Mercedes-Benz May Face German Sales Ban After Nokia Wins Patent Ruling

(Bloomberg) --

Nokia Oyj won a court ruling in a patent dispute with Daimler AG, giving the Finnish company leverage in a long-running fight over mobile technology in automobiles.

Daimler, owner of the Mercedes-Benz brand, violated Nokia’s mobile-technology patents, judges in Mannheim, Germany, said Tuesday.

The ruling goes to the heart of how technology must be licensed for mobile-telecommunication systems that are standard features in most modern cars.

“We cannot understand the verdict of the Mannheim court and will appeal,” Daimler said in an emailed statement.

The court said it had to side with Nokia because Daimler wasn’t willing to abide by existing rules for so-called standard essential patents.

No License

“The facts show that Daimler and its supporters in the case aren’t willing to take a license,” the court said in a statement.

The ruling potentially could allow Nokia to stop Daimler from selling vehicles in Germany, but doing so would require Nokia to post collateral of 7 billion euros ($8.3 billion) in a separate proceeding. Daimler said it didn’t expect Nokia to seek a sales ban.

Nokia shares rose 1.5% at 1 p.m. in Helsinki, after declining as much as 1.4%, while Daimler shares rebounded to rise 0.9% in Frankfurt.

‘Major Endorsement’

“Today’s finding is a major endorsement of the long-term engineering work by innovators at Nokia and the important principle that innovators should receive a fair reward,” Jenni Lukander, president of Nokia Technologies, said in a statement. “We hope that Daimler will now accept its obligations and take a license on fair terms.”

Carmakers in Europe are dependent on the technology to enable their autos for e-connectivity. Nokia seeks to charge fees per car instead of granting auto-parts makers licenses for the components they produce. As a result some suppliers, including Continental AG and Robert Bosch GmbH, are supporting Daimler in the litigation.

The case is being closely watched beyond the car industry as it may have repercussions for the internet of things as mobile connectivity gets more important in almost all products and industries.

Cartel Office

In a rare move that shows how high the stakes are, Germany’s Federal Cartel Office in June asked the Mannheim judges to seek the guidance of the European Court of Justice before deciding the dispute. The Mannheim judges on Tuesday rebuffed the request.

Nokia has sued Daimler in three German courts over the portfolio of mobile technology patents. The Mannheim court in February dismissed a similar suit by Nokia and has stayed two other cases to wait for a ruling on their validity.

More suits are pending in Munich and Dusseldorf. Daimler has also filed a suit to annul Nokia’s patents in a separate court.

The Finnish company wants Daimler to pay royalties based on each car sold, but Daimler argues that the fees would be too high. It wants Nokia to license the technology to the suppliers of the equipment used to integrate mobile devices in its vehicles, which would then charge the German carmaker.

Daimler and some of its suppliers, including Continental, have asked the European Commission to go after Nokia, claiming the Finnish company missuses its market power. Auto-parts makers also see their business model at stake so they joined the suit to defend Daimler against Nokia.

Continental said it was willing to purchase a license on fair terms, but blamed Nokia for refusing to reach a deal. The parts maker has sued Nokia in the U.S. and in early 2019 asked the European Union’s executive arm to step in.

“In light of the decision of the Mannheim Regional Court, intervention by the European Commission seems more important than ever,” Continental said in a statement.

Nokia has said its license model has been accepted by other carmakers, including BMW AG and Volkswagen AG.

The winners in patent suits must weigh the risk of enforcing rulings, which include the possibility of massive damages should the injunction be overturned on appeal. That’s why courts require the winners to set aside a large sum before allowing enforcement of a sales ban.

Tuesday’s case is: LG Mannheim, 2 O 34/19. The patent is: EP 2 981 103.

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