Philippa Maister
10-02-2008

Could it be that the patent troll, once believed to survive only in the concrete jungles, high-tech valleys, and small Texas towns of North America, has extended its range to Europe? A case pending before a German court in Mannheim could signal its arrival.

The plaintiff is IPCom GmbH & Co., of Pullach, Germany. The defendant is Nokia, the Finnish mobile phone company. IPCom is claiming payments that could total a whopping 12 billion euros ($16.8 billion) for infringement of its patents on mobile telecom technology.

IPCom acquired the patents in 2007 from Robert Bosch GmbH, a global automotive and industrial technology company that pioneered the technology. The patents fall into 11 groups, within them 35 "standard and essential patents" used in most mobile phones, including SIM cards. IPCom seeks to enjoin Nokia from using the patents in Germany.

In an e-mailed statement, Nokia spokesperson Laurie Armstrong said Nokia will vigorously defend itself. "Nokia believes it has good defenses, the patents in suit being invalid and not infringed," Armstrong said. "In addition, we have our own claims pending against Bosch. The company has refused to honor its commitments to standardization organizations and Nokia." Armstrong asserts that IPCom is "owned by Bosch's outside counsel."

The German patent lawyer she is referring to is IPCom's managing director, Bernhard Frohwitter. Frohwitter co-founded Bardehle Pagenberg, one of Europe's largest IP law firms, before going on to launch Munich-based Frohwitter Intellectual Property Counselors in 1998. He says he did indeed represent Bosch, helping to assemble the patent portfolio and arrange licenses. But Frohwitter rejected the implication that he was part of any "scheme."

As he tells it, Bosch decided in 2000 that telephony no longer fit in with its core business. Frohwitter moved to buy the patents, partnering with two companies with deep pockets, the Schoeller Group of Pullach, a packaging, container and logistics firm dating from 1600, and, interestingly, Fortress Investment Group, a big publicly-held New York-based hedge and private equity fund.

Like many in the IP field, Frohwitter argues about the semantics of "patent troll," and angrily denies that IPCom is one. He describes IPCom as an "intellectual property asset manager." During a 10-year stint in Houston, Frohwitter says he came to admire the professional approach of U.S. firms to exploiting patents as an asset class, something that did not exist in Europe, and wanted to copy this model. "I saw in the U.S. what a patent troll is -- a kind of blackmailer. That is not our business. IPCom is not a litigating firm. We like amicable settlements. The standard is what is fair and reasonable, no more and no less," Frohwitter says.

According to Frohwitter, Nokia had been in negotiations for five years. He says litigation was originally initiated by Nokia, which sought a declaratory judgment in Mannheim and agreed to fair and reasonable licensing fees. But it balked at IPCom's definition: 5 percent of Nokia's mobile phone sales in countries covered by Bosch patents, or 600 million euros ($841 billion) a year -- totaling 12 billion euros ($16.8 billion) over 20 years. IPCom then sought the injunction. Both cases are currently ongoing.

Sabine Rojahn, a partner in Taylor Wessing's Munich office, says German law tends to work very much in favor of the patent owner. IPCom has an advantage in bringing the suit in Mannheim's regional court, which specializes in patent infringement cases, Rojahn notes. The Mannheim court rules on whether a patent has been infringed before the federal patent court in Munich decides on validity. In addition to seeking damages, patent owners have an automatic right to an injunction if infringement is found -- before the federal court has ruled on validity, says Rojahn. Also, "if a patent troll wins damages, the infringer can be forced to pay back its gross revenues for a product as damages," she says, "and not just its net profit."

Duncan Curley, director and founder of Innovate Legal Services, a London IP boutique, says Nokia's response suggests that it may question whether Bosch fully disclosed all its patents as required by standards-setting organizations (SSOs), a familiar question in U.S. courts.

Frohwitter said both Bosch and IPCom played by the SSO rules. He says IPCom's technology has been licensed amicably to other companies, including Siemens AG, Motorola Inc., Philips Electronics and Alcatel-Lucent -- and a settlement has just been reached with Research in Motion Ltd., the Canadian maker of BlackBerry devices.

Whatever decision the German courts reach will apply only in Germany -- a fact that so far has discouraged patent troll activity in Europe. But if IPCom wins even a fraction of what it's asking, that could change.

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