Showing posts with label France. Show all posts
Showing posts with label France. Show all posts

Thursday, September 14, 2023

French publishers' U.S. antitrust class action against Apple is largely dismissed, making it economically irrelevant short of successful appeal: Northern District of California

Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California just denied in part--and in economic terms, almost completely--a U.S. antitrust class action brought on behalf of leading French publishers such as Le Figaro and L'Équipe (about that one, see my personal note toward the end).

Here's the decision, which I'll explain briefly:

https://www.documentcloud.org/documents/23977262-23-09-13-order-on-motion-to-dismiss-le-figaro-et-al-v-apple: Société du Figaro et al. v. Apple (case no. 4:22-cv-4437-YGR, N.D. Cal.): Order granting part and denying in part APple's motion to dismiss with partial leave to amend

The court gives the French publishers three weeks (until October 4) to amend their complaint, but they can only amend limited parts that won't change anything about the fact that there's no more serious money left for them to be made even if they won. But in order to turn this into something that has significant economic potential, they need a successful appeal.

In this first reaction, I'm not going to take a position on whether I agree with Judge Gonzalez Rogers. I disagreed with key parts of her Epic Games v. Apple ruling (which is now going to be appealed to the Supreme Court), but her dismissal of Pistacchio v. Apple, a class action over Apple Arcade, was well-reasoned (at least the market definition part).

The introductory part of the decision indicates between the lines a bit of an annoyance with the fact that certain class-action lawyers brought this case shortly after setting a U.S. developer class action against Apple over largely the same issues. This here looked like a double-dipping (as far as the lawyers--not the parties--are concerned). But that does not, in and of itself, render the entire case meritless.

The economically biggest part is that Judge YGR does not allow the French publishers to sue in U.S. court for damages relating to foreign sales. Those publishers obviously have some U.S. revenues, as there are French expats and other people who read one or more of those publications. But obviously most of the money they make is generated in France, followed by other French-speaking parts of the world (such as Québec).

If they go ahead now and take this to trial, the maximum damages award they could ever realistically hope for would still not offset litigation costs. A victory would be somewhat symbolic. The only value they could get value out of a win related to their U.S. revenues would be that this might persuade a French court to rule against Apple in a similar way. But is that going to be worth it? I doubt it.

Earlier this year I highlighted the problem that Apple doesn'T want to be liable in any jurisdiction. Epic Games experienced the same. If app makers sue outside the U.S., Apple says only U.S. courts have jurisdiction, and in the U.S., Apple points to the Foreign Trade Antitrust Improvements Act (FTAIA), which is a law that was enacted to prevent extraterritorial overreach by U.S. courts.

Based on this U.S. decision, the French publishers and others will find it easier to convince foreign courts that they have jurisdiction over App Store abuse claims relating to those non-U.S. markets, despite a choice-of-jurisdiction clause in the contract Apple imposes on app developers. So there may be something positive here.

Another potential strategy for the French publishers would be to bring in additional plaintiffs on the occasion of the amendment, which could be publishers with very substantial U.S. revenues.

When I first commented on the French publishers' U.S. class action, I found one part of the complaint particularly intriguing: they raised the issue of App Tracking Transparency (ATT), a money and power grab by Apple under the pretext of privacy. Judge Gonzalez Rogers allows the plaintiffs to amend their ATT claim if they bring an amended complaint. That may now be another reason to widen the class definition and include publishers with substantial U.S. sales (an amendmend that Apple would presumably oppose, but the plaintiffs could try to get it approved by the court). For publishers, ATT is a huge problem. So maybe the focus will change a little bit. However, the alternative would be to drop this one and bring a new one with U.S. publishers (or UK and other publishers with substantial U.S. revenues) on board from the start, and with a focus on ATT.

I guess something will happen. I don't expect this complaint to just be dropped at this stage without an appeal, amendment, or a new complaint with an ATT focus (or even a combination of two or more measures of that kind).

Personal note: As I mentioned L'Équipe: while I currently have no paying subscription to any media outlet, simply because there are too many around the globe that are relevant to me at different times, L'Équipe is actually one of two publications I plan to subscribe to for the purpose of brushing up my French. I actually learned most of my Spanish from sports newspapers AS, Marca, and Sport. If I subscribed to it through their Android apps, Google would tax my subscription fees...

Sunday, January 22, 2023

Apple argues foreign app developers cannot bring antitrust lawsuits ANYWHERE on Earth: developer agreement requires suing in California, but FTAIA allegedly immunizes Apple

In the previous post I acknowledged that Apple has a reasonable basis to challenge the UK Competition & Market Authority's market investigation reference over mobile browser engines and cloud gaming. But in some other respects, Apple is the Evil Empire, extremely unreasonable, and acts in highly abusive ways.

A class-action lawsuit brought by French publishers over the way Apple's App Store terms and policies affect them puts Apple's utter unreasonableness on full display. Apple unilaterally imposes a forum-selection clause on app developers: Northern District of California. But when foreign developers actually sue there, as do those French media companies, Apple argues that the Foreign Trade Antitrust Improvements Act (FTAIA) bars such claims.

As Epic Games CEO Tim Sweeney once mentioned in a tweet I haven't been able to find again (search is an area in which Twitter has huge room for improvement, and using Google to search Twitter is also suboptimal), Apple's position taking in different jurisdictions often amount to denying liability under the antitrust laws of any jurisdiction. Epic filed lawsuits in the U.S. (where a Ninth Circuit panel is now working on its decision), UK, and Australia, and Apple then moved to dismiss or stay the foreign cases in light of the California action, but in California argued that any remedies could not apply to foreign markets.

If one thinks it through, Apple's positions across jurisdictions are just another expression of the neofeudalist attitude of an arrogant and abusive organization that knows no shame: the tyrannical dictator forces developers to sign agreements that bar them from suing anywhere other than in the Northern District of California, and then tells foreign developers serving foreign target markets that they have no rights under the antitrust laws of the United States "because FTAIA".

In the end, only entities who are not bound by Apple's unilaterally-imposed developer agreement would be able to bring antitrust cases in foreign jurisdictions: competition authorities and, maybe, consumers.

Heads I win, tails you lose. Or: What's mine is mine, what's yours is mine, too. That behavior, in and of itself, constitutes an abuse.

The case (Société du Figaro et al. v. Apple) was already filed in August (in the Northern District of California), Apple responded with a motion to dismiss in October, and as I suggested at the time, the complaint was subsequently amended:

Société du Figaro et al. v. Apple (case no. 4:22-cv-4437-YGR, N.D. Cal.), December 2, 2022: Plaintiffs' First Amended Class Action Complaint for Violations of the Sherman Act, California Unfair Competition Law, and California Cartwright Act

On Friday, Apple renewed its motion to dismiss:

Société du Figaro et al. v. Apple (case no. 4:22-cv-4437-YGR, N.D. Cal.), January 20, 2023: Defendant Apple Inc.'s Motion to Dismiss Plaintiffs' Amended Complaint

Apple describes "plaintiffs' purely foreign claims" as "[t]ransactions between French developers and foreign consumers, made on foreign App store storefronts, in foreign currency, and through a foreign (non-party) Apple entity" as "foreign nonimport commerce, not subject to any FTAIA exception."

Apple says "short shrift" should be given to the French publishers' argument involving the developer agreement's U.S. choice-of-law provision. Apple points to a Second Circuit decision (Lotes Co. v. Hon Hai Precision Industry, the latter being Foxconn, Apple's largest contract manufacturer) where the holding was that a party to such an agreement "remain[s] free to argue that, under the FTAIA, the Sherman Act does not apply to or regulate the conduct at issue in this case."

The 2nd Cir. decision is not binding in the 9th Cir., and therefore not on Judge Yvonne Gonzalez Rogers. One can reasonably disagree with it. But this is just one of several arguments made by the French publishers as to why the FTAIA does not bar their U.S. federal lawsuit with respect to foreign sales.

Those companies also offer their apps to U.S. consumers, but presumably their U.S. revenues are minuscule compared to the ones in France and other French-speaking countries and regions. So the FTAIA would not dispose of the entire case, but if Apple prevailed on its FTAIA argument, it would render the litigation commercially insignificant.

I plan to comment on the other elements of Apple's motion to dismiss as the briefing process unfolds. Apple really doesn't want to deal with litigation over its pernicious App Tracking Transparency (ATT) framework, and argues that the French publishers still don't get market definition right and, in any event, lack standing to challenge ATT. As for the market definition underlying the publishers' App Store claims, Apple expressly reserves the right to oppose their single-brand market definition, but does not raise that question at the motion-to-dimiss stage. What I think may be the focal point of the discussion at the motion-to-dismiss hearing is Apple's argument that the settlement in the Cameron v. Apple developer class-action litigation resolved the key issues, and now the same law firm (Hagens Berman) is suing Apple again, but with different plaintiffs (and now even challenging the reduced 15% app tax).

I'm one of those developers who consider the Cameron settlement's terms extremely unsatisfactory. The French publishers' case has more potential because that's a group of reasonably large and sophisticated plaintiffs who are not going to settle for a Cameron-style set of terms.

By the way, one developer wrote a letter to Judge YGR earlier this month, complaining that even though he's clearly a member of the class and is entitled to "a substantial sum" per the outcome of the Cameron litigation, he was not contacted about the settlement:

Cameron et al. v. Apple Inc. (case no. 4:19-cv-3074-YGR, N.D. Cal.), January 6, 2023: letter from Lionheart Software LLC

It's unknown whether this was just an oversight or clerical error affecting a single developer or whether there's a more fundamental problem.

Thursday, January 5, 2023

French fine over App Store privacy violations undermines credibility of one of Apple's two favorite pretexts for monopoly abuse, pours fuel on fire of German antitrust authority's ATT investigation

Yesterday it became known that on December 29 a panel of the Commission nationale de l'informatique et des libertés (CNIL; National Commission on Informatics and Liberty)--which is tasked with the enforcement of the EU's General Data Privacy Regulation in France--"imposed an administrative fine of 8 million euros" on an Ireland-based Apple subsidiary for failing to obtain the consent of French iPhone users (specifically, users of version 14.6 of the operating system) "before depositing and/or writing identifiers used for advertising purposes on their terminals."

The same CNIL actually played a very regrettable role--which calls into question whether the ones running that agency really understand how mobile ecosystems work--when it effectively prevented French antitrust watchdog Autorité de la concurrence (Adcl; Competition Authority) from ordering interim measures against Apple's introduction of App Tracking Transparency (ATT). The economic fallout from ATT is disastrous, and a narrow-minded government agency that obstructs through government-internal lobbying--whether it's for dogmatic reasons, institutional influence, or someone's ego--the enforcement of competition law against such a massive abuse fails its country's companies and consumers alike.

I actually remember the CNIL's rapporteur on this Apple case, Professor François Pellegrini (now a vice president of the agency), from the days of the EU legislative process on the patentability of computer-implemented inventions (aka "software patents directive"). Back in the day we fundamentally disagreed on strategy, and we haven't been in contact in well over a decade. I don't know whether he was in any way responsible for the CNIL's misguided opposition to antitrust enforcement against ATT.

Presumably, the French digital economy--represented by the France Digitale industry association--was no less disappointed in the CNIL's irresponsible support of Apple's abusive scheme than I was. Regardless, France Digitale brought a complaint with the CNIL over Apple's self-preferencing: they just asked that Apple be held to the GDPR standard, and the CNIL found that Apple was out of compliance at least with respect to iOS 14.6.

Apple made a jurisdictional argument according to which only Ireland's data protection agency would be able to enforce the GDPR against Apple, and EU politicians have criticized Ireland for treating its largest tax payers and key foreign investors with kid gloves. Apple portrayed the way in which end users' actions on the App Store (viewing, downloading, and purchasing apps) were tracked as just a natural extension of an authentication method that would be necessary at any rate.

The €8M amount is not even chump change for Apple, but there are reasons for which Apple--in a statement first published by San Francisco-based Financial Times correspondent Patrick McGee--declared itself "disappointed with this decision" and vowed to appeal.

I've read the French decision (PDF) in full. In para. 92, the order notes that Professor Pellegrini established three criteria for the conformity of the mechanism by which iOS obtains user consent to targeted advertising based on a set of IDs (device ID, device pack ID etc.):

  1. The relevant window must be in French.

  2. Apple can't just broadly claim that it does not track user activities.

  3. No identifier may be used for (targeted) advertising purposes prior to obtaining, through a valid mechanism, the user's consent to such use of their data.

Apple then said (according to para. 93) that it had meanwhile translated the relevant on-screen messages to French, and that no identifier would be stored on the end-user device or read for advertising purposes ahead of the user's consent. And in March 2023 (at the latest), Apple said it would also change the text from "Apple does not track your activities" to "Apple does not track your activities in third-party apps and on third-party websites."

Whether those changes will satisfactorily alleviate all concerns is unclear at this stage, but let's assume for now that the €8M fine is indeed just a penalty for past conduct and Apple does not have to make changes beyond what it said would be the state of affairs in March 2023 (if not sooner). In that case, Apple's Search Ads business would probably thrive in France just like before. ATT kneecapped all advertising networks on iOS. End users are mostly going to grant Apple the requested consent unless Apple would have to display the same "alarmist" warning that end users see when a third-party app requests such consent. Instead, Apple focuses on user benefits (more relevant ads) when its own business is concerned, and emphasizes fear, uncertainty, and doubt (FUD) when it's about third-party apps.

So, if the fine doesn't hurt, and if the CNIL itself is not in a position to fully address Apple's self-preferencing, why does the decision (provided that Apple's appeal fails) still matter?

  • The most important effect would be if the CNIL stopped supporting Apple with respect to ATT. Maybe the CNIL has started to realize that it made a mistake last time, such as when it became known that Apple was bullying Meta/Facebook and, when it didn't get the revenue share it wanted, put ATT in place. If the CNIL could at least stay neutral with respect to antitrust enforcement against ATT, that would be great, but I don't know whether that's the case. Hopefully Apple has lost that governmental ally.

  • Where I have no doubt about a positive effect is the investigation of the German Bundeskartellamt (Federal Cartel Office) into self-preferencing with respect to ATT, but also more generally the anticompetitive effects of that money and power grab (see also the FCO's English-language press release). So far the Federal Cartel Office has been a dog that barks but doesn't really bite Big Tech (a topic I'll address in another post when I find the time for it). Anyway, the fact that a French government agency has already found Apple to engage in self-preferencing that apart from antitrust considerations even violates the GDPR is a silver bullet for political and psychological reasons.

  • There is a French App Store case in which the Paris Commercial Court rendered a decision last month, and which is about the app tax as opposed to ATT. Apple's two key pretexts for its App Store monopoly abuse are privacy and security. Apple's credibility on privacy has taken a hit now.

  • Last year, Apple CEO Tim Cook got a lukewarm reception at a gathering of privacy activists. Any decision that calls into question Apple's actual commitment to privacy will further reduce the willingness of that crowd to support Apple's commercial interests in continued monopoly abuse. Of course, Apple can still buy goodwill from privacy as well as security "experts" and "activists"--and Apple engages in astroturfing anyway, no matter the context.

  • In all App Store cases worldwide, the privacy pretext plays a role, and any credible decision that holds Apple in violation of data privacy laws, especially when there is a close connection with tracking user activities on the App Store, is somewhat relevant. However, Epic Games v. Apple is now at the appellate stage, and Epic rightly argued at the appellate hearing that only procompetitive justifications count (which was the key issue in NCAA v. Alston). So the question of how much substance there is to Apple's privacy pretext wouldn't even matter in that scenario. And at the hearing, the key judge--Ninth Circuit Judge Milan D. Smith--very much emphasized market definition, where the concern is a potential failure of proof. I continue to hope that Judge Smith will arrive at the conclusion that the district judge made enough mistakes in the market definition context to warrant a remand, and in that case I hope he will get the support of at least one other member of the panel. In a retrial, privacy could again become a topic of discussion unless the appeals court makes it clear that only procompetitive justifications matter.

  • Ultimately, I don't think the ATT problem can be solved through the enforcement of privacy rules, and even if self-preferencing came to an end, Apple would benefit from it (as app makers would still have to rely on non-ad revenues, some of which Apple can tax). The only solution is the availability of third-party app stores that enable developers to reach iOS users without having to submit their apps to Apple's app review. Apple could then try to use its control over iOS in other ways, but there are various technical ways in which users and devices can be identified even if Apple tries to complicate it (even fingerprints).

All in all, I think the CNIL decision (again, provided that it isn't overturned) has the potential to come back to haunt Apple in a number of contexts--and around the globe. And let me quote the assessment of the CNIL decision by French antitrust lawyer (and Adlc adviser) Fayrouze Masmi-Dazi, who advises various clients with respect to Apple's App Store abuse:

"It is a very important decision and another step towards sanctioning illicit practices - the Paris commercial court also sanctioned Apple for the significant imbalance of several contractual provisions of its developer[] license agreement."

Tuesday, December 20, 2022

Paris Commercial Court declined to find fault in Apple's 30% app tax, referred to EU Commission enforcement of antitrust law and DMA: French government should appeal certain parts

Yesterday it was reported by Reuters and subsequently by other media that the Tribunal de Commerce de Paris (Paris Commercial Court) imposed a fine of approximately 1 million euros (to be precise: €1,090,909) on Apple over some of its App Store terms.

Most of the reporting focused on the fact that some terms--such as Apple's absolute right to reject apps submitted by developers--were deemed unfair ("déséquilibre", i.e., an "imbalance" in trading conditions resulting from one party's superior bargaining power). As an app developer who brought his own complaints over Apple's app review tyranny, I welcome any decision that declares Apple's arbitrary censorship unlawful. However, that's just part of the story. Apple defended itself against multiple claims; otherwise the fine would have been roughly twice as high.

I have meanwhile obtained and perused a copy of the entire 30-part judgment by the Paris Commercial Court's 13th Chamber (trade judges Alain Wormser (presiding judge), Gérard Palti, and Beatriz Rego Fernandez). There are other counts on which Apple prevailed, and which have not received enough attention. As a commentator on these cases, I can't just ignore the unfavorable parts of a decision.

Apple may appeal the million-euro fine, but the French Minister of Economic Affairs and Finance, Bruno Le Maire, may equally--and hopefully will--appeal any unfavorable parts of the ruling to the Cour d'appel de Paris (Paris Court of Appeal).

My overall impression of the decision is that the three-judge panel was simply not interested in tackling some of the more difficult questions, such as the fairness of Apple's requirement that all in-app purchases use Apple's IAP system and the app tax of 30% or more for developers of a certain size (and 15% or more for small ones). With respect to those claims, the court

  • finds that the percentage and the collection method were not facially outrageous, claiming without any particular explanation that smaller developers didn't care anyway and larger ones had other ways of reaching customers,

  • mindlessly lists Apple's spurious arguments such as that Progressive Web Apps are an alternative to native apps (though it's simply a market reality that they are not), many apps are free and Apple does not tax the sale of physical goods,

  • points to the European Commission's responsibility to enforce EU antitrust law against mobile app stores (which is ridiculous given actions that are pending in EU member states such as Germany and the Netherlands), and

  • refers to the EU's Digital Markets Act (DMA), which will require Apple to allow third-party app stores.

There are unmistakable signs that the court wanted to sidestep certain questions. The overall analysis in the judgment (most of which is just a summary of the procedural history and the parties' arguments) is skin-deep at best. Referring to the European Commission's enforcement of EU antitrust rules and to the future effects of the DMA (which won't really change anything in the marketplace until 2024 at the earliest) is tantamount to a dereliction of duty.

I wish to underscore that the ruling does not "bless" the 30% app tax. It merely finds that "le déséquilibre significatif n'est pas suffisamment démontré par le Ministre" ("the Minister has not sufficiently shown the allegedly significative imbalance"). And the court specifically declined to analyze Apple's challenged conduct under antitrust law.

The rule changes that the Paris Commercial Court expects Apple to make relate to app review and to appeals of app rejections, but also to Apple's unilateral right to change the terms of the Developer Program License Agreement (DPLA) anytime. The Paris Commercial Court took into account that there are more than 10 million iPhones in use in France and that developers need a way to reach those users. Apparently Google has already been required to make some changes in that regard.

It's remarkable that the case is actually about five years old, and it took the court so long to hand down a rather thin ruling that decided only some easy parts against Apple. The judgment reflects that Apple engaged in stalling. For example, the French government called Apple's motion for a preliminary reference to the European Court of Justice (ECJ) "abusive and dilatory" as it spans 34 pages, raises 16 partly duplicative questions for review, is highly repetitive, and that the motion's sole purpose was to waste the Court's and the French government's time ("APPLE a, de manière abusive et dilatoire, consacré à ces seize questions préjudicielles pas moins de 34 pages de ses écritures, qui comportent moult doublons et répétitions, dans le seul objectif de faire perdre leur temps au tribunal et au Ministre"). Apple's motion for a preliminary reference was denied, but may indeed have delayed the proceedings.

The court also rejected a procedural motion by which the France Digitale industry association sought to support the French government. France Digitale was not allowed to intervene. While that is unfortunate, the court may have had good reasons. Based on what I found out, the representative of France Digitale lacked the necessary power of attorney to engage in litigation, and the petition to intervene was brought at a relatively late stage of proceeding.

Before the Paris Court of Appeal, not only France Digitale could try to file a timely petition to intervene, but so could other parties. It would be great if there could be broadbased support for the French government, possibly also by organizations like the Coalition for App Fairness (which was founded only in 2020, too late for the case before the lower court).

Regrettably, the Paris Commercial Court did grant ACT | The App(le) Association's petition to intervene. ACT receives most of its funding from Apple, and is effectively controlled by Apple, as Bloomberg reported in September. But that masterpiece of investigative journalism was too late for the proceedings in the lower court. The appeals court might take note of those revelations, however.

The French government told the Paris Commercial Court that ACT's intervention was "opaque" ("imprégnée d'opacité") and that ACT and Apple are linked ("ACT et APPLE sont liées"). According to the French ministry, ACT's intervention was "purely opportunistic, dilatory, and completely useless" ("l'intervention volontaire de l'association de droit belge ACT est purement opportuniste, dilatoire et parfaitemente inutile"). Maybe those argumnents will convince the appeals court, especially with ACT itself having admitted to Bloomberg that the majority of its funding comes from Apple.

This litigation by the French government against Apple has been described as part of a trade war that was started by then-President Trump. However, it appears that the case (and especially the investigation that resulted in it) predated the imposition of punitive tariffs on steel and aluminum imports by the Trump Administration. The judgment notes that the investigation started in 2015, which was during the Obama presidency ("La DGCCRF a ouvert en 2015 une enquête relative aux relations commerciales entre APPLE et les développeurs d'application sur la plateforme App Store").

Some French app makers are suing Apple in the Northern District of California. They have meanwhile amended their complaint, and I'll talk about the differences between the amended complaint and the original one on another occasion. The U.S. class action by French publishers is the result of a cooperation between French antitrust attorney Fayrouze Masmi-Dazi and U.S. class action firm Hagens Berman.

Saturday, October 29, 2022

Banks amend Apple Pay antitrust complaint with elaborate single-brand market definition and French publishers should consider amending their U.S. complaint over App Tracking Transparency

This post discusses two different App Store antitrust class actions pending in the Northern District of California (before different judges) and Apple's related motions to dismiss. I'll start with the Affinity v. Apple case over Apple Pay and access to the NFC chip, but if you wish to skip right to the French publishers' U.S. antitrust action, just click here.

Affinity Credit Union v. Apple: amended complaint contains detailed single-brand market pleadings; Apple withdraws motion to dismiss for now

In mid-July, the class action law firm of Hagens Berman filed a complaint against Apple on behalf of credit card issuers. In October, Apple moved for dismissal, arguing that Apple Pay competes with plenty of other payment methods. A near-simultaneous request by Apple to stay discovery was initially opposed by the class action lawyers, and that opposition brief gave us an idea as to how they would seek to defend their complaint. However, shortly thereafter they announced their intent to amend the complaint, which was possible until yesterday (Friday). And indeed they filed the amended complaint on that day:

Affinity Credit Union, GreenState Credit Union, and Consumers Co-Op Credit Union v. Apple: Amended Class Action Complaint for Violation of the Sherman Act and Clayton Act

The key difference is that the amended complaint pleads facts and contains legal argument related to the banks' single-brand market definition of Tap-and-Pay iOS Mobile Wallets. Market definition is also the part of Epic Games v. Apple that I'm most interested in. It contains of a foremarket and a dissociated aftermarket (Kodak/Newcal precedent). Epic clearly has better arguments than Apple on both.

The original Affinity complaint did not mention the word "foremarket" at all, and "aftermarket" only once (and only in parentheses). The amended one mentions "foremarket" (though they often use the plural--"foremarkets"--which I struggle with) and "aftermarket" several dozen times.

Shortly after the amended complaint was filed, Apple withdrew its motion to dismiss for the time being. I expect them to file a renewed one, but the amended complaint is definitely more defensible.

The Apple Pay case, which is very much about Apple restricting other payment app's access to the iPhone's NFC chip, has a lot of merit. Some of the legal hurdles are higher, however, than the ones Epic is facing (and last year's district court judgment in Epic's case shows it's the opposite of a cakewalk).

Société du Figaro, SAS et al. v. Apple: Apple moves for dismissal

On August 1, the same class action law firm (Hagens Berman)--in cooperation with French antitrust lawyer Fayrouze Masmi-Dazi--filed a complaint against Apple on behalf of major French publishers such as the company that publishes Le Figaro, probably the most famous French newspaper. What I found particularly interesting about it is now also a key target of Apple's motion to dismiss: the complaint seeks an injunction against, inter alia, Apple's App Tracking Transparency (ATT) rules. The fallout from ATT even raises macroeconomic concerns.

Here's Apple's motion to dismiss:

Defendant Apple Inc.'s Motion to Dismiss

It's a motion of the "throw in the kitchen sink" or "leave no stone unturned" kind. Parts of it are unpersuasive. For instance, Apple argues that there is no case over communications restrictions because Apple allows developers (under a recent class action settlement involving the same lawyers) to "send communications outside of the app to their user base about purchasing methods other than in-app purchase." But there still are restrictions for what developers can tell users within an app.

Apple tries to portray this case as--without using that originally French word--encore of the developer class action that the same firm settled with Apple. I do believe that the cases are distinguishable, however, and in particular, ATT was not at issue in that earlier case.

The part that argues the case should be dismissed under the Foreign Trade Antitrust Improvements Act (FTAIA) was expected. It is, at first sight, a bit counterintuitive that French publishers would sue in California. The complaint already anticipated that challenge and addresses any FTAIA questions.

The part that I am most interested in is, as I mentioned before, ATT. Apple argues that the plaintiffs don't have standing, and that is a hurdle I believe the class action lawyers can overcome, but some other points made by Apple are at least somewhat valid. The complaint could state the alleged harm more clearly, and Apple is right that there should be "the definition and analysis of [ATT's] alleged effects in an advertising market, but [the plaintiffs] allege no relevant advertising market."

The ATT part is really important, and it would be wonderful if the class action lawyers could amend their complaint accordingly (as they did in the Apple Pay/NFC case I discussed further above).

Wednesday, August 3, 2022

FINALLY: U.S. injunction sought against Apple's App Tracking Transparency (ATT) scheme to harm others' ad business, and against app tax: antitrust complaint by large French publishers

This here is a FOSS Patents exclusive because no one else appears to have noticed the following:

Well-hidden in a new 90-page U.S. antitrust complaint against Apple (even 251 pages with the exhibits (PDF)), filed on Monday in the Northern District of California, is a challenge to one of the most devious and ruthless schemes Cupertino has ever devised: App Tracking Transparency (ATT).

This is precisely what Meta (Facebook) would love to do, but it hasn't gone to court (at least not yet) and is, instead, contenting itself with drawing public attention to the issue.

Under the pretext of "privacy," App Tracking scares iPhone and iPad users away from granting even the most innocuous apps permission to share with advertising networks non-sensitive information that has nothing to do with spying on users, but is simply necessary in order to avoid that the same user will see irrelevant ads--ad even the same irrelevant ads over and over again. As a result, ATT

The issue of Search Ads being an extension of Apple's app tax came up, but didn't take center stage, in last year's Epic Games v. Apple trial. Judge Yvonne Gonzalez Rogers, to whom the new complaint by those French publishers is likely to be assigned, made terrible mistakes. Yesterday I published a 33-page PDF that details 271 (yes, two-hundred seventy-one!) typos, punctuation errors, inconsistencies, and similar mistakes, which is embarrassing for the (otherwise world-class!) United States District Court for the Northern District of California. And I've previously shown that in the single most critical part of the decision (market definition), Judge YGR was wrong on the law, wrong on the economics, and wrong on the technology. But she did get some things right (as I also clarified in my previous post), and this includes the finding that Search Ads aren't necessarily a blessing for app developers:

Footnote 498:

"[...] Developers must pay for these search ads and competitors may use them to artificially drive traffic, which decreases overall app discoverability. [...] Thus, the search ads are, at best, a mixed blessing for poor overall matchmaking."

At first sight, Société du Figaro et al. v. Apple is just an extension of other U.S. class actions that app developers have previously brought against Apple in the Northern District of California over the 30% app tax. One might be led to think that the only difference is that previous cases--which merely led to a sham settlement the only major beneficiaries of which were Apple and both sides' lawyers--pursued claims on behalf of U.S.-based app developers, and the Figaro case is now seeking redress on behalf of French legal entities under U.S. federal and California state law because the App Store is a global operation.

The headline of the press release with which the Hagens Berman firm announced the new complaint mentions only "Apple's App Store Fees." The firm's name partner Steve Berman then says:

"Our firm is happy to see iOS developers from other countries seeking the same justice we were able to achieve for U.S. developers. We believe they too have been wrongfully subjected to the stifling policies of Apple’s App Store, and we intend to hold Apple to the law." (emphasis added)

The first-named plaintiff's famous newspaper Le Figaro published an article yesterday that says the damages and interests sought from Apple could exceed US$1 billion. And this group of plaintiffs is not going to be as easily persuaded to agree to a sham settlement: they aren't little guys, but powerful and deep-pocketed publishers.

The emphasis remains on the infamous app tax where Hagens Berman's press release describes the issues raised in the complaint: "France-based iOS developers [...] were subjected to Apple’s high commissions, fees and other policies." The term I just emphasized--"other policies"--does, however, include ATT. The prayers for relief include a request for "injunctive relief requiring that Apple cease the abusive, unlawful, and anticompetitive practices described [t]herein." And Apple's ATT program is addressed by paragraphs 187 et seq.:

b. Apple’s ATT program

187. Another situation that Apple has devised and then exploited for yet more profits is that involving recent implementation of its App Tracking Transparency (ATT) program. Ostensibly, this program is good for end-user consumers because it gives them more choice as to third-party tracking of personal data.

188. However, large and small iOS developers claim that it is implemented in such a way that they are unfairly robbed of their ability to monetize their work by fair use of consumer data for targeted advertising. These developers, which include plaintiffs Individual Developers, as well as associational plaintiff le GESTE, allege that Apple’s ATT program will mean less free-to-get apps; developers will forgo creating them, or will begin to charge fees for heretofore free-to-get apps, because they will be unable to make a living by means of advertising.

189. Moreover, they claim that Apple is advantaging itself by the way in which it presents consumers with the option to opt-out of certain third-party tracking, versus other means that would more fairly present the choice.179 They also claim that Apple advantages itself by offering a Personalized Ads architecture for its own apps that is not parallel to the way it presents the ATT opt-out choice; instead, as the U.K.’s CMA has written, it “employs a different choice architecture compared to the ATT prompt.”180 Thus, Apple, which already holds stores of first-party data, and whose advertising services can “use the Apple Ads Attribution API while third parties must use SKAdNetwork [which may be more limited and immature],” is and will be further advantaged vis-à-vis other entities that participate in digital marketing or product development. And so will other large gatekeepers such as Google, which itself holds enormous stores of first-party data gathered by way of its many properties.

190. By monopolizing the relevant market, Apple affords iOS developers who do not wish to participate in ATT, especially as implemented, nowhere to go. Again, Apple presents ATT as a take-it-or-leave-it proposition, if iOS developers wish to sell their iOS apps and in-app products. If there were competition, iOS developers such as Individual Plaintiffs could choose other distribution avenues, or they could more effectively press Apple to change some of its policies and practices around ATT. As to the latter—changing policies and practices—Apple might be persuaded to change the ways in which it presents the opt-out screen to consumers. Or it might be persuaded to allow developers to tell end-users in a fair manner, when the ATT opt-out screen is presented, that if they opt-in, they will receive remuneration or free or discounted digital products, for example. But instead, affected iOS developers are offered no real choices. On the other hand, in typical Apple fashion, it benefits from ATT monetarily. Apple’s App Store Search Ads, which iOS developers that can afford them buy in order to help to alleviate the discoverability issue, are reportedly up in volume sold and more expensive following the introduction of ATT. Because they are auction-based, the more developers that bid on them, the higher the prices go. And in fact there are more bidders, as iOS developers shift more of their own app-related advertising dollars to Apple, given ATT’s negative effect on the quality of certain other places where they might have advertised previously. Once again, iOS developers are squeezed, as Apple’s App Store-related profits increase yet again. Apple harms iOS developers—consumers of its iOS app-distribution and IAP services—by way of supracompetitive pricing and retail pricing mandates.

Given that the app developers here are actually publishers, ATT and its impact on advertising revenues as well as user acquisition costs is going to play a major role in this litigation. And so are subscriptions as opposed to an exclusive focus on one-off in-app purchasing (IAP) transactions.

There are three original plaintiff entities:

  • Société du Figaro, SAS (famous for the namesake newspaper),

  • L'Équipe 24/24 SAS, publisher of the namesake sports paper and related streaming app, and

  • le GESTE, an industry association of French publishers whose membership includes 140 online publishers, two of which are the previously named plaiintiffs. Le GESTE brings the class action on behalf of all of its members. But the class is open to opt-in by other French entities.

The issues in the case are obviously not limited to French publishers. There's no reason why, say, British or German publishers couldn't pursue the same types of claims. And with respect to in-app subscriptions and App Tracking, a victory by those French plaintiffs would immediately lead to additional cases being brought by U.S. plaintiffs. This is a scalable business for Hagens Berman and other firms active in that space, but that's OK as long as their next cases--unlike the case involving small U.S. app developers--truly bring about change.

Consumer class actions against Apple are pending in the United States, Australia, the United Kingdom, the Netherlands (where one of the two class actions invites all EU-based consumers to join, not just Dutch ones), and--most recently--Portugal. In my post on the Portuguese action you can find a structured list of those consumer cases.

But there's also a growing diversity of corporate class actions. The same firm that is representing the French publishers brought a case against Apple--over Apple Pay and restrictions on the access to the iPhone's NFC functionality--on behalf of credit card issuers last month.

Hagens Berman (in the U.S.) and Hausfeld (in a variety of jurisdictions) are presently the two most active firms pursuing class actions against Apple (with parallel cases often targeting Google, but Apple's conduct raises far more issues).

It's worth noting that there also is an effort underway in France. The equivalent of a preliminary injunction against ATT was denied last year, but that case is still ongoing. In the French case, various publishers are being represented by Fayrouze Masmi-Dazi, who also cooperates with Hagens Berman on the case in the Northern District of California.

Tuesday, October 19, 2021

Nokia tries to drown OPPO in patent infringement lawsuits, makes Germany (15 patents-in-suit and anti-antisuit injunction) center of gravity of multijurisdictional enforcement campaign

Nokia v. OPPO is presently the most massive 5G-centric patent dispute out there. In July, Nokia sued the Chinese smartphone maker--one of the largest in the world--in a multiplicity of European and Asian jurisdictions, and has made additional filings since. OPPO, which holds many 5G patents itself, has started to bring counteractions against Nokia, four of which I have found out about in Germany. The stakes are even higher in Ericsson v. Apple, but those two parties still have a license agreement in place (while the one between Nokia and OPPO expired at the end of June), which is why there aren't any Ericsson v. Apple infringement cases yet.

There is consensus in the wireless industry that Apple underpays. In a UK litigation it turned out that Apple's cumulative patent royalty costs are--and this is just an order of magnitude--at a level of about 1% of its sales. If major standard-essential patent (SEP) holders like Nokia and Ericsson can't seize the 5G opportunity to get Apple to pay a lot more this time around, it won't ever happen--or at least not for approximately another decade.

Compared to major smartphone patent disputes, Nokia v. Daimler (10 patents-in-suit) was just a B movie, though it had an effect of transcendental importance as it proved that the automotive industry can and will take car-level patent licenses in the end. OPPO is no Daimler, though. First, while car makers generally exhibit behavior that exposes them to ever more credible accusations of being unwilling licensees, OPPO does not have any history of infringement: it merely appears to disagree with some patent holders on royalty rates, but there are no signs of hold-out. Second, OPPO alone is a more sophisticated and effective litigant than the totality of Daimler and its tier 1 (i.e., direct) suppliers.

For both Nokia and OPPO, their dispute is about much more than the substantial volume the deal will ultimately represent. Nokia is known to have major renewals coming up with Samsung (where only some sideshows have been resolved) and, especially, Apple. It would benefit from a quick settlement with OPPO--on Nokia's preferred terms--with a view to those other negotiations and potential litigations. OPPO, however, will face royalty demands all the time, from a diversity of patent holders large and small, given its market position. There is no question that both Nokia and OPPO would benefit from a quick settlement, but they wouldn't be fighting each other in courts around the globe if they had already identified a royalty rate that works for either party's purposes.

In late July I found out about the first three Nokia v. OPPO trial dates (all of them in Mannheim and over a total of four patents-in-suit). I'm now in a position to provide further information on the dispute, though I fear that this is already outdated--in the sense of "non-exhaustive"--at the time of publication as Nokia may have made additional filings that haven't become discoverable.

In some cases, Nokia accuses OPPO and OnePlus devices of infringement at the same time, but there are also patents that Nokia asserts against the two affiliate entities in different venues. Presumably, OnePlus devices have higher margins on average than OPPO devices, so Nokia expects to get leverage even from an enforcement against just one of the two product brands (if the courts reach divergent conclusions or if one ruling comes down far ahead of the other). In terms of venue choices, Nokia doesn't have faith in Dusseldorf anymore with respect to SEP cases, though this may change as the Dusseldorf judges are apparently trying to make their forum more attractive for SEP litigation.

  • Anti-antisuit injunction (Germany)

    In case no. 21 O 8690/21, the Munich I Regional Court's 21st Civil Chamber (Presiding Judge Tobias Pichlmaier) granted Nokia an anti-antisuit injunction ("A2SI")--along with the usual A4SI--against OPPO. The Munich court (and more recently even the Dusseldorf court) grants A2SIs/A4SIs to prevent any interference with German patent infringement actions in the form of antisuit injunctions issued by foreign courts, and the factors that go into the analysis include a defendant's conduct in other disputes. OPPO once sought a global royalty determination by a Chinese court in its (meanwhile settled) dispute with Sharp. The Munich anti-antisuit injunction also shields Nokia's actions in other German venues (Mannheim, Dusseldorf).

  • Mannheim enforcement actions

    Mannheim SEP cases:

    • against OPPO and its affiliate OnePlus, a pair of cellular standard-essential patents from the same family: EP2981103 (which won Nokia an injunction against Daimler) and EP3220562 on an "allocation of preamble sequences"

    • against OPPO and OnePlus, EP2145404 on a "method and apparatus for providing control channels for broadcast and paging services" (last year Nokia felt forced to stipulate to a stay of a case against Daimler over this patent, but fared better in the parallel nullity proceeding than the Mannheim court had expected)

    • EP3557917 on a "method and apparatus for providing efficient discontinuous communication", targeting OnePlus devices here while OPPO devices are being accused in a Munich action

    • against OPPO and OnePlus, EP2087626 on "additional modulation information signaling for high speed downlink packet access" (Nokia originally asserted this patent against Daimler in Dusseldorf, but withdrew it on the eve of the trial--as the Dusseldorf court had made a preliminary reference to the ECJ, which potentially would have resulted in further stays--and refiled in Munich, where the case never went to trial due to the settlement)

    Mannheim non-SEP cases:

    • EP1700183 on a "method for secure operation of a computing device", targeting OPPO devices here while OnePlus devices are being accused in a Dusseldorf action

    • EP1741183 on a "front-end topology for multiband multimode communication engines", targeting OnePlus devices here while OPPO devices are being accused in a Dusseldorf action

    • against OPPO and OnePlus, EP1704731 on a "method and apparatus for indicating service set identifiers to probe for" (a WiFi patent)

  • Munich enforcement actions

    Munich SEP cases:

    • against OPPO and OnePlus, EP2070217 on an "apparatus, method and computer program product providing multiplexing for data-non-associated control channel" (not previously seen in litigation, hearing scheduled for June 23, 2022)

    • against OPPO and OnePlus, EP2080193 on "pitch lag estimation" (not previously seen in litigation)

    • EP3557917 on a "method and apparatus for providing efficient discontinuous communication", targeting OPPO devices here while OnePlus devices are being accused in a Mannheim action listed further above

    • against OPPO and OnePlus, EP3396868 on a "method and apparatus for conveying antenna configuration information" (not previously seen in litigation)

    • against OPPO and OnePlus, EP1671505 on a "redundancy strategy selection scheme" (the Munich court previously showed a strong inclination to consider this patent standard-essential and pushed back the trial date in order to await developments in a parallel nullity proceeding, where Nokia fared better than one might have expected; meanwhile Nokia and Daimler settled)

    Munich non-SEP case:

    • EP1728352 on "secure data transfer", targeting OnePlus devices here while OPPO devices are being accused in a Dusseldorf action

  • Dusseldorf enforcement actions

    No Dusseldorf SEP cases discovered so far

    Dusseldorf non-SEP cases:

    • against OPPO and OnePlus, EP2728964 on a "distributed multiradio controller"

    • against OPPO and OnePlus, EP3716560 on "processing transmission signals in radio transmitter"

    • EP1700183 on a "method for secure operation of a computing device", targeting OnePlus devices here while OPPO devices are being accused in a Mannheim action listed further above

    • EP1741183 on a "front-end topology for multiband multimode communication engines", targeting OPPO devices here while OnePlus devices are being accused in a Mannheim action listed further above

    • EP1728352 on "secure data transfer", targeting OPPO devices here while OnePlus devices are being accused in a Munich action listed further above

  • High Court of Justice in England (EWHC)

    London SEP cases:

    • EP2087626 on "additional modulation information signaling for high speed downlink packet access" (also being asserted in Mannheim, listed further above)

    • a pair of cellular standard-essential patents from the same family: EP2981103 (which won Nokia an injunction against Daimler) and EP3220562 on an "allocation of preamble sequences" (also being asserted in Mannheim, see further above)

    London non-SEP case:

    • EP3716560 on "processing transmission signals in radio transmitter" (also being asserted in Dusseldorf)

  • Tribunal judiciaire de Paris

    • EP1702486 on "arranging handover"

    • EP1704731 on a "method and apparatus for indicating service set identifiers to probe for" (a WiFi patent that is also being asserted in Mannheim)

  • Juzgado de lo Mercantil nº 5, Barcelona

    • EP1574024 on "an apparatus and a method for providing information to a user" (not previously seen in litigation)

    • EP2615570 on "a method for secure operation of a computing device" (from the same patent family as EP1700183, a non-SEP that is being asserted in Mannheim)

These are just four Western European jurisdictions, and cases are pending elsewhere, but I have yet to obtain more information.

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Monday, April 12, 2021

Apple and Google abuse their app store monopolies to obstruct governmental COVID pandemic control efforts in the UK (not even for the first time)

For a long time I gave Apple and Google the benefit of the doubt with respect to app store policies. When my own app development company got affected by the utterly unreasonable COVID app rules those monopolists had promulgated more than a year ago, I couldn't help but conclude that the situation was unsustainable. And brought my own antitrust complaints against those companies in multiple jurisdictions (including the UK) though I continue to agree with those companies in some other areas, particularly patent policy.

It's bad enough that private companies like the Coronavirus Reporter team and mine were prevented from making our little contributions to the fight against COVID-19. But what's really unfathomable is that Apple and Google's hubris even impedes governmental pandemic control efforts.

This must be a wake-up call for lawmakers, regulators, and courts. Alternative third-party app stores for iOS and Android are absolutely needed. Even governments need such alternatives in a situation like this.

The BBC's technology desk editor Leo Kelion reported today that "[a]n update to England and Wales's contact tracing app has been blocked for breaking the terms of an agreement made with Apple and Google." Yes, this is about the official contact-tracing app provided by the National Health Service (NHS).

With UK shops, restaurants and pubs reopening today thanks to a relaxation of COVID prevention rules, it was actually a very smart idea for the NHS COVID-19 app to ask users to scan QR codes when entering such places, thereby enabling the system to inform people if they had been in a virus hotspot at a critical moment.

In the Western world, contact tracing has failed to make a noteworthy positive impact. In parts of Asia, however, those apps made a huge contribution because people were not even allowed to enter restaurants unless the contact-tracing apps on their smartphones greenlighted them (meaning they had not recently been near an infected person for a certain period). It made a whole lot of sense for the UK to adopt what worked in Asia.

But Apple and Google are not susceptible to reason in the COVID context. They shamelessly distribute (partly for free, partly for money) material that promotes bogus medications and treatments. Such material may not explicitly mention COVID-19, but stuff like Homeopathy for Epidemics discusses pandemics at a general level and certainly talks about COVID symptoms (even without mentioning COVID). Such material raises false hopes that what has been proven over and over to be fake medicine could solve the problem. Homeopathy is essentially about putting tiny white sugarballs in your ear and you'll be fine without masks, without vaccination, and don't have to see a doctor if you show symptoms of COVID-19 because your body, with the help of bogus medicine, will cope with everything all by itself.

While the U.S. Department of Justice brought enforcement action against a "chiropractor" promoting fake COVID-19 treatment, Apple and Google get away with the distribution of disinformation.

Apple and Google abuse their app store monopolies in many ways. As the BBC notes, "[u]nder the terms that all health authorities signed up to in order to use Apple and Google's privacy-centric contact-tracing tech, they had to agree not to collect any location data via the software." And on that basis, the latest update to the UK's COVID-19 app was rejected.

Pacta sunt servanda--contracts must be fulfilled--but not when abusive monopolists unilaterally impose unfair and unreasonable terms. Epic Games was absolutely right last summer to refuse to comply with Apple's and Google's in-app payment rules, and the UK government shouldn't be bound to illegal terms either.

There already is an ongoing UK investigation of Apple's suspected anticompetitive conduct in connection with the App Store. On March 30, Epic complained to the UK's Competition & Markets Authority. Competition enforcers in the UK should say "enough is enough."

About a year ago, Nature reported on contact tracing apps and mentioned that an earlier version of the NHS app was tested, "[b]ut because this app eschews Apple and Google’s protocol, it will not be able to run in the background on iPhones." An expert called this "a nail in the coffin." Obviously, contact tracing is of little use if you actually have to have the contact tracing app running in the foreground all the time.

So the UK has been hit by Apple's abusive conduct for the second time. Nature mentioned that "[t]he United Kingdom and France [we]re still pursuing centralized options." By now we know that contact tracing apps have been next to useless in those countries.

Even the contact tracing apps developed by several U.S. states, such as Utah and the two Dakotas, ran into the problem that "Apple and Google will not let apps that record location data use their APIs."

As the BBC's Rory Cellan-Jones accurately notes:

"What this underlines is that governments around the world have been forced to frame part of their response to the global pandemic according to rules set down by giant unelected corporations.

"At a time when the power of the tech giants is under the microscope as never before, that will leave many people feeling uncomfortable."

Apple uses privacy as a sword and a shield, and Google has recently discovered privacy as a means of cementing its monopoly with a technique it calls FLoC. Apple's credibility in the privacy and security contexts will be among the issues to be discussed in court next month, and Apple appears to be profoundly worried--so much so that Apple didn't event want to justify its App Store abuse at a United States Senate hearing, but after a letter from Senators Klobuchar (D-Minn.) and Lee (R-Utah) reconsidered.

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Thursday, March 18, 2021

The French Connection: Thales is third industrial giant from France to intervene in Nokia v. Daimler standard-essential patent dispute

The Dusseldorf Regional Court's preliminary reference to the European Court of Justice asks the top EU court to opine on certain questions of antitrust law with respect to the availability of standard-essential patent (SEP) licenses to component makers. Daimler argues that Nokia actually owes its suppliers an exhaustive license that would, by extension, cover the Mercedes maker.

In late 2018, Daimler filed with the European Commission's Directorate-General for Competition (DG COMP) a complaint over Nokia's refusal to license its suppliers. About two years ago, Nokia started a patent infringement litigation campaign against Daimler that has so far failed to give the former handset maker decisive leverage.

Daimler notified its tier 1 (direct) suppliers of those cases and the possibility of indemnification claims. Certain suppliers such as Peiker, a German subsidiary of a French company named Valeo, intervened (in support of defendant Daimler) early on. Last year it became known that even French automotive company Renault is technically a supplier to Daimler, by virtue of making a car for Daimler under a cooperation agreement. Renault may not have intervened in all Nokia v. Daimler cases, but in at least a couple of Munich lawsuits.

By now, Valeo and Renault are no longer the only two French companies to have skin in the Nokia v. Daimler game: I've recently found out that Thales, a French industrial giant with 80,000 employees, finally elected to intervene in the Dusseldorf case that gave rise to the ECJ referral. Almost two years after the filing of the complaint, Thales apparently didn't want to miss this opportunity to try to influence the proceedings in Europe's highest court.

Thales is not a direct supplier to Daimler, but a tier 2 supplier (one degree removed) through its customer TomTom. Similarly, Huawei is a tier 2 supplier through such telematics control unit (TCU) makers as Continental and Harman (a Samsung subsidiary).

With a belated filing on February 20, 2021, Thales--represented by Simmons & Simmons antitrust attorney Dr. Jens Steger--attempted to persuade the Dusseldorf court to refer a set of alternative or additional questions to Luxembourg. As far as I can see, the Dusseldorf court shows no signs of being inclined to do so. It will stick to its original set of questions.

In addition to unilateral-conduct issues under Art. 102 TFEU, Thales sought to raise a couple of cartel questions (Art. 101 TFEU):

  • In one of its proposed questions, Thales points out that the FRAND licensing pledge companies like Nokia made to ETSI was key to the European Commission's approval of "the ETSI agreements"--and on that basis suggests that Nokia violates Art. 101 by refusing to license component makers.

  • In another question Thales takes aim at an Avanci contract clause according to which that patent pool reimburses its members' SEP enforcement costs. Thales calls into question that a pool covering more than 60% of the patents essential to a given standard. Apart from the fact that this percentage is merely based on Avanci's own estimates (which are inconsistent with various independent studies), collective ownership percentages of SEPs aren't relevant from a competition law point of view as even a single truly essential patent confers market power upon its holder.

While it's important never to forget that what makes SEPs so powerful is horizontal cooperation, which would raise serious cartel issues without a FRAND licensing obligation, I welcome the fact that the focus will remain on unilateral conduct (monopoly abuse) questions. After all, that's what makes this preliminary reference a seamless continuation of Huawei v. ZTE with a special focus on component-level licensing. Thales aspired to make creative contributions to the process, but the new theories it espouses aren't quite so compelling as to warrant a modification of the referral order, much less at this procedural stage.

Where Thales does, however, still have every opportunity to make a positive impact is by lobbying the French government--which will have the opportunity to submit written observations (comparable to an amicus curiae brief, except that the ECJ doesn't allow private non-parties to make submissions). Thales could also lobby the French EU commissioner, Thierry Breton, who has so far been more sympathetic to Nokia and Ericsson's patent monetization interests than the concerns of the automotive and wider IoT industry over SEP abuse. As internal market commissioner, Mr. Breton has responsibility for the European economy at large (and European consumers), but that doesn't mean he has to act forever as if he were Finland's permanent representative (ambassador) to the European Union. Europe has far more to gain from component-level SEP licensing: its strong automotive sector is reason enough all by itself, and its growth potential in IoT makes it an even smarter choice for the future.

Thales declined to sign Nokia's non-disclosure agreement, and I applaud them for that. However, the need to withhold certain confidential business information from them may slow down its lawyers' access to the record. Unfortunately, German litigation procedures are antiquated, so Thales can't just be provided with access to digital documents. Instead, the court has to provide the original paper documents, and the formal referral to the ECJ can take place only after Thales has had its opportunity to make copies or scans.

Subsequently to the formal referral, the CJEU can start the translation process. The deadline for the written observations to be filed by the European Commission and the governments of the EU member states (to the extent they do so) will be a couple months later--in the late summer, presumably.

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Wednesday, January 6, 2021

Compared to the EU's COVID VaxGate, Watergate was merely a transgression: two questions of life or death the EU can't answer satisfactorily

I already mentioned in my first post this year about the EU's miserable failure to buy COVID-19 vaccines (as compared to the U.S., Canada, the UK, Israel, and Bahrain), primarily because the French government didn't want the EU to buy too many doses from non-French companies. That scandal now has a far higher profile, with two of the three parties in Merkel's governing coalition already having voiced criticism in public. Many politicians and reporters in other EU member states haven't understood the significance of this yet. Even France itself will suffer far more from the consequences of Macron's worst initiative than it ever stood to gain.

Merkel and Macron are the Axis of Evil. Many thousands of Europeans will die because of their failure. That's why this is so much worse than Watergate. The EU's VaxGate amounts to political mass murder.

Two questions about COVID-19 vaccine purchases force the EU Commission, the Merkel government, and all their apologists (especially but not only in state-owned media) to be evasive (or to lie):

  1. German newsweekly Der Spiegel cited anonymous sources involved with the EU's vaccine procurement effort as saying that Macron (apparently even personally) told the EU not to buy the 500 million doses of Pfizer/BioNTech's vaccine that could have been in the November 11, 2020 purchase agreement. At that point, Pfizer/BNT had reported amazing Phase 3 results and were clearly ahead of everyone else, and other governments had already secured huge amounts of that vaccine several months earlier. But Macron didn't want an American-German joint project to save Europe from COVID, so he vetoed anything that would have resulted in Pfizer/BNT selling more doses to the EU than French Sanofi, which at that point had already fallen far behind.

  2. A closely related question they can't answer is why the EU signed a deal with slow-moving Sanofi (which won't be able to ship before late 2021, if ever) on September 18, but with front runner Pfizer/BNT almost two months later--while other major purchasers (U.S., UK, Israel etc.) had done so way earlier.

    The difference of two months actually understates the asymmetry by far. One has to look at how much progress a given research project had made at the time. The EU signed with Pfizer/BNT only after they reported stellar results from their Phase 3 study, while Sanofi got a yuuuge contract before it even had any Phase 1 results to show. This is like if one athlete got the Olympic gold medal before the race even starts, while another won't get it until after crossing the finish line ahead of the rest of the world.

These two questions get asked. Obviously, the EU apologists and Merkel sycophants among European political reporters wouldn't raise such tough questions. But there are plenty of unbiased reporters out there, and the analytically stronger ones among them have figured out that those two questions get to the heart of the problem.

If anyone points to the need for diversity (of vaccines, and also of vaccination technologies), that's not wrong but fails to address the above questions. You could have had diversity and still could have placed the right bets. That's simply the combination those other buyers, such as the U.S., achieved.

Diversity is related to costs. But that's a smokescreen. The cost of those COVID lockdowns in Europe is so high that even if the EU had matched offers by the Trump Administration and Israel, and even if they had contractually committed to such quantities in the aggregate of multiple vendors that they could have vaccinated every EU citizen ten times, it would have been cheap compared to the costs of those lockdowns. To put this into perspective, Pfizer/BNT gets about 12 euros per dose from the EU. That's about 25 per vaccinated person. Multiply this by four (other vaccines actually cost less, or even much less), and you arrive at a cost of €8 billion for Germany (approximately 80 million inhabitants), where the cost of a protracted lockdown amounts to hundreds of billions of euros as Dr. Daniel Stelter and other economists have pointed out. Frankly, "penny-wise and dollar-foolish" is a gross understatement when you're dealing with a cost to Europe that is practically in the trillions of euros versus a cost in the billions.

One of the things you'll hear from the EU Commission is that they deny any political reason behind the Sanofi deal. Let's give them the benefit of the doubt that they had a reasonable basis to assume Sanofi would deliver (it actually ran into serious problems after the deal). But the question is not whether the Sanofi deal might have made sense if viewed in isolation. What neither the EU nor the Merkel Administration have denied so far is that the French government prevented the EU from upping the purchase volume in its Pfizer/BNT deal, especially as it was signed after Phase 3 and at a point when Sanofi was far, far behind. That was just pharma protectionism and nationalism on the French government's part--which will cost many thousands of lives this year, make many people suffer COVID symptoms, make people lose their jobs, and make companies go out of business.

Under President Nixon, people died because of a war he had inherited. The Merkel-Macron Axis of Evil (as Merkel simply supported what Macron was doing) will be responsible for countless deaths in 2021.

One of the "red herrings" in this context is that they say they'll eventually get enough for every EU citizen to be vaccinated, and the current bottleneck is manufacturing capacity. Yes, and that's why the EU's decisions were so terrible. At a minimum, by placing a large order early on, rather than the same quantity later, or a smaller quantity first and a reorder later, you make sure your orders are high up in the queue. Also, if the EU had committed to 500 million doses when it signed the Pfizer/BNT deal (which had obviously been under negotiation for more than a couple of days, but it would always have been easy to just modify a couple of numbers in the contract), Pfizer/BNT would have had a basis for investing sooner and more aggressively in additional European manufacturing capacity.

The problem facing the EU now is that customers such as the U.S., UK, and Israel are ahead of them in the queue. It's not a strict sequence in the sense that the EU wouldn't be served before the others are, but the others get a lot more at this point.

Another red herring that doesn't get better by being repeated also fails to address the real issue: they like to point to logistical issues in various EU member states, and different regions of Germany. While it's plausible that there are now, at the start of the mass vaccination effort, places where the bottleneck is of an organizational nature, it's just a question of one or two months until those minor local and regional shortcomings have been addressed, and then a shortage of supply will be the only major problem. A lethal shortage, that is.

Apart from those points, a German Member of the European Parliament, Merkel minion Peter Liese, said on TV that the Trump Administration and other early adopters of the Pfizer/BNT vaccine accepted weaker indemnification clauses, which caused a delay in the EU. But it's simply a business reality that in a seller's market, it's not just that prices may go up but also that other deal terms may not be the ones a buyer prefers. But who would want to let people die and suffer, and companies go out of business, over an indemnification clause?

Similarly irrelevant is the fact that a group of four countries (Germany, France, Italy, and the Netherlands), who were originally working on a joint-purchasing initiative before they asked (under pressure from Merkel and von der Leyen) the EC to take over, primarily wanted to sign a deal with AstraZeneca in June. That was before the EU's deals with Sanofi and Pfizer/BNT, and there's no evidence that they were going to rely exclusively on Astra.

The excuses I just mentioned are merely diversionary tactics. But some of the apologists are either extremely stupid or liars: they argue that even by the summer, Sanofi was considered to be ahead. The truth is this: you can take any EU decision and look at when it was made, and then you look up the New York Times' Coronavirus Vaccine Tracker, which will show you that Pfizer/BNT and Moderna had actually been in the lead when the EU still prioritized other vendors.

The question is not whether VaxGate is the absolute low in the history of the European Union, and whether countless people will die as a result. The only question is whether they'll be able to somehow mitigate the damage. Yesterday Merkel expressed hopes that the supply situation would improve as a result of additional vaccines being approved. She particularly mentioned AstraZeneca (Dr. Fauci wonders whom to vaccinate with an inferior product), Johnson & Johnson (also a vector-based vaccine, like Astra's), and CureVac. Interestingly, CureVac's technological approach is mRNA, like Pfizer/BNT's and Moderna's, and the EU signed a huge deal with them. But they, too, fell behind at some point. It's possible that major commitments had already been made to CureVac in Europe, besides a direct investment by the German government, just to dissuade them from selling out to Trump. However, the best way to make the right purchasing decisions is to track the progress of the projects--and not to listen to Macron.

It's pretty clear now that the EU and the Merkel Administration will overstate the efficacy and understate the adverse affects of whatever vaccine the European Medicines Agency will approve. After not buying an extra 200 million doses (500 vs. 300) from Pfizer/BNT and another 300 million from Moderna (they've meanwhile bought some, but again the problem is where you are in the queue), even at a point when those companies were the clear leaders, they've proven to be irresponsible and even immoral. So who would care about a lower efficacy of a vaccine or some adverse effects? European citizens are treated terribly by their governments. They'll do anything to cover up for their mistake. Hell is freezing over as Merkel even called Vladimir Putin these days to discuss joint vaccine manufacturing options. Her legacy will be death, disease, and economic destruction. But to the extent they can, they'll mislead people, defend indefensible decisions, and resort to inferior products.

They'll keep saying that no one could know what vaccine would become available first. But when there's a free public resource like the New York Times Coronavirus Vaccine Tracker that provided all of the key facts one needed to know at any given point in time, it's clear the EU simply didn't decide based on the merits of those research projects.

They'll also keep accusing any critic of VaxGate as being a "nationalist" who didn't want a European approach. I, for my part, wouldn't care if the EU's joint-purchasing cartel--a monopsony--had benefited European citizens. Theoretically, it could have. Practically, Brussels means backroom deals and horse trades. And it means you have ruthless people like Macron abusing the system, even to the detriment of his own electorate in this case.

Throughout the year, the numbers, however, will continue to expose the impact of VaxGate. The vaccination gap between countries like the U.S., UK and Israel on the one hand, and the EU on the other hand, will widen for many months at least. The COVID-19 death count will speak a clear language (relative to population size, more people are presently dying from it in Germany than in the United States, which the mainstream media hardly ever mentions). By the end of 2021, it will be easy to see that Brussels backroom shenanigans will have killed many Europeans. And there'll be parliamentary investigations, with particularly a libertarian German party, the FDP, demanding special committees in both the German and the European Parliament.

I've been following COVID-related topics, including the vaccine situation, very closely. When you build a real-time strategy game about a virus during the coronavirus pandemic, you obviously pay more attention than otherwise.

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