Pio Suh tried their luck in London. Three years ago, they had already filed a lawsuit against Nokia. In 2019 the parties accused Vodafone, HTC, Lenovo and Xiaomi of infringing the 100A patent. Legal actions against Lenovo are also pending in France.
The speed of the London court and its FRAND-friendly reputation were likely no small inducement. Initially, success came quickly. In summer, the Court of Appeal imposed a sales ban on HTC devices in the UK.
2019 The Unwired Planet v. Huawei case is transferred to the UK Supreme Court. UK patent courts are currently hesitant when it comes to SEP suits.
It is not the first time, however, that IPCom lawsuits have been caught in the maelstrom of important developments. In 2015, in the SEP dispute between Unwired Planet and Huawei, High Court judge Colin Birss ordered Huawei to pay a global FRAND licence based on a UK patent. The dispute went up to the Supreme Court in 2019. Since then, the UK patent courts have been very reluctant to deal with FRAND cases.
IPCom has lost the race against time before. In 2015 the European Court of Justice set new FRAND standards with its Huawei vs. ZTE decision, making SEP suits more difficult. Uncertain about the requirements from Luxembourg, the German patent courts heard barely any SEP claims in the following two years. As a result, many IPCom lawsuits are still pending in German courts today.
Those responsible at IPCom must have suspected early on that time might be running out. In 2008, Frohwitter acquired a further portfolio of mobile phone patents from Hitachi. Then, Frohwitter founded the Frohwitter Intellectual Property Agency (Fipa). Fipa is affiliated with IPCom under corporate law via a tight network of subsidiaries.
2019: IPCom sues Vodafone, HTC, Lenovo and Xiaomi in UK for infringing the 100A patent. Shortly after, the Court of Appeal bans HTC from selling devices in the UK.
Fipa successfully sued Samsung, LG, HTC and Sony. Although Sony accepted the Fipa licence quite quickly, the other three opponents put up a fight. However, the Hitachi patents have now also expired. Fipa can therefore only win compensation.
According to JUVE Patent information, IPCom and Fipa together have concluded ten licences with mobile phone companies. This includes probably its most lucrative deal with Deutsche Telekom. But observers speculate that the €100 million are likely just enough to cover the cost of 13 years’ worth of litigation in Germany, France, the UK and US. It is not known what the contracts with the other licensees are worth. IPCom does not provide any financial details.
Insiders wonder whether this is enough to satisfy investors such as Fortress, which once helped to finance the purchase of the Bosch patent. In any case, many observers doubt whether IPCom can be considered a financial success story. The long proceedings have resulted in high legal fees and court costs.
However, IPCom’s managing director Pio Suh points out that the lawsuits were profitable for the NPE overall.
2019 The Enlarged Board of Appeal rules Haar belongs to Munich as part of a jurisdictional dispute in an opposition filed by Vodafone against an IPCom patent.
“Our declared goal was to compensate for the investments made by Robert Bosch in research and development in the mobile communications sector. We have been very successful with the previous licensees,” says Suh. “However, we have learned, particularly in recent years, that the other patent infringers chose to hold out on taking a licence instead of openly negotiating a fair licence with us, therefore banking on the lengthy proceedings before the German courts.”
IPCom could be seen as a victim of the German bifurcation system – similar to the German car industry, but the other way around. The car industry claims the German system is susceptible to misuse by plaintiffs. Critics say is too easy for them to gain an automatic injunction, even if a patent’s validity is unclear.
IPCom managing director Suh does not share this criticism. Rather, he sees plaintiffs such as IPCom as disadvantaged by so-called hold-outs.
Suh says, “A final judgment from the Federal Court of Justice in our lawsuit against various Saturn and Media Markt stores will be issued long after the 100A patent has expired. This means that we no longer have the possibility of getting a binding injunction.”
He adds, “The court system, in its current form, offers defendants and courts too many tactical possibilities to delay final judgments in order to avoid issuing a decision on an injunction.”
However, according to observers it was the reservations of lawyers and judges against NPEs that hindered IPCom after 2007. They claim that Bernhard Frohwitter and IPCom also made tactical mistakes. “Frohwitter wanted great success quickly and demanded too much money from Nokia,” says an insider. That would have made IPCom seem greedy. “Maybe that’s why the NPE did not get an injunction against HTC.”
But observers also believe that IPCom could have concluded an agreement with Nokia on similar terms to those with Deutsche Telekom. This would have increased the pressure on other defendants to accept an IPCom licence early on.
IPCom has long since shed its dubious reputation as a patent troll. Observers agree that IPCom has also done pioneering work for subsequent NPE lawsuits.
One insider says, “Even though the 100A patent has now expired, IPCom still stands to win millions because it’s entitled to compensation dating back ten years.” That is, provided the courts find the patents were infringed.
The goal now is to get compensation from the remaining opponents such as Apple, HTC, Vodafone, MediaSaturn, Lenovo and Xiaomi, says Suh.
2020 On 15 February IPCom’s famous patent 100A expires.
“We also have other patents in our portfolio that we can enforce in court,” says Suh. “We owe this to our current licensees, who have paid or are still paying fair royalties to IPCom based on the principle of equal treatment.” The NPE will most likely launch further campaigns, focusing more on the UK, China and the US.
Anyone who knows Bernhard Frohwitter knows that he does not give up easily. Observers and old colleagues are sure that IPCom has been a worthwhile venture for the charismatic lawyer from Munich.
He is co-owner of IPCom and his law firm is involved in all proceedings and coordinates the litigation throughout Europe. Moreover, IPCom has also provided numerous other IP lawyers with a great deal of work in countless lawsuits throughout Europe over the last 13 years.