HMD addresses problems involving the EVS substandard of 4G LTE

HMD Global Oy (“HMD“) welcomes the decision of the German Federal Patent Court (Bundespatentgericht) to invalidate all the claims asserted against HMD of the German counterpart to the European Patent EP 3,132,443. Said patent is one of the several patents that VoiceAge EVS LLC (“VAEVS“, a patent monetization entity controlled by the US investment bank Fortress having acquired its patents from a different Canadian company called VoiceAge Corporation, “VAC“) has litigated against HMD in each of Germany, the USA and Brazil. As is regrettably common, a separate German patent infringement court has already earlier issued an injunction against HMD based on said patent, even though its asserted claims have now been adjudged invalid. Altogether five such injunctions remain in force against HMD in Germany for the time being.

VAEVS originally commenced litigation based on its patents before asserting any patents or making any licensing offer, much less any FRAND licensing offer, to HMD. Its patents allegedly relate to the so called EVS substandard of the 4G LTE standard. EVS is but one of the altogether five alternative voice codecs for 4G VoLTE calls. However, EVS is excessively complex and offers no material real life benefits over the other alternative VoLTE codecs or over the far more commonly used de facto patent free voice codecs, such as the OPUS codec, which is used far more broadly for VoIP calls with, e.g., WhatsApp, Microsoft Teams and Zoom.

This all calls for the question whether EVS should have been standardized in the first place, and if that were to be the case, what its value can be in light of other alternatives, including generally equally good and more broadly used de facto patent free alternatives. The standardization process leading into the standardization of EVS was also highly unusual such that VAEVS' predecessor, VAC, was able to participate in the final standardization, even though its own candidate codec was judged to be the worst out of all about dozen codecs proposed. These questions about seemingly excessive standardization seem even more pronounced with the 3D audio codec IVAS, the successor to EVS and being currently standardized by 3GPP, which requires up to 7 spatially distant loudspeakers and microphones each. Not only do several alternative 3D audio codecs already exist, but the use case of IVAS seems particularly far-fetched for smartphones. Yet, it seems destined to be standardized by 3GPP to the apparent detriment of consumers.

VAEVS' published purported programmatic royalty rates, as available on its website, exceed the average royalty rates actually collected globally almost all far larger licensors at the average sales price of HMD smartphones. This despite the fact that VAEVS' portfolio of alleged 4G LTE (EVS) essential patents is several orders of magnitude smaller and less valuable with only about 14 patent families in total. Said non-FRAND rates, when combined with the several injunctions VAEVS has obtained against HMD in Germany, have forced HMD to remove EVS support from its products sold in certain markets, such as Germany. This, in turn, eliminates HMD smartphones from certain markets, such as the operator sales channel, to the extent the operators require EVS support from smartphones sold through them - even though many of them do not presently even support EVS in their networks. As HMD sees it, VAEVS' demands and VAEVS' behavior more broadly breaches against voluntary FRAND licensing commitments binding on VAEVS and made for the patents now owned by VAEVS. This causes continued harm to HMD and the consumers. HMD is of the view that German courts are not properly adjudicating such cases in light of the ECJ's decision in Huawei vs. ZTE and the proportionality of remedies principle as existing under EU law.

For these reasons, HMD has now also filed competition law complaints against VAEVS before the European Commission in order seek the authorities to intervene in issues such as over-standardization, requirements for open standards and apparent non-FRAND demands and behavior. The litigations between HMD and VAEVS remain under way in each of Brazil, the USA and Germany and both parties are appealing the relevant judgments issued thus far. Even then, HMD remains confident about the outcome with said litigations in a manner aligned with the interests of the consumers and the broader cellular industry.

The concerns related to abusive behavior are not limited to HMD. Recently, in October 2022, another non-practicing entity, Crystal Clear Codec (“CCC“) sued each of Apple, Xiaomi and OPPO in Munich with alleged EVS SEPs originating from Huawei. Based on information currently available to HMD, said patents have been acquired in connection with Huawei's earlier settlement with another similar non-practicing entity EVS Codec Technologies and possibly also involving Saint Lawrence Communications, which both have, just like VAEVS, asserted patents they have acquired or obtained exclusive licensing rights for from VAC. CCC's purported programmatic EVS royalty rates are even higher than those of VAEVS even though its portfolio of alleged EVS SEPs is even smaller. To conclude, CCC appears to be yet another, perhaps already the fifth, non-practicing entity making, in a similar pattern, non-FRAND royalty demands in the cellular speech codec space, resorting to courts to achieve the same and based on or resulting from the assertion of patents originating from VAC.

HMD itself owns a portfolio of patents essential to various cellular standards more than twice the size of VAEVS. Thus, this is not a one-way street for HMD – we continue to approach our own portfolio of essential patents in the very same FRAND compliant manner as those of others like VAEVS. Standards should always be open, available for implementation on FRAND terms and standardization without real life benefits to consumers, or even with downright detriment to the consumers, should not be allowed. HMD invites all others, including its peers, interested in the same to support its competition law cases against VAEVS so as to bring clarity on these important issues.