| 12:28 PM EST

Daimler Slapped with Second Injunction over Patent Use

Nokia and now Sharp win okay to block sales in Germany...at a price
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Daimler faces a second sales ban in Germany over its unlicensed use of patented connectivity technologies.

A regional court in Munich has granted electronics supplier Sharp an injunction to block sales of Daimler vehicles because the carmaker refuses to pay the demanded licensing fee. Cellular service Nokia won a similar injunction from a court in Mannheim last month.

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“Essential” Patents

Both vendors want Daimler to pay them royalties on so-called “standard-essential patents” covering telematics technologies that connect Mercedes-Benz cars to their surroundings—via the driver’s smartphone, for example.

Standard-essential patents apply to a special class of technologies that are, in effect, mandated by regulation. Daimler contends that Nokia, Sharp and other companies are abusing their regulation-defined market position by demanding excessive fees.

This is a very big issue for carmakers. All of them agree that their cars are quickly becoming cellphones on wheels and will require more and more connectivity technologies.

Pay to Play

The two court rulings are important milestones in the dispute. But under German law, they’re only the first step.

The country’s legal system requires a plaintiff to post a security deposit ahead of legal action. The funds are intended to cover the defendant’s expenses if the complaint is overturned on appeal.

The Mannheim court says Nokia must post a whopping $8.3 billion in collateral to pursue its sales ban against Daimler. The Munich court asks only a $6.5 million deposit from Sharp, which makes further action far more likely.

Naturally, Daimler wants to avoid a sales ban. But it doesn’t want to be forced into paying never-ending costly royalties to avoid it.

What’s Next?

Courts worldwide have tended to favor the patent holder in disputes like this one. But they also recognize that holders of standard-essential patents must be reasonable in their royalty demands.

With the Daimler debate tied up with multiple cases in multiple regional courts, a resolution in Germany seems headed for slow, case-by-case resolution.

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