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Tuesday, July 19, 2005 7:29:31 AM
Having gone back and reviewed Boyle's Declaration in the UK case (dated October 2004) and the reasons a party can move to vacate, I have devised at least what I think is the likely ground Nokia might move to vacate and/or stay. According to Boyle's Declaration, Nokia wanted the arbitration delayed until the UK patent case was completed. Nokia's second contention in the arbitration was that if a Phase 2 royalty is set, that royalty rate should be diminished under the "all relevant factors" clause if the 3 UK patents are revoked (note: Nokia's first contention is that it didn't own any Phase 1 royalties, clearly it lost that argument). Thus, Nokia claimed it would be premature to set a royalty rate prior to the UK hearing. IDCC, in turn, argued that the 3 patents out of its 1400 patent portfolio are irrelevant to the royalty rate, and that the 3 challenged patents were not all in the S/SE case. In short, IDCC said even if it loses the UK litigation and patents, Nokia would still owe the same amount in Phase 2.
With this background in mind, note that one ground for moving to vacate an arbitration award is: "the arbitrators were guilty of misconduct by refusing to postpone the hearing upon sufficient cause." Thus, Nokia may argue that the arbitrations committed misconduct by not postponing the hearing until after the UK litigation. Further, Nokia may argue that the award should be stayed pending the UK litigation because: (a) on the one hand, if Nokia loses in the UK, then it will have no reason to challenge the award (i.e., the UK ruling would not effect the "all relevant factors" clause); and (b) if Nokia wins, then Nokia believes that the panel erred in not waiting to see the result of the UK litigation and considering it under the "all relevant factors" clause.
I think while Nokia's argument might make some intrinsic sense, its ultimately a losing argument. In determining that it did not need to wait for the UK resolution, the panel implicitly (if not explicitly in its order) found that regardless of how the UK case was resolved, the phase 2 royalty rate would be the same. I believe a district court would have to find that finding to have been a manifest disregard of the law in order to buy Nokia's argument. That is, if the panel is correct that the UK litigation is irrelevant, there is no reason to stay because no matter how the UK case is resolved, the phase 2 royalty rate will be the same. Nokia seems to ignore this point in its reasoning. But, this point is important because the finding that the UK litigation is irrelevant to the Phase 2 royalty rate is a legal and factual finding that I doubt - if properly presented - the district court will overturn. Put differently, to accept Nokia's argument, the Court will first have to overturn the panel's finding that the UK patent result is relevant to the royalty rate.
My suspicion is that the dissent held that: (1) S/SE is a trigger; (2) phase 2 royalties are due; but (3) it cannot definitively determine a rate without the UK litigation because it effects the "all relevant factors" clause. This would be consistent with Nokia's press release that all 3 arbitrators agreed on some points, including cutting Nokia's rates in half (and Nokia contends that the dissent would have cut them even more if Nokia wins in the UK).
I think this is the most likely scenario. I also think that if IDCC can properly point out to the Court that the question of whether the UK patents will effect the royalty rate was decided by the arbitration panel (or at least 2 of them), and that the panel decided they are irrelevant, then the Court should deny both the motion to vacate and to stay. That is, the Court should find that Nokia's arguments that the UK rate is relevant was considered and rejected by the panel, and a district court cannot re-address that ruling.
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