German court decisions

Cases from OLG Düsseldorf - Higher Regional Court

OLG Düsseldorf

18 July 2017 - Case No. I-2 U 23/17

A. Facts

The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a provider of telecommuni­cation services. Under the policy governing the relevant standard, the Claimant is obliged to license its SEP on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Against Claimant’s SEP a nullity action is pending. The Claimant, nevertheless, concluded portfolio licensing agreements also covering the SEP in question with two companies.

Since November 2012, the Claimant made efforts to license his SEP also to the Defendant. The parties could, however, not reach an agreement. In January 2016, the Claimant brought an action against the Defendant before the Regional Court of Düsseldorf requesting for a declaration of the Defendant’s liability for damages as well as rendering of accounts (main proceedings). After the main proceedings were ini­tiated, the Claimant made two offers for a license agreement to the Defendant. In order to protect busi­ness secrets connected with these offers, the Claimant requested the Defendant to sign a Non-Disclosure Agreement (NDA). The Defendant refused to sign a NDA. Moreover, the Defendant brought an action against the Claimant before an Irish Court requesting for a declaration that Claimant’s offers did not comply with FRAND.

Subsequently, the Claimant filed a motion for a preliminary injunction against the Defendant before the Regional Court of Düsseldorf. The Regional Court of Düsseldorf dismissed Claimant’s motion. The Claimant appealed this judgement. With the present ruling the competent Higher Regional Court of Düsseldorf in­dicated that the Claimant’s appeal has no prospects of success.

B. Court’s reasoning

The court made clear that preliminary injunctions involving SEPs are subject to the same strict prerequi­sites as injunctions referring to non-SEPs. The SEP-holder has, therefore, to adequately establish the va­lidity of the SEP, its use by the alleged infringer as well as the urgency of its request for a preliminary injunction.

Besides this, prior to seeking for a preliminary injunction, the SEP holder also has to fulfill the require­ments set forth by the Court of Justice of the European Union in its decision in the matter Huawei ./. ZTE (Huawei judgement). This follows from the fact that SEP-holders’ claims for injunctive relief are, in prin­ciple, only enforceable, after the prerequisites established by the Huawei judgement have been fully met.

Since preliminary injunctions may severely affect alleged infringer’s ongoing business, such injunctions can only be granted, when both the validity and the use of the SEP by the alleged infringer appear to be given with a high degree of certainty.

The validity of a SEP is deemed to be given, when the SEP has been confirmed in patent opposition or nullity proceedings. Without a prior confirming decision, the validity of a SEP can, exceptionally, also be regarded as being given, when

• the alleged infringer has unsuccessfully intervened in the proceedings, in which the SEP was granted,
• no opposition or nullity proceedings were initiated against the SEP, because it is universally consid­ered to be able to receive patent protection (one indication for this being, for instance, the fact that the SEP was licensed to renowned licensees),
• the objections raised against SEP’s validity can be proven to be unfounded even by the limited means of the summary examination foreseen in proceedings for interim relief, as well as
• in “extraordinary circumstances”, in which the SEP-holder will face substantial disadvantages, if he is forced to wait with the initiation of proceedings against the infringer, until after the end of opposition or nullity proceedings pending against the SEP.

Against this background, the court argued that the Claimant is most likely not entitled to the requested preliminary injunction.

First, the Claimant failed to establish the validity of the SEP in dispute with the required high degree of certainty. A decision confirming the SEP in dispute is missing, since the nullity proceedings are still pending. Furthermore, the exceptions allowing this conclusion to be drawn, even without a prior con­firming decision, do most likely not apply. In particular, the fact that the Claimant concluded portfolio licensing agreements with two other companies covering also the SEP in question, does not suffice to adequately establish its validity. This fact only proves that the licensees held the SEP-holder’s portfolio as being able to receive patent protection as a whole, not, however, that they considered the SEP itself as being worthy of such protection. Furthermore, due to the high level of technical complexity, the court does not expect that the objections raised against the validity of the SEP can be proven as being unfounded solely on basis of the limited examination means available to the court in the present pro­ceedings for interim relief.

Second, the court has also substantial doubts that urgency is given. The Claimant was aware of the alleged infringement since 2012. Nevertheless, the Claimant refrained from making his claim for injunctive relief enforceable by fulfilling the Huawei judgement requirements. Furthermore, in the main proceedings ini­tiated prior to the present proceedings for preliminary injunction, the Claimant did not request for injunc­tive relief, but limited his action against the Defendant to damages and rendering of accounts. In terms of urgency, it could be expected from the Claimant to request for injunctive relief already in the main proceedings. Furthermore, the fact that the Defendant brought an action before an Irish Court requesting a declaration that Claimant’s offers did not comply with FRAND, also fails to establish urgency. It is the Defendant’s right to seek legal redress.

C. Other issues

In addition, the court expressed its view regarding the consequences of the refusal of a potential licensee to sign a NDA covering information connected with the SEP-holder’s offer for a licensing agreement on FRAND terms, without, however, ruling on this question on the merits of the present case.

Sisvel v Haier

30 March 2017 - Case No. I-15 U 66/15

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [2] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [3] and that the claimant had not made a license offer on FRAND conditions. [4] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [5] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [6] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [7]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [8] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [9] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [9] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [10] because the patent in question was related to data transfer, an essential function of the GPRS standard. [11]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [12] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [13] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [13] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [14]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [15] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [15]

3. The Defendant’s Willingness to Enter into a License Agreement

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [16] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [17] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [17] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [17]

4. The SEP Owner’s Licensing Offer and the Standard Implementer’s Reaction

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [18] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [19] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [19] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [19] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [20] because it discriminated against the defendants. [21] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [22]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [23] SEP owners have discretion regarding the license fees that they charge. [24] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [25] Further, license conditions can be abusive only if they are significantly different between licensees. [25] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [26] The burden of proof for such substantially unequal treatment lies with the defendant, [27] whilst the onus is on the claimant to prove that this unequal treatment is justified. [27] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [27] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [28] without having a proper justification. [29] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [30] or that these discounts were a result of the particularities of the case. [31]

• [2] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
• [3] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
• [4] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
• [5] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
• [6] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
• [7] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
• [8] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
• [9] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
• [10] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
• [11] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
• [12] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
• [13] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
• [14] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
• [15] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
• [16] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
• [17] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
• [18] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
• [19] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
• [20] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
• [21] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
• [22] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
• [23] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
• [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
• [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
• [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
• [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
• [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
• [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
• [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
• [31] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Sisvel v Haier

13 January 2016 - Case No. 15 U 65/15

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 4a O 144/14 to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. As to the facts of the case, it can be referred to the deliberations under point “1b” of the previous summaries.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous. If the decision, as in the present case, has been declared provisionally enforceable subject to the provision of security by Claimant suspension of execution will only be granted in exceptional circumstances. [32]
2. Court’s reasoning
   
   
   1. The SEP owner’s licensing offer
      The question of whether granting a portfolio license would be FRAND was referred to the subsequent appeal proceedings. [33]
   2. The standard implementer’s reaction
      More importantly, the Court found that the standard user is not required to respond to a license offer of the SEP proprietor if the terms of that offer are not FRAND. In other words, the subsequent obligations of the alleged infringer derived from Huawei only arise when and provided that the SEP proprietor submitted an offer on FRAND terms. As the lower court had not determined whether the conditions of the proprietor’s license offers were FRAND, the Court considered this part of the lower court’s decision to be manifestly erroneous. Given this flaw in the lower court’s reasoning, it was left undecided by the Court whether a license offer submitted in the course of the oral hearings can fulfill the Huawei requirements. [34]
3. Other important issues
   For the purposes of the present proceedings, the Court explicitly stated that there is—in principle—no reason to treat patent assertion entities, such as Claimant, in a different manner than other market participants. [35]

• [32] Case No. 15 U 65/15, para. 2
• [33] Case No. 15 U 65/15, para. 28
• [34] Case No. 15 U 65/15, para. 23-30
• [35] Case No. 15 U 65/15, para. 12

Canon v Carsten Weser

29 April 2016 - Case No. I-15 U 49/15

The proceedings before the Court concerned the subsequent appeal of Defendants in Case LG Düsseldorf, 11 June 2015 – Case No. 4a O 45/14 (decision rendered before Huawei) seeking to set aside the decision of the lower court. As Cases No. I-15 U 49/15 and No. I-15 U 47/15 are interconnected, the Court came to the same conclusions and framed them in essentially the same wording as in its decision OLG Düsseldorf, 29 April 2016 - Case No. I-15 U 47/15 (cf. above). Therefore, no separate and detailed summary is provided here.

Sisvel v Haier

13 January 2016 - Case No. I-15 U 66/15

1. Facts
   The proceedings concerned the subsequent application of Defendants in Case No. 4a O 93/14 seeking to suspend the execution of the District Court’s decision until the appellate court has decided on the merits of an appeal brought by Defendants. As to the facts of the case, it can be referred to the summary above.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous. [36]
2. Court’s reasoning
   
   
   1. The SEP owner’s licensing offer
      The question of whether granting a portfolio license would be FRAND was referred to the subsequent appeal proceedings. [37]
   2. The standard implementer’s reaction
      More importantly, the court found that the standard user is not required to respond to a license offer of the SEP proprietor if the terms of that offer are not FRAND. In other words, the subsequent obligations of the alleged infringer derived from Huawei only arise when and provided that the SEP proprietor submitted an offer on FRAND terms. As the lower court had not determined whether the conditions of the proprietor’s license offers were FRAND, the court considered this part of the lower court’s decision to be manifestly erroneous. Given this flaw in the lower court’s reasoning, it was left undecided by the court whether a license offer submitted in the course of the oral hearings can fulfill the Huawei requirements. [38]
3. Other important issues
   For the purposes of the present proceedings, the court explicitly stated that there is—in principle—no reason to treat non-practicing entities, such as Claimant, in a different manner than other market participants. [39]

• [36] Case No. I-15 U 66/15, para. 4-5
• [37] Case No. I-15 U 66/15, para. 20
• [38] Case No. I-15 U 66/15, para. 17-20
• [39] Case No. I-15 U 66/15, para. 11

Canon v Sieg/Kmp Printtechnik/Part Depot

29 April 2016 - Case No. I-15 U 47/15

1. Facts
   The proceedings before the court concerned the subsequent appeal of Defendants in Case LG Düsseldorf, 11 June 2015 – Case No. 4a O 44/14 (decision rendered before Huawei) seeking to set aside the decision of the lower court.
   Claimant, a Japanese company that produces and markets photocopiers, printers and cartridges in cooperation with undertaking “C”, is the proprietor of European patent 2 087 AAA B1 which has not been declared essential to a particular standard. Defendants “1”, “2” and “3” are involved in the supply and distribution, inter alia to Germany, of cartridges of brand “E”, being based on recycled models of and serving as substitutes for particular OEM-cartridges of Claimant. In 2011, Claimant and “C” made a commitment towards the EU Commission that their products would comply with EU-Directive 2009/125/EC. Part of this commitment is the obligation to secure interoperability of the products with non-OEM cartridges.
   The admissible appeal of Defendants has been rejected by the court of second instance.
2. Court’s reasoning
   Even though the commitment made toward the EU Commission does, contrary to the opinion of Claimant, not constitute merely a non-binding memorandum but rather a binding declaration it executes Article 15 (2) Directive 2009/125/EC and has the sole purpose of enhancing the environmental performance of the products at issue. Hence, it can be considered neither as a direct nor as an indirect FRAND declaration and the Huawei obligations do not apply in the present case. [40] In consequence, Claimant is not obliged to present a licensing offer corresponding to FRAND terms. [41]
   Nor can Claimant’s seeking of a prohibitory injunction be considered as abusive pursuant to § 242 BGB since Claimant’s declaration could not establish a reliance worthy of protection to the effect that Defendant was entitled to make use of Claimant’s patent protected inventions. [42]
   Moreover, the cumulative conditions established by the ECJ (inter alia in IMS Health) for granting a compulsory license on the basis of Article 102 TFEU absent a standard-setting context are not fulfilled. [43]

• [40] Case No. I-15 U 47/15, para. 72 et seq.
• [41] Case No. I-15 U 47/15, para. 74
• [42] Case No. I-15 U 47/15, para. 48, 78 et seq.
• [43] Case No. I-15 U 47/15, para. 88 et seq.

Saint Lawrence v Vodafone

9 May 2016 - Case No. I-15 U 36/16

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 4a O 73/14 seeking to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. As to the facts of the case, it can be referred to the summary above.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous.
2. Court’s reasoning
   1. Notice of infringement and declaration of willingness to license
      Firstly, the court of appeal focused on the Huawei requirement to submit an infringement notification prior to the initiation of proceedings. Although the court voiced some doubts over whether a distinction between transitional and non-transitional cases is permitted and whether, in transitional cases, reliance of a SEP proprietor on the Orange Book standard of conduct is worthy of protection, it did not consider the result reached by the lower court as manifestly erroneous. Since the SEP proprietor has the option to withdraw its action, to perform its Huawei obligations and to re-file the claim afterwards, it seems overly formalistic to deny the option to perform the Huawei obligations within the ongoing trial. Among a number of further reasons [44] for its position the court stressed that the ECJ intended the Huawei framework to be fact-sensitive. [45]
      Secondly, the court confirmed the lower court’s view that Defendant did not comply with its Huawei obligation to express its willingness to conclude a licensing agreement because it reacted belatedly (more than five months after the infringement notification) and in an evasive manner. The fact that proceedings have been initiated by Claimant does not alter the Huawei requirements and Defendant will particularly not be granted more time to comply with its respective obligations. [46]
   2. The SEP owner’s licensing offer / The standard implementer’s reaction
      The court left it undecided whether the lower court erred in focusing on a licensing offer which Claimant presented solely to the Intervener but not to Defendant. According to the court the conduct of the parties required by Huawei constitutes a mechanism of alternating, consecutive steps in which no subsequent conduct requirement is triggered unless the other party performed the previous “step”. In consequence, Claimant was, in the present case, not obliged to submit a FRAND licensing offer at all since Defendant had failed to signal willingness to license. [47]
      The lower court’s finding that Claimant’s licensing offer was FRAND while the Intervener’s counter-offer failed to meet this threshold was accepted. Hence, the court considered it as irrelevant under the present circumstances—and as a completely open question in general—whether a SEP proprietor is obliged, before bringing an action for prohibitory injunction against the supplier of a standard-implementing device, to (cumulatively) submit a FRAND licensing offer not only to the supplier but also to the producer of said device. [48]
3. Other important issues
   The remarks of the lower court rejecting, in the present case, a patent ambush-argument were not deemed manifestly erroneous, mainly because the lower court had reasonably argued that such an abusive practice would only result in the SEP proprietor’s obligation to grant licenses on FRAND terms. [49]
   Licensing negotiations (allegedly) undertaken by Defendant after the decision of the lower court provided no reason to suspense execution since it was not evident to the court that Defendant had thereby fulfilled its Huawei obligations. [50]

• [44] For details, cf. OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16, para. 2, b, aa
• [45] Case No. I-15 U 36/16, para. 2, b, aa
• [46] Case No. I-15 U 36/16, para. 2, b, bb
• [47] Case No. I-15 U 36/16, para. 2, b, cc
• [48] Case No. I-15 U 36/16, para. 2, b, ff
• [49] Case No. I-15 U 36/16, para. 2, b, ee
• [50] Case No. I-15 U 36/16, para. 2, b, dd

Saint Lawrence v Vodafone

9 May 2016 - Case No. I-15 U 35/16

The proceedings concerned the subsequent application of Defendant in Case No. 4a O 126/14 seeking to suspend execution of the lower court’s decision. As Cases No. 4a O 126/14 and No. 4a O 73/14 are interconnected, the Court came to the same conclusions and framed them in exactly the same wording as in its decision OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16 (cf. above). Therefore, no separate and detailed summary is provided here.

OLG Düsseldorf

14 December 2016 - Case No. I-2 U 31/16

1. Facts
   The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a telecommunications company, which inter alia sells mobile phones allegedly using Claimant’s SEPs. Upon Claimant’s action, the Regional Court of Düsseldorf (1) ordered the Defendant to render accounts regarding the sales of mobile phones embedding Claimant’s SEPs and (2) recognized Defendant’s obligation to pay damages to the Claimant resulting from the infringement of its SEPs (cf. Regional Court of Düsseldorf, decision dated 19th January 2016, Case No. 4b O 49/14). The Defendant appealed this judgement. In the appeal proceedings before the Higher Regional Court of Düsseldorf (Case No. 2 U 31/16), one issue in dispute was whether the license fees, which the Claimant had calculated, were Fair, Reasonable and Non-Discriminatory (FRAND). The Claimant explained its calculation in a statement to the court that was produced in two versions. In the first version, which was filed only with the court, the information regarding the FRAND calculation (including comparable license agreements pre¬sented as evidence), were fully disclosed. In the second version, which was presented to the Defendant and a third party that had joined the proceedings (Intervener), the respective sections (and evidence) were redacted.
   With the present interlocutory application, the Claimant requested the court to order that disclosure of full information (and evidence) regarding its FRAND calculation shall be required only towards Defendant’s and Intervenor’s counsels, provided that the court would oblige the counsels to full confi-dentiality towards everyone, including their clients themselves (that is the Defendant and the Intervener). The Defendant objected this request. The Intervener, on the other hand, stated that it agreed with the proceeding defined in Claimant’s request.
   In its first decision dated 14th December 2016, the court rejected the application with respect to both the Defendant and the Intervener. Instead, the court encouraged the parties to enter into a Non-Disclosure Agreement (NDA) reinforced by a contractual penalty, in case confidentiality was breached.
   This decision was consequently modified by a further decision rendered by the court on 17th January 2017. The court granted Claimant’s application in respect to the Intervener, but again rejected the application in respect to the Defendant. The court, however, requested from the Defendant to present an offer for an NDA to the Claimant incorporating particularly the following conditions within a deadline of three weeks:
   • The confidential information should be used only in the context of the present litigation.
   • The information would be made available only to four company representatives of the Defendant (as well as any experts engaged by the Defendant in the ongoing litigation).
   • These persons shall be themselves obliged to confidentiality by the Defendant.
   • In case confidentiality was breached, the Defendant shall be liable for payment of a contractual pen-alty amounting to EUR 1 million.
   
   
   
   
   
2. Court’s Reasoning
   In its first decision, the court found that the German rules of Civil Procedure do not provide a legal basis for granting an order in the form requested by the Claimant. [51] Such an order would exclude Defendant’s right to be heard with respect to Claimant’s FRAND calculation, in breach of Art. 103 Sec. 1 of the German Constitutional Law (Grundgesetz). [51] The fact that Defendant’s counsels would have access to the relevant information, does not suffice to meet the requirements set forth by the aforementioned provision. Party’s right to be heard contains also the right to personally participate in the proceedings. Consequently, a limitation of a party’s right to be heard reaching so far as Claimant requested, is not possible, unless the party affected expressly waives its right to personally participate in the proceedings. [51] Since the Defendant decided to not do so, a respective order cannot be rendered against it.
   The fact that the Intervener waived its respective right, can also not justify rendering such an order against the Defendant. [52] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [53] Accordingly, it cannot make decisions that would affect the party’s standing, such as a declaration to waive the right to be heard. In the present case, the Intervener’s decision to waive its respective right may, therefore, impact its own standing in the proceedings, but cannot affect Defendant’s position.
   
   As a result, the Claimant can either make the confidential information available to the Defendant or keep this information redacted, accepting that the court cannot take redacted information into consideration for its decision. [54]
   
   Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [55] the court held, that, as a rule, it can be expected from the implementer of SEPs to enter into a NDA reinforced by a contractual penalty with the SEP holder. [56] SEP implementer is obliged to facilitate FRAND licensing negotiations to the best of its ability. This includes also taking justified confidentiality interests of the SEP holder into account. [56]
   
   In its second decision dated 17th January 2017 the court applied the above considerations. Since the Intervener waived its right to be heard, the court found that there is no reason to deny Claimant’s request in relation to the Intervener. On the other hand, due to Defendant’s denial to waive its respective right, the court still refrained for granting Claimant’s request against the Defendant. Taking Claimant’s confi¬dentiality interests into account, the court ordered, however, the Defendant to submit an offer for a NDA to the Claimant based particularly on the conditions mentioned above.

• [51] Judgement dated 14th December 2016, para. 1
• [52] Judgement dated 14th December 2016, para. 2
• [53] Judgement dated 14th December 2016, para. 2
• [54] Judgement dated 14th December 2016, para. 3
• [55] Bundesgerichtshof, Decision dated 19th February 2014, Case No. I ZR 230/12
• [56] Judgement dated 14th December 2016, para. 5

OLG Düsseldorf

25 April 2018 - Case No. I-2 W 8/18

A. Facts

The Claimant holds a patent essential to a technical standard (Standard Essential Patent or SEP) which is subject to a so-called “FRAND-undertaking”, that is a commitment to make the SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant entered into nego¬tiations for a FRAND licensing agreement with the Defendant. In June 2017, the parties signed a Non-Disclosure Agreement (NDA). [57] A few days later, the Claimant entered into an NDA also with a third party, the Intervener . Shortly after signing the NDA, the Intervener [58] argued that several clauses of the agreement were void. [59]

In September 2017, the Claimant initiated infringement proceedings against the Defendant before the District Court of Düsseldorf (District Court). The Intervener joined these proceedings in support of the Defendant. After joining the proceedings, the Intervener claimed that the NDA with the Claimant does not cover information which the latter has to produce in the trial. This is particularly the case with infor-mation regarding to comparable licensing agreements concluded by the Claimant with third parties (comparable licences), which the Claimant regarded as strictly confidential. [60]

In December 2017, the Intervener requested full access to the court files. [61] The District Court dismissed the Intervener’s motion in part, namely by excluding access to confidential information, including information on comparable licences. The District Court held that the protection of such information was not adequately ensured, since the Intervener’s behaviour raised significant doubts that he considered himself bound to confidentiality by the NDA signed with the Claimant. [62] The Intervener appealed this decision.

The Higher District Court of Düsseldorf (Court) set the above ruling aside and requested the District Court to further clarify the facts of the case and decide again on the Intervener’s motion for full access to the court files on basis of the principles set forth in its present judgement. [63] In particular, the Court requested from the District Court to (re-)examine whether the Claimant actually possessed confidential business information which needed protection. [63] If this fact could be positively established, then a limited access to the court files would, basically, be justified, if the party seeking access to the files refused to commit itself to confidentiality. [64]

B. Court’s reasoning

The Court pointed out that parties to court proceedings seeking to protect confidential information must undertake efforts to sign an NDA with the opposing party and any intervener that has joined or is expected to join the proceedings with a high degree of certainty, before disclosing such information in the trial. [65] A party doing so without an NDA has to accept that the opposing party and/or the intervener could gain access to confidential information through an inspection of the court files. [66]

In the eyes of the Court, requesting from the party seeking to protect confidential information to actively pursue the conclusion of NDAs with other parties involved in the proceedings does not put that party at a disadvantage. The unjustified refusal of the opposing party (or an intervener) to enter into an NDA allows the party seeking protection to use only non-confidential information in the proceedings for specifying the FRAND conformity of its licensing offer to the potential licensee. [67] Although still obliged to specify the conditions of its FRAND licensing offer, the party has a lower burden to bear; to the extent (and not be¬yond) that is required for protecting its justified confidentiality interests, the party can meet its respective obligation by making “merely indicative observations” in the trial. [68]

In case that an intervener joins the proceedings at a point in time, in which a party has already produced confidential information on grounds of an NDA previously signed with the opposing party, the intervener’s right to inspect the court files can only be limited, if it was (or can) be established that the party seeking protection actually possesses confidential business information. [69] The fact that the other parties involved in the proceedings have already signed an NDA does not of itself limit the intervener’s right to full access to the court files. [70]

To establish that it possesses confidential business information worthy of protection, a party must identify such information and concretely explain why this information constitutes a business secret. [71] The party also needs to present in detail which measures were taken so far for securing confidentiality with respect to the information in question. [71] In addition, the party has to demonstrate in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed. [71] It also needs to be explained, with which degree of certainty the said disadvantages are expected to occur. [71]

When protection of confidential information contained in comparable licences is sought, the existence of confidentiality interests requires, in general, special justification. [72] In the Court’s view, the SEP holder’s FRAND-undertaking entails transparency vis-à-vis interested stakeholders with respect to licensing conditions. [72] Moreover, knowledge of licensing conditions already accepted in the market can help potential licensees exercise their rights in infringement proceedings effectively. [72] Considering the non-discriminating element of SEP holder’s FRAND undertaking, it is not immediately apparent to the Court which interest worthy of legal protection the SEP holder could have in keeping conditions agreed in existing licensing agreements confidential. [72] In fact, several licensing pools (e.g. MPEG) publish their licensing agreements online. [72]

Should the party seeking protection fail to establish that it possesses confidential business information needing protection, full access to the court files must be granted to the intervener upon request, irrespective of whether the latter signs an NDA or not. [73] Conversely, if the existence of confidential business information is established, the intervener’s right to inspect the court files can be limited only to non-confidential information, as long as the intervener refuses to enter into an NDA with the party seeking protection of its confidentiality interests. [64]

In case that a party which has signed an NDA breaches its obligations under this agreement or “backs out” of the NDA, the party relying on the protection of its confidentiality interests can again limit its (future) submissions of facts in the proceedings to non-confidential information. [74] In other words, in terms of detail, the party must again not present information going beyond “merely indicative observations”. [74] Whether a party has “backed out“ of an NDA is a question of fact which has to be decided on a case-by-case basis. [75] For this, it is required that the party’s behaviour has caused a high risk of a breach of confidentiality. [75] For instance, this could be the case, when legal arguments brought by the party against the validity of the NDA are not reasonable, but rather serve as a pretext. [75]

• [57] Higher District Court of Düsseldorf, judgement dated 25 April 2018, Case No. I-2 W 8/18, para. 26
• [58] Ibid, para. 26
• [59] Ibid, para. 32
• [60] Ibid, para. 35
• [61] Ibid, para. 2
• [62] Ibid, para. 27
• [63] Ibid, para. 36 et seq
• [64] Ibid, para. 17
• [65] Ibid, paras 11 and 14
• [66] Ibid, para. 11
• [67] Ibid, para. 13
• [68] Ibid, para. 13
• [69] Ibid, para. 15
• [70] Ibid, para. 15 et seq
• [71] Ibid, para. 23
• [72] Ibid, para. 24
• [73] Ibid, para. 16
• [74] Ibid, para. 20
• [75] Ibid, para. 21

Cases from OLG Karlsruhe - Higher Regional Court

Saint Lawrence v Deutsche Telekom

23 April 2015 - Case No. 6 U 44/15

A. Background

1. Facts

The proceedings related to the defendant’s application to the Higher Regional Court of Karlsruhe for a stay of execution of the decision of the District Court of Mannheim (Case No. 2 O 103/14, 10 March 2015). The background was the alleged infringement of patent EP 1.125.276.B1, which covered technology for coding broadband signals which is essential for the ETSI AMR-WB standard.

The defendant was a major German telecommunications company (Deutsche Telekom). Intervenor 1 and intervenor 2 were smartphone manufacturers (HTC and others) whose products used the AMR-WB standard. These phones were supplied to the defendant and then sold to consumers as part of the defendant’s contract plans. [98] The claimant, a German non-practicing entity, Saint Lawrence, became owner of the respective SEP in August 2014. [99] The previous owner of the SEP had declared its willingness to grant licenses on FRAND conditions several times. [100] The defendant had shown no interest in such a license. [100] After commencing infringement proceedings in the District Court of Mannheim, the claimant contacted intervenor 2 for the first time. Intervenor 2 signed a confidentiality agreement on 23 February 2015, rejected an initial offer made by the claimant, and made a counter offer. On 25 March 2015 (after the decision of the District Court of Mannheim), the claimant made another offer, which intervenor 2 also rejected.

2. Ensuing Decisions

On 10 March 2015, the District Court of Mannheim granted an injunction. Inter alia, it held that the defendant had not attempted to enter into negotiations for a license. [100] In particular, the court considered it irrelevant that intervenor 2 might have demonstrated its willingness to enter into a license on FRAND conditions. In the eyes of the court, the relevant issue was whether the claimant had a right to demand an injunction to stop the defendant using the patent. Even if an intervenor could successfully raise a competition law based defence relying on the Federal Court of Justice decision Orange Book Standard, [101] this was of no relevance for the relationship between the claimant and the defendant. [102]

The defendant and intervenor 1 applied to the Higher Regional Court of Karlsruhe to stay the execution of the District Court decision. Under the German rules of civil procedure, the Higher Regional Court can grant a stay of execution only if an appeal is pending and it is probable that the challenged decision will be overturned on the basis that it appears manifestly erroneous. [103] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [103]

The Higher Regional Court of Karlsruhe granted the defendant’s application to stay the execution regarding the smartphones manufactured by intervenor 2, but dismissed the application made by intervenor 1. [104] It held that it would be sufficient for a successful competition law based defence that an intervenor is willing to enter into a license agreement. [105] Since the District Court of Mannheim had dismissed the intervenors’ willingness as irrelevant for the case, the resulting decision was manifestly erroneous. [105] Significantly, the Higher Regional Court required the defendant to make a deposit of EUR 5 million into the court to safeguard the claimant’s financial interests.

B. Court’s Reasoning

Importantly, the decision was handed down in April 2015 and thus several months prior to the CJEU Huawei/ZTE ruling. The Higher Regional Court stated that the final opinion of Advocate General Wathelet [106] was the legal basis of its decision. [107]

The Higher Regional Court reasoned that a patent holder could seek injunction orders against any business in the supply chain of the product that infringes the respective SEP – which includes manufacturers (such as the intervenors) and distributors (such as the defendant). In principle, according to the Federal Court of Justice decision Tripp-Trapp-Stuhl,Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06. the decision against whom to bring proceedings lies with the patent holder. [109] However, according to the Higher Regional Court, this was not the issue in this case. The issue was whether the patent holder was abusing its dominant market position by commencing proceedings against the defendant. The only relevant question is whether this is conduct that deviates from ‘normal’ competition behaviour, being detrimental to consumer interests. If the SEP holder has made a FRAND declaration in the past and is typically entering into license agreements with manufacturers, then the court could see no objective reason why the SEP holder would only bring proceedings against the distributor. [109] In contrast, there is a reasonable expectation that the SEP holder makes an offer to the manufacturer of the relevant product first. Bringing proceedings against distributors would put significant pressure on the manufacturer. This can distort the license negotiation because distributors will have little interest in legal arguments with patent holders. If a patent holder is a dominant undertaking, exerting such pressure constitutes an abuse of market power. [109] In addition, bringing proceedings against distributors whilst granting licenses to manufacturers in other cases is inconsistent behaviour. [109]

C. Other Important Issues

The Higher Regional Court pointed out that the claimant was a non-practising entity. Accordingly, by exercising its patent rights it is not protecting its own market share in the market for smartphones. [110] In contrast, it is in the claimant’s objective interest that as many mobile phones using its SEP from numerous manufacturers are present in this market. Moreover, it is unlikely that a stay of execution would jeopardise the claimant’s financial interests. A deposit made by the defendant into the court should be a sufficient safeguard. [110] On the other hand, an execution of the decision at first instance would cause considerable harm to the defendant. As a telecommunications company, the defendant relies on a comprehensive portfolio of mobile phones that it can offer to consumers. [111] Removing the devices manufactured by intervenor 2 from the portfolio would be a significant blow to the defendant’s core business. Moreover, a removal would also be detrimental for intervenor 2 because a major distribution channel for its smartphones would become inaccessible. [112] As a result, the defendant’s interest in staying the execution outweigh the interests of the claimant.

• [98] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 2.
• [99] Landgericht Mannheim, 10 March 2015, 2 O 103/14, para 27.
• [100] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 3.
• [101] Bundesgerichtshof, 6 May 2015, KZR 39/06.
• [102] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 6.
• [103] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 17.
• [104] OLG Karlsruhe, 8 September 2016, 6 U 58/16, para 38. After lodging the application, the claimant and intervenor 1 had reached a settlement agreement. As a result, intervenor 1 had withdrawn its appeal to the Higher Regional Court of Karlsruhe. Thus, in the eyes of the court, no stay of execution was required.
• [105] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 19.
• [106] GA Wathelet, 20 November 2014, C-170/13.
• [107] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 20.
• [108] Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06.
• [109] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 21.
• [110] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 25.
• [111] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 26.
• [112] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 27.

Pioneer v Acer

31 May 2016 - Case No. 6 U 55/16

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 7 O 96/14 seeking to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. The facts underlying the two decisions are therefore the same: Claimant owns the patent EP 1 267348, allegedly essential to the DVD standard and administered with regard to its licensing by the patent pool “A”. Early in 2013 “A” and the Defendant’s group parent were in contact regarding “A” ’s DVD licensing activity, but no concrete notice of infringement was made and no licensing negotiations ensued. After having been sued for patent infringement Defendant submitted, on 6 October 2014, an offer to license the patent-in-suit for Germany at FRAND conditions, with the exact royalty rate to be determined by Claimant pursuant to § 315 German Civil Code. Furthermore, Defendant declared to be willing to negotiate a portfolio license for all German patents of Claimant and, in case the negotiations were to fail, to have the licensing conditions determined by a state court or arbitration tribunal. In order to indicate what Defendant considered to be a FRAND royalty rate Defendant submitted an expert opinion. As of 28 November 2014, Claimant proposed to modify the conditions to the effect that Defendant’s group parent was supposed to take a worldwide portfolio license comprising all Claimant’s portfolio patents administered by “A”. Claimant made a (perhaps: additional) FRAND declaration with regard to the patent and informed Defendant thereof in December 2014. After Defendant had rejected this offer, Claimant offered, on 13 March and 13 April 2015, a worldwide portfolio license to Defendant’s group parent company. To the offer were added claim charts for two pool patents, as well as information on how Claimant deduced the royalty from the overall royalty rates of the “A”-patent pool. On 5 May 2015, Defendant’s group parent requested claim charts regarding all patents to be licensed as well as further information on royalty calculation. Claimant sent, on 7 August 2015, claim charts for five additional patents declaring its willingness to provide further information as soon as constructive technical discussions would be taken up. In a filing to the court as of 20 November 2015, Claimant explained its royalty calculation in greater detail and submitted an expert opinion on the issue.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous.
2. Court’s reasoning
   1. Applicability of Huawei to transitory cases
      The court tentatively confirms that, in transitory cases, it is sufficient if the SEP proprietor fulfills its Huawei duties by way of the statement of claims or even after the lawsuit was initiated. [113] As to the reasons for this finding, the court is not convinced by the considerations of the lower court (cf. above LG Mannheim, 8 January 2016 - 7 O 96/14), in particular because the ECJ has not stated that actions for infringement brought prior to the Huawei decision had to comply only with the Orange Book rules of conduct and not the Huawei rules. [114] However, according to the Court, the Huawei decision deals only with the abusive bringing of an action for SEP infringement, not with the question whether such action remains abusive even after the SEP proprietor has fulfilled its conduct obligations under Huawei. [115] It appears possible that, at least in transitory cases, the continuation of an infringement action is no longer abusive where the statement of claims provided sufficient notice of the infringement, where the SEP proprietor made a Huawei-compliant licensing offer during the ongoing litigation, and where the standard implementer failed to appropriately react to this offer. Hence, the lower court’s finding on that issue was not considered manifestly erroneous.
   2. Standard of review for licensing offers
      The court did, however, find the lower court’s ruling to be manifestly erroneous with regard to the standard of review it had postulated for the SEP proprietor’s licensing offer: [116] As stated clearly by the ECJ, the SEP proprietor has to make a licensing offer that qualifies as FRAND—not, for instance, slightly above FRAND—and it is for the respective court to assess the FRAND quality of the offer. A reduced standard of review, consisting merely in a summary assessment of whether the offer is evidently non-FRAND, has no basis in Huawei. Even if the SEP proprietor were to be granted much leeway in determining the licensing conditions—a question which the court reserves for its decision on the merits of the appeal—the conditions would still have to remain within the FRAND range. Since the lower court’s conclusion that Claimant had complied with the Huawei rules of conduct while Defendant had violated them was reached by applying the reduced standard of review the court decided to partly [117] suspend the enforcement of the first instance-ruling.

• [113] Case No. 6 U 55/16, para. 24-28
• [114] Case No. 6 U 55/16, para. 26
• [115] Case No. 6 U 55/16, para. 27
• [116] Case No. 6 U 55/16, para. 29-36
• [117] The reasons why the Court limited the suspension to the recall and destruction of infringing products are of no interest here, cf. OLG Karlsruhe, 31 May 2016 – Case No. 6 U 55/16, para. 37 et seq.

Philips v Acer

29 August 2016 - Case No. 6 U 57/16

1. Facts
   
   1. Decision First Instance
      The proceedings related to the defendant’s application to the Higher Regional Court of Karlsruhe for a stay of execution of the decision of the District Court of Mannheim (Case No. 7 O 23/14). This case first instance concerned the infringement of the patent EP 0.745.307.B3, which covered a technology for subtitles in the DVD standard. The defendant marketed computers that use a DVD-software. The claimant, which commercialised the patent in question through a patent pool, [118] had made a FRAND-declaration to the “DVD-Forum” which administers the DVD standard. [119]
      On 30 May 2014, the defendant offered to enter into a license agreement for patent in question and respective products marketed in Germany. The license fees were based on an expert opinion which the defendant had commissioned. Alternatively, the defendant suggested that the license fees could be determined by the claimant in good faith pursuant to sec 315 of the German Civil Code. [120] The defendant made a deposit with the Düsseldorf Magistrates Court which covered use of the patent in Germany and rendered account to the claimant. On 25 July 2014, the claimant sent an amended counter-offer, which was rejected by the defendant. [121] On 13 March 2015, the claimant made another license offer for a world-wide portfolio license, giving details about the calculation of the license fee. [122] The defendant requested claim charts and rejected the calculation details as insufficient. [123]
      The District Court of Mannheim ordered the defendant to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [124] to calculate the amount of compensation it owed. [125]
   2. The Ensuing Application for Stay of Execution
      Under the German rules of civil procedure, the Higher Regional Court can only grant a stay of execution if an appeal is pending and it is probable that the challenged decision will be overturned because it appears manifestly erroneous. [126] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant (now: the applicant) can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [126]
      The applicant sought to stay the execution of the order of the District Court of Mannheim, [127] which required it to render full account. Instead, the applicant contended that it was only necessary to render information required to calculate the amount of compensation owed via license analogy (i.e. time of sale and number of units sold). [128] The Higher Regional Court of Karlsruhe dismissed the application. [126] It held that the decision of the District Court of Mannheim was not manifestly erroneous. Further, the applicant had not provided sufficient evidence that particularly severe harm would be caused if the decision of the District Court of Mannheim were executed. [129]
2. Court’s reasoning
   
   Most aspects of the decision do not directly relate to the Huawei ruling. However, the court held that the decision of the District Court of Mannheim was not manifestly erroneous in ordering the applicant to render accounts in full detail. It held that the District Court of Mannheim had correctly decided that the Huawei ruling did not contain any restrictions of the SEP holder’s information claims. [130] In the eyes of the District Court of Mannheim, the CJEU had not referred to means of calculating the amount of compensation owed - it had only clarified that Art. 102 TFEU does not prevent the SEP owner from demanding the alleged infringer to render accounts for use of the patent in the past. [130] Accordingly, the District Court of Mannheim considered that competition law, and in particular, the existence of a FRAND declaration, are not relevant considerations for compensation and information claims. [131] In the eyes of the court, this view is not manifestly erroneous.
3. Other important issues
   The claimant commercialised the patent in question through a patent pool. This fact itself, according to the court, does not mean that the applicant’s interests outweigh the interests of the claimant. [132] In the past, the court had given special consideration to whether the claimant’s interests were primarily focused on receiving royalties (Higher Regional Court of Karlsruhe, 23 April 2015, Case No. 6 U 44/15; Higher Regional Court of Karlsruhe, 31 May 2016, Case No. 6 U 55/16). However, the court reasoned, in contrast to the case at issue, that the aforementioned decisions had concerned cases in which it was likely that the decision at first instance would not be upheld on appeal. [132]
   The court held that the decision at first instance was not manifestly erroneous in its interpretation of Art. 101 TFEU (anticompetitive conduct). The District Court of Mannheim had been of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. [133] If a standardisation agreement breached Art. 101 TFEU, the standard would be void. The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts if the commencement of patent infringement proceedings by an SEP holder constituted a breach of Art. 101 TFEU. However, even if that were the case, this defence would only be relevant against injunctions, but not in respect of compensation and rendering accounts claims. [134]

• [118] Case No. 6 U 57/16, para 5
• [119] Case No. 6 U 57/16, para 8
• [120] Case No. 6 U 57/16, para 10
• [121] Case No. 6 U 57/16, para 11
• [122] Case No. 6 U 57/16, para 12
• [123] Case No. 6 U 57/16, para 13
• [124] Case No. 6 U 57/16, paras 15-19
• [125] The decision omits further details on the decision first instance because they are not relevant for the application, see OLG Karlsruhe, 29 August 2016, Case No. 6 U 57/16, para 14
• [126] Case No. 6 U 57/16, para 25
• [127] Case No. 6 U 57/16, para 23
• [128] Case No. 6 U 57/16, para 23, 31
• [129] Case No. 6 U 57/16, para 26
• [130] Case No. 6 U 57/16, para 31
• [131] Case No. 6 U 57/16, para 32, 33
• [132] Case No. 6 U 57/16, para 43
• [133] Case No. 6 U 57/16, para 28
• [134] Case No. 6 U 57/16, para 30

OLG Karlsruhe

8 September 2016 - Case No. 6 U 58/16

1. Facts
   
   1. Decision First Instance
      The proceedings related to the defendant’s application to the Higher Regional Court of Karlsruhe for a stay of execution of the decision of the District Court of Mannheim (Case No. 7 O 23/14). Case No. 7 O 23/14 related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard. The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used a DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. [135] In early 2013, the patent pool approached the defendant’s mother company about the use of the patent, but without making a license offer. [136]
      On 30 May 2014, the defendant offered a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license for the claimant’s German patents. It was also willing to have a third party determine the royalties owed. [136] On 25 July 2014, the claimant suggested to change the license offer to a world-wide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 of the number of respective computers they put into circulation between July 2013 and June 2014 in Germany. It also made a deposit of EUR 12.972,- with the Düsseldorf Magistrates Court.
      On 13 March 2015, the claimant made another offer for a world-wide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details on how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. Instead, the claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s mother company on 3 September the parties were unable to come to a conclusion.
      The District Court of Mannheim granted an injunction order on 4 March 2016. [137] It held that the defendant was liable for compensation [138] and ordered it to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [139] to calculate the amount of compensation it owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels. [140]
   2. The Ensuing Application for Stay Proceedings
      Under the German rules of civil procedure, the Higher Regional Court can grant a stay of execution only if an appeal is pending and it is probable that the challenged decision will be overturned because it appears manifestly erroneous. [141] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant (now: the applicant) can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [141]
      The applicant sought to stay the execution of two elements of the resulting court order. [142] First, the applicant challenged the order to render full account. It contended that it was only necessary to render information required to calculate the amount of compensation owed via license analogy (i.e. time of sale and number of units sold). [143] Secondly, the applicant contended that the recall order was based on the District Court’s summary assessment of the offered license conditions, which was an insufficient standard of review. [144]
      The Higher Regional Court of Karlsruhe granted the application to stay the execution in respect of the order to the recall of products. [145] However, it dismissed the application in respect of the order to render accounts because the decision of the District Court of Mannheim was not manifestly erroneous. [145]
2. Court’s reasoning
   
   1. SEP Owner’s Licensing Offer
      Regarding the order to recall and remove the infringing products, the Higher Regional Court held that the District Court’s interpretation of the Huawei ruling in respect of the SEP owner’s license offer was manifestly erroneous. The Higher Regional Court reiterated its view that the Huawei ruling required a full review of the conditions of the license (see the previous decision of the Higher Regional Court of Karlsruhe, 31 May 2016, Case No. 6 U 55/16). A reduced standard of review as applied by the District Court was not in line with the fundamentals of the Huawei ruling. The CJEU had held that the SEP owner’s refusal to grant a license on FRAND terms is the main reason why an injunction cannot be granted by an infringement court. Accordingly, the Higher Regional Court reasoned that any arguments raised by the applicant as to why an offer is not FRAND needs to be taken into consideration by the court. This requires a full review of the license offer and not just a summary review as to whether the offer is not obviously non-FRAND. [146] However, the Higher Regional Court conceded that the SEP owner has a wide discretion in determining the FRAND conditions because there might be a number of different license conditions that are FRAND. [147]
   2. Rendering Accounts and Compensation Claims
      Regarding the order to render accounts, the Higher Regional Court held that the decision of the District Court was not manifestly erroneous. The CJEU had reasoned that a court order to render accounts does not have implications as to whether products enter the market or can stay on the market. Thus, the Higher Regional Court concluded that a claim to render accounts cannot be abusive under Art. 102 TFEU. [148] Further, the Huawei ruling did not contain any restrictions in respect of the SEP holder’s information claims. [149] The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts how the amount of compensation owed is exactly calculated (and accordingly, what information the infringer must disclose to enable the SEP holder to carry out this calculation). [150] Accordingly, the order to render accounts in full detail (thus enabling the claimant to calculate the compensation owed in different ways) was not erroneous.
3. Other Important Issues
   
   The Higher Regional Court held that the District Court’s interpretation of Art. 101 TFEU (anticompetitive conduct) was not manifestly erroneous. The District Court of Mannheim had been of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. [151] The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts whether the commencement of patent infringement proceedings by an SEP holder constituted a breach of Art. 101 TFEU. However, even if the commencement did constitute a breach, this defence would only be relevant against injunctions, but not in respect of compensation and rendering of accounts claims. [152]
   In relation to the order to render accounts, the Higher Regional Court acknowledged that the information that is required for calculating the amount of compensation will generally be a trade secret. [153] It is in the applicant’s legitimate interest to keep them secret. However, the court held that this interest alone does not constitute an irreversible detriment that is so severe that the execution of the court order needs to be stayed. [153]

• [135] 6 U 58/16, para 6
• [136] 6 U 58/16, para 7
• [137] 6 U 58/16, para 12-17
• [138] 6 U 58/16, para 25
• [139] 6 U 58/16, para 18-24
• [140] 6 U 58/16, para 26-28
• [141] 6 U 58/16, para 39
• [142] 6 U 58/16, para 33
• [143] 6 U 58/16, para 45
• [144] 6 U 58/16, para 35
• [145] 6 U 58/16, para 38
• [146] 6 U 58/16, para 51
• [147] 6 U 58/16, para 52
• [148] 6 U 58/16, para 62
• [149] 6 U 58/16, para 63
• [150] 6 U 58/16, para 63-64
• [151] 6 U 58/16, para 59-60
• [152] 6 U 58/16, para 61
• [153] 6 U 58/16, para 67

Cases from LG Düsseldorf - Regional Court

Sisvel v Haier

3 November 2015 - Case No. 4a O 93/14

1. Facts
   Claimant, a non-practicing entity, is the proprietor of European patent EP B, originally granted to the applicant “A”, allegedly covering a feature of the GPRS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market GPRS-based devices. On 10 April 2013, Claimant made a commitment towards ETSI declaring to grant a license on FRAND terms with regard to, inter alia, patent EP B. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014 Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Patent Program” and made an offer but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by Defendant “J” without a counter-offer. By letter as of 12 August 2015 Defendants submitted a counter-offer regarding patent EP B which was, in turn, refused by Claimant on 24 August 2015. After Claimant had brought an action against “I” and “J”, Defendants made yet another licensing offer in their court filing as of 21 September 2015 which was refused as well. In the course of the oral hearings on 29 September 2015, Defendants submitted a security in the amount of € 5000 and rendered account in respect of acts of use in the past.
2. Court’s reasoning
   1. Market power and notice of infringement
      The court left open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power (cf. below). As to the infringement notification, [154] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules. In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.
      
      
   2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [155]
      
      
   3. The standard implementer’s reaction
      According to the court even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [156] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [157] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [158]
      
      
3. Other important issues
   In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [159] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [160]

• [154]  Case No. 4a O 93/14, para. 90-94
• [155]  Case No. 4a O 93/14, para. 96-98, 125
• [156]  Case No. 4a O 93/14, para. 98-101
• [157]  Case No. 4a O 93/14, para. 14, 103-109
• [158]  Case No. 4a O 93/14, para. 103-111
• [159]  Case No. 4a O 93/14, para. 37-40
• [160]  Case No. 4a O 93/14, para. 118-123

Sisvel v Haier

3 November 2015 - Case No. 4a O 144/14

1. Facts
   The facts of the case are very similar to those of LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14: Claimant, a non-practicing entity, is the proprietor of the European patent EP D, originally applied for by “A” and formerly owned (after various transfers) by “B”, allegedly covering part of the UMTS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market UMTS-based devices. On 10 April 2013 Claimant made a FRAND commitment towards ETSI, inter alia regarding patent EP D. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014, Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Program” but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by “J” without a counter-offer. By letter as of 13 October 2014 one of the Defendants submitted a first counter-offer regarding patent EP D which Claimant refused on 20 October 2014 referring to the ongoing negotiations with the parent company of that Defendant. On 12 August 2015 Defendants “I” and “J” made a second counter-offer which was rejected by Claimant on 24 August 2015. After Claimant had brought a lawsuit Defendants made a last counter-offer in their court filing as of 22 September 2015 that was also refused by Claimant. In the course of the oral hearings of 29 September 2015, Defendants submitted a security (€ 5000) and rendered account in respect of acts of use in the past.
2. Court’s reasoning
   Except for references to the slightly differing facts of both cases the court’s considerations are identical to those in the decision LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14.
   1. Market power and notice of infringement
      The court left open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power (cf. below). As to the infringement notification, [161] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules.
      
      In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.
   2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [162]
   3. The standard implementer’s reaction
      According to the court, even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [163] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [164] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [165]
3. Other important issues
   In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [166] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [167]

• [161] Case No. 4a O 93/14, para. 90-94
• [162] Case No. 4a O 93/14, para. 96-98, 125
• [163] Case No. 4a O 93/14, para. 98-101
• [164] Case No. 4a O 93/14, para. 14, 103-109
• [165] Case No. 4a O 93/14, para. 103-111
• [166] Case No. 4a O 93/14, para. 37-40
• [167] Case No. 4a O 93/14, para. 118-123

Saint Lawrence v Vodafone

31 March 2016 - Case No. 4a O 73/14

1. Facts
   Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [168] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
2. Court’s reasoning
   1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [169] The court declared the Huawei rules applicable to claims for the recall of products. [170] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [171] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [172] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [173] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [174] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [175] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
   2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [176] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [177] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [178] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [179] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [180] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [181]
   3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [182] Whether the Intervener satisfied the ECJ criteria was left undecided. [183] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [184] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [185] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [186] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [187] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [188] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [189] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [190]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [191] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [192] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [193]

• [168] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
• [169] Case No. 4a O 73/14, para. 184
• [170] Case No. 4a O 73/14, para. 187
• [171] Case No. 4a O 73/14, para. 195 et seq.
• [172] Case No. 4a O 73/14, para. 208-210
• [173] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [174] Case No. 4a O 73/14, para. 193
• [175] Case No. 4a O 73/14, para. 270 et seq.
• [176] Case No. 4a O 73/14, para. 222 et seq.
• [177] Case No. 4a O 73/14, para. 225 et seq.
• [178] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
• [179] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
• [180] Case No. 4a O 73/14, para. 256 et seq.
• [181] Case No. 4a O 73/14, para. 279 et seq.
• [182] Case No. 4a O 73/14, para. 214-220
• [183] Case No. 4a O 73/14, para. 214-220; 278
• [184] Case No. 4a O 73/14, para. 266
• [185] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
• [186] Case No. 4a O 73/14, para. 264
• [187] Case No. 4a O 73/14, para. 291 et seq.
• [188] Case No. 4a O 73/14, para. 278
• [189] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
• [190] Case No. 4a O 73/14, para. 304
• [191] Case No. 4a O 73/14, para. 189
• [192] Case No. 4a O 73/14, para. 309-313
• [193] Case No. 4a O 73/14, para. 317 et seq.

Unwired Planet v Samsung

19 January 2016 - Case No. 4b O 120/14

1. Facts
   Since 7 March 2014 Claimant, a non-practicing entity, is the proprietor of European patent EP D, allegedly covering a feature of the GSM standard, originally granted to the Intervener, and subsequently transferred to company “I”. Defendants, belonging to the K-group, produce and market GSM- and UMTS-based devices.
   In an agreement as of 26 October 2011, the Intervener granted a worldwide non-exclusive license to Qualcomm Inc., being, in turn, allowed to grant sub-licenses to its customers. Furthermore, by agreement as of 1 February 2014 one of the Defendants was granted a worldwide, non-exclusive license to patents owned by the Intervener.
   On 10 January 2013, the Intervener concluded a so-called “Master Sales Agreement” (MSA), concerning the exploitation of a portfolio of more than two thousand patents, with “E”, “F” and its subsidiaries. Claimant became a party to the MSA later on. After its accession to the MSA, “I”, by assuming the existing FRAND obligation of the Intervener in accordance with the MSA, made a separate FRAND commitment towards ETSI on 14 June 2013 and declared, in an agreement as of 13 February 2013, to ensure that subsequent acquirers equally assume this obligation. Accordingly, after the transfer of patent EP D to Claimant the latter made, on 6 March 2014, a separate commitment towards ETSI declaring to be willing to grant licenses on FRAND terms with regard to, inter alia, patent EP D.
   In order to implement the MSA the parties concluded three transfer agreements. Claimant argues that the Intervener validly transferred a part of its patent portfolio, including patent EP D, by agreement as of 11 February 2013 to undertaking “B”. On 13 February 2013, “B”, in turn, transferred the patent portfolio, including patent EP D, to “I”. After successfully requesting, on 3 September 2013, an amendment of the patent register, being performed on 24 October 2013, “I” transferred, on 27 February 2014, the patent portfolio, including patent EP D, to Claimant. Claimant successfully requested, on 7 March 2014, an amendment of the patent register which was performed on 3 July 2014.
   As a reaction to Claimant’s public license proposal including a royalty of USD 0.75 per mobile device Defendants allegedly submitted a counter-offer but no licensing agreement was concluded.
2. Court’s reasoning
   1. Market power
      The court stressed that an application of Article 102 TFEU does not automatically result from SEP ownership but that it requires proof of a dominant position on the relevant market being conveyed by the SEP in question. Due to the fact that products not implementing the patent-in-suit could not effectively compete on the relevant market because of GSM being a key feature for such products market power of Claimant was affirmed. [194]
   2. Applicability of the Huawei rules to damages and the rendering of accounts
      While the Huawei rules of conduct apply to actions for injunction, recall and destruction of products they are, in principle, not directly applicable to claims for damages and the rendering of accounts. [195] Nor is it necessarily abusive for a SEP proprietor to bring an action for damages and the rendering of accounts without having notified the standard implementer of an infringement and without having offered a FRAND license beforehand. The Huawei obligations do, however, have an indirect impact on the extent to which damages and the rendering of accounts are due: Where the SEP proprietor fails to grant a FRAND license although he has made a FRAND commitment and the standard implementer has expressed its readiness to take a license, damages are limited to the FRAND royalty level but only for the period after the SEP proprietor’s abusive refusal to license. [196] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [197]
   3. Cap on damages/rendering of accounts in casu
      In casu Defendant could not show that he had complied with its Huawei obligation to sufficiently express its willingness to take a FRAND license. In consequence, no cap on Claimant’s claim for damages was deemed appropriate. [197]
3. Other important issues
   Whether a SEP proprietor is free to enforce its patent in court or whether the proprietor is obliged to grant a FRAND license has to be determined under Art. 102 TFEU, not Art. 101 TFEU. [198] A FRAND declaration is not an unconditional offer made by the patent proprietor to enter into a licensing agreement with anyone willing to take a license, it merely expresses that the proprietor is, in principle, ready to grant a FRAND license if the patent in question conveys market dominance. As such, the FRAND commitment merely specifies a duty to license which competition law would impose anyway but it has an impact on the patent owner’s obligations under Art. 102 TFEU. [199]
   As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes—also with regard to claims for damages and the rendering of accounts—presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. The non-registration of “B” as an interim owner was considered irrelevant under the circumstances of the present case (but not generally). Case No. 4b O 120/14, para. I, 1-2
   The MSA and the subsequent transfer agreements neither violate the German provisions on merger control (§§ 35-43 GWB) since, in any case, merger control thresholds are not reached.
   Nor was a violation of the European provisions on anticompetitive agreements (Article 101 TFEU) or on the abuse of a dominant position (Article 102 TFEU) found. Case No. 4b O 120/14, para. I, 4, a-c In particular, the transactions did not aim at enforcing non-FRAND royalties or at discriminating between licensees and the agreements framing the transactions ensured that the acquirers of the relevant patents were bound by (the initial) FRAND commitments. [200] The acquirer of a SEP is neither obliged to continue the transferor’s licensing practice in an unmodified manner nor to implement exactly the same conditions in all licensing agreements, provided the conditions are FRAND and no unjustified discrimination takes place. It is not abusive in itself for a (former) SEP proprietor to split its portfolio and to transfer the parts to several acquirers, thereby trying to arrive at higher overall royalties being paid for the portfolio. Nor is a resulting increase in the number of licenses a standard implementer has to take per se inacceptable. However, licensing conditions are FRAND only if the cumulative royalty level resulting from the licensing of all pertinent SEPs is not excessive. Putting it differently, where the royalty level for the entire portfolio was below or at the lower end of the FRAND range, it is not abusive to arrive, by way of splitting the portfolio and licensing its parts separately, at a higher overall royalty level within the FRAND range. Furthermore, the transaction agreements did not amount to price fixing. [201]

• [194] Case No. 4b O 120/14, para. VII, 6, a
• [195] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
• [196] Case No. 4b O 120/14, para. VII, 6, b, dd
• [197] Case No. 4b O 120/14, para. VII, 6, b, ee
• [198] Case No. 4b O 120/14, para. VII, 4
• [199] Case No. 4b O 120/14, para. VII, 5
• [200] Case No. 4b O 120/14, para. I, 4, b, aa
• [201] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

Saint Lawrence v Vodafone

31 March 2016 - Case No. 4a O 126/14

1. Facts
   Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
   Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
   On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [202] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
2. Court’s reasoning
   The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
   1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [203] The court declared the Huawei rules applicable to claims for the recall of products. [204]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [205] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [206] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [207]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [208]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [209] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
   2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [210]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [211] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [212] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [213]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [214]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [215]
   3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [216] Whether the Intervener satisfied the ECJ criteria was left undecided. [217]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [218] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [219] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [220]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [221] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [222]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [223] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [224]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [225]
   Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [226]
   Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [227]

• [202] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
• [203] Case No. 4a O 73/14, para. 184
• [204] Case No. 4a O 73/14, para. 187
• [205] Case No. 4a O 73/14, para. 195 et seq.
• [206] Case No. 4a O 73/14, para. 208-210
• [207] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [208] Case No. 4a O 73/14, para. 193
• [209] Case No. 4a O 73/14, para. 270 et seq.
• [210] Case No. 4a O 73/14, para. 222 et seq.
• [211] Case No. 4a O 73/14, para. 225 et seq.
• [212] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
• [213] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
• [214] Case No. 4a O 73/14, para. 256 et seq.
• [215] Case No. 4a O 73/14, para. 279 et seq.
• [216] Case No. 4a O 73/14, para. 214-220
• [217] Case No. 4a O 73/14, para. 214-220; 278
• [218] Case No. 4a O 73/14, para. 266
• [219] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
• [220] Case No. 4a O 73/14, para. 264.
• [221] Case No. 4a O 73/14, para. 291 et seq.
• [222] Case No. 4a O 73/14, para. 278
• [223] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
• [224] Case No. 4a O 73/14, para. 304
• [225] Case No. 4a O 73/14, para. 189
• [226] Case No. 4a O 73/14, para. 309-313
• [227] Case No. 4a O 73/14, para. 317 et seq.

France Brevets v HTC, LG Düsseldorf

26 March 2015 - Case No. 4b O 140/13

A. Facts

The Claimant is a patent assertion entity established by the French State [1] . The Claimant was granted an exclusive licence by a company previously called Inside Technologies S.A. (SEP holder) for a European patent essential (Standard Essential Patent or SEP) for the implementation of the Standard LL V11.0.0, 2011-09 (LL standard) which was developed by the European Telecommunications Standards Institute (ETSI) [2] . The SEP holder had made an undertaking towards ETSI to make its SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [3] . The LL standard enables applications of the so-called “Near field Communication” (NFC) technology to run on smartphones over the phone’s SIM-card [4] . NFC-applications can alternatively be implemented on smartphones also by a so-called “Smartcard”, or so-called “embedded secure elements” [5] .

The Defendant is the German subsidiary of an international manufacturer of smartphones that incorporate a so-called “NFC-controller” implementing the LL standard [6] The Defendant promotes the offering and sale of smartphones manufactured by its parent company in Germany [7] .

The Claimant brought an action for infringement of the German part of the SEP in question against the Defendant before the District Court (Landgericht) of Düsseldorf (Court), requesting for injunctive relief, information and rendering of accounts [8] . The Claimant also sought for a declaratory judgment on the Defendant’s liability for damages on the merits [8] .

Against these claims, the Defendant raised inter alia a defence based on antitrust considerations; basically, it argued that the Claimant’s request for injunctive relief constitutes an abuse of market power conferred to the Claimant by the SEP in suit in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU) (antitrust defence) [9] . The Defendant also requested the Court to stay its proceedings, until the Court of Justice of the European Union (CJEU) rendered its final decision in the matter Huawei v ZTE which concerned the availability of injunctive relief to SEP holders [10] .

The Court dismissed the Defendant’s request to order a stay of the proceedings [11] and granted the Claimant’s motions to the full extent. In its analysis regarding to the antitrust defence, the Court took into account the opinion delivered by Advocate General Wathelet in the matter Huawei v ZTE (Wathelet opinion) [12] , before the final decision of the CJEU was delivered on 16th July 2015 [13] .

B. Court’s reasoning

As a starting point, the Court made clear that an entity granted an exclusive licence for a SEP is entitled to all rights arising from the patent, including claims for injunctive relief as well as claims for damages, information and rendering of accounts [14] .

Having said that, the Court pointed out that the protection of intellectual property rights (IPRs) is a high priority; IPRs are expressly protected under the Charter of Fundamental Rights of the European Union (Article 17 Sec. 2), which also guarantees right holders access to justice (Article 47). Limitations of these rights can be justified only by antirust rules for the protection of general public interest, particularly Article 102 TFEU [15] .

Following the Wathelet opinion, the Court found that a dominant position of the Claimant, which is re-quired for the implementation of Article 102 TFEU, cannot be established solely on grounds of its legal position with respect to the SEP in suit [16] . In the Court’s view, not every SEP confers market power relevant from an antitrust perspective to its holder [16] . Moreover, it has to be examined on a case-by-case basis whether the technical teachings protected by the SEP actually establish such market power [16] .

Further, the Court held that ownership of a SEP does not give rise to the presumption that market power exists [17] . Standards, particularly in the telecommunications sector, refer also to technical functionalities which are of secondary importance to the relevant market; with respect to such functionalities, there are no grounds for a presumption that the SEP holder has market power [17] . Insofar, the party asserting the existence of market power must plead and establish the relevant facts in trial [17] .

With respect to IPRs, the relevant market from an antitrust perspective is not the licensing market, but the downstream product market [18] . Looking at SEPs, relevant is the market in which products implement-ing the respective standard are offered [19] . Accordingly, the Court found that the relevant market in the present case is the smartphone market, because the NFC technology is almost solely used in smartphones [20] .

Since the NFC technology does not apply to basic functionalities of smartphones and is, therefore, no prerequisite for market entry, market power could only be established, if smartphones that do not use the teachings of a SEP could not compete in the market with products implementing this patent [21] .

In the eyes of the Court, this was not the case. The SEP in suit (and the LL Standard) enable NFC-applications to run over smartphones’ SIM-card. However, NFC-applications can alternatively also run over so-called “Smartcards” or “embedded secure elements”. The Defendant could not establish that NFC-applications running over the SEP in suit have reached market penetration to the extent that market power could be achieved [22] . On the contrary, smartphone byers do not appear to base their purchase decision on which of the three available technical solutions for enabling NFC-applications the smartphone uses [22] .

• [1] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 18
• [2] Ibid, paras. 19, 20, 24 and 26
• [3] Ibid, para. 22
• [4] Ibid, para. 212
• [5] Ibid, para. 213
• [6] Ibid, para. 22.
• [7] Ibid, paras. 151 et seq
• [8] Ibid, para. 3
• [9] Ibid, para. 46
• [10] Ibid, para. 38
• [11] Ibid, para. 219
• [12] Opinion of Advocate General Wathelet delivered on 20 November 2014, ECLI:EU:C:2014:2391
• [13] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 197 et seqq
• [14] Ibid, para. 61
• [15] Ibid, para. 197
• [16] Ibid, para. 199
• [17] Ibid, para. 201
• [18] Ibid, para. 204
• [19] Ibid, para. 205
• [20] Ibid, para. 206
• [21] Ibid, para. 208
• [22] Ibid, para. 217

Cases from LG Mannheim - District Court

LG Mannheim

4 March 2016 - Case No. 7 O 24/14

A. Facts

Case No. 7 O 24/14 [228] related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard (‘subtitle data encoding/decoding and recording medium for the same’). [229] The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used such DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. In early 2013, the patent pool approached the defendant’s parent company about the use of their patents in general.

On 30 May 2014, the defendant offered to enter into a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license (but for Germany only). It was also willing to have the claimant determine the royalties owed under section 315 of the German Civil Code. On 25 July 2014, the claimant suggested to change the license offer to a worldwide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 as to the number of respective computers they put into circulation between July 2013 and June 2014 in Germany.

On 13 March 2015, the claimant made an offer for a worldwide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details as to how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. The claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s parent company on 3 September 2015, the parties were unable to reach an agreement. On 30 September 2015, the claimant sent a PowerPoint presentation containing explanations regarding the patent and the calculation of the license fees.

The District Court of Mannheim granted an injunction order on 4 March 2016. [230] It also held that the defendant was liable for compensation and ordered it to render full and detailed accounts of its sales to determine the amount of compensation owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

B. Court’s Reasoning

1. Notice of Infringement

According to the Huawei/ZTE ruling, the claimant is required to notify the defendant of the alleged patent infringement. According to the District Court, this notice is supposed to provide the defendant an opportunity to assess the patent situation. [231] Thus, it is insufficient to notify the defendant that its products contain the respective standard and it is therefore infringing the SEP. Instead, the claimant is required to specify the infringed patent, the standard in question, and that the patent has been declared essential. The level of detail required depends on the respective situation. [232] However, the description does not need to be as thorough as a statement of claim in patent litigation. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. By sending the charts to the defendant, the claimant had met its obligations under the Huawei/ZTE ruling. [233]

The Huawei/ZTE principles require the SEP holder to give notice of infringement before commencing patent infringement proceedings. Otherwise, the SEP holder would abuse its market power, which would mean that the patent infringement court would not be able to grant an injunction order. However, according to the District Court, in such a situation the SEP holder would not lose its patent rights, but would be prevented from exercising those rights in court. [234] Proceedings that had been commenced prior to the Huawei/ZTE ruling present a special case. In that situation, the SEP holder could not have been aware of the obligations that the CJEU subsequently imposed on claimants. Thus, it must be possible for an SEP holder to go through the Huawei/ZTE process subsequently without losing the pending lawsuit. [235] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [236]

2. The SEP Owner’s Licensing Offer

The District Court expressed its view that the CJEU had wanted to establish a procedure that keeps the infringement proceedings free of complicated deliberations about the conditions of the offer, similarly to the German Federal Court of Justice decision Orange Book Standard. [237] If the alleged infringer argues that the conditions of the offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. [232] Thus, the District Court took the view that an infringement court only assesses in a summary review whether the conditions were not evidently non-FRAND. An offer is only non-FRAND if it is under the relevant circumstances abusive. For example, this would be the case if the conditions offered to the alleged infringer were significantly worse than those offered to third parties. [238] The District Court held that in the case in issue the royalties were not evidently non-FRAND because the royalty rates were generally accepted in the market. [239]

The offer needs to include the calculation method in respect of the royalties. [238] However, the CJEU did not elaborate on the level of detail required. [240] The District Court took the view that the SEP holder needs to enable the alleged infringer to understand why the offer is FRAND. In the case in issue, the claimant had included the calculation method. It had also provided further explanations regarding the calculation, which met the Huawei/ZTE requirements. [241]

3. The standard implementer’s reaction

The alleged infringer is required to respond to the SEP proprietor’s license offer, even if the infringer is of the opinion that the offer does not meet the FRAND criteria. [240] The only possible exception is an offer that, by means of summary examination, is clearly not FRAND, which would constitute an abuse of market power. A counter-offer would need to be made as soon as possible, taking into account recognized commercial practices in the field and good faith. The District Court held that the defendant had not made an adequate counter-offer. It is common business practice to enter into license agreements in respect of worldwide portfolio licenses. [242] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [242] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [243]

C. Other Important Issues

The court held that the procedures prescribed by the Huawei/ZTE ruling apply to applications for injunctions and recall orders, but not to rendering accounts and compensation. Regarding rendering accounts and compensation, SEP holders could pursue their rights in court without additional requirements. [240]

Further, the District Court was of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. Even if the claimant’s conduct was anti-competitive pursuant to Art. 101 TFEU, the standardisation agreement would be void. [244] This has no implications for patent infringement proceedings.

The court also held that there was no general rule that the SEP holder could only bring proceedings against the manufacturer of the infringing product. [245] In the eyes of the District Court, the Higher Regional Court of Karlsruhe decision 6 U 44/15 (23 April 2015) did not establish such a principle. In that case, the defendant was a company that acted merely as a distributor of infringing products (which means it was reselling the products without making any alterations). In contrast, the defendant in the present case had installed the infringing software onto laptops and then sold them under its own brand name. Thus, the two cases were not comparable. [245]

• [228] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
• [229]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
• [230] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
• [231] LG Mannheim, 4 March 2016, 7 O 24/14, p. 22.
• [232] LG Mannheim, 4 March 2016, 7 O 24/14, p. 23.
• [233] LG Mannheim, 4 March 2016, 7 O 24/14, p. 34/35.
• [234] LG Mannheim, 4 March 2016, 7 O 24/14, p. 26.
• [235] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 27-30.
• [236] LG Mannheim, 4 March 2016, 7 O 24/14, p. 33.
• [237] LG Mannheim, 4 March 2016, 7 O 24/14, p. 21.
• [238] LG Mannheim, 4 March 2016, 7 O 24/14, p. 24.
• [239] LG Mannheim, 4 March 2016, 7 O 24/14, p. 37.
• [240] LG Mannheim, 4 March 2016, 7 O 24/14, p. 25.
• [241] LG Mannheim, 4 March 2016, 7 O 24/14, p. 35/36.
• [242] LG Mannheim, 4 March 2016, 7 O 24/14, p. 38.
• [243] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 38-40.
• [244] LG Mannheim, 4 March 2016, 7 O 24/14, p. 43.
• [245] LG Mannheim, 4 March 2016, 7 O 24/14, p. 44.

Saint Lawrence v Deutsche Telekom

27 November 2015 - Case No. 2 O 106/14

1. Facts
   Since 28 August 2014, Claimant, a non-practicing entity established under German law, is registered as the current proprietor of the European patent EP 1.125.284 B1, originally granted to applicant “V” (Voiceage Corporation). Whether “V” validly transferred the patent to Claimant is disputed between the parties. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices. The patent has been found to be essential to ETSI’s AMR-WB standard by IPEC. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001 “V”, who joined ETSI only after the standard had been set, repeatedly—on 29 May 2001, 26 October 2004 and 7 January 2010—declared its readiness to grant licenses on FRAND terms for the respective patent.
   After initiating the present action—Defendant having been served with the claim on 7 August 2014—Claimant informed Defendant by letter as of 31 July 2014 (including a copy of the statement of claims as of 23 July 2014) that it was ready to grant licenses on FRAND terms for the patent-in-suit and five other German patents allegedly used by Defendant. Inviting Defendant to discuss such a licensing agreement Claimant offered, in addition, to communicate a draft licensing agreement by letter as of 9 December 2014. Defendant did not show any interest in acquiring a license regarding the patent-in-suit.
   Prior to the infringement action, Claimant neither tried to contact nor to make a licensing offer to Defendant’s supplier “H”(HTE) which, knowing about the lawsuit since August 2014, acted as an intervener in the present proceedings. Subsequent to Defendant’s third-party notice, “H” started licensing negotiations with Claimant on 9 December 2014. After “H” had signed a non-disclosure agreement provided by Claimant on 22 December 2014, Claimant submitted a draft licensing agreement on 12 January 2015, being corrected on 26 January 2015. Talks took place on 9 February 2015. By letter as of 23 February 2015 “H” made a supplemented proposal for the determination of the licensing conditions. In an e-mail as of 6 March 2015 “H” declared its willingness to take a license for Germany alone and specified conditions. As a reaction to Claimant’s offer as of 25 March 2015 concerning a worldwide license “H” submitted, on 2 April 2015, a counter-offer that was limited to Germany and suggested third party determination of royalties by the High Court of England and Wales. While Claimant rejected the counter-offer by letter as of 19 April 2015, “H” declared to adhere to its offer by letter as of 8 June 2015. On 3 September 2015 “H” sent an additional letter according to which a bank guaranteed, under certain conditions, payment of royalties for past use of the relevant patents in Germany. As Claimant criticized the letter as incomprehensible by e-mail of 13 September 2015, Defendant subsequently (inter alia by submitting documents to the court on 23 September 2015) explained in greater detail how the royalties were to be calculated.
2. Court’s reasoning
   1. Market power and notice of infringement
      The court finds, in any case, no abuse of (potential) market power, as H behaved tactically motivated causing delay and made its own offers linked to unacceptable conditions. However, the court leaves open the questions (1) of whether the SEP conveyed actual market power to Claimant, (2) of whether—even absent actual market dominance—the FRAND declaration subjected Claimant to the conduct requirements for a market dominant SEP proprietor, (3) of whether Claimant is to be treated as if it had made the FRAND declaration itself, and (4) of whether a refusal to grant FRAND licenses to Defendant’s device suppliers entitled Defendant to a FRAND defense regardless of its own readiness to take a license. [246] The court made however clear that enforcing the right of injunction is not a misuse when the infringer, even after the complaint has been raised and despite a reasonable timeframe, does not show any interest in getting a license.
      As regards the Huawei requirement to alert the standard user of the infringement, the court focused on different aspects. Since, in the present case, Defendant refrained from expressing its willingness to conclude a licensing agreement on FRAND terms it was left undecided whether Claimant complied with its obligation to notify prior to the initiation of court proceedings by sending, after bringing the action but before the statement of claims was served to Defendant, a letter from which Defendant could recognize that an action had already been brought.
      The Mannheim court did also not determine whether Claimant, in order to avoid a violation of Article 102 TFEU, had to inform “H” about the patent infringement because the latter learned or could have easily learned about the possible violation of the SEP during a phone call with Defendant in August 2014. [247] However, “H” did not sufficiently express its willingness to conclude a licensing agreement on FRAND terms because it took “H” more than three months to submit a license request after it had become aware of the court action. “H” could have objected a violation of Article 102 TFEU if it had expressed such willingness and complied with the subsequent Huawei obligations. However, “H” failed to do so also because it refrained from submitting a satisfying counter-offer. [248]
   2. The SEP owner’s licensing offer
      The court seems to favor FRAND-compatibility of worldwide licenses as it clarifies that limiting the counter-offer to Germany was “unacceptable” but does not decide on the issue. Also, the court left undecided whether the royalty rate offered by Claimant satisfied FRAND. [249]
   3. The standard implementer’s reaction
      Considering the subsequent conduct obligation of the standard user, the district court found that a FRAND counter-offer has to be submitted irrespective of whether the preceding licensing offer made by the SEP proprietor itself is FRAND. In order to trigger the counter-offer obligation it is sufficient that the licensing offer contains—as in the present case—all information, in particular regarding royalty calculation, which is necessary for Defendant to submit a counter-offer corresponding to FRAND terms. The Huawei obligation to diligently respond does not merely arise where a licensing offer is FRAND but it has to be considered as an expression of the sincere willingness of Defendant to conclude a licensing agreement. If such willingness is given, the patent proprietor will not be allowed to present a subsequent FRAND licensing offer after the initiation of proceedings. [250]
      The court then analyzed whether Defendant’s counter-offer met the ECJ requirements in terms of content, but left it undecided whether a limitation to Germany could be in compliance with FRAND terms. It denied the existence of a “specific” counter-offer in the present case because the amount of the royalty was not specified in the document itself but was intended to be determined by an independent third party. [251] In consequence, “H” could not fulfill its obligation to provide appropriate security because it was not possible to anticipate which amount of royalty would have been stipulated by the “independent third party”. [252]
3. Other important issues
   In the course of licensing negotiations, the standard user is neither prevented from challenging validity, standard-essentiality or effective use of the patent in question nor to reserve its right to do so. [253]
   As regards ownership and the transfer of the patent from the original patent proprietor to the non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes the presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [254]
   No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [255] Defendant and Intervener could establish neither collusion of “V” and “N” (a participant in the setting of the AMR-WB standard) nor bad faith of “N” regarding “V” ’s patents. Hence, non-declaration by “N” did not amount to a patent ambush. Nor could non-declaration by “V” constitute a patent ambush since “V” was no member of ETSI—and, hence, not bound by a duty to disclose resulting from ETSI’s IP policy—when the AMR-WB standard was being set. Furthermore, Defendant and Intervener could not show why they should have been adversely affected by “V” ’s alleged violation of the ETSI IPR Policy, given that Claimant had declared its willingness to grant a license on FRAND terms. [256] In particular, they could not substantiate that a different form of the standard, avoiding “V” ’s patents, would have been set, had the standard-setting participants known about these patents. [257] Given these deficiencies in the attempt to establish a patent ambush the court left open whether such an ambush would result in an obligation to grant a royalty free- or “only” a FRAND license but indicated to favor the FRAND license-sanction. [258]

• [246] Case No. 2 O 106/14, para. 133
• [247] Case No. 2 O 106/14, para. 139-144
• [248] Case No. 2 O 106/14, para. 146-149
• [249] Case No. 2 O 106/14, para. 152-153
• [250] Case No. 2 O 106/14, para. 153-160
• [251] Case No. 2 O 106/14, para. 158-164
• [252] Case No. 2 O 106/14, para. 167-169
• [253] Case No. 2 O 106/14, para. 146
• [254] Case No. 2 O 106/14, para. 78-80
• [255] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
• [256] Case No. 2 O 106/14, para. 118-131
• [257] Cf. LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 131, i.a. on the mechanism of “blind selection” among technological alternatives, (initially) irrespective of existing patents and their ownership situation.
• [258] Case No. 2 O 106/14, para. 198

NTT DoCoMo v HTC

29 January 2016 - Case No. 7 O 66/15

1. Facts
   Claimant owns the patent EP 1 914 945, declared to be essential with regard to ETSI’s UMTS standard. Defendant markets devices implementing the UMTS standard (in particular the HSUPA/EUL technology). On 19 March 2014 Claimant sent to Defendant’s group parent a detailed licensing offer and explained its conditions at several instances before filing suit in April 2015. As of 7 April 2014 and 15 July 2014, Claimant communicated to Defendant’s group parent company claim charts in order to demonstrate standard-essentiality of its patent and further explained the issue in a presentation on 8 July 2014. Defendant submitted its first counter-offer on 30 October 2015. The counter-offer envisaged a 3 year-license limited to some of the countries in which Defendant markets its products. Claimant rejected the counter-offer on 12 November 2015. Defendant did not provide security but merely promised to do so, based on a calculation including sales of relevant devices in Germany only. Claimant rejected this and demanded security based on worldwide sales.
2. Court’s reasoning
   1. General meaning of the Huawei framework
      Prior to discussing specific conduct requirements established by the Huawei ruling, the court sketches its approach in a general manner. [259] According to the court the Huawei decision establishes a set of rules of due conduct in SEP licensing negotiations. Based on whether the parties comply with these rules the respective court can determine whether an SEP owner’s seeking of an injunction and a recall of products constitutes an abuse of a position of market dominance or a justified reaction to a standard implementer’s delaying tactics. In consequence, the respective court does not—unless it has to decide a claim for the payment of licensing fees and not claims for injunction and recall of products—have to rule on the substance of the offered licensing conditions or their being FRAND. [260] This is in line with recognized commercial practice according to which reasonable parties will not usually want courts to determine their licensing conditions. Furthermore, the ECJ has—from the perspective of the Mannheim District court—stressed that the exercise of the exclusive rights conveyed by a patent will be barred only in very exceptional circumstances. As a result, it is up to the standard implementer to show that such exceptional circumstances are present. [261]
   2. Market power and notice of infringement
      The court does not elaborate on the market power issue. As part of the notice of infringement [262] the court deems it necessary for the proprietor to identify the (allegedly) violated patent, including the patent number, and to inform that the patent has been declared standard-essential. Furthermore, the proprietor has not only to name the standard but to specify the pertinent part of the standard and the infringing element of the implementer’s products in a way that enables the standard implementer to assess whether its use of the standard infringes on the patent-in-suit. The level of detail required must be determined on a case-by-case basis, depending mainly on the expertise of – or available to – the implementer. Presenting claim charts corresponding to recognized commercial practice for licensing negotiations is, in principle, an acceptable way to give notice of the alleged infringement. In casu the court considered the proprietor’s notice as sufficient. [263] In particular, notice was given before the bringing of an action for infringement and the proprietor had submitted claim charts not only with regard to the patent-in-suit but also with regard to six other patents from the portfolio offered for license, a sample which the court deemed in accordance with recognized commercial practice. Sufficient notice having taken place, the court left open the question whether, (1) the Huawei rules applied at all in spite of the action being brought before the ECJ’s decision, and whether (2) the proprietor was obliged to submit claim charts for other patents than the patent-in-suit.
   3. The SEP proprietor’s licensing offer
      The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [264] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept. In casu the court accepted the Huawei compliance of the licensing offer, [265] in particular because the proprietor had explained its calculation of the licensing fee based on the percentage of patents in the WCMA/SIPRO and the VIA patent pools held by the proprietor. The proprietor was not required to prove its share in the patent pools. The parties disagreed over whether the smallest saleable unit forms an appropriate basis for royalty calculation and whether it is acceptable to look only at the size, not the quality of a proprietor’s share in a relevant patent pool. The court, however, considered these issues as not decisive for the Huawei-conformity of the licensing offer.
   4. The standard implementer’s reaction
      As a further consequence of the court’s general approach, the standard implementer’s duty to diligently react to the proprietor’s licensing offer is not removed only because the offer does not fully comply with FRAND. [266] . An exception applies only where it can be established by a mere summary assessment that the offer evidently violates FRAND. If a reaction of the alleged infringer is due, the “diligence”, i.e. timeliness, of this offer has to be determined cases-by-case, based on the principles of good faith and recognized commercial practice. In casu the standard implementer’s reaction was insufficient (1) because a counter-offer was made only 1.5 years after receiving the licensing offer and 0.5 years after the bringing of the proprietor’s action, (2) because security was merely promised, not provided, and (3) because the amount of security offered fell short of the court’s suggestions.
3. Other important issues
   The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products. It is, however, free from their grip when bringing an action seeking the rendering of accounts in relation to past acts of use or an award of damages in respect of those acts of use.

• [259] Case No. 7 O 66/15, para. 53 et seq.
• [260] Case No. 7 O 66/15, para. 56
• [261] Case No. 7 O 66/15, para. 53
• [262] Case No. 7 O 66/15, para. 57
• [263] Case No. 7 O 66/15, para. 65-69
• [264] Case No. 7 O 66/15, para. 58
• [265] Case No. 7 O 66/15, para. 70-72
• [266] Case No. 7 O 66/15, para. 59 et seq

Pioneer v Acer

8 January 2016 - Case No. 7 O 96/14

1. Facts
   Claimant owns the patent EP 1 267348, allegedly essential to the DVD standard and administered with regard to its licensing by the patent pool “A”. Early in 2013 “A” and the Defendant’s group parent were in contact regarding “A” ’s DVD licensing activity, but no concrete notice of infringement was made and no licensing negotiations ensued. After having been sued for patent infringement Defendant submitted, on 6 October 2014, an offer to license the patent-in-suit for Germany at FRAND conditions, with the exact royalty rate to be determined by Claimant pursuant to § 315 German Civil Code. Furthermore, Defendant declared to be willing to negotiate a portfolio license for all German patents of Claimant and, in case the negotiations were to fail, to have the licensing conditions determined by a state court or arbitration tribunal. In order to indicate what Defendant considered to be a FRAND royalty rate Defendant submitted an expert opinion. As of 28 November 2014, Claimant proposed to modify the conditions to the effect that Defendant’s group parent was supposed to take a worldwide portfolio license comprising all Claimant’s portfolio patents administered by “A”. Claimant made a (perhaps: additional) FRAND declaration with regard to the patent and informed Defendant thereof in December 2014. After Defendant had rejected this offer, Claimant offered, on 13 March and 13 April 2015, a worldwide portfolio license to Defendant’s group parent company. To the offer were added claim charts for two pool patents, as well as information on how Claimant deduced the royalty from the overall royalty rates of the “A”-patent pool. On 5 May 2015, Defendant’s group parent requested claim charts regarding all patents to be licensed as well as further information on royalty calculation. Claimant sent, on 7 August 2015, claim charts for five additional patents declaring its willingness to provide further information as soon as constructive technical discussions would be taken up. In a filing to the court as of 20 November 2015, Claimant explained its royalty calculation in greater detail and submitted an expert opinion on the issue.
2. Court’s reasoning
   1. General meaning of the Huawei framework and applicability to transitory cases
      As to the court’s general take on the Huawei rules cf. LG Mannheim, 29 January 2016 - 7 O 66/15 (above). Where an action for prohibitory injunction and recall of products has been brought before the ECJ handed down its ruling it has, in the opinion of the court, no negative effect on the action if Claimant fulfills its Huawei conduct obligations only after filing the lawsuit. [267] According to the extensive analysis undertaken by the court this is because, inter alia, the SEP proprietor could not be expected to comply with the – then future and unknown – conduct requirements established by Huawei but rather with the legal framework set by the German Federal Court (BGH) in Orange Book. Hence, a proprietor’s conduct that respected Orange Book but deviated from Huawei cannot be taken to signal inappropriate economic goals or lack of willingness to grant FRAND licenses. Furthermore, it seems more in line with the ECJ’s core intention of furthering successful licensing negotiations if the parties get the chance to perform their Huawei conduct obligations even though litigation is already underway.
      Where, however, the action is brought after the Huawei ruling a violation of the conduct requirements established therein bars—as a matter of substantive law, not of procedural law—Claimant from enforcing its patent-based rights to prohibitory injunction or recall of products. [268] Although Claimant’s action will then be dismissed, Claimant is free to catch up on its Huawei obligations and re-file the action if the standard user fails to comply with Huawei.
   2. Market power and notice of infringement
      Leaving open whether Claimant was market dominant, the court formulates general considerations identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). The court doubts whether the initial contact between the patent pool “A” and Defendant’s group parent qualifies as an appropriate notice of infringement. In any case, such notice has been given by and after bringing the infringement lawsuit. Claimant’s statement of claims, in particular, contained all information necessary. Producing the original document in which Claimant made its FRAND declaration or proving that a FRAND declaration has been properly made during the standard-setting procedure is not required as long as the SEP proprietor considers itself bound by a FRAND licensing obligation. Not least because the lawsuit had been suspended for several months and some more months elapsed between the ECJ’s Huawei ruling and the oral hearings in the case at issue, there was ample time for the standard user to fulfill its Huawei duties and negotiate a license unburdened by the pressure created by an impending prohibitory injunction. [269] Even if it were justified to request—the court seems to doubt this—claim charts for a sample of patents where a worldwide portfolio license is offered, Claimant would have met this obligation, in particular because Defendant did not communicate that or why it considered the sample insufficient. It was not necessary for Claimant to impart to Defendant a documentation of the standard at issue. [270]
   3. The SEP proprietor’s licensing offer
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above): The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [271] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept.
      In casu the court considered Claimant’s offer as sufficient, [272] in particular because a worldwide license, granted to the parent of a group, corresponded to recognized commercial practice in the field. It was no evident FRAND violation to calculate the royalties based on the licensing conditions of the patent pool “A” and Claimant’s share in the patents of this pool. It was further appropriate to demand a lump sum for past use of the patents to be licensed without specifying (in the licensing offer) the exact amount for lack of accessible information on the extent of the use. The information provided by Claimant on how the royalties were calculated was deemed sufficient. It was not necessary to impart to Defendant licensing contracts concluded with other market participants since “A” ’s model contracts were accessible on the Internet and no circumstances indicated unequal treatment of licensees absent objective justification such as differing turnovers.
   4. The standard implementer’s reaction
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). In casu the court considered Defendant’s counter-offer to be evidently non-FRAND, mainly because the license would have—inappropriately, given the facts of the case and recognized commercial practice—been limited to Germany. [273] Furthermore, Defendant neither rendered account nor provided security for its use of the patent in the past. The fact that Defendant has—allegedly—terminated its use of the patent does not remove these obligations for past periods of use. [274] As the court explains in some detail, [275] an overall assessment of the conduct of the parties indicates that Defendant engaged in delaying tactics while Claimant was not trying to use the infringement action for extorting excessive royalties.
3. Other important issues
   The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products (cf. LG Mannheim, 29 January 2016 - 7 O 66/15, above). Regarding claims for rendering of accounts it mentions, but does not decide the question whether the existence of a FRAND declaration has an impact on the content of such claims. [276]
   Even if the standard-setting at issue had—due to the lack of a timely FRAND commitment by Claimant—violated Art. 101 TFEU, this would not bar Claimant from enforcing its patents within the limits set by Art. 102 TFEU and the Huawei ruling. [277]
   Neither competition law nor the general principle of good faith required Claimant to primarily address entities that produce standard-implementing components of Defendant’s products. [278] On the contrary, Claimant was free to immediately demand the taking of a license from Defendant, all the more so because Defendant was not only engaged in marketing and selling third-party devices but also devices produced by Defendant’s group of companies using the standard-implementing components.

• [267] Case No. 7 O 96/14, para. 84-107
• [268] Case No. 7 O 96/14, para. 81-83
• [269] Case No. 7 O 96/14, para. 109 et seq.
• [270] Case No. 7 O 96/14, para. 114-117
• [271] LG Mannheim, 29 January 2016 – Case No. 7 O 66/15, para. 58
• [272] Case No. 7 O 96/14, para. 118-129
• [273] Case No. 7 O 96/14, para. 131-133
• [274] Case No. 7 O 96/14, para. 134 et seq.
• [275] Case No. 7 O 96/14, para. 136-141
• [276] Case No. 7 O 96/14, para. 142
• [277] Case No. 7 O 96/14, para. 144 et seq.
• [278] Case No. 7 O 96/14, para. 146

Philips v Archos

1 July 2016 - Case No. 7 O 209/15

1. Facts
   Claimant, a globally operating electronics manufacturer, is the proprietor of European patents EP 1 062 743 B1 and EP 1 062 745 B1, allegedly covering part of the UMTS- and LTE-standard respectively. Defendant, being the German subsidiary of the French parent company Archos S.A., produces and markets UMTS- and LTE-based devices under the brand name “ARCHOS” in Germany.
   By letter of 5 July 2014, Claimant sent an infringement notification, including a list of the patents affected, to Defendant. Furthermore, on 15/16 September 2014, Claimant explained its licensing program to Defendant and provided for corresponding documents. After Defendant offered Claimant in a meeting on 25 November 2014 the transfer of patents which it considered essential to the UMTS- and LTE-standard respectively, Claimant sent a written licensing offer, containing a list of SEPs and patent-infringing products, to Defendant on 28 July 2015 and provided for additional technical information concerning the SEPs in-suit on 25 September 2015 via e-mail. On 12 January 2016, Defendant, in turn, submitted a written counter-offer to Claimant for a licence covering Claimant’s worldwide LTE/UMTS-patent portfolio including royalties of 0.071% of the net sales price per unit. Since the parties did not conclude a binding licensing agreement subsequently, Claimant brought an action against Defendant on 16 October 2015, received by the court on 19 October 2015. In April 2016, Defendant deposited an amount of EUR 161’343.00 at the Landesjustizkasse (federal justice treasury) Bamberg, which should cover the worldwide sales of LTE/UMTS-based devices between 2012 and 30 June 2016 and was calculated on the basis of the royalties previously offered in Defendant’s counter-offer.
2. Court’s reasoning
   1. Market power and infringement notification
      The court left open the question of whether the SEP conveyed market power to Claimant since it did, in any case, find no abuse of such potential market power.
      Having regard to the content of the infringement notification, the Mannheim court held that, in any case, the SEP proprietor, on the one hand, has to denote the patent in-suit, which it deems essential, by reference to its patent number and to indicate, that the patent has be declared essential by the respective standardization organization. In order to specify the way in which the SEP has been infringed, the SEP proprietor’s notification must, on the other hand, clarify to which standard the patent in-suit is essential and based on which circumstances it assumes that the alleged infringer makes use of the patent’s teachings. For this purpose, the SEP proprietor must indicate which (category of the) technical functionality of the challenged embodiment makes use of the standard. The alleged infringer must be able to assess the intellectual property rights situation autonomously or by recourse to a third party.
      The level of detail to be adhered to in the infringement notification depends on the specific circumstances of the case, taking into account in particular the technology knowledge of the alleged infringer or by what means it can acquire the corresponding professional expertise in a reasonable manner. In order to substantiate the facts of the infringement in accordance with Huawei, it is deemed sufficient to refer to so-called claim charts, being customarily used in the course of licensing negotiations, comparing the asserted claim of the patent in-suit according to features with the relevant passages of the standard without fulfilling the requirements of the conclusiveness test of an infringement action. In contrast, the mere reference that the standard implementer would produce or market products implementing the standard and therefore infringe the patent in-suit is not adequate.
   2. The SEP owner’s licensing offer
      As regards the Huawei condition to submit a written offer on FRAND terms prior to the initiation of proceedings, the court requires a contractual offer that is ready to be adopted and comprises the essentialia negotii. However, in the opinion of the judges, Huawei does not oblige the infringement court to determine pursuant to objective criteria whether the licensing offer complies with FRAND terms, if the latter fact is disputed by the alleged infringer. [279] The SEP proprietor’s offer is only considered not FRAND and in violation of antitrust law, if it constitutes an expression of exploitative abuse, taking into account the specific negotiation situation and, in particular, the market conditions.
      In order to comply with the obligation to specify the way in which the royalty is to be calculated, the SEP proprietor must put the alleged infringer in a position to understand on the basis of objective criteria why the former considers its licensing offer as FRAND. For this purpose, it is, in the case of quota licence agreement, not sufficient to indicate the royalties per unit without substantiating their FRAND character. The respective amount must be made sufficiently transparent, e.g. by reference to an established standard licensing program or by indicating other reference values allowing to deduce the royalty demanded, such as a pool licence fee.
      Taking into account the summary examination of the Higher Regional court in Karlsruhe granting the SEP proprietor much leeway in determining FRAND terms [280] , the Mannheim court left in the present case undecided whether it has to reassess its own standards of review, because Claimant did not sufficiently explain why royalties of USD 1.00 per unit should be FRAND in accordance with Huawei. The mere indication of the multipliers underlying the calculation of the royalties were deemed inadequate, since on the basis of this incomplete (market) information the alleged infringer is neither able to assess whether Claimant’s offer is FRAND nor to submit a FRAND counter-offer.
      The subsequent explanations as well as the expert opinion, seeking to prove the non-discriminatory character of the royalties, forming part of Claimant’s reply, did not fulfill the Huawei requirements, because prior to the initiation of proceedings Claimant has to substantiate both the manner of patent infringement and the way of calculating the royalties. Without completely dissenting from the decision previously rendered by the OLG Düsseldorf [281] , the Mannheim court, by reference to the subsequent rectification order issued by the ECJ on 15 December 2015, denied the SEP proprietor’s unlimited possibility to perform its Huawei obligations within the ongoing trial without incurring sanctions, because otherwise the central idea underlying the ECJ decision of being able to negotiate without the burden of pending proceedings while having all necessary information to evaluate the FRAND conformity of the licensing offer would be diminished.
      Moreover, Claimant was not exempted from its respective Huawei obligation due to Defendant’s alleged lack of willingness to conclude a licensing agreement. In contrast, a fundamental unwillingness to enter into licensing negotiations was rejected, because Defendant, firstly, complained in letters of 20 November 2015 and 4 December 2015 about Claimant’s deficient explanation why the licensing fee should be FRAND according to Huawei; secondly, it made a counter-offer including royalties of 0.071% of the net sales price per unit and provided for an expert opinion elaborating on the FRAND character of this royalty; thirdly, it submitted an offer to transfer own patents prior to the proceedings; and lastly, even though conducted after the initiation of proceedings, Defendant deposited a considerable amount with the court, which should cover worldwide sales with its LTE/UMTS-based products.
   3. The standard implementer’s reaction
      The standard implementer is obliged to react to a licensing offer, even if it deems the later not as FRAND in accordance with Huawei [282] , unless it is established by means of summary examination that the licensing offer is evidently not FRAND and therefore constitutes an abuse of dominance.
3. Other important issues
   Although the Mannheim court rejected the action for prohibitory injunction and for the recall of products for reasons of antitrust law, it confirmed, on the basis of § 140b PatG and § 242 BGB, Claimant’s application for information as well as for rendering account and granted damages in accordance with § 139 (2) PatG, because it found Defendant to infringe the patents in-suit.
   Besides, the Court denied the exhaustion of the patents in-suit. [283]

• [279] The judges stated in an even more general manner that the infringement court shall not be required under Huawei to determine the FRAND terms, if the proceedings do not involve the payment of royalties, but only relate to actions for a prohibitory injunction or for the recall of products.
• [280] See above OLG Karlsruhe, 31 May 2015 – Case No. 6 U 55/16
• [281] See above OLG Düsseldorf, 9 May 2016 – Case No. 15 U 36/16
• [282] See also LG Mannheim, 27 November 2015 – Case No. 2 O 106/14 and LG Düsseldorf, 3 November 2015 – Case No. 4a O 144/14
• [283] Para. V, p. 34 et seq.

Philips v Archos

17 November 2016 - Case No. 7 O 19/16

Prof. Dr. Philipp Maume, S.J.D. (La Trobe)

1. Facts
   The claimant is an international electronics company, which owns a range of patents relating to mobile phone technology. In particular, the claimant owns the patent EP 1.440.525, which is allegedly essential for the UMTS and LTE standards. The defendant is a German subsidiary of a French multinational electronics company that offers Android tablets and smartphones which are compliant UMTS and LTE standards. On 5 July 2014, the claimant informed the defendant in writing that by marketing and selling mobile phones, the defendant is infringing standard essential patents owned by the claimant. On 15/16 September 2014, the claimant handed over written documents about its licensing program to the defendant. In a discussion on 25 November 2014, the defendant offered to transfer patents that it deemed essential to the standards in question. In a letter dated 28 July 2015, the claimant offered to grant a license for the relevant patent. This letter included a list of all allegedly infringing products and patents in question, and relevant technical details. The claimant sent additional technical information via email on 25 September 2015. On 12 January 2016, the defendant sent a written offer to enter into a license agreement for the claimant’s worldwide patent portfolio. The parties did not reach an agreement. The claimant commenced infringement proceedings in the District Court of Mannheim on 16 October 2015 (received by the court on 19 October 2015). The defendant subsequently made a deposit at the Bavarian Justice Exchequer at Bamberg in April 2016. The deposit was supposed to cover all royalties owed for the worldwide sale of LTE/UMTS devices by the defendant between 2012 and 30 June 2016. The court dismissed the actions for injunction, recall and destruction of products because the claimant had not complied with its obligations under EU competition law. However, the court ordered the defendant to render accounts and declared that the defendant was liable for compensation.
2. Court’s reasoning
   1. Market Power and Notice of Infringement
      TThe court did not comment on the existence of a dominant market position. It focused on the notice of infringement and the license offer. The court held that the notice of infringement should enable the alleged infringer to examine and assess the patent situation. [284] It is insufficient to indicate that the alleged infringer is marketing products covered by a standard and is therefore infringing a patent. Rather, the SEP proprietor needs to specify the patent number and the standard for which it has been declared essential. The SEP proprietor also needs to describe the technical functionality of the standard which is at issue. The level of detail of these descriptions depends on the particular situation. [284] The SEP proprietor needs to take into consideration the level of the alleged infringer’s technological knowledge, or its ability to gain the required knowledge through professional advice. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. However, the description does not need to be as thorough as a statement of claim in patent litigation.
   2. The SEP owner’s licensing offer
      The court stated that the SEP proprietor’s written license offer needs to contain all relevant aspects of the contract, to enable the alleged infringer to accept the offer. [285] If the alleged infringer argues that the conditions of this offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. The Court acknowledged that the Higher Regional Court of Karlsruhe had rejected this view in the decision 6 U 55/16 of 31 May 2016. [286] The Mannheim District Court, however, reiterated its view that a reduced standard of review of the offered conditions is sufficient, referring to the final opinion given by the Advocate General in the ZTE/Huawei ruling. [285] It was, the court argued, the CJEU’s intention to keep the infringement proceedings free of the determination as to what precise conditions would exactly be FRAND in each particular situation. [285] Only an offer that is clearly abusive, i.e. evidently non-FRAND, would not meet the CJEU criteria at this point. [285]
      Of course, the SEP proprietor’s mere assertion that the offer is FRAND would be insufficient. [285] Instead, the Court requires the SEP proprietor to be transparent about the calculation. That means that it needs to specify how the terms of the license offer are calculated. [287] It needs to make clear the basis of the SEP proprietor’s conclusion that the offer is FRAND. Merely stating the royalties owed per unit (in this case: USD 1,- per unit without further explanation) [288] is also insufficient. Rather, the SEP proprietor needs to find a proper way of substantiating its view as to what royalties are owed. This could be a standard license agreement entered into with third parties, or other references such as fees for a pool license that contains SEPs of the respective standard.
      The SEP proprietor needs to make these explanations before it commences infringement proceedings. [289] Only then, the alleged infringer is able to assess the situation unburdened by the treat of an ongoing court case. The Court was aware that the Higher Regional Court of Düsseldorf had recently (Case No. I – 15 U 36/16, 9 May 2016) expressed its view that this understanding might be overly formal. However, the Mannheim District Court upheld its opinion that only a thorough explanation by the SEP proprietor enabled the alleged infringer an informed decision as to whether the license offer is FRAND. [289]
      The Court held that, in theory, the claimant could be exempt from this transparency obligation if the defendant had been unwilling to enter into a license agreement. [290] However, in the case at issue the defendant had demonstrated its willingness to enter into a license agreement. The Court took into account four factors:
      1. the defendant’s had repeatedly requested the claimant to explain the basis of the license offer calculation, [290]
      2. the defendant had offered to transfer some of its own patents in exchange, [290]
      3. the defendant had made an offer and had commissioned an expert opinion that elaborated why the respective conditions were FRAND, [290]
      4. the defendant had deposited a substantial amount. [291]
   3. Standard Implementer’s Reaction
      The Court repeated its view expressed in the decision 2 O 106/14 of 27 November 2015. [292] Accordingly, the alleged infringer needs to respond to the SEP proprietor’s offer, even if the infringer considers that the offer does not meet the FRAND criteria. The only possible exception is an offer that, by means of summary examination, is clearly not FRAND and therefore constitutes an abuse of market power. A potential counter offer needs to be made in due course, which means as soon as possible, taking into account the recognized commercial practices in the field and good faith.

• [284] Case No. 7 O 19/16, para 77
• [285] Case No. 7 O 19/16, para 78
• [286] Case No. 7 O 19/16, para 76
• [287] Case No. 7 O 19/16, para 79
• [288] Case No. 7 O 19/16, para 84
• [289] Case No. 7 O 19/16, para 86
• [290] Case No. 7 O 19/16, para 87
• [291] Case No. 7 O 19/16, para 88
• [292] Case No. 7 O 19/16, para 80

Italian court decisions

Sisvel v ZTE, Tribunale Ordinario di Torino

18 January 2016 - Case No. 30308/20215 R.G.

1. Facts
   Claimant (Sisvel Int. S.A.) is the proprietor of European patent EP 1 264 504, originally granted to Nokia Corporation, allegedly covering part of the UMTS standard, and being part of Claimant’s patent portfolio “Sisvel Wireless patents” which purportedly encompasses patents essential to various ICT standards. Defendant I (ZTE Italy S.R.L.) and Defendant II (Europhoto Trading S.R.L.) produce and market UMTS-based devices.
   On 10 April 2013, Claimant made a commitment towards ETSI declaring to grant a license on FRAND terms with regard to patent EP 1 64 504. By letter as of December 2012 Claimant informed ZTE Corporation, parent company of Defendant I, about its ownership in various SEPs, indicated that the teachings of these patents were implemented in Defendant I’s devices and expressed its willingness to grant licenses on FRAND terms. On 19 December 2012, ZTE Corporation requested from Claimant further information in order to be able to assess that offer. On 29 January 2013, Claimant sent a non-disclosure agreement (NDA) which ZTE Corporation signed only about seven months later on 3 September 2013. In the course of meetings in September and October 2013, Claimant and ZTE Corporation entered into licensing negotiations without concluding a licensing agreement. On 25 July 2014, after a break of several months, the licensing negotiations have been reinitiated and ZTE Corporation for the first time addressed a claim chart provided by Claimant about ten months before.
   Claimant, by letter as of 13 October 2014, gave notice of its decision to unilaterally terminate the NDA within thirty days because ZTE Corporation adhered to delaying tactics. At the same time, though, Claimant continued the licensing negotiations. Although ZTE Corporation declared at first, on 5 February 2015, to agree to the terms proposed by Claimant it submitted a counter-offer a few months later. The counter-offer was rejected by Claimant. After the presentation of a draft licensing agreement by Claimant on 11 March 2015 and several meetings of the parties Claimant submitted a final licensing offer on 4 November 2015 being rejected by ZTE Corporation due to its alleged non-conformity with FRAND terms. Since a further licensing offer being presented in December 2015 was equally refused by ZTE Corporation, Claimant commenced litigation against Defendants.
   After Defendant II, a retail company, was informed about the seizure of twenty mobile phones implementing the UMTS-standard, it immediately returned the remaining six devices to its supplier and provided the necessary sales documents to the court.
2. Court’s reasoning
   Since Claimant only entered into licensing negotiations with and addressed all licensing offers to ZTE Corporation, being the parent company of Defendant I, it did not comply with its Huawei obligations vis-à-vis Defendant I. Claimant neither noticed Defendant I of the alleged infringement prior to initiating litigation nor did it provide the necessary documents indicating the essential character of the patent in question. [293]
   While rejecting all other actions , particularly as to the seizure of devices using the patent-in-suit, raised against Defendant II, who neither became involved into the licensing negotiations between Claimant and ZTE Corporation nor possesses mobile devices implementing the UMTS standard anymore, the court upheld the action for prohibitory injunction because the confirmation of cessation of sales does not completely exclude periculum in mora. [294] Furthermore, the court rejected the preliminary measures raised by Claimant against Defendant I.
   Furthermore, the court stated that the NDA was not validly terminated by Claimant’s unilateral declaration as of 19 December 2014 and that therefore Claimant was not allowed to initiate proceedings against ZTE Corporation or its subsidiaries, such as Defendant I, until 3 September 2016.

• [293] Case No. 30308/20215 R.G., para. 3
• [294] Case No. 30308/20215 R.G., para. 5, a-c

Sisvel v ZTE, Tribunale Civile e Penale di Torino, Sezione I Civile

4 March 2016 - Case No. 2695/2016 R.G.

Additional information: Sezione I Civile, specializzata in materia di impresa (specialized in enterprise issues).

1. Facts
   The proceedings before the Tribunale Civile e Penale di Torino concerned the appeal of Claimant in Case No. 30308/20215 R.G. seeking to set aside the decision of the court of first instance. As to the facts of the case, it can be referred to the summary of that case above.
2. Court’s reasoning
   Due to non-compliance with the minimum duration of the NDA, including apactum de non petendo in connection to ZTE Corporation and its affiliates (such as Defendant I), of three years until 3 September 2016, Claimant’s unilateral termination of the agreement by letter as of 13 October 2014 and the subsequent initiation of proceedings were declared inadmissible. Claimant validly waived its right to bring actions under Italian law and it cannot circumvent this obligation by paying damages. According to the wording of the agreement, a lack of reaction on the part of ZTE Corporation was not to be interpreted as a waiver of rights.
3. Other important issues
   Claimant argued that the patents in question never were essential to the UMTS standard and, hence, there existed no FRAND licensing obligation. The court rejected the appeal because Claimant’s action before the court of first instance was based on exactly the opposite argumentation (i.e. the patents in question being essential to the UMTS standard).

English court decisions

TQ Delta LLC v Zyxel Communications and Ors., EWHC

13 June 2018 - Case No. HP-2017-000045, [2018] EWHC 1515 (Ch)

A. Facts

The Claimant acquired patents which were declared as essential to the DSL standard under the so-called "ITU Recommen¬dations" (Standard Essential Patents, or SEPs) from a company called Aware Inc [1] . The ITU Recommendations require from the SEP holder to make its patents accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] . The Defendants manufacture and sell various types of equipment complying with the DSL standard [2] .

The Claimant asserted claims against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds [3] . The proceedings involve, on the one hand, technical issues concerning the validity, essentiality and infringement of the SEPs in question and, on the other hand, the licensing of these SEPs on FRAND terms [4] .

Prior to service of the statements of case, the Court ordered the Claimant to disclose licence agreements concluded with third parties covering the SEPs in suit (comparable agreements) [5] . The Claimant entered into licences with two companies (in the following referred to as "counterparty A" and "counterparty B") [6] and also possesses copies of licences previously granted by Aware Inc. to other SEP users [7] . Counterparty A and Aware Inc. argued that their licence agreements can only be disclosed on an "external eyes only" basis (that is only towards i.e. external counsels and independent experts), since they contain confidential information, such as party names, pricing terms and other commercial information [8] . Counterparty B did not object to the disclosure of its licence agreement to the Defendant (provided that this would take place on a confidential basis), but argued that any other confidential information provided to the Claimant in the course of negotiations for the licence can only be disclosed to "external eyes only" [9] .

The Claimant suggested that the parties to the proceedings enter into a co-called "Confidentiality Club Agreement". The agreement proposed by the Claimant differentiated between "Confidential Infor-mation" and "Highly Confidential Information" [10] . Whether information is designated as "Confidential" or "Highly Confidential" would be determined by the disclosing party [10] . Information designated as "Highly Confidential" would be subject to an "external eyes only" limitation [10] . This limitation would apply to both comparable licences granted by the Claimant and licences granted by Aware Inc. [11] . The Defendants did not agree with the Claimant’s proposal. Instead, they requested that two named individuals from the Defendant’s group should be given access to the comparable licences [10] .

The Court did not approve the establishment of an "external eyes only" mechanism as suggested by the Claimant [12] and ordered disclosure of the comparable licences. Nevertheless, the Court temporarily stayed that order to give the third parties affected (counterparties A and B and Aware Inc.) the opportunity to set it aside or vary it, before disclosure of the comparable licences is made [13] .

B. Court’s reasoning

In the Court’s eyes, it is "common practice" in patent cases for parties to reach Confidentiality Club Agreements [10] ; such agreements are "often essential", when disclosure of confidential information is required in court proceedings [14] . In cases involving intellectual property rights, a mechanism for disclosure limiting access to confidential documents to specific representatives of one of the parties is considered "commonplace" [14] . Furthermore, documents can be redacted to exclude confidential material which is irrelevant to the dispute [14] .

Looking particularly at "external eyes only" mechanisms, the Court takes the view that such mechanisms can be included in Confidentiality Club Agreements upon agreement of the parties (as it was the case in the matter Unwired Planet v Huawei [15] ) [16] . If no agreement can be reached on such a provision, parties can request the Court to restrict access to specified documents to "external eyes only" [7] .

The Court finds, however, that such a confidentiality regime can be applied only to exceptional cases [17] . An "external eyes only" mechanism enables one party to exclude access to any document that it chooses, placing the burden of seeking access to documents to the opposing party, despite the fact that the latter is prima facie entitled to such access [18] . In the Court’s view, the opposite should rather be the case: The party wishing to limit access to documents to "external eyes only" should be obliged to justify that limitation [19] .

According to the Court, when determining whether "external eyes only" restrictions should be ordered, the role which the affected documents are expected to play in the case must be considered [20] . Where the documents are of limited, if any, relevance to the proceedings and their disclosure could be unnecessarily damaging for the party asserting confidentiality, ordering an "external eyes only" limitation may be justified in specific cases [14] (insofar the Court adopts the notion expressed in the matter IPCom v HTC [21] ). Furthermore, the Court did not rule out that in certain exceptional cases an "external eyes only" mechanism might also be justified with respect to specific documents of "greater relevance", at least at an interim stage of the proceedings [22] .

When it comes to documents key to the case, the Court finds, however, that the "blanket exclusion" of access to such documents enabled through "external eyes only" mechanisms is not in line with the right to a fair hearing stipulated by Article 6 of the European Convention on Human Rights and the principles of natural justice . Such a regime is further incompatible with the obligation of lawyers to share all relevant information of which they are aware with their clients . If key documents were to be subject to an "external eyes only" restriction, the opposing party would be unable to discuss the respective documents with its legal representative, to attend parts of the trial and to see all of the reasons for the judgment .

Against this background, the Court held that in the present case, approving the establishment of an "ex-ternal eyes only" mechanism as suggested by the Claimant would "merely postpone the resolution of the dispute" . The Court had ordered the disclosure of the comparable licences, because they are, or are likely to be, key documents in the above sense . Since the Court may be asked to decide on a FRAND licence which must be reasonable and non-discriminatory, existing licence agreements entered into by the Claimant (and its pre¬decessor, Aware Inc.) may be highly relevant documents as comparators .

• [1] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 2.
• [2] Ibid, para. 3.
• [3] Ibid, para. 1.
• [4] Ibid, para. 1. With respect to the relationship between the 'technical trials' (that means the proceedings concerning the validity, essentiality and infringement of the SEPs in suit) and the 'non-technical trial' regarding to FRAND licensing see, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 21 November 2017, Case-No. HP-2017-000045, [2017] EWHC 3305 (Pat)
• [5] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), paras. 25 and 30.
• [6] Ibid, para. 25.
• [7] Ibid, para. 25.
• [8] Ibid, paras. 26 and 28.
• [9] Ibid, para. 27.
• [10] Ibid, para. 4.
• [11] Ibid, para. 22.
• [12] Ibid, paras. 34 et seqq.
• [13] Ibid, para. 35.
• [14] Ibid, para. 23.
• [15] Unwired Planet v Huawei, UK High Court of Justice, 5 April 2017, Case-No. HP-2014-000005, [2017] EWHC 711 (Pat).
• [16] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.
• [17] Ibid, para. 21.
• [18] Ibid, paras. 21 and 34.
• [19] Ibid, para. 34.
• [20] Ibid, para. 15.
• [21] IPCom GmbH and Co KG v HTC Europe Co. Limited and ors, judgement dated 23 January 2013, Case No. HC11 C02064, [2013] EWHC 52 (Pat).
• [22] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.

Apple v Qualcomm, [2018] EWHC 1188 (Pat)

22 May 2018 - Case No. HP-2017-000015

A. Facts

The Claimants are the US-based parent company of the Apple group, Apple Inc., and five European subsidiaries. The Apple group manufactures and sells, among other products, mobile telecommunication and media devices [408] .

The two Defendants are the US-based parent company of the Qualcomm group, Qualcomm Incorporated (Qualcomm USA), and its subsidiary, Qualcomm (UK) Limited (Qualcomm UK) [409] . Qualcomm USA supplies manufacturers of Claimants’ devices with chipsets for mobile phones [410] . The company holds a great number of patents declared essential (Standard Essential Patents, or SEPs) to mobile telecommuni¬cation standards developed by the European Telecommunications Standards Institute (ETSI) [409] . Qualcomm USA made undertakings towards ETSI pursuant to Article 6.1 of the ETSI Intellectual Property Rights Policy (IPR Policy) that it “and its Affiliates” would make its SEPs accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (FRAND undertakings). Qualcomm UK, on the other hand, neither holds SEPs relating to ETSI standards, nor made a FRAND undertaking vis-à-vis ETSI pursuant to Article 6.1. ETSI [411] . The company is, nevertheless, a member of ETSI.

The Claimants brought an action against both Defendants before the High Court of Justice (Court). Against Qualcomm USA the Claimants asserted claims for declaration of invalidity, for revocation and for declaration of non-essentiality with respect to certain SEPs [412] , a claim for declaration that rights derived from SEPs held by Qualcomm USA are exhausted [413] , a claim for damages allegedly suffered by an abuse of dominant position by Qualcomm USA in the relevant markets [414] , as well as claims arising from an alleged breach of the ETSI IPR Policy and the FRAND undertakings [415] .

Against Qualcomm UK the Claimants raised one single claim: They argued that Qualcomm UK as a member of ETSI was in breach of an obligation to license or procure licences on FRAND terms for SEPs held by the Qualcomm group [416] .

In its present decision, the Court did not rule on the merits of the claims asserted against Qualcomm USA. The Court focused on procedural questions regarding to the service of these claims, expressing doubts that some of the claims raised (particularly the claim for damages resulting from an alleged abuse of market power) could be validly served on Qualcomm USA outside the UK jurisdiction [417] .

Regarding to the claim asserted against Qualcomm UK, the Court found that no real prospect of success on the merits exist [418] . Accordingly, the Court signaled that it will grant Qualcomm UK a summary judg-ment against that claim, as the latter requested [419] .

B. Court’s reasoning

The Claimants based the claim against Qualcomm UK on the notion that the ETSI IPR policy obliges all ETSI members to license or procure a licence for SEPs on FRAND terms [416] . In addition, the Claimants argued that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to see to it that Qualcomm USA, or other companies belonging to the Qualcomm group, performed their FRAND undertakings [420] . Further, the Claimants pleaded that the FRAND undertakings made by Qualcomm USA towards ETSI on behalf of itself and its “Affiliates” also covered Qualcomm UK; thus, a breach of these undertakings was enforceable and actionable against the latter as well [421] .

Ruling on the obligations of ETSI members, the Court made clear that the ETSI IPR Policy does not require ETSI members which do not own SEPs to make a FRAND undertaking, not least because such an undertaking could not be fulfilled [422] . Moreover, in the eyes of the Court, the ETSI IPR Policy does not establish such an obligation even for entities which hold SEPs [422] . This can be derived from the provisions contained in the ETSI IPR Policy regulating the steps to be taken, in case that the patent holder chooses to refrain from making a FRAND undertaking (Article 8 ETSI IPR Policy) [422] .

Furthermore, the Court rejected the notion that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to make sure that Qualcomm USA performed its FRAND undertakings [420] . According to the Court, there is nothing in the wording of the ETSI IPR Policy or in the nature of the ETSI scheme which could establish such an obligation of ETSI members [420] . The Court did not see any need to impose an unexpressed obligation of that kind on ETSI members, either [420] .

Finally, the Court ruled that the FRAND undertakings of Qualcomm USA did not affect Qualcomm UK [423] . In the Court’s view, the reference to “Affiliates” in connection with undertakings pursuant to Article 6.1 ETSI IPR Policy covers only subsidiaries which themselves own SEPs subject to the respective undertaking [424] . Again, a company which does not own SEPs cannot be required to grant licences for patents that it does not hold [425] .

• [408] Applev Qualcomm, UK High Court of Justice, judgement dated 22ndMay 2018, Case-No. HP-2017-000015, [2018] EWHC 1188 (Pat), para. 1 et seq.
• [409] Ibid, para. 3.
• [410] Ibid, para. 63.
• [411] Ibid, para. 35 et seq.
• [412] Ibid, para. 13 et seq.
• [413] Ibid, para. 15.
• [414] Ibid, para. 16.
• [415] Ibid, paras. 13 et seq.
• [416] Ibid, paras. 11 and 38.
• [417] Ibid, paras. 92 and 115 et. seq.
• [418] Ibid, para. 57.
• [419] Ibid, paras. 8 and 57.
• [420] Ibid, para. 53.
• [421] Ibid, para. 38.
• [422] Ibid, para. 47.
• [423] Ibid, para. 49 et seq.
• [424] Ibid, para. 50 et seq.
• [425] Ibid, para. 50.

TQ Delta LLC v Zyxel Communications, [2017] EWHC 3305 (Pat)

21 November 2017 - Case No. HP-2017-000045

A. Facts

The Claimant is holder of two patents declared as essential to the implementation of the DSL standard under the relevant policy (ITU Recommen­dations). According to this policy he is required to license these patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. The Defendants manufacture and sell various types of equipment complying with the DSL standard.

The parties were unable to reach an agreement on a worldwide portfolio license. The Claimant argued that the Defendants followed a “hold-out” strategy by trying to delay negotiations and litigation as long as possible, in order to avoid royalty payments.

The actions brought before the High Court of Justice of England and Wales (EWHC) involve, on the one hand, the technical issues of validity, essentiality and infringement (technical trials) and, on the other hand, non-technical issues regarding licensing on FRAND terms (non-technical trial).

The parties agreed that the technical trials should be tried separately from, and before, the non-technical trial. After holding a case management conference, the court complied with the parties’ agreement to hold the technical trials first. The court, however, refrained from ordering the stay of the non-technical trial until the completion of the technical trials. Instead, the court allowed it to go ahead.

B. Court’s reasoning

In light of both the decision of the European Union Court of Justice in the matter Huawei v ZTE and the recent decision of the EWHC in the matter Unwired Planet v Huawei the court questioned the practice it followed so far, to hold FRAND related trials after technical trials.

In the court’s opinion, particularly if a global license for a global portfolio is in dispute between the parties, it is worth considering whether the prioritization of the trials should be altered, so that the non-technical trial comes first. If the defendant (potential infringer) wishes to argue that it does not need to take any license under any of the patents in suit, it is not compelled to do so. In this case, however, the defendant risks that it will, subsequently, be injuncted in infringement proceedings.

To justify its decision not to stay the non-technical trial, the Court referred to EWHC’s decision in the matter Unwired Planet v Huawei and pointed out, that the longer these proceedings are postponed, the longer their objective from the Claimant's perspective is frustrated, that is to obtain appropriate relief by way of injunction and/or financial compensation.

C. Other issues

Although the court did not rule on Claimant’s allegation that the Defendants pursued a “hold out” strategy, it made clear – again under reference to the matter Unwired Planet v Huawei – that if that is the case, then the Defendants face the risk of being injuncted, if they should be unsuccessful in either of the technical trials.

Unwired Planet v Huawei, [2017] EWHC 711 (Pat)

5 April 2017 - Case No. HP-2014-000005

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [295] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [296] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [297]

In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [298] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [299] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [300]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [301] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [302]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [303] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [304] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [305]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [306] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [307] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [308] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [308]

The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [309] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [310] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [311]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [312] This eliminates the so-called Vringo-problem, [313] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [314]

The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [315] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [317] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [317]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [318] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [319] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [320]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [319] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [321] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [320]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [322] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [322] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [323] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [324] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [325]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [326] Other freely-negotiated license agreements might be used as comparables. [327] This may be compared with a top down approach [328] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [329] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [326] License agreements must meet certain criteria to be comparable. [330] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [330] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [331]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [332] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive.

• [295] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
• [296] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
• [297] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
• [298] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
• [299] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
• [300] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
• [301] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
• [302] Unwired Planet v Huawei, EWHC 1304 (Pat).
• [303] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
• [304] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
• [305] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
• [306] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
• [307] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
• [308] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
• [309] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
• [310] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
• [311] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
• [312] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
• [313] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
• [314] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
• [315] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
• [316] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
• [317] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
• [318] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
• [319] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
• [320] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
• [321] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
• [322] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
• [323] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
• [324] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
• [325] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
• [326] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
• [327] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
• [328] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
• [329] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
• [330] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
• [331] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
• [332] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

Unwired Planet v Huawei, [2017] EWHC 1304 (Pat)

7 June 2017 - Case No. HP-2014-000005

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [334] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [335]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [336] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [337] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [337]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [338] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [339] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [338] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [340] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [340]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [341] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [342] One reason is that it involves a public vindication of the claimant’s rights. [342] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [342] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [343] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [344] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [344]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [345] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [346] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [347] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [348] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [349] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [350] The ensuing question was whether any deductions were appropriate. [351] The court held that neither party had offered terms that were essentially FRAND. [352] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [352] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [353] second, the hard-edged non-discrimination point; [354] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [355] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [356]

• [333] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
• [334] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
• [335] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
• [336] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
• [337] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
• [338] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
• [339] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
• [340] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
• [341] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
• [342] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
• [343] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
• [344] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
• [345] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
• [346] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
• [347] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
• [348] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
• [349] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
• [350] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
• [351] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
• [352] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
• [353] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
• [354] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
• [355] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
• [356] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Unwired Planet v Huawei, EWHC

2 October 2015 - Case No. HP-2014-000005

Dates: 2 October 2015, 19 November 2015, 23 November 2015, 7 December 2015, 16 December 2015, 28 January 2016, 29 January 2016, 12 February 2016, 22 March 2016, 29 April 2016, 27 May 2016

1. Facts
   The overall dispute can be separated into five technical trials (A-E), three of which have been completed, each dealing with one patent and relating to technical issues such as validity, infringement and essentiality. Still uncompleted is the fifth trial, concerning the only non-SEP in the portfolio, and one trial relating to competition law and FRAND issues, scheduled to start on 20 October 2016 and to last for approximately thirteen weeks.
   Claimant (Unwired Planet Int. and Unwired Planet LLC) is the proprietor of European patents EP 2 229 744 whose standard-essential character has been confirmed in Trial A; EP 2 119 287 and EP 2 485 514 who have been revoked in Trial B; and EP 1 230 818 whose standard-essential character has been confirmed in Trial C. All patents were originally granted to Ericsson and are part of a patent portfolio Claimant obtained from Ericsson, purportedly encompassing patents essential to various ICT standards. Defendants (in particular Huawei and Samsung) produce and market GSM- and LTE 4G-based devices.
   In the decision of interest here, the court had to decide on the application of Defendant Samsung to transfer competition law as well as FRAND issues to the Competition Appeal Tribunal (CAT). The application was rejected because it appeared not to be feasible to decide these issues separately from the rest of the case. [357]
   With regard to competition law the court has, so far, examined three competition law defences pursuant to Article 101 TFEU raised by Defendant Samsung against the claim for patent infringement. This claim is based on, inter alia, the Master Sale Agreements (MSA) concluded as of 10 January 2013 between Claimant and Ericsson. The MSA entitles Ericsson to a share in the patent royalties and contains the option to transfer a substantial number of additional patents to Claimant in the future. On 14 June 2013 and 6 March 2014 respectively, Claimant and one of its subsidiaries made FRAND commitments towards ETSI. Defendant’s first defence contends that the MSA generally failed to transfer the FRAND commitments made by Ericsson towards ETSI to Claimant, because (a) it does not require Claimant to give any FRAND undertaking, (b) even if there were such an obligation, it cannot be enforced by third parties and (c) the MSA does not prohibit Claimant from obtaining licensing terms more favorable than those Ericsson could obtain. The second defence alleges that Claimant and Ericsson could, as an effect of the patent portfolio’s division by the MSA, demand excessive royalties. Moreover, by means of its third defence, Defendant argues that particular clauses of the MSA have the object or potential effect of restricting competition under Article 101 TFEU because they define minimum royalties and exclude alternative royalty schemes.
2. Decision of the court of first instance
   The court of first instance let the second defense go to trial because it held that the MSA is not a straightforward agreement for the sale of patents since Ericsson retains a share in the royalties to be earned and can transfer a substantial further body of patents if it chooses to do so. Moreover, the acquirer, as a non-practicing entity, does not compete in the downstream market in the way that Ericsson does. In these circumstances the court of first instance considered it was arguable that the MSA has as its object or would have as its effect the distortion or restriction of competition.
   The court of first instance reached the same conclusion in relation to the third defence. It considered it arguable that the pertinent clauses would contribute to the creation of an anti-competitive incentive to charge higher royalties.
   However, the court of first instance rejected all elements of the first defense. As for the first aspect, it recognised that the acquirers acknowledged (1) that the SEPs were subject to existing encumbrances, including FRAND commitments to ETSI; (2) that all encumbrances would continue after assignment; and (3) that within a reasonable time after closing they would provide declarations to ETSI including FRAND undertakings in accordance with the ETSI IPR Policy. Such FRAND undertakings were indeed provided. Turning to the second element, the court of first instance considered that it was unarguable because once a FRAND undertaking had been given any third party could require to license the patents on FRAND terms. As for the third element, the judge rejected as unarguable the contention that Ericsson’s own FRAND obligations should have been assigned to and become binding on Unwired Planet.
   Defendant appealed against the findings regarding the second and third elements of the first defence.
3. Court’s reasoning
   Having regard to the second element of the first defence the court, considering the fact that Claimant made commitments towards ETSI shortly after the conclusion of the MSA, found that the undertaking to grant licences on FRAND terms is equally binding for Claimant irrespective of the fact whether it is a member of ETSI and rejected Defendant’s submission that the obligations under the MSA cannot be enforced by third parties. [358]
   Contrary to the findings of the court of first instance regarding the third element of the first defence, the court states that Article 101 TFEU may require an effective transfer of Ericsson’s FRAND obligation to Claimant to the effect that the latter cannot obtain more favorable terms from its licensees than Ericsson could itself have obtained. It therefore let this aspect go to full trial as well.

• [357] HP-2014-000005, 29 April 2016, para. 30 et seq., 46
• [358] HP-2014-000005, 27 May 2016, para. 38-40

VRINGO Infrastructure v ZTE, [2015] EWHC 214 (Pat)

30 January 2015 - Case No. HC 2012 000076, HC 2012 000022

So far, this litigation is still in its technical phase and has not produced substantial results with regard to the issues of interest here. This may, however, change in the future.

Unwired Planet v Huawei, [2017] EWHC 711 (Pat)

4 May 2017 - Case No. HP-2014-000005

1. Facts
   The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [359] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [360] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [361]
   In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [362] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [363] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [364]
   The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [365] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [366]
2. Court’s reasoning
   1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [367] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [368] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [369]
      
   2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
         The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [370] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [371] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [372] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [372]
         The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [373] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [374] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [375]
         
      2. ‘True FRAND Rate’
         The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [376] This eliminates the so-called Vringo-problem, [377] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [378]
         The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [379] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [380] Since Art. 102 TFEU condemns excessive pricing, [381] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [381]
         
      3. Discrimination
         The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [382] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [383] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [384]
         Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [383] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [385] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [384]
         
      4. Territorial Scope of License
         The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [386] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [386] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [387] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [388] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [389]
         
3. Court’s reasoning
   1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [390] Other freely-negotiated license agreements might be used as comparables. [391] This may be compared with a top down approach [392] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [393] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [390] License agreements must meet certain criteria to be comparable. [394] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [394] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [395]
   2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [396] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
      

• [359] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
• [360] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
• [361] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
• [362] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
• [363] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
• [364] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
• [365] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
• [366] Unwired Planet v Huawei, EWHC 1304 (Pat)
• [367] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
• [368] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
• [369] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
• [370] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
• [371] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
• [372] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
• [373] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
• [374] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
• [375] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
• [376] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
• [377] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
• [378] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
• [379] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
• [380] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
• [381] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
• [382] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
• [383] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
• [384] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
• [385] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
• [386] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
• [387] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
• [388] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
• [389] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
• [390] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
• [391] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
• [392] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
• [393] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
• [394] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
• [395] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
• [396] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

Conversant v Huawei and ZTE, [2018] EWHC 808 (Pat)

16 April 2018 - Case No. HP-2017-000048

A. Facts

The claimant, Conversant, is a licensing firm incorporated in Luxembourg. The defendants are two major Chinese telecoms equipment and handset manufacturers, Huawei and ZTE, and their English affiliates. After years of negotiations that failed to result in licenses for claimant’s portfolio of Standard Essential Patents (SEPs) reading on ETSI wireless telecoms standards (and comprising inter alia Chinese and UK patents),Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5. the claimant filed an action for infringement of four of its UK SEPs before the High Court of Justice (Court), and requested the Court to define Fair, Reasonable and Non-Discriminatory (FRAND) terms for its global SEP portfolio. [398] The defendants in separate proceedings initiated in China disputed the validity, essentiality and infringement of claimant’s Chinese patents. Since the defendants failed to unequivocally commit to conclude licenses on FRAND terms decided by the Court, the plaintiff amended its pleading to include injunctive relief, unless and until the defendants comply with the Court’s FRAND determination. [399]

The judgment at hand involves the defendants’ challenge to the Court’s jurisdiction to decide upon the terms of a global portfolio license. According to the defendants, a UK court has no jurisdiction to decide on the validity and infringement of foreign (in the present case: Chinese) patents. [400] Furthermore, the defendants claim that the jurisdiction most closely connected to the case is China which is the centre of the defendants’ manufacturing activities as well as the jurisdiction where the bulk of their sales takes place. [401]

B. Court’s Reasoning

The court dismissed the defendants’ challenge of jurisdiction. Following the reasoning of Birss J in Unwired Planet,Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67 Carr J held that, although issues of validity of patents granted in foreign jurisdictions are not justiciable in the UK, nevertheless the issue of validity should be distinguished from the issue of the determination of a global portfolio license on FRAND terms. According to Carr J, the defendants are free to challenge the validity, essentiality, and infringement of claimant’s Chinese patents in separate proceedings before Chinese courts; the pending issues of validity, essentiality and infringement do not preclude, however, the Court from determining FRAND terms for a global license and providing a mechanism of adjusting the royalty rate according to the validity and infringement decisions of courts in other jurisdictions.Conversant v. Huawei and ZTE(n. 1) paras 17 et seq. Furthermore, the defendants’ justiciability defense, were it to be accepted, would make it impossible for patent holders with a global portfolio of SEPs to obtain relief in the form of court-determined FRAND terms for a global license, since they would need to commence litigation on a country-by-country basis. [404] Forcing the patent holder to seek separate licenses for every individual country where it held SEPs could be characterized as a ‘hold-out chater’, in the eyes of the Court. [404]

Moreover, the Court seized jurisdiction over the case on the ground that the plaintiff’s claim concerns four patents granted in the UK; the issue of relief for patent infringement, and in particular whether such relief will take the form of setting FRAND terms for a global license, is to be decided in the context of a ‘FRAND trial’, after a decision on infringement is reached. [405] Were the defendants’ argument to be accepted, the Court would, in effect, be barred from deciding on the infringement and the proper relief for patents granted in the UK. [401] Besides that, the Court also held that the defendants’ failed to establish that the Chinese courts would be the appropriate forum for the dispute. [406] In this respect, given that royalty rates for telecommunication SEPs are usually lower in China than in other countries, the Court particularly pointed out that no holder of a global SEP portfolio would voluntarily prefer to submit to determination of a FRAND license for the entirety of portfolio in a country, where the rates applied would be lower than the rest of the world. [407]

• [397] Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5.
• [398] ibid, para 7.
• [399] ibid, para 8.
• [400] ibid, paras 9, 12 and 13.
• [401] ibid.
• [402] Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67
• [403] Conversant v. Huawei and ZTE(n. 1) paras 17 et seq.
• [404] ibid, para 28.
• [405] ibid, para 69.
• [406] ibid, paras 72 et seq.
• [407] ibid, para 63.

Romanian court decisions

Vringo v ZTE, Bucharest Court of Appeal 4th Civil Divison

28 October 2015 - Case No. 29437/3/2015

1. Facts
   The litigation before the Bucharest court of appeal concerns an appeal against decision no. 947/31, August 2015, of the Bucharest Tribunal, 5^th civil division, dismissing Defendant’s motion to revoke the interim measures ordered by the Bucharest Tribunal, 4^th civil division, in its previous decision no. 801/30, June 2014, and to replace them by Defendant’s obligation to deposit a bond of EUR 350.000 to secure damages incurred by Claimant.
   Claimant (Vringo Infrastructure Inc.) is the proprietor of patent EP 1808029, originally granted to Nokia Corporation and allegedly covering parts of the LTE 4G standard. Defendants (inter alia ZTE) produce and market LTE 4G-based devices.
   As a member of ETSI, Claimant is considered to be subject to an obligation to grant FRAND licences for its SEPs. After informing Defendant, on 25 September 2012, about its SEP portfolio and inviting it to indicate its interest in obtaining a global license, Claimant submitted, on 28 March 2013, a licensing offer (inter alia) for the patent-in-suit. Defendant did not respond to Claimant’s communications.
2. Court’s reasoning
   Notwithstanding the retroactive effect of ECJ decisions, the court refused to reexamine the challenged decision with regard to whether Claimant complied with the requirements defined in Huawei. According to the court, the Huawei decision places the Member States under no obligation to review final court decisions that qualify as res judicata.
   However, as a secondary consideration, the court confirmed that the challenged decision of the court of first instance is in compliance with Huawei. Furthermore, Claimant’s argument that it would contravene recognized commercial practice in the field to grant licences limited to Romania, instead of global licences, was considered plausible.

French court decisions

Wiko v Sisvel, Tribunal de Commerce de Marseille

20 September 2016 - Case No. RG: 2016F01637

1. Facts
   Claimant WIKO S.A.S. markets mobile phones as well as telecommunication products and services, produced by its parent company TINNO, in France and Europe. Defendant SISVEL UK LTD is a division of SISVEL INTERNATIONAL and performs the function of an intermediary between manufacturers seeking access to high-level technology and intellectual property rights holders willing to grant licenses to their portfolio. Claimant considers itself a victim of acts of unfair competition committed by Defendant. The latter sent letters to several French distributors and customers of Claimant, such as Carrefour, Casino or LDLC, alerting them that they (purportedly) infringed Claimant’s patents allegedly essential to the LTE standard. In consequence, Claimant sued Defendant before the Tribunal de Commerce de Marseille, seeking, inter alia, a decision declaring Defendant’s letters to be acts of unfair competition, forcing Defendant to issue a notice of revocation, and awarding damages to Claimant.
2. Court’s reasoning
   The Tribunal de Commerce de Marseille rejected Claimant’s submission regarding the alleged violation of the French rules on unfair competition. Against the background of paras. 61, 63 of the Huawei judgment, requiring the SEP proprietor to alert the alleged infringer about the infringement prior to the initiation of proceedings and to present a specific, written offer for a license on FRAND terms, the Court considered the letters as prior notice in the sense of the Huawei rules of conduct and denied a violation of the French rules on unfair competition. In particular, the court stressed that the documents communicated by Defendant provided an overview including each SEP, its filing date as well as the parts of the LTE standard implementing the respective patented technology. They indicated not only the consequences of acts of unauthorized use and the devices allegedly embodying such use but informed the distributors also about their option to contest both the communicated information and the validity of the patents at issue. Furthermore, Defendant had offered to grant a FRAND license in the sense of the Huawei decision, defined a response period for this offer and attached a terms sheet substantiating the general framework, the basic clauses and, in particular, the royalties of a potential FRAND licensing agreement. The letters did not, however, ask for a cessation of sales of the allegedly infringing products.

Dutch court decisions

Archos v. Philips, Rechtbank Den Haag

8 February 2017 - Case No. C/09/505587 / HA ZA 16-206 (ECLI:NL:RBDHA:2017:1025)

1. Facts
   Defendant (Koninklijke Philips N.V.) is the proprietor of a number of patents declared essential to ETSI’s UMTS (3G) and LTE (4G) standards. Defendant made FRAND commitments towards ETSI on 15 January 1998 and 26 November 2009. Claimant (Archos S.A.) markets mobile devices which are alleged to infringe upon Defendant’s patents.
   By letter of 5 June 2014, Defendant brought her UMTS and LTE patent portfolio and her licensing program to the attention of Claimant. In this letter, Defendant made clear that Claimant was infringing her patents by marketing products incorporating the UMTS and LTE standards and explained the possibility of obtaining a FRAND license. On 15 September 2014, a meeting took place to inform Claimant of Defendant’s patent portfolio and to discuss the licensing offer. In another meeting on 25 November 2014, Claimant suggested Defendant to grant her a royalty-free license to all of Defendant’s patents (i.e. not only to the UMTS/LTE patents but also to other patents related to so-called ‘Portable Features’) in exchange for the transfer of certain patents of Claimant to Defendant. Defendant informed Claimant by email of 23 December 2014 that it was not interested in Claimant’s patents because it considered them to represent ‘relatively low value’.
   By letter of 28 July 2015 Defendant sent Claimant an updated list of UMTS/LTE patents as well as a draft licensing agreement in which she confirmed her earlier licensing offer. The proposed royalty amounted to $ 0.75 per product containing UMTS and/or LTE functionality. For products already sold, a royalty of $ 1 would need to be paid. At a next meeting on 3 September 2015, it became clear that Claimant did not wish to obtain the license offered. On behalf of Claimant, it was made clear during the meeting that Defendant would have to take legal action if she wished to obtain a license fee. In October 2015, Defendant started proceedings before the Rechtbank Den Haag for infringement of her European Patents EP 1 440 525, EP 1 685 659 and EP 1 623 511.
   By letter of 12 January 2016, Claimant made a written counter offer of 0.071% of her net revenue from products incorporating the UMTS and/or LTE standards. For a net sale price per product of € 100, the offered royalty would amount to 7 eurocent per product.
2. Court’s reasoning
   Claimant asked the court to declare that Defendant’s licensing offer of 28 July 2015 is not FRAND and to declare that a royalty fee of € 0.007 for every product sold by Claimant incorporating the UMTS standard and a royalty fee of € 0.020 for every product sold by Claimant incorporating the UMTS and LTE standards is FRAND. In addition, Claimant asked the court to rule that its own licensing offer of 12 January 2016 is higher than what a fair, reasonable and non-discriminatory royalty fee would require.
   
   1. Market power and notice of infringement
      The court left open whether the SEPs conferred market power to Defendant since it did, in any case, find no abuse of such potential market power. The court argued that it is generally accepted and to be inferred from the system laid down in the Huawei/ZTE judgment that a FRAND license has a certain bandwidth. After all, the Huawei/ZTE judgment contemplates that the SEP holder makes a FRAND offer first and afterwards, if the SEP user does not agree with the offer, makes a counter offer which also has to be FRAND. During this negotiation process, the characteristics of the SEP user as well as its specific objections can be taken account in the license at the discretion of the parties. As such, the court noted that the fact that Defendant’s initial offer would turn out to be unreasonable for Claimant because she finds itself in the low budget segment of the market and her margins are small does not imply that the offer made by Defendant on 28 July 2015 is not FRAND.
      The court also made clear that until the Huawei/ZTE judgment the initiative to obtain a license was incumbent on the SEP user and not on the SEP holder in line with the common interpretation of the judgment of the Rechtbank Den Haag in Philips/SK Kassetten and the Orange Book ruling of the Bundesgerichtshof. In the view of the court the, on this crucial point, contrary Huawei/ZTE judgment that was delivered on 15 July 2015 constituted a new moment for negotiation between the parties. The court noted that, in line with the Huawei/ZTE judgment, Defendant took initiative with its licensing offer of 28 July 2015. Since Claimant made clear in the meeting on 3 September 2015 that Defendant would have to take legal action if she wished to obtain more than a few thousand euros in licensing fees, it seems unfitting that Archos reproaches Philips to have not been open to negotiation, or at least that position is insufficiently substantiated (par. 4.3).
   2. The SEP owner’s licensing offer
      Claimant put forward a number of arguments for its claim that Defendant’s offer of 28 July 2015 is not FRAND. All of these arguments were rejected by the court on the ground that Claimant had not sufficiently substantiated them. The main arguments raised are as follows.
      Claimant argued that Defendant’s rights regarding devices incorporating Qualcomm baseband chips had been exhausted due to the cross-license that Defendant had already concluded with Qualcomm for these chips. Since a number of Claimant’s products rely on Qualcomm baseband chips, the compensation that Defendant had already received from Qualcomm should, in the view of Claimant, at least have been taken into account in the license offer. The court noted that Claimant had not sufficiently contested that the Qualcomm license did not cover production and sales of mobile phones – as Defendant had made clear before the court – and that Claimant could have raised this point during the negotiations (par. 4.4).
      The court continued by stating that the fact that Defendant’s licensing offer covered both UMTS and LTE SEPS could not affect the FRAND-ness of the offer in the case at hand considering that Claimant’s products do not merely require a license under the LTE SEPs but also under the UMTS SEPs (par. 4.5).
      While the parties agreed that the Defendant’s share of the absolute number of SEPs in the UMTS-SEP portfolio is an important factor for assessing the FRAND-character of Defendant’s offer, they each reached different absolute numbers. The court concluded that the calculations in the consultancy reports on which Claimant relied do not lead to accurate results and are rather speculative in nature. As such, the Claimant downplayed the value of Defendant’s SEPs (par. 4.6-4.7).
      With regard to Claimant’s argument that Defendant’s proposed royalty rate would amount to impermissible royalty stacking, the court argued that this was insufficiently substantiated by Claimant (par. 4.8).
      Claimant also argued that the royalty rate should not be based on the total price of a phone but merely on the part in which the technology at issue is incorporated (the Smallest Saleable Patent-Practising Unit, SSPPU). In this context, the court noted that Defendant rightly pointed out that the requested royalty was set at a fixed amount as a result of which there is no relationship with the market value of the phone. Furthermore, since the SSPPU concept is at the very least subject to debate, the court noted that this issue could have been considered in the negotiations. That the royalty rate suggested by Defendant, which was not based on the SSPPU price, would not be FRAND for that mere reason could not be established by the court (par. 4.10).
      The court also dismissed Claimant’s reference to patent hold-up on the ground that a situation of hold-up can only occur in the case of a non-FRAND license which had not been established in the case at issue (par. 4.13).
      In the end, the court dismissed Claimant’s request to make a declaratory statement that Defendant’s offer of 28 July 2015 was not FRAND.
   3. The standard implementer’s reaction
      Considering that Claimant’s counter offer of 12 January 2016 is more than a factor 10 lower than the Defendant’s offer and is based on an inaccurate (at least insufficiently substantiated) share of Defendant’s SEPs in the relevant UMTS standard, the court refused to declare the counter offer to be FRAND, let alone to declare that this counter offer is higher than a FRAND royalty rate as requested by Claimant (par. 4.17-4.18).
3. Other important issues
   AA defence that Defendant invoked was that Claimant had no interest (anymore) in the requested declaratory statements because its respective FRAND commitments were exhausted due to the unwilling attitude of Claimant. However, as Claimant’s requests for the declaratory statements were found not to be sufficiently substantiated, there was no need for the court to discuss this issue anymore (par. 4.18).

National Courts Guidance

Increased clarity provided on the principles established by the Court of Justice of the European Union in Huawei v ZTE.

The Court of Justice of the European Union clarified, in Huawei v ZTE (Case No. C-170/13), European law relating to the availability of injunctive relief for infringements of FRAND-based standard essential patents. In doing so, the Court provided a legal framework focused on the good faith conduct to be expected of both parties. Since the Court’s decision in 2015, national courts have been steadily exploring the scope of these obligations, providing further clarity on what is or is not to be considered appropriate behaviour. Below is a summary of these steps drawn from 4iP Council’s post-Huawei v ZTE case search tool.

This information is not intended as legal advice and, in the event of dispute, independent advice should be sought. In addition, the precedential nature of these decisions depends on the jurisdiction and instance in which they were delivered.

Huawei v ZTE process