Continental Sues Nokia in Royalty Fight Over Telecom Patents

Continental AG asked a U.S. court to determine a fair payment for the use of Nokia Oyj patented technology, as a global battle over royalties on telecommunications technology in vehicles escalates.

Nokia is demanding unreasonable royalties, a violation of commitments made to standard-setting organizations that help ensure the wide adoption of important technologies, Continental claims. Continental didn’t specify how much Nokia is seeking, only that it’s “multiples too high.”

The lawsuit, filed in Delaware Chancery Court, expands a wider clash between the auto and telecommunications industries over royalties on technology that turns a car into a computer on wheels. Continental makes control units for Daimler AG vehicles that provide interface controls and GPS services as well as cellular communications.

“There is simply no reasonable economic, technical, or other justification for the high royalty rates being demanded by Nokia,” Continental said in the complaint.

Nokia was down 0.7% at $4.82 at 1:45 p.m. in New York trading on Tuesday, erasing an earlier gain of almost 9%. The shares jumped 15% on Monday.

Clash of Approaches

Because the patents on the technology are part of an industry standard, patent owners like Nokia have pledged to grant licenses on “fair, reasonable and non-discriminatory terms,” a phrase that’s open to interpretation.

Nokia had originally demanded that royalties be paid by the automakers, either directly or through a patent pool it helped create called Avanci LLC, which charges a set rate for every vehicle. The auto parts makers say it actually enables Nokia and its Avanci partners, including Qualcomm Inc. and Sharp Corp., to charge unfairly high rates.

The telecom industry’s approach clashes with the way the auto industry operated traditionally, with parts makers paying royalties and indemnifying the automakers from any infringement claims.

Faced with lawsuits and regulatory scrutiny over its licensing strategy, Nokia agreed to start negotiating with Continental in September, almost three years after the German company first sought a direct license. Continental said Nokia is being unreasonable and wants the Chancery Court judge to set the appropriate rate.

‘Fair and Reasonable’

Nokia said in a statement that it has made “fair and reasonable offers to Daimler direct, to Continental” and through the patent pool. A court in Germany found that the offer was fair and that Daimler and Continental were unwilling to agree to a license “and have been engaging in delaying tactics,” Nokia said.

“We encourage them to do the right thing” and agree to a license “on the same fair terms as many other car companies,” it said.

Continental had previously sued Avanci for refusing to negotiate, but a judge threw out the case last year and that decision is on appeal.

Daimler and Continental have urged the European Union’s antitrust regulator to step in and stop what they consider unfair competition, and the European Court of Justice has been asked by judges in Germany to issue guidance on how technology that is part of a mobile standard needs to be licensed.

Daimler declined to comment on Continental’s suit but said access to standard-essential patents is critical to development of new products for vehicle connectivity.

“We have a different legal opinion on the question of how to license patents in the automotive industry that are essential for telecommunications standards,” Daimler said in a statement. “We believe that a company cannot be prohibited from using such patents if its suppliers are willing to pay a corresponding license.”

The case is Continental Automotive Systems Inc. v. Nokia Corp., 2021-66, Delaware Chancery Court (Wilmington).

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