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1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP


A Limited Liability Partnership
2 Including Professional Corporations
STEPHEN S. KORNICZKY, Cal. Bar No. 135532
3 MARTIN R. BADER, Cal. Bar No. 222865
MATTHEW W. HOLDER, Cal. Bar No. 217619
4
12275 El Camino Real, Suite 200
5 San Diego, California 92130
Telephone: 858.720.8900
6 Facsimile: 858.509.3691
E mail skorniczky@sheppardmullin.com
7 mbader@sheppardmullin.com
mholder@sheppardmullin.com
8

9 MICHAEL W. SCARBOROUGH, Cal. Bar No. 203524


MONA SOLOUKI, Cal. Bar No. 215145
10 LAI L. YIP, Cal Bar No. 258029
Four Embarcadero Center, 17th Floor
11 San Francisco, California 94111
Telephone: 415.434.9100
12
Facsimile: 415.434.3947
13 E mail mscarborough@sheppardmullin.com
msolouki@sheppardmullin.com
14 lyip@sheppardmullin.com
15 Attorneys for Plaintiff Continental Automotive

16 Systems, Inc.

17 UNITED STATES DISTRICT COURT

18 NORTHERN DISTRICT OF CALIFORNIA

19 CONTINENTAL AUTOMOTIVE Case No. 5:19-cv-02520-LHK


SYSTEMS, INC.,
20 CONTINENTAL’S MEMORANDUM OF
Plaintiff, POINTS AND AUTHORITIES IN
21 SUPPORT OF ITS EX PARTE
v. APPLICATION FOR TEMPORARY
22
RESTRAINING ORDER AND ORDER TO
23 AVANCI, LLC, et al., SHOW CAUSE WHY A PRELIMINARY
INJUNCTION SHOULD NOT ISSUE
24 Defendants.
Judge: Hon. Lucy H. Koh
25

26
27

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1 TABLE OF CONTENTS
Page
2
I. INTRODUCTION ..................................................................................................................1
3
II. FACTUAL BACKGROUND ................................................................................................3
4
A. The Nature and Risks of Standardization ...................................................................3
5
B. The Dispute Between the Parties ...............................................................................5
6
1. Continental sought a direct license to Defendants’ SEPs...............................5
7
2. Daimler and others filed complaints against Nokia with the
8 European Commission. ..................................................................................6

9 3. Nokia then filed retaliatory infringement lawsuits against Daimler. .............6

10 4. Continental filed the present action to resolve the global dispute. .................7

11 5. Nokia obtained a secret order thwarting Continental’s prior motion. ............7

12 6. Sharp followed Nokia’s lead in filing infringement lawsuits against


Daimler. ..........................................................................................................9
13
7. Conversant then joined its cohorts in suing Daimler. ..................................11
14
III. APPLICABLE LEGAL STANDARD .................................................................................11
15
IV. SHARP AND CONVERSANT SHOULD BE ENJOINED FROM SEEKING
16 INJUNCTIVE RELIEF AGAINST CONTINENTAL PRODUCTS, AND
DEFENDANTS SHOULD BE ENJOINED FROM FILING NEW LAWSUITS
17 TARGETING CONTINENTAL PRODUCTS. ...................................................................13

18 A. The Parties and Issues Are Functionally the Same. .................................................13

19 1. Continental is the real party-in-interest where Defendants sue for


patent infringement based on the use of Continental and its
20 affiliates’ products. .......................................................................................14

21 2. This lawsuit is dispositive of the matters to be enjoined..............................17

22 B. Multiple Unterweser Factors Justify an Anti-Suit Injunction. .................................19

23 1. Requests for injunctions on SEPs frustrate important U.S. policies. ...........19

24 2. Defendants’ lawsuits are (and will be) vexatious and oppressive. ...............21

25 C. The Impact of an Injunction on Comity Is Tolerable. ..............................................23

26 V. A TRO IS NECESSARY TO MAINTAIN THE STATUS QUO. ......................................24


27 VI. CONCLUSION ....................................................................................................................25

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1 TABLE OF AUTHORITIES

2 Page(s)
Cases
3
Apple v. Motorola
4
757 F.3d 1286 (Fed. Cir. 2014) ..................................................................................................20
5
Applied Med. Distrib. Corp. v. Surgical Co. BV
6 587 F.3d 909 (9th Cir. 2009) ......................................................................................................12

7 Codex Corp. v. Milgo Elec. Corp.


553 F.2d 735 (1st Cir. 1977) ......................................................................................................16
8
E. & J. Gallo Winery v. Andina Licores S.A.
9
446 F.3d 984 (9th Cir. 2006) ..........................................................................................12, 19, 23
10
Ericsson, Inc. v. D-Link Sys.
11 773 F.3d 1201 (Fed. Cir. 2014) ....................................................................................................4

12 FTC v. Qualcomm Inc.


No. 17-CV-00220-LHK, 2019 WL 2206013 (N.D. Cal. May 21, 2019) ...................................21
13
Gilbane Fed. v. United Infrastructure Projects Fzco
14 Case No. 14-cv-03254-VC, 2014 WL 4950011 (N.D. Cal. Sep. 24, 2014) ...............................13
15
Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers
16 415 U.S. 423 (1974) ...................................................................................................................11

17 Huawei Techs., Co. v. Samsung Elecs. Co.


Case No. 3:16-CV-02787-WHO, 2018 WL 1784065
18 (N.D. Cal. Apr. 13, 2018) ...................................................................................12, 13, 18, 20, 24
19 Int’l Equity Invs. Inc. v. Opportunity Equity Partners Ltd.
441 F. Supp. 2d 552 (S.D.N.Y. 2006) aff’d, 246 Fed.Appx. 73 (2d Cir. 2007) .........................13
20

21 Kahn v. GMC
889 F.2d 1078 (Fed. Cir. 1989) ..................................................................................................16
22
Katz v. Lear Siegler, Inc.
23 909 F.2d 1459 (Fed. Cir. 1990) ..................................................................................................16
24 Laker Airways, Ltd. v. Sabena, Belgian World Airlines
731 F.2d 909 (D.C. Cir. 1984) ...................................................................................................21
25

26 Medtronic, Inc. v. Catalyst Research Corp.


518 F. Supp. 946 (D. Minn. 1981), aff’d, 664 F.2d 660 (8th Cir. 1981)..............................17, 18
27
Microsoft Corp. v. Motorola Inc.
28 696 F.3d 872 (9th Cir. 2012) ..............................................2, 5, 12, 13, 17, 18, 19, 20, 21, 22, 23

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1 Microsoft Corp. v. Motorola Inc.


795 F.3d 1024 (9th Cir. 2015) ..........................................................................................4, 18, 21
2
Microsoft Corp. v. Motorola, Inc.
3 871 F. Supp. 2d 1089 (W.D. Wash. 2012), aff’d, 696 F.3d 872 (9th Cir. 2012) .......................12
4
In re Nintendo of Am., Inc.
5 756 F.3d 1363 (Fed. Cir. 2014) ..................................................................................................16

6 In re Personalweb Techs., LLC Patent Litig.


Case No. 18-md-02834-BLF, 2019 WL 1455332 (N.D. Cal. April 2, 2019) ............................17
7
Quanta Comput., Inc. v. LG Elecs., Inc.
8 553 U.S. 617 (2008) ...................................................................................................................19
9
Realtek Semiconductor Corp. v. LSI Corp.
10 946 F. Supp. 2d 998 (N.D. Cal. 2013) .........................................................................................5

11 Seattle Totems Hockey Club, Inc. v. Nat’l Hockey League


652 F.2d 852 (9th Cir. 1981) ......................................................................................................19
12
Sierra On-Line, Inc. v. Phoenix Software Inc.
13 739 F.2d 1415 (9th Cir. 1984) ....................................................................................................24
14 Spread Spectrum Screening LLC v. Eastman Kodak Co.

15 657 F.3d 1349 (Fed. Cir. 2011) ............................................................................................16, 17

16 Stuhlbarg Int’l Sales Co. v. John D. Brush & Co.


240 F.3d 832 (9th Cir.2001) .......................................................................................................11
17
TCL Communication Technology Holdings, Ltd. v. Telefonaktienbolaget LM
18 Ericsson
No. 8:14-cv-00341-JVS-DFM, Dkt. 279-1 (C.D. Cal. June 29, 2015) ......................................18
19
Textile Unlimited, Inc. v. A. BMH and Co.
20
240 F.3d 781 (9th Cir. 2001) ......................................................................................................11
21
In re Unterweser Reederei, GmbH
22 428 F.2d 888 (5th Cir. 1970) ..............................................................................12, 13, 19, 21, 22

23 Zynga, Inc. v. Vostu USA, Inc.


816 F. Supp. 2d 824 (N.D. Cal. 2011) .......................................................................................12
24
Other Authorities
25

26 Fed. R. Civ. P. 65 .............................................................................................................................24


27

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1 I. INTRODUCTION

2 Plaintiff Continental Automotive Systems, Inc. (“Continental”) moves for a TRO and an

3 order to show cause why an anti-suit injunction should not issue in two respects:

4 (1) Continental seeks to prohibit defendants Sharp Corp. (“Sharp”) and Conversant

5 Wireless Licensing SARL (“Conversant”) from seeking injunctive relief against Daimler vehicles

6 incorporating products, namely telematics control units (“TCUs”), made or sold by Continental or

7 its affiliates, in their pending litigation in Germany (as to the pending cases, Continental is only

8 targeting injunctive relief affecting its products—the cases can otherwise continue); and

9 (2) Continental seeks to prohibit Defendants from instituting against Continental or its

10 customers (or their affiliates) any new action alleging infringement of their 2G, 3G, and 4G

11 standard-essential patents (“SEPs”) based on use of products made or sold by Continental or its

12 affiliates, during the pendency of this case (as to future cases, only claims directed at Continental

13 products would be prohibited—the customers’ use of a TCU from another supplier would be

14 beyond the scope of the requested injunction).

15 What Continental is seeking in this case is simple—a binding worldwide FRAND license

16 to Defendants’ SEPs for the benefit of Continental and its affiliates. The reason there are multiple

17 Defendants here—and the reason Continental seeks this TRO and anti-suit injunction—is because

18 of the nature of Defendants’ ongoing conspiracy to undermine Continental’s right to a FRAND

19 license. Continental filed this lawsuit after Defendants failed and refused to grant Continental a

20 direct license to their SEPs, despite being bound to do so. Defendants have instead conspired to

21 circumvent Continental’s right to a license in favor of demanding non-FRAND royalties from

22 Continental’s customers, the automotive vehicle manufacturers (“OEMs”), and then suing those

23 customers for patent infringement when they dare to refuse Defendants’ demands. To date in

24 2019, Nokia, Sharp, and Conversant—all Avanci members—have filed 16 patent infringement

25 actions against Continental’s customer Daimler in Germany based, in large part, on Daimler’s use

26 of TCUs supplied by Continental and its affiliates. Five of the six cases filed by Sharp and
27 Conversant were filed after Continental filed this lawsuit. Just three weeks ago, Sharp expanded

28 two of its cases to seek injunctive relief against Daimler based on Daimler’s use of Continental

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1 products. Nokia previously added requests for injunctive relief in all 10 of its cases against

2 Daimler. These requests for injunctive relief are unwarranted given Continental’s commitment to

3 license Defendants’ SEPs on the FRAND terms to be adjudicated by this Court.

4 Given the above, it is clear that Defendants are engaging in a coordinated campaign to

5 pressure Daimler (their chosen first target) to accept an Avanci license on non-FRAND terms by

6 using the threat of an injunction, as well as the financial burden of litigating Defendants’ seriatim

7 infringement actions. Indeed, when Sharp first sued Daimler, it did so without ever first seeking

8 to negotiate a license, and instead informed Daimler that it could make the lawsuit go away if it

9 would just accept the Avanci license. (Dkt. 82-1, ¶ 5.) The Ninth Circuit has upheld an anti-suit

10 injunction in a similar situation, explaining that “injunctive relief against infringement is arguably

11 a remedy inconsistent with the [FRAND] licensing commitment.” Microsoft Corp. v. Motorola

12 Inc., 696 F.3d 872, 885 (9th Cir. 2012) (“Microsoft I”). The Ninth Circuit also recognized that

13 piecemeal litigation underscored by the potential for injunctions threatened “the court’s ability to

14 reach a just result in the case before it free of external pressure on [plaintiffs] to enter into a

15 ‘holdup’ settlement before the litigation is complete.” Id. at 886.

16 In contrast to what Defendants are doing in Germany, Continental’s action is intended to

17 fully resolve the dispute between Continental, its affiliates, and Defendants by confirming

18 Continental’s entitlement to a license to Defendants’ SEPs, and determining and imposing the

19 FRAND royalty rates in a binding license. In order to allow the Court to decide this case on the

20 merits, free from the threat that Continental or its customers will be coerced into signing non-

21 FRAND licenses under the shadow of injunction requests, Continental previously filed a motion

22 for anti-suit injunction against Nokia and the other Defendants in this litigation. Sharp was later

23 added to the case when Continental discovered it had also filed a German lawsuit against Daimler.

24 Eager to maintain its undue pressure on Daimler, Nokia sought and obtained a secret “anti-anti-

25 suit injunction” in Germany requiring Continental to withdraw its prior motion with respect to the

26 10 pending Nokia lawsuits against Daimler under penalty of severe sanctions. After Continental
27 did so, and noting an ambiguity as to whether Sharp was covered by the motion, this Court denied

28 without prejudice Continental’s motion, stating that “Plaintiff may refile a motion for anti-suit

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1 injunction that includes Sharp.” (Dkt. 173, p. 2.) Since that order, Sharp has expanded two of its

2 lawsuits against Daimler to add a request for injunctive relief, and Continental also became aware

3 that Conversant recently filed a new patent infringement lawsuit against Daimler in Germany.

4 Accordingly, Continental respectfully requests that the Court enjoin Sharp and Conversant

5 from seeking injunctive relief with respect to vehicles incorporating Continental products in their

6 pending lawsuits against Daimler in Germany until the FRAND issues are resolved in this case.

7 Also, because Defendants should not be allowed to extend their coercive behavior via the filing of

8 new lawsuits, Continental further requests that the Court enjoin Defendants from filing any new

9 actions against Continental or its customers alleging infringement of the SEPs at issue in this

10 litigation based on the inclusion of products supplied by Continental or its affiliates, or otherwise

11 acting in concert with anyone else to file or pursue such actions, while this case remains pending.

12 In order to ensure this Court is not deprived of its ability to reach the merits of this motion,

13 Continental further requests that the Court issue a TRO providing for the above relief pending the

14 Court’s ruling on this motion, and further that the Court immediately restrain Defendants from

15 seeking an injunction from a foreign court depriving Continental of the right to pursue this motion.

16 An immediate threat exists that one or more Defendants will seek the same type of “anti-anti-suit

17 injunction” Nokia sought in response to Continental’s prior motion. Such an injunction would

18 irreparably harm Continental by depriving it of the right to have its motion heard on the merits, all

19 while Sharp and Conversant have free reign to continue adding requests for injunctive relief in

20 their pending actions, and Defendants can continue suing Continental’s customers. In requesting a

21 TRO, Continental simply seeks to preserve the status quo until the Court can rule on its motion

22 and—if the anti-suit injunction is ultimately granted—preserve Continental’s right to a full

23 adjudication of its claims free from undue pressure on Continental and its customers to enter into

24 “hold-up” licenses because of the threat of injunctions and endless new infringement lawsuits.

25 II. FACTUAL BACKGROUND

26 A. The Nature and Risks of Standardization


27 Avanci’s Members own allegedly standard-essential patents subject to the obligations of

28 various standard-setting organizations (“SSOs”), i.e., the European Telecommunications

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1 Standards Institute (“ETSI”), the Alliance for Telecommunications Industry Solutions (“ATIS”),

2 and the Telecommunications Industry Association (“TIA”). (Dkt. 97 (FAC), ¶¶ 86–102.) These

3 SSOs have been involved in standardizing numerous 2G, 3G, and 4G cellular technologies. (Id.,

4 ¶¶ 70–76.) The development of technology standards such as those at issue in this litigation has

5 many benefits, including for companies who participate in standardization, companies who

6 manufacture products compliant with the standards, consumers, and society as a whole.

7 Along with the many advantages of standardization, however, the incorporation of

8 technology into a standard also carries the risk that SEP owners will engage in anti-competitive

9 behavior. See Microsoft Corp. v. Motorola Inc., 795 F.3d 1024, 1030-31 (9th Cir. 2015)

10 (“Microsoft II”). As the Ninth Circuit has recognized, once a standard becomes widely adopted,

11 SEP holders obtain substantial leverage over manufacturers of standard-compliant products and

12 can abuse that leverage by demanding more for a license than the patented technology would be

13 worth had it not been adopted by the SSO. See id. at 1031. The tactic of withholding a license

14 unless and until a manufacturer agrees to pay an unduly high royalty rate for an SEP is referred to

15 as “hold-up.” Id.; Ericsson, Inc. v. D-Link Sys., 773 F.3d 1201, 1209 (Fed. Cir. 2014).

16 To mitigate the risk that SEP holders will extract more than the fair value of the patents,

17 SSOs require SEP holders to declare potentially essential patents and commit to license them on

18 FRAND terms and conditions. For example, the ETSI IPR Policy requires SEP owners to commit

19 to provide “irrevocable licenses on fair, reasonable and nondiscriminatory (‘FRAND’) terms and

20 conditions.” (Decl. of Matthew W. Holder, Ex. 4 at § 6.1.) The TIA policy requires any SEP

21 holder that wishes to monetize its essential patents to commit to license SEPs “to all applicants

22 under terms and conditions that are reasonable and non-discriminatory . . . to the extent necessary

23 for the practice of . . . the Standard.” (Id., Ex. 5 at § 3.1.1(2)(a).) The ATIS policy requires SEP

24 holders to commit that a license “will be made available . . . to the applicants desiring to utilize the

25 license for the purpose of implementing the standard . . . under reasonable terms and conditions

26 that are demonstrably free of any unfair discrimination.” (Id., Ex. 6.)
27 Avanci’s Members have declared many of their patents as essential, or are successors-in-

28 interest to patents that were declared essential to the 2G, 3G, and 4G telecommunications

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1 standards established by the above SSOs. (FAC, ¶¶ 80–102.) Therefore, Avanci’s Members are

2 bound to license their patents consistent with the SSO’s policies. (See id.)

3 Unfortunately, the mere existence of the FRAND commitment alone, without judicial

4 enforcement, does not protect against the efforts of some SEP owners to act in an anti-competitive

5 manner. As the Federal Trade Commission has explained, SEP owners seeking to inappropriately

6 exploit the value added by virtue of standardization “may have especially severe consequences for

7 innovation and competition in the context of standardized technology.” (Holder Decl., Ex. 7 at p.

8 22.) This pursuit of overcompensation would raise prices or even “threaten to undermine the

9 collaborative innovation that can result from the standard setting process.” (Id., p. 28.)

10 Courts and commentators also have recognized that “injunctive relief against infringement

11 is arguably a remedy inconsistent with the [FRAND] licensing commitment.” Microsoft I, 696

12 F.3d at 885; Realtek Semiconductor Corp. v. LSI Corp., 946 F. Supp. 2d 998, 1006-08 (N.D. Cal.

13 2013); Holder Decl., Ex. 8 at pp. 6–7 (“Patent holders should not generally be allowed to obtain

14 injunctions in the presence of a FRAND commitment . . . [I]njunctions are inimical to some of the

15 fundamental objectives of FRAND, such as fostering broad licensing of SEPs and adoption of the

16 standard.”). This is because the mere threat of injunctive relief gives the SEP owner additional

17 power to hold up implementers. See Microsoft I, 696 F.3d at 886; Holder Decl., Ex. 8 at p. 7 (“An

18 injunction provides a means for a patent holder to exercise the additional market power gained by

19 inclusion of a patent in a standard, and the threat of an injunction places at risk the investment and

20 ongoing profits of firms using the standard. This allows the patent holder to engage in hold-up

21 and ask for payment in excess of the ex ante value of the patent.”).

22 B. The Dispute Between the Parties

23 1. Continental sought a direct license to Defendants’ SEPs.

24 Continental is one of the leading providers of TCUs to OEMs in the automotive industry.

25 (FAC, ¶¶ 1, 17–18.) No later than early 2017, Defendants began targeting Continental customers,

26 asserting that their connected cars practice the cellular standards covered by the alleged SEPs, and
27 insisting they pay excessive royalty rates. (See id., ¶¶ 137–148.) But in the automotive industry,

28 intellectual property licenses have historically been handled by the suppliers of the components

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1 (given, for example, that there are hundreds, if not thousands, of separate components which are

2 incorporated into the vehicle). As the parties responsible for implementing the technology,

3 component suppliers are in a much better position than OEMs to determine whether or not a given

4 component practices a patented technology. As the supplier of TCUs to OEMs and a willing

5 licensee, Continental attempted to negotiate with Defendants in a good-faith effort to obtain

6 FRAND licenses to all relevant SEPs, but was continually rebuffed by Avanci and various of its

7 members. (See id.) Rather, Defendants are only willing to grant direct licenses to OEMs and have

8 failed or refused to grant direct licenses to suppliers.

9 2. Daimler and others filed complaints against Nokia with the European Commission.

10 After years of Defendants, and Nokia in particular, refusing to offer a direct license to

11 Daimler’s suppliers and insisting, contrary to Defendants’ FRAND obligation, that they will only

12 directly license at the OEM level, Daimler filed a complaint against Nokia with the European

13 Commission in November 2018. (Dkt. 32-22, ¶¶ 2–5.) Daimler noted that “[f]air and non-

14 discriminatory access to these standards for all users of the essential patents for

15 telecommunications standards is a key prerequisite for the development of new products and

16 services for connected driving.” (Id.)

17 Daimler’s complaint was followed by similar individual complaints from some of

18 Daimler’s suppliers, including Continental, Bury, and Valeo, as well as chip and module maker

19 Gemalto. (Id.) Continental’s complaint to the European Commission related directly to Nokia’s

20 refusal to license SEPs for mobile telecommunication standards on FRAND terms to any supplier

21 of automotive components seeking a license, including Continental. (See id.)

22 3. Nokia then filed retaliatory infringement lawsuits against Daimler.

23 Rather than adjust course and offer direct FRAND licenses to Daimler’s suppliers, Nokia

24 further exacerbated the dispute by filing a wide array of retaliatory patent infringement lawsuits

25 intended to pressure Daimler into taking a non-FRAND license. On March 20, 2019, Nokia filed

26 ten patent infringement suits against Daimler in Germany: three each in Munich and Düsseldorf,
27 and four in Mannheim (collectively, the “Nokia German Actions”). (See Dkt. 32-22, ¶ 6.) All of

28 the patents asserted against Daimler in Nokia’s German Actions were declared by Nokia to ETSI

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1 and thus are subject to the FRAND obligation. (See id., ¶¶ 9, 15, 20, 25, 30, 36, 41, 45, 50, 55,

2 Exs. 4, 8, 11, 14, 19, 22, 24, 27, 30.) Nokia’s complaints against Daimler also claim that the

3 asserted patents are essential to the 3G and 4G standards. (See, e.g., id., ¶¶ 8–9; Ex. 3 §§ II, V.)

4 Nokia’s German Actions expressly concern Daimler vehicles with TCUs, including those supplied

5 by Continental. (Id., ¶ 8; Ex. 3 at § III (emphasis added).)

6 In each of its German Actions, Nokia expanded its original complaints to include a request

7 for injunctive relief against Daimler’s products incorporating Continental TCUs. (See id., ¶¶ 17,

8 22, 27, 32, 38, 47, 52, 57; Exs. 9, 12, 15, 17, 20, 25, 28, 31.) Nokia added these requests for

9 injunctive relief very close in time to when Continental filed the current lawsuit. These requests

10 for injunctive relief are not directed toward protecting any of Nokia’s rights (because Nokia can

11 otherwise obtain FRAND royalties), but rather toward pressuring Daimler to accept a license.

12 Two of Continental’s affiliates formally intervened in Nokia’s German Actions under a

13 Third Party Notification procedure initiated by Daimler. (Id., ¶ 11, Ex. 5.) Under German law,

14 Daimler is only entitled to file such notice as to a third party against which it “believes to be able

15 to raise indemnification claims . . . in case of a negative outcome of the proceedings.” (Id., ¶ 11.)

16 4. Continental filed the present action to resolve the global dispute.

17 On May 10, 2019, Continental initiated this litigation because Defendants’ collusive

18 agreement to refuse licenses to Continental and other suppliers on FRAND terms breaches

19 Defendants’ FRAND commitments and constitutes anticompetitive conduct, and also because the

20 royalties demanded by Defendants are far higher than what should be considered FRAND. (FAC,

21 ¶¶ 8–15.) Continental asks the court to “[a]djudge and decree that Continental and other suppliers

22 in the automotive supply chain are entitled to a license from Defendants” for all relevant SEPs,

23 and to “set the FRAND terms and conditions” of the license. (Id., Prayer For Relief D–E.) In

24 contrast to Defendants’ piecemeal patent infringement lawsuits, this litigation is intended to result

25 in a global and binding FRAND license for Continental and its affiliates which would resolve all

26 disputes between Continental and Defendants related to Defendants’ SEPs.


27 5. Nokia obtained a secret order thwarting Continental’s prior motion.

28 On June 12, 2019, Continental filed a motion for anti-suit injunction seeking to enjoin

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1 Nokia from prosecuting its German actions against Daimler and enjoining Defendants from

2 instituting against Continental or its customers any additional actions alleging infringement of

3 their global 2G, 3G and 4G SEPs during the pendency of the FRAND proceeding in this Court.

4 (See Dkt. 32.) Nokia then filed a motion to enlarge its time to respond to the motion for anti-suit

5 injunction, claiming that “the enlargement to time would cause no prejudice to Continental.”

6 (Dkt. 45.) The Court extended Nokia’s time to oppose the motion until July 24, 2019. (Dkt. 56.)

7 On June 20, 2019, Continental filed an amended complaint adding another Avanci

8 member, Sharp, as a defendant after learning that Sharp had filed a patent infringement complaint

9 against Daimler in Germany. (Dkt. 62, refiled with leave from the Court on July 23, 2019 at Dkt.

10 97.) On June 28, 2019, Continental filed a Supplemental Declaration in support of its Motion for

11 Anti-Suit Injunction detailing the relevance of Sharp’s complaint to Continental’s motion.

12 (Dkt. 82.) Counsel for Sharp was served with Continental’s FAC on June 24, 2019, and with

13 Continental’s Motion for Anti-Suit Injunction and Supplemental Declaration on June 28, 2019.

14 After the Court granted Continental leave to amend the complaint, Sharp was re-served with the

15 FAC, Motion for Anti-Suit Injunction, and the Supplemental Declaration. (Dkt. 120.)

16 On July 17, 2019, Nokia filed a notice letter informing the Court, and Continental, that it

17 had sought and obtained a secret injunction from the First Munich Regional Court ordering

18 Continental to withdraw its motion for an anti-suit injunction “immediately after service of th[e]

19 injunction order” as to the ten pending Nokia lawsuits in Germany, or face severe penalties,

20 including “up to EUR 250,000.00 for each case of contravention,” and/or potential imprisonment

21 of Continental’s board members. (Dkt. 89, 89-1 at 6–7.) On September 3, 2019, after Nokia

22 completed service of this “anti-anti-suit injunction,” Continental was forced to partially withdraw

23 its motion. (Dkt. 166.) On the same day, Continental filed its opposition to the injunction in

24 Germany. (Decl. of Dr. Frank-Erich Hufnagel, ¶ 42.) A hearing was held on October 2, 2019, and

25 a judgment was issued upholding the order. Continental is appealing the decision.1 (Id.)

26
1
27 In addition to the ex parte injunction obtained against Continental, Nokia also sought a similar
injunction against its ultimate parent company, Continental AG. (Id., ¶ 40.) The First Munich
28 Court initially rejected Nokia’s request for an injunction against Continental AG. (Id., ¶ 43.)

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1 On September 6, 2019, Sharp filed a Notice Letter that sought a court order to clarify

2 whether Continental’s pending motion for anti-suit injunction can be directed to Sharp.

3 (Dkt. 172.) On September 10, 2019, the Court denied without prejudice Continental’s motion for

4 anti-suit injunction, stating that “it is unclear whether the motion for anti-suit injunction, and if

5 granted, the anti-suit injunction, extends to Sharp,” but that “Plaintiff may refile a motion for anti-

6 suit injunction that includes Sharp.” (Dkt. 173, pp. 1–2.)

7 6. Sharp followed Nokia’s lead in filing infringement lawsuits against Daimler.

8 While the above was taking place, Sharp also began harassing Daimler with infringement

9 lawsuits, all for the benefit of Avanci. (FAC, ¶ 145.) Sharp has filed five such actions against

10 Daimler, asserting its SEPs as part of an apparently coordinated litigation campaign to “gang up”

11 on one customer (as a starting point), and thus force Daimler to accept a non-FRAND license. All

12 of Sharp’s German complaints were filed after Continental AG and Daimler filed their complaints

13 with the European Commission against Nokia, and all but one of these actions was filed after

14 Continental filed the present action seeking declaratory judgment that it is entitled to a license on

15 FRAND terms and conditions to Sharp’s SEPs through Avanci. Notably, rather than offering

16 Daimler a direct license to Sharp’s patents—and before even seeking to negotiate with Daimler in

17 any form—Sharp filed suit against Daimler and sent a letter stating that “[a] FRAND-license to

18 Sharp's SEP patent portfolio relating to the 3G and LTE Standard remains available to Daimler

19 through Avanci.” (Dkt. 82-1, ¶ 5 (emphasis added).) The message was clear—accept the Avanci

20 license or we (and perhaps other Avanci members) will keep suing you for infringement.

21 Specifically, on April 12, 2019, Sharp filed its first Complaint against Daimler alleging

22 infringement of European Patent No. 2154903 B1 (the “’903 Patent”). Sharp’s infringement

23 allegations related to the’903 Patent’s alleged essentiality to the LTE standard, specifically 3GPP

24 TS 36.321. (Hufnagel Decl., ¶¶ 8–9.) Sharp’s infringement allegations cover all of Daimler’s

25

26
After a hearing, the German court reversed its decision and granted the injunction on August 30,
27 2019. (Id.) Continental AG appealed that decision on September 3, 2019, and a hearing in the
Munich Higher Regional Court is scheduled on October 31, 2019. In the event Nokia’s anti-anti-
28 suit injunction is lifted by the German courts, Continental will apprise the Court here and address
whether further relief is appropriate given that development.
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1 LTE capable vehicles incorporating a telecommunications module. (See id., ¶ 9.)

2 On June 5, 2019, nearly a month after Continental filed the present action against Avanci,

3 Sharp filed a second patent infringement Complaint against Daimler in the Mannheim Regional

4 Court, Case No. 2 O 87/19, alleging infringement of EP 2 129 181 (the “’181 Patent”) based on

5 implementation of the LTE standard. (Hufnagel Decl., ¶¶ 13–14.) Between June 25 and 28, after

6 Continental filed its original motion for anti-suit injunction and its original FAC to add Sharp,

7 Sharp filed three additional patent infringement lawsuits against Daimler in Germany – Case Nos.

8 21 O 8609/19, 21 9918/19, and 7 O 8818/19. (Id., ¶¶ 18–34.) Like the first two, all three of these

9 new actions involved patents declared as essential to ETSI and allege infringement based on the

10 implementation of LTE in TCUs incorporated into Daimler’s vehicles. (Id., ¶¶ 19, 25, 31.)

11 In its German Actions, Sharp is seeking claims for information and rendering of account as

12 to the extent of infringing activities, as well as a declaratory judgment that Daimler is liable to pay

13 damages for the infringing activities. (Id., ¶¶ 10, 15, 20, 26, 32.) Most concerningly,

14 approximately three weeks ago, on September 17, 2019, Sharp amended its complaints in Case

15 No. 21 O 8609/19 (filed June 25, 2019) and Case No. 21 O 9918/19 (filed June 27, 2019) to add

16 claims for injunctive relief, recall and destruction of Daimler’s vehicles. (Id., ¶ 22.)

17 Continental, through its affiliates, supplies LTE-capable TCUs to Daimler which are the

18 subject of Sharp’s infringement allegations, and Continental is under contract to continue

19 providing such units to Daimler in the future. (Decl. of Brian Droessler, ¶¶ 11-13.) On June 28,

20 2019, Daimler filed formal Third Party Notifications in Case Nos. 2 O 46/19 and 2 O 87/19

21 notifying two of Continental’s affiliates—Continental Automotive GmbH and Continental

22 Automotive Hungary Kft.—that components originating from these entities are involved in the

23 patent infringement action. (Hufnagel Decl., ¶¶ 11, 16.) Continental Automotive GmbH and

24 Continental Automotive Hungary Kft. formally intervened in those proceedings on July 8, 2019.

25 (Id., ¶¶ 12, 17.) Daimler has filed a similar Third Party Notification in the remaining three Sharp

26 German Actions, and Continental Automotive GmbH and Continental Automotive Hungary Kft.
27 expect to formally intervene in that case in the near future. (Id., ¶¶ 21, 23, 27, 29, 33–34.)

28

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1 7. Conversant then joined its cohorts in suing Daimler.

2 Conversant has (not coincidentally) adopted the same strategy as Nokia and Sharp. On

3 August 13, 2019, Conversant filed a patent infringement complaint against Daimler in the Munich

4 First Regional Court, Patent Division, Docket No. 21 O 11384/19. (Hufnagel Decl., ¶¶ 35-39.)

5 Just like Nokia and Sharp, Conversant’s German Action alleges infringement based on the

6 inclusion of LTE-capable TCUs in Daimler vehicles. (Id., ¶¶ 36-37, Ex. 13 at ¶ 165 (“Since the

7 patent is essential for the LTE standard and therefore the automobiles challenged by the action,

8 which are equipped with LTE-capable TCUs, have to comply with the standard specifications, the

9 defendant directly infringes device claim 1.”).) Indeed, European Patent No. 2934050 B1,

10 asserted by Conversant against Daimler, issued from a patent family assigned by Nokia to

11 Conversant (formerly Core Wireless Licensing S.A.R.L.). (See Holder Decl., ¶ 10.)

12 As discussed above, Continental and its affiliates are suppliers of the LTE-capable TCUs

13 which are the focus of Conversant’s complaint against Daimler. Daimler has not yet filed formal

14 Third-Party Notifications in this action, but Continental expects Daimler to issue such notices to

15 Continental Automotive GmbH and Continental Automotive Hungary Kft. as suppliers of the

16 accused components. (Hufnagel Decl., ¶ 39.) Once Third-Party Notifications are issued,

17 Continental Automotive GmbH and Continental Automotive Hungary Kft. plan to formally

18 intervene in Conversant’s German Action.

19 III. APPLICABLE LEGAL STANDARD

20 A TRO and preliminary injunction preserve the status quo so the Court may adjudicate a

21 potentially meritorious claim for relief while protecting the movant against irreparable harm. See

22 Textile Unlimited, Inc. v. A. BMH and Co., 240 F.3d 781, 786 (9th Cir. 2001) (“A preliminary

23 injunction is not a preliminary adjudication on the merits, but a device for preserving the status

24 quo and preventing the irreparable loss of rights before judgment.”); Granny Goose Foods, Inc. v.

25 Bhd. of Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974) (purpose of TRO is

26 “preserving the status quo and preventing irreparable harm”). “The same legal standard applies to
27 a motion for a temporary restraining order and a motion for a preliminary injunction.” Stuhlbarg

28 Int'l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n. 7 (9th Cir.2001).

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1 This Court has the power to enjoin parties from proceeding with an action in the courts of a

2 foreign country. See Microsoft I, 696 F.3d at 880–81; E. & J. Gallo Winery v. Andina Licores S.A.,

3 446 F.3d 984, 989 (9th Cir. 2006). “Such injunctions allow the court to restrain a party subject to

4 its jurisdiction from proceeding in a foreign court in circumstances that are unjust.” Id. Anti-suit

5 injunctions are appropriate when a party’s foreign actions “frustrate[] this court’s ability to

6 adjudicate issues properly before it” or when “[w]ithout the issuance of an anti-suit injunction, the

7 integrity of the action before this court will be lessened.” Microsoft Corp. v. Motorola, Inc., 871

8 F. Supp. 2d 1089, 1100 (W.D. Wash. 2012), aff’d, 696 F.3d 872 (9th Cir. 2012). The Ninth

9 Circuit emphasizes that district courts have “a duty to protect their legitimately conferred

10 jurisdiction to the extent necessary to provide full justice to litigants.” Gallo, 446 F.3d at 995.

11 A request for an anti-suit injunction is evaluated under “the Gallo test,” not the traditional

12 test for a preliminary injunction. See Microsoft I, 696 F.3d at 881; Applied Med. Distrib. Corp. v.

13 Surgical Co. BV, 587 F.3d 909, 913 (9th Cir. 2009); Zynga, Inc. v. Vostu USA, Inc., 816 F. Supp.

14 2d 824, 827 (N.D. Cal. 2011) (“To obtain an anti-suit injunction, the applicant is not required to

15 show a likelihood of success on the merits of the underlying claim. Rather, it need only

16 demonstrate that the factors specific to an anti-suit injunction weigh in its favor.”); id. at 827 n.4

17 (noting that “the absence of any mention of the [factors for preliminary injunction] by the Applied

18 Medical Distribution court suggests” that consideration of those factors for an anti-suit injunction

19 is unnecessary”); Huawei Techs., Co. v. Samsung Elecs. Co., Case No. 3:16-CV-02787-WHO,

20 2018 WL 1784065, at *4 (N.D. Cal. Apr. 13, 2018) (“Huawei”) (“The Ninth Circuit’s analysis [in

21 Microsoft] convinces me that I need only focus on the three-part inquiry under Gallo . . . .”).

22 Under the Gallo test, the Court first determines “whether or not the parties and the issues

23 are the same” in both actions, and whether the current action is dispositive of the action to be

24 enjoined. Microsoft I, 696 F.3d at 881, citing Gallo, 446 F.3d at 991; see also Applied Med., 587

25 F.3d at 914–15 (explaining the first step of the Gallo test is a “functional inquiry concerning

26 dispositiveness,” not a requirement that the claims be identical). Second, the court determines
27 whether at least one of the “Unterweser factors” applies, asking whether the litigation to be

28 enjoined would “(1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or

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1 oppressive; (3) threaten the issuing court’s in rem or quasi in rem jurisdiction; or (4) where the

2 proceedings prejudice other equitable considerations.” Microsoft I, 696 F.3d at 881–82; In re

3 Unterweser Reederei, GmbH, 428 F.2d 888, 890 (5th Cir. 1970). Finally, the court assesses

4 whether the proposed injunction’s impact on comity is tolerable. See Microsoft I, 696 F.3d at 881.

5 However, “[c]omity is less likely to be threatened in the context of a private contractual dispute

6 than in a dispute implicating public international law or government litigants.” Id. at 887.

7 IV. SHARP AND CONVERSANT SHOULD BE ENJOINED FROM SEEKING

8 INJUNCTIVE RELIEF AGAINST CONTINENTAL PRODUCTS, AND

9 DEFENDANTS SHOULD BE ENJOINED FROM FILING NEW LAWSUITS

10 TARGETING CONTINENTAL PRODUCTS.

11 A. The Parties and Issues Are Functionally the Same.

12 “The threshold consideration for a foreign anti-suit injunction is whether or not the parties

13 and the issues are the same in both the domestic and foreign actions, and whether or not the first

14 action is dispositive of the action to be enjoined.” Huawei, 2018 WL 1784065 at *6 (internal

15 citations and quotations omitted). The court considers this “functionally, not in a technical or

16 formal sense, but in the sense that all the issues in the foreign action can be resolved in the local

17 action.” Id. Perfect identity is not required. Instead, courts have held that “[w]here parties to the

18 two actions are affiliated or substantially similar, such that their interests are represented by one

19 another, courts have found the first requirement is met.” Int’l Equity Invs. Inc. v. Opportunity

20 Equity Partners Ltd., 441 F. Supp. 2d 552, 562 (S.D.N.Y. 2006) aff’d, 246 Fed.Appx. 73 (2d Cir.

21 2007); Gilbane Fed. v. United Infrastructure Projects Fzco, Case No. 14-cv-03254-VC, 2014 WL

22 4950011, at *3 (N.D. Cal. Sep. 24, 2014) (parties under common control are “treated as the same

23 if they are affiliated such that their interests can be represented by one another”).

24 Continental, as a manufacturer of the allegedly infringing products, is the real party-in-

25 interest in any patent infringement lawsuits filed by Defendants against Continental’s customers

26 (e.g., Sharp and Conversant’s pending actions against Daimler in Germany). Moreover, the relief
27 sought by Continental in this action—namely, that the Court “set the FRAND terms and

28 conditions that Continental is entitled to under Defendants’ obligations to the relevant SSOs . . .

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1 for a license to Defendants’ 2G, 3G, and 4G SEPs,” such that Continental can and will enter into a

2 FRAND license for the benefit of itself and its affiliates—would resolve any patent infringement

3 claims relating to Defendants’ SEPs against Continental and its customers. (FAC, pp. 61-62.)

4 1. Continental is the real party-in-interest where Defendants sue for patent

5 infringement based on the use of Continental and its affiliates’ products.

6 There is no dispute the named plaintiffs in the German lawsuits partly at issue in this

7 motion—Sharp Corp. (also known as Sharp Kabushiki Kaisha) and Conversant Wireless

8 Licensing SARL—are also defendants in the present action. (Hufnagel Decl., Exs. 1, 4-5, 8, 11,

9 13.) The lawsuits filed by Sharp and Conversant are clear that the accused functionality resides in

10 the LTE-capable TCUs—components which are supplied to Daimler, in part, by Continental, the

11 plaintiff in this case, and its affiliates. In the current lawsuits filed by Sharp and Conversant, and

12 indeed in any future lawsuits filed by any Defendant in this action targeting products from

13 Continental or its affiliate purchased and installed by a customer, Continental’s interests align with

14 its customer’s interests such that the “same parties” requirement is satisfied.

15 In the five pending Sharp cases, and in accordance with German procedure, Daimler

16 served two Continental affiliates—Continental Automotive GmbH and Continental Automotive

17 Hungary Kft. (the “Intervening Continental Affiliates”)—with Third Party Notifications of the

18 dispute, and those Continental affiliates have joined two of those cases as intervenors. (Hufnagel

19 Decl., ¶¶ 11-12, 16-17, 21, 27, 33, Exs. 2-3, 6, 9, 12.) Continental’s affiliates will formally

20 intervene in the remaining Sharp cases shortly, and likewise will intervene in the Conversant case

21 once a Third Party Notification is served (which Continental anticipates will occur). (Id., ¶¶ 23,

22 29, 34, 39.) Daimler’s notices recognize Continental’s legal interest in the German Actions and

23 the alignment of Continental’s interests with Daimler’s interests in those suits.

24 The interests of the Intervening Continental Affiliates are well represented by the plaintiff

25 entity in this action (“CAS” for purposes of this section). CAS is an indirect corporate subsidiary

26 of Continental Automotive GmbH, and is the global headquarters for the Continental Group’s
27 telematics business. (Droessler Decl., ¶¶ 2-5.) CAS is responsible for the Continental Group’s

28 research and development efforts related to the telematics control units (TCUs) at issue in the

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1 German Actions. (Id., ¶ 6.) Employees of CAS are primarily responsible for developing the

2 hardware and software for each of the TCU platforms developed and sold by the Continental

3 Group, including development of the specific TCUs sold to Daimler. (Id.) Employees of CAS

4 regularly travel to Daimler to discuss the architecture of TCUs and address Daimler’s technical

5 requirements. (Id., ¶ 10.) CAS employees also oversee production of TCUs designed by CAS

6 through affiliates in the Continental Group, including Continental Automotive Hungary Kft., for

7 certain TCUs supplied to Daimler. (Id., ¶ 11.) In bidding on TCU projects for Daimler, CAS

8 employees work in conjunction with employees from Continental Automotive GmbH, which

9 serves as a local customer interface in Germany and provides some local engineering support.

10 (Id., ¶ 12.) In some cases, CAS makes sales directly to Daimler’s U.S. subsidiary, and, in other

11 cases, the sale to Daimler may take place through another Continental affiliate (such as the two

12 Intervening Continental Affiliates). (Id., ¶ 13.) Regardless of the contracting formalities, CAS is

13 the entity ultimately responsible for designing, developing, overseeing, manufacturing, and selling

14 the TCUs to Daimler. (Id.) Daimler’s decision to send third-party notices to the Intervening

15 Continental Affiliates rather than CAS does not mean that CAS does not fully represent their

16 interests in the German Actions. Indeed, under German law, the Daimler entity in Germany could

17 only send third-party notices to the entities who supplied the TCUs or otherwise had a legal

18 interest in the outcome of the proceedings. (Dkt. 32-22, ¶ 9.)

19 Consistent with industry practices, in this case Continental is seeking to adjudicate the

20 terms and conditions of a worldwide license covering all sales of relevant products from

21 Continental and its worldwide affiliates. (FAC, ¶ 134; see also Holder Decl., Ex. 11, p. 10

22 (Nokia-approved publication from the European Committee For Standardization, acknowledging

23 that “[g]lobal portfolio licensing is a common practice” and “[a] global portfolio license provides a

24 license to all of the SEP owner’s relevant SEPs around the world, so enabling a licensee to

25 manufacture and sell its products or services anywhere in the world”).) In their German Actions,

26 both Sharp and Conversant represent that a license to their SEPs is available through Avanci.
27 (Hufnagel Decl., Exs. 1, 4-5, 8, 11, 13.) Notably, Avanci’s model license broadly defines

28 “affiliate” to mean “another Entity which controls, is controlled by, or is under common control

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1 with such first Entity.” (Dkt. 162-1, p. 57.) In other words, a Continental license with Avanci

2 would cover sales by the Intervening Continental Affiliates to Daimler, as well as sales by any

3 other Continental affiliates worldwide to additional Continental customers. In the present action,

4 Continental represents the interests of the Intervening Continental Affiliates in the German

5 Actions, and therefore the parties are sufficiently similar to satisfy the threshold requirements to

6 grant an anti-suit injunction.

7 With respect to the relationship between the Continental Group and Daimler, federal courts

8 recognize under the “customer suit exception” doctrine that manufacturers of allegedly infringing

9 products are the real party-in-interest when their customers are sued for infringement, and, on that

10 basis, enjoin patentees from litigating first-filed lawsuits against customers when there is a

11 separate proceeding involving the manufacturer. See In re Nintendo of Am., Inc., 756 F.3d 1363,

12 1365 (Fed. Cir. 2014); Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 1990). “The

13 customer suit exception is based on the manufacturer’s presumed greater interest in defending its

14 actions against charges of patent infringement; and to guard against possibility of abuse.” Kahn v.

15 GMC, 889 F.2d 1078, 1081 (Fed. Cir. 1989). “At the root of the preference for a manufacturer’s

16 declaratory judgment action is the recognition that, in reality, the manufacturer is the true

17 defendant in the customer suit.” Codex Corp. v. Milgo Elec. Corp., 553 F.2d 735, 737–38 (1st

18 Cir. 1977). As recognized in Codex, “it is a simple fact of life that a manufacturer must protect its

19 customers, either as a matter of contract, or good business, or in order to avoid the damaging

20 impact of an adverse ruling against its products.” Id. at 738. The “guiding principles” of the

21 customer suit exception are “efficiency and judicial economy.” Spread Spectrum Screening LLC

22 v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011).

23 The rationale underlying the customer suit exception is equally applicable here. In any

24 instance where Defendants file suit for patent infringement targeting Continental’s products (as

25 Nokia, Sharp, and Conversant have already done), Continental is the functional defendant in that

26 lawsuit regardless of whether it is a named party. In addition to the business need to protect its
27 customers, recognized repeatedly by the federal courts in the “customer suit exception” line of

28 cases, Continental has also received requests for indemnification from its customers related to

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1 Defendants’ infringement allegations related to the SEPs at issue in this litigation. (See, e.g.,

2 Holder Decl., Ex. 3.) Under similar circumstances, courts have recognized that a manufacturer

3 and customer are in privity based on an indemnification obligation “because they share the same

4 interest in the unfettered use of” an allegedly infringing product and the manufacturer “adequately

5 represent[s] this interest.” In re Personalweb Techs., LLC Patent Litig., Case No. 18-md-02834-

6 BLF, 2019 WL 1455332, at *8 (N.D. Cal. April 2, 2019) (finding Amazon and its customers were

7 privies based on their indemnity agreement). Moreover, resolving Defendants’ claims against

8 Continental’s products through this litigation, rather than litigating the issue in a piecemeal

9 fashion against different customers in different jurisdictions, promotes efficiency and judicial

10 economy. See Spread Spectrum Screening LLC, 657 F.3d at 1357.

11 For the above reasons, the interests of Continental and its customers in defending against

12 patent infringement claims which target Continental’s products are sufficiently aligned, such that

13 the “identity of parties” requirement for granting an anti-suit injunction is satisfied.

14 2. This lawsuit is dispositive of the matters to be enjoined.

15 In deciding whether to issue an anti-suit injunction, the Ninth Circuit has explained that a

16 court should assess “whether the issues are the same not in a technical or formal sense, but [rather]

17 in the sense that all the issues in the foreign action . . . can be resolved in the local action.”

18 Microsoft I, 696 F.3d at 882–83 (citations omitted). In Microsoft I, the Ninth Circuit affirmed the

19 anti-suit injunction issued by the trial court, agreeing that Microsoft’s RAND claim was capable of

20 resolving Motorola’s infringement claim in Germany because Motorola’s licensing offers included

21 the German patents and Motorola promised to license those German patents on RAND terms. See

22 id. at 883–84; see also Medtronic, Inc. v. Catalyst Research Corp., 518 F. Supp. 946 (D. Minn.

23 1981), aff’d, 664 F.2d 660 (8th Cir. 1981) (issuing an anti-suit injunction against the enforcement

24 of foreign patents based on a contract between the parties not to enforce the patents).

25 First and foremost, the present motion seeks to prevent Sharp and Conversant from

26 pursuing any request for injunctive relief against Daimler vehicles incorporating Continental’s
27 TCUs in the German Actions. Continental’s FAC alleges that Defendants have breached their

28 contractual commitments to the relevant SSOs, including ETSI, TIA, and/or ATIS, by refusing to

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1 license their alleged 2G, 3G, and/or 4G SEPs to Continental. (FAC, Prayer For Relief D–G.)

2 Continental asks this Court to declare that “Continental [is] entitled to a license from Defendants”

3 for all 2G, 3G, and 4G SEPs, and further to “set the FRAND terms and conditions that Continental

4 is entitled to under Defendants’ obligations to the relevant SSOs.” (Id. at Prayer For Relief D, E.)

5 Continental seeks a binding worldwide license to Defendants’ SEPs, consistent with Avanci’s

6 representations that the “Avanci license covers the entire essential 2G, 3G and 4G patent

7 portfolio” of its members. (Holder Decl., Ex. 9 (emphasis added).)

8 In similar situations, courts have recognized that “the availability of injunctive relief for

9 each party’s SEPs depends on the breach of contract claims.” Huawei 2018 WL 1784065, *12.

10 As the Huawei court recognized, adjudication of Continental’s breach of contract claim “will

11 resolve the propriety of injunctive relief for the parties' declared SEPs.” Id., at *12 n.15. Because

12 “[t]he contractual umbrella over the patent claims” controls, Microsoft II, 696 F.3d at 883, this

13 action is dispositive of Sharp and Conversant’s German Actions insofar as any request for

14 injunctive relief vis-à-vis Continental products is concerned. See id.

15 Continental also seeks to preserve the status quo by preventing Defendants from filing any

16 new patent infringement actions based on the use of Continental products. Several courts have

17 recognized the propriety of broadly resolving FRAND licensing disputes between parties in a

18 single action, rather than allowing piecemeal patent infringement suits on individual SEPs around

19 the world. In TCL v. Ericsson, for example, the court granted an anti-suit injunction to prevent

20 Ericsson from pursuing foreign patent claims on individual SEPs that were the subject of the

21 court’s global FRAND determination because “the [domestic] FRAND action should resolve [the

22 parties’] global licensing dispute.” TCL Communication Technology Holdings, Ltd. v.

23 Telefonaktienbolaget LM Ericsson, No. 8:14-cv-00341-JVS-DFM, Dkt. 279-1 at 5 (C.D. Cal. June

24 29, 2015). To the extent Defendants file any further patent infringement lawsuits based on the use

25 of Continental’s products to implement the 2G, 3G, and/or 4G standards, this action is capable of

26 mooting those actions. Indeed, if this Court determines that Defendants are obligated to license
27 their 2G, 3G, and 4G SEPs to Continental in the first instance and sets the FRAND terms and

28 conditions of the license—what Continental seeks—then Defendants’ infringement claims against

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1 all Continental products, whether sold to Daimler or any other Continental customer, will be

2 mooted. Once this Court enters the requested declaratory judgment and injunction, Continental’s

3 sales to its customers will be licensed, and Defendants’ patent rights exhausted. See Quanta

4 Comput., Inc. v. LG Elecs., Inc., 553 U.S. 617, 625 (2008).

5 Accordingly, the issues in this action are dispositive of any requests for injunctive relief by

6 Sharp and Conversant in the pending German Actions, and an anti-suit injunction is appropriate

7 against Defendants to prevent the proliferation of piecemeal litigation worldwide.

8 B. Multiple Unterweser Factors Justify an Anti-Suit Injunction.

9 The second step of the framework followed in Microsoft I is to determine if any of the

10 Unterweser factors apply. Importantly, only one factor needs to apply for injunctive relief to be

11 appropriate. See Gallo, 446 F.3d at 991. Here, multiple Unterweser factors support the requested

12 anti-suit injunction. Sharp and Conversant’s German actions are vexatious and oppressive, will

13 frustrate U.S. law and policy, and prejudice multiple equitable considerations. Likewise, any

14 newly-filed cases based on the inclusion of Continental’s products will also be vexatious and

15 oppressive, and risk undermining this Court’s ability to fairly resolve the parties’ dispute.

16 1. Requests for injunctions on SEPs frustrate important U.S. policies.

17 Courts have repeatedly found that foreign litigation will frustrate domestic policy when

18 defendants use it to evade contractual obligations or compliance with U.S. law. See Seattle

19 Totems Hockey Club, Inc. v. Nat'l Hockey League, 652 F.2d 852, 853, 856 (9th Cir. 1981) (where

20 plaintiff brought U.S. litigation alleging that certain contracts violated U.S. antitrust law, district

21 court appropriately enjoined defendants from bringing foreign suit seeking damages under the

22 contracts); Gallo, 446 F.3d at 991–92.

23 After this Court denied without prejudice Continental’s prior motion (which was mostly

24 focused on the Nokia actions against Daimler), Sharp added a claim for injunctive relief to two of

25 the lawsuits it filed against Daimler after Continental filed this action. (Hufnagel Decl., ¶ 22, 28.)

26 Further, Sharp and Conversant may still add claims for injunctive relief in the remaining German
27 actions against Daimler (German process would permit such late amendments).

28 Seeking injunctive relief against a willing licensee is antithetical to a SEP holder’s

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1 FRAND commitments. See, e.g., Microsoft I, 696 F.3d at 885 (upholding order preventing

2 enforcement of German injunction because injunctive relief was inconsistent with the contractual

3 RAND obligation); Apple v. Motorola, 757 F.3d 1286, 1332 (Fed. Cir. 2014); Holder Decl., Ex. 8

4 at pp. 6–7 (“As a matter of economics, injunctions are inimical to some of the fundamental

5 objectives of FRAND, such as fostering broad licensing of SEPs and adoption of the standard.”).

6 As the Ninth Circuit noted in Microsoft, seeking an injunction in the German action “[interferes]

7 with ‘equitable considerations’ by compromising the court's ability to reach a just result in the case

8 before it free of external pressure on Microsoft to enter into a ‘holdup’ settlement before the

9 litigation is complete.” Microsoft I, 696 F.3d at 886. In Huawei, the district court likewise

10 granted a motion for anti-suit injunction in view of the important policy of preserving the “court’s

11 ability to determine the propriety of injunctive relief.” Huawei, 2018 WL 1784065, at *12.

12 Defendants in this litigation are well aware of the power a threatened injunction possesses

13 to tip the bargaining power in their favor. Nokia, the defendant who initiated the campaign of

14 infringement litigation against Daimler (and the original assignee of the patent now being asserted

15 by Conversant against Daimler), took the position in prior litigation against Qualcomm that a SEP

16 owner “is not entitled to an injunction or exclusion order that could prevent implementation of the

17 standard—except in extraordinary circumstances, such as where the manufacturer refuses to pay

18 judicially determined FRAND compensation for the actual infringement of a valid essential

19 patent.” (Holder Decl., Ex. 2 at pp. 1–2.) As Nokia acknowledged, the “effects of an injunction

20 itself could be devastating and irreparable,” and the mere threat of an injunction can “substantially

21 distort royalty negotiations.” (Holder Decl., Ex. 1 at ¶ 34.)

22 Here, Continental has clearly demonstrated that it is a willing licensee by seeking a license

23 from Defendants and then by initiating the present litigation to adjudicate the terms of a binding

24 license when negotiations failed to produce a FRAND license offer from any Defendant. None of

25 the extraordinary circumstances which may justify an injunction vis-à-vis the practice of SEPs are

26 present in this case. Defendants should not be permitted to circumvent the policy against
27 enjoining a willing licensee in SEP cases by seeking injunctions against Continental’s downstream

28 customers in a foreign country. This is especially true when the alleged infringement relates to a

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1 single component in a product (the car) that otherwise incorporates countless other technologies

2 and is obviously not fundamentally based on the use of the cellular standards.

3 Defendants’ seeking of injunctive relief is particularly egregious in this case when

4 combined with their collective refusal “to offer individual fully exhaustive direct FRAND licenses

5 to suppliers in the automotive supply chain in order to preserve Avanci’s ability to extract supra-

6 competitive prices at the OEM level.” (FAC, pp. 47–48, 50–56.) Ninth Circuit precedent clearly

7 states that “SSOs requir[e] members who hold IP rights in standard-essential patents to agree to

8 license those patents to all comers on [FRAND] terms.” Microsoft I, 696 F.3d at 876 (emphasis

9 added); see also Microsoft II, 795 F.3d at 1031 (a “SEP holder cannot refuse a license to a

10 manufacturer who commits to paying the [F]RAND rate.”); FTC v. Qualcomm Inc., No. 17-CV-

11 00220-LHK, 2019 WL 2206013, at *75-81 (N.D. Cal. May 21, 2019) (finding Qualcomm’s policy

12 of licensing only at the OEM level inconsistent with its FRAND obligation and U.S. antitrust law).

13 Defendants are refusing to license at the component level “because it is more lucrative to license

14 only OEMs.” FTC v. Qualcomm, 2019 WL 2206013, at *75–81. An anti-suit injunction is proper

15 in this case where Defendants are “attempting to escape application of the antitrust laws to [its]

16 conduct” by using the filing of serial patent litigation and the threat of injunctions to pressure

17 Continental’s customers to accept non-FRAND terms, all while trying to avoid or otherwise delay

18 an adjudication by this Court that its refusal to license Continental is a breach of FRAND and in

19 violation of U.S. antitrust law. See Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 731

20 F.2d 909, 932 (D.C. Cir. 1984).

21 In short, preventing SEP holders from abusing their dominant position by using injunctive

22 relief to force a settlement of claims on non-FRAND terms, all while refusing to license a willing

23 manufacturer further upstream in the supply chain, is exactly in line with U.S. law and policy.

24 2. Defendants’ lawsuits are (and will be) vexatious and oppressive.

25 An anti-suit injunction is also appropriate under the Unterweser factors because

26 Defendants’ filing of serial litigation is vexatious and oppressive to Continental and its customers,
27 and interferes with this Court’s ability to reach a just result free of external pressure on

28 Continental and its customers to enter into a “hold-up” settlement before the litigation is complete.

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1 In Microsoft I, the court found that Motorola’s actions raised concerns of “duplicative and

2 vexatious litigation” which were “heightened by the fact that Motorola’s commitments to the ITU

3 involved approximately 100 Motorola owned patents, yet Motorola invoked the German Action

4 implicating only two . . . of these patents and sought injunctive relief in Germany before this court

5 could adjudicate that precise issue.” Microsoft I, 696 F.3d at 886.

6 Defendants in this case have similarly chosen to file piecemeal infringement actions

7 against Daimler in an effort to force it to sign a non-FRAND license. As discussed above, all but

8 one of the Sharp and Conversant German actions were filed after Continental filed the present

9 litigation, and Sharp added its claims for injunctive relief against Daimler just three weeks ago, on

10 September 17, 2019. (Hufnagel Decl., ¶¶ 8, 13, 18, 22, 24, 28, 30, 36.) The German Actions filed

11 by Sharp and Conversant, like any similar infringement actions filed on individual SEPs, will not

12 directly resolve the disputes between either Continental or its customers and Defendants. Rather,

13 Defendants’ campaign is calculated to “substantially distort royalty negotiations” by pressuring

14 Continental’s customers with injunctive relief and raising the cost for both Continental (via the

15 successive intervention requests) and its customers to defend against such actions. (Holder Decl.,

16 Ex. 1 at ¶ 34; Droessler Decl., ¶ 6.) Defendants, including Sharp and Conversant, are trying to

17 pressure Continental, Daimler, and other Continental customers watching this litigation play out

18 (and, lest there be any doubt, this case is being closely watched by all in the automotive industry)

19 to capitulate to an Avanci license before this Court has the opportunity to reach a just result on the

20 merits of Continental’s claims. The risk of distortion is even greater here because Defendants seek

21 injunctive relief excluding entire vehicles from the market (with retail prices almost always well in

22 excess of $30,000), based merely on their inclusion of a TCU which is obviously tangential to the

23 overall functionality of the vehicle. Where, as here, Continental has come to the Court seeking a

24 binding FRAND license covering all relevant products made and sold by it and its affiliates,

25 Defendants have no justification for harassing Continental’s customers with patent infringement

26 litigation based on their use of those same products.


27 Any of the factors discussed above, by itself, “may justify a foreign anti-suit injunction.”

28 Microsoft I, 696 F.3d at 882 n.9. Because multiple Unterweser factors apply here, Continental’s

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1 request for an anti-suit injunction is especially appropriate.

2 C. The Impact of an Injunction on Comity Is Tolerable.

3 The final step of the Gallo analysis is to address whether the injunction’s “impact on

4 comity is tolerable.” Gallo, 446 F.3d at 991. “Comity is the ‘recognition which one nation allows

5 within its territory to the legislative, executive or judicial acts of another nation, having due regard

6 both to international duty and convenience, and to the rights of its own citizens, or of other

7 persons who are under the protection of its laws.’” Gallo, 446 F.3d at 994 (citations omitted).

8 Comity is “neither a matter of absolute obligation . . . nor of mere courtesy and good will.” Id.

9 The Court need not “calculate the precise quantum of the injunction’s interference with comity,”

10 but rather need only determine “whether any such interference is so great as to be intolerable.”

11 Microsoft, 696 F.3d at 886. The Ninth Circuit has made clear that private contractual disputes like

12 this case have little, if any, impact on comity. See id. at 887.

13 The anti-suit injunction requested by Continental would have little impact on comity. This

14 is a private commercial dispute based on the contractual promises made by Sharp, Conversant, and

15 the other Defendants to license their SEPs on FRAND terms and conditions. The purpose of the

16 present lawsuit is to enforce Defendants’ obligation to license their SEPs to Continental, obtain a

17 ruling that Defendants’ demanded royalty rates are not FRAND, and establish the FRAND terms

18 and conditions for a license to Defendants’ SEPs so the parties may enter into such license. The

19 requested anti-suit injunction merely (1) prevents Sharp and Conversant from using a request for

20 injunctive relief as leverage to force Continental’s customer Daimler to accept a non-FRAND

21 license (it does not seek to stop the cases in their entirety, e.g., to the extent they seek monetary

22 relief or are directed to non-Continental devices), and (2) prevents Defendants from engaging in a

23 similar campaign of harassment by filing a slew of new patent infringement actions against

24 Continental’s customers in an attempt to capture supra-FRAND royalty rates. All of the above is

25 intended to afford this Court the fair opportunity to adjudicate Defendants’ obligations under their

26 FRAND commitments without the risk of inconsistent, piecemeal judgments in a foreign court.
27 Courts may also consider "[t]he order in which the domestic and foreign suits were filed"

28 in evaluating the impact on comity. See Microsoft I, 696 F.3d at 887, citing Applied Med.,587 F.3d

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1 at 921 (where “subsequent filing” of foreign action “raises the concern that [party] is attempting to

2 evade the rightful authority of the district court,” enjoining foreign action would not “intolerably

3 impact comity”). In this case, five of the six German Actions at issue in this motion were filed

4 after Continental filed this lawsuit, and all of the requests for injunctive relief targeted by this

5 motion post-date Sharp being added to this lawsuit. “The scope of the injunction further indicates

6 that the impact on comity is tolerable.” Huawei, 2018 WL 1784065 at *12 (finding “negligible

7 impact on comity” where the scope was limited to Huawei seeking injunctive relief).

8 V. A TRO IS NECESSARY TO MAINTAIN THE STATUS QUO.

9 A TRO and subsequent anti-suit injunction are devices “for preserving the status quo and

10 preventing the irreparable loss of rights before judgment.” Sierra On-Line, Inc. v. Phoenix

11 Software Inc., 739 F.2d 1415, 1422 (9th Cir. 1984). As noted in the ex parte application,

12 Continental seeks a TRO that will do two things: (1) provide the relief sought in this application

13 while it remains pending before the Court (to bridge the time from filing to a decision on the

14 application); and (2) preclude Defendants from seeking a so-called “anti-anti-suit injunction” that

15 would undermine this Court’s ability to decide Continental’s application on the merits.

16 If the Court does not enter a TRO in this case, there is a very real likelihood that Sharp,

17 Conversant, and the other Defendants will use the time while this motion remains pending to

18 undermine the relief sought by Continental, and even seek to prohibit Continental from having its

19 motion heard on the merits. Regarding the latter risk, Nokia has already shown a willingness to

20 seek extraordinary (and secret) remedies from the German courts to prevent this Court from

21 reaching the merits of this case. Without a TRO, there is a substantial threat that Sharp and/or

22 Conversant will follow Nokia’s lead and seek an “anti-anti-suit injunction” in Germany, which—if

23 successful—would force Continental to withdraw this motion under penalty of severe sanctions.

24 A TRO preventing Defendants from seeking such an order in Germany until this Court has an

25 opportunity to decide Continental’s motion is exactly the type of order contemplated by Fed. R.

26 Civ. P. 65 to preserve the status quo and prevent Continental’s irreparable loss of rights.
27 Regarding the former risk, Continental’s motion risks being rendered substantially less

28 meaningful and effective if—while this motion remains pending before this Court—Sharp and

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1 Conversant were allowed to continue adding requests for injunctive relief to their German Actions,

2 and Defendants were otherwise permitted to file still further patent infringement lawsuits against

3 Continental’s customers (adding to the 16 already filed by Nokia, Sharp, and Conversant). The

4 pursuit of injunctive relief is precisely intended to coerce Continental’s customer Daimler to enter

5 into a non-FRAND license. As Nokia itself previously argued, the “effects of [a product]

6 injunction itself could be devastating and irreparable,” with the potential to “substantially distort

7 royalty negotiations, as patent holders may seek unreasonable royalties through the mere threat of

8 lawsuits and injunctions thus practically holding hostage the entire revenue stream and profits of

9 the target company’s relevant business.” (Holder Decl., Ex. 1 at ¶ 34.) Further, the filing of new

10 actions targeting the use of products made or sold by Continental and affiliates—which in turn

11 will force Continental or its affiliates to have to intervene in those cases at great expense—can

12 only be intended to harass Continental and its customers, and thus exert undue leverage, given that

13 Continental has already indicated here that it wants an order requiring Defendants to license

14 Continental, and setting and imposing the FRAND terms and conditions for such license.

15 Defendants cannot reasonably argue that the “balance of hardships” weighs against a TRO.

16 Other than stopping Sharp’s ability to pursue injunctive relief in the two cases where such request

17 was added three weeks ago, a TRO does nothing more than preserve the status quo by preventing

18 Sharp, Conversant, and the other Defendants from filing new, additional lawsuits or remedy

19 requests in the future, prior to the Court’s decision on this motion. In particular, with the

20 exception noted above, Sharp and Conversant are merely prohibited from adding new requests for

21 injunctive relief targeting Continental products to their pending cases. They are not prohibited

22 from continuing the cases in all other respects. Likewise, Defendants would be prohibited only

23 from filing new lawsuits targeting Continental products. Defendants have no legitimate need to

24 add to the 16 such cases already filed when Continental seeks a binding license here in this action.

25 VI. CONCLUSION

26 For the reasons set forth herein, Continental respectfully requests that the Court grant its
27 request for a TRO and issue an order to show cause why the requested anti-suit injunction should

28 not issue. It is only fair that the status quo be maintained while the Court decides this motion.

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1 Dated: October 8, 2019

2 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP


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4 By /s/ Matthew W. Holder


STEPHEN S. KORNICZKY
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MARTIN R. BADER
6 MATTHEW W. HOLDER
MICHAEL W. SCARBOROUGH
7 MONA SOLOUKI
LAI L. YIP
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9 Attorneys for Plaintiff Continental Automotive


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