CJEU decisions

Huawei v ZTE

16 July 2015 - Case No. C-170/13

A. Facts

The Claimant, Huawei Technologies Co. Ltd., holds a patent declared as essential to the practice of the LTE wireless telecommunication standard (Standard Essential Patent, or SEP) developed by the European Telecommunications Standards Institute (ETSI) [1] . In March 2009, the Claimant committed towards ETSI to make the patent in question accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] .

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [3] and also market, inter alia in Germany, LTE-compliant products [4] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [4] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [5] . An offer for a licensing agreement was, however, not finalized [5] .

In April 2011, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court), seeking for injunctive relief, the rendering of accounts for past uses, the recall of products and an award for damages for patent infringement [6] .

The District Court stayed its proceedings and submitted a reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) to the Court of Justice of the European Union (CJEU). In brief, the District Court noted that the German Federal Court of Justice (Bundesgerichtshof) and the European Commission appeared to have adopted conflicting positions on the question under which conditions an action for a prohibitory injunction brought by a SEP holder against a SEP user constitutes an abuse of dominant position in violation of Article 102 TFEU [7] : In its Orange Book ruling, the German Federal Court of Justice held that, in infringement proceedings concerning SEPs, the defendant is entitled to raise a defence under Article 102 TFEU (and thus avoid an injunction), only and insofar as it submits an unconditional, fair offer to conclude a licence to the patent holder, accounts for past acts of use and also makes a deposit on the royalty payments resulting thereof [8] . The European Commission, on the other hand, in proceedings relating to enforcement actions taken by Samsung against Apple in a number of EU member states, took the view that an action for injunctive relief concerning a SEP may, in principle, infringe Article 102 TFEU to the extent to which the defendant has demonstrated his willingness to negotiate a licence on FRAND terms in accordance with the patent holder’s FRAND commitments [9] .

With the present judgment, the CJEU established the conditions under which a SEP holder can file an action for a prohibitory injunction against a patent user, without violating Article 102 TFEU. In particular, the CJEU ruled that a SEP holder which has given an irrevocable undertaking to make its patents accessible on FRAND terms, does not abuse its dominant position by seeking an injunction and/or the recall of infringing products, as long as – prior to bringing a respective court action – it has

• firstly, notified the user about the infringement of its patent ‘by designating that patent and specifying the way in which it has been infringed’, and
• secondly, if the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, ‘presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated’ [10] .

By contrast, the SEP user may invoke the abusive nature of a patent holder’s action for a prohibitory injunction and/or for the recall of products, only if it responds to SEP holder’s offer without delay [11] . In case that the patent user rejects that offer, it has to

• submit ‘promptly and in writing, a specific counter-offer that corresponds to FRAND terms’ to the patent holder [12] and
• if its counter-offer is rejected, provide appropriate security for the use of the patent(s), ‘for example by providing a bank guarantee or by placing the amounts necessary on deposit’ [13] .

The CJEU made clear that the above framework does not apply to SEP holders’ claims for damages and/or the rendering of accounts in relation to past acts of use; actions concerning these claims cannot infringe Article 102 TFEU, since they have no impact on whether standard compliant products can appear or remain on the market [14] .

B. Court’s Reasoning

The CJEU stressed the need to balance, on the one hand, the effective judicial protection of SEP holders’ fundamental intellectual property rights (IPRs) and, on the other hand, the public interest in free undistorted competition [15] .

Since the parties had not contested that the Claimant held a dominant market position, the Court’s analysis focused on the existence of an ‘abuse’ in terms of Article 102 TFEU [16] . According to the CJEU, the exercise of an IPR cannot ‘in itself’ be abusive, even if it is the act of an undertaking holding a dominant position [17] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances” [18] .

Cases, in which SEPs are involved, distinguish themselves from other IPR-related cases: First, the fact that the patent has obtained SEP status means that the patent holder can ‘prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question’ [19] . Besides that, by making a FRAND commitment, the patent holder has created ‘legitimate expectations’ to third parties implementing the standard that the SEP will be accessible on FRAND terms [19] . Having regard to the ‘legitimate expectations’ created, the patent user sued in infringement proceedings can, in principle, defend himself by invoking Article 102 TFEU, in case that the SEP holder refused to grant him a FRAND licence [20] .

Although the SEP holder cannot be deprived of its rights to have recourse to legal proceedings for the protection of its IPRs, the CJEU found that the FRAND undertaking justifies the imposition of an obligation on the SEP holder to comply with specific requirements, when seeking for injunctive relief [21] . In particular, in order to avoid a violation of Article 102 TFEU, the SEP holder should meet the following conditions: (a) prior to the filing of an action for a prohibitory injunction, it must notify the user about the infringement ‘by designating that SEP and specifying the way in which it has been infringed’ [22] , and (b) submit a specific written offer for a licence on FRAND terms to the user, particularly specifying ‘the royalty and the way in which it is to be calculated’, if the latter has expressed its willingness to enter into such a licence [23] . In this context, the CJEU observed that the SEP holder can be expected to make such an offer, since it is ‘better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer’, because, as a rule, no public standard licensing agreement exists and the terms of existing agreements entered by the SEP holder with third parties are not made public [24] .

On the other hand, the (alleged) infringer must diligently respond to the SEP holder’s offer, ‘in accordance with recognised commercial practices in the field and in good faith’ [11] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics’ [11] .

In case that the infringer finds the proposed terms as falling short of the patent holder’s FRAND commitment and chooses to reject the SEP holder’s licensing offer, it must submit a specific written counter-offer on FRAND terms to the SEP holder [12] . If the counter-offer is rejected and the (alleged) infringer already used the SEP in question without a licence, it is obliged to provide ‘appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit’ [13] . The calculation of that security must include, inter alia, ‘the number of the past acts of use of the SEP’, and the alleged infringer must be able to render accounts in respect of those acts of use [13] .

When no agreement is reached following the counter-offer by the (alleged) infringer, the CJEU pointed out that the parties have the option, to request ‘by common agreement’ that the amount of the royalty be determined ‘by an independent third party, by decision without delay’ [25] .

Finally, the CJEU made clear that the (alleged) infringer is allowed to challenge the validity and/or the essentiality and/or the actual use of SEP holder’s patents in parallel to the licensing negotiations, or to reserve the right to do so in the future [26] .

• [1] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
• [2] Ibid, para. 22.
• [3] Ibid, para. 40.
• [4] Ibid, para. 24.
• [5] Ibid, para. 25.
• [6] Ibid, para. 27.
• [7] Ibid, paras. 29 et seqq.
• [8] Ibid, paras. 30 et seqq
• [9] Ibid, paras. 34 et seqq
• [10] Ibid, para. 77.
• [11] Ibid, para. 65.
• [12] Ibid, para. 66.
• [13] Ibid, para. 67.
• [14] Ibid, paras. 72 et seqq
• [15] Ibid, para. 42.
• [16] Ibid, para. 43.
• [17] Ibid, para. 46.
• [18] Ibid, para. 47.
• [19] Ibid, para. 53.
• [20] Ibid, paras. 53 et seqq
• [21] Ibid, paras. 58 et seqq
• [22] Ibid, para. 61.
• [23] Ibid, para. 63.
• [24] Ibid, para. 64.
• [25] Ibid, para. 68.
• [26] Ibid, para. 69.

German court decisions

Cases from Federal Court of Justice - BGH

Sisvel v Haier

5 May 2020 - Case No. KZR 36/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (Standard Essential Patents, or SEPs).

The defendants are a German and a French subsidiary of the Haier group (Haier) which has its headquarters in China. The Haier group produces and markets -among other things- electronic devices complying with the GPRS standard.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) about the infringing use of Sisvel's SEPs. Sisvel provided a list of approx. 450 patents included in its portfolio and informed Haier that Sisvel offers licences for its SEPs.

On 10 April 2013, Sisvel made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

In August and November 2013, Sisvel sent further letters with information about its licensing program to Haier China. Haier China replied to Sisvel only in December 2013. It expressed the hope to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned by Sisvel in previous communications.

In August 2014, Sisvel made a licensing offer to Haier, which was rejected in September 2014. Shortly after that, Sisvel filed an infringement action against Haier before the District Court of Duesseldorf (District Court) based on a SEP covering data transmission technology under the GPRS standard (patent in suit). As a reaction to this step, Haier filed a nullity action against the patent in suit before the German Federal Patent Court in March 2015.

On 3 November 2015, the District Court granted an injunction against Haier [2] . The District Court also ordered the recall and destruction of infringing products. It further recognised Haier's liability for damages on the merits and ordered Haier to render full and detailed account of the sales of infringing products to Sisvel.

Haier appealed this decision and also requested the Higher District Court of Duesseldorf (Appeal Court) to order a stay in the enforcement of the injunction granted by the District Court. In January 2016, the Appeal Court rendered a respective order [3] .

In the appeal proceedings, Haier argued –among other things– that the District Court had not adequately taken into account the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE in a decision rendered in July 2015 (Huawei judgment), that is after Sisvel had filed the infringement action [4] . During the course of the proceedings before the Appeal Court, on 16 January 2016, Haier further declared that is was willing to take a FRAND licence from Sisvel, however, only in case that the German courts would finally confirm the validity and infringement of the patent in suit. On 23 March 2016, Haier sent another letter to Sisvel, stating that their position remained unchanged. Moreover, Haier requested claim charts with respect to all of Sisvel's patents as well as further information about the royalty calculation. In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

By judgment dated 30 March 2017, the Appeal Court partially granted Haier's appeal [5] . It confirmed Haier's liability for damages on the merits as well as its obligation to render accounts. However, the Appeal Court held that Haier was under no obligation to recall and destroy infringing products, because Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier. The Appeal Court did not have to decide about the claim for injunctive relief, because the parties had agreed to settle the matter in this regard. Reason for that was that the patent in suit had expired in September 2016. Sisvel appealed the decision of the Appeal Court.

In October 2017, the Federal Patent Court narrowed certain claims of the patent in suit and, otherwise, confirmed its validity [6] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [7] .

With the present judgment dated 5 May 2020 [8] (cited by https://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=3abd1ba29fc1a5b129c0360985553448&nr=107755&pos=0&anz=1), the FCJ reversed the judgment of the Appeal Court. The ruling of the District Court in first instance was confirmed with respect to Sisvel's damage claims and claims for information and rendering of accounts. Sisvel's claims for the recall and destruction of infringing products were limited to products that were in the possession of Haier or had been produced or delivered until the expiration of the patent in suit in September 2016. Sisvel's claim for injunctive relief was not subject to the Court's ruling, since this claim was withdrawn in the course of the preceding proceedings before the Appeal Court after the patent in suit had lapsed.

B. Court's reasoning

The Court found that the patent in suit was essential to the GPRS standard and infringed [9] .

Furthermore, the Court held that by initiating infringement proceedings against Haier, Sisvel had not abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [10] .

In the Court's eyes, Sisvel met its obligation under the Huawei judgment to notify Haier about the infringing use of its SEPs prior to filing the infringement action. On the other hand, Haier had failed to comply with its Huawei obligation to adequately express its willingness to enter into a licensing agreement with Sisvel. Although this fact was no longer decisive for the present case, the Court also expressed the view that Sisvel had made a FRAND licensing offer to Haier in line with the respective Huawei requirement.

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [11] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [12] . For this, several factors need to be considered [13] . One key factor is the relevant market. When a patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives to the standard are not available for products brought on a downstream market, relevant for the assessment of dominance is the (distinct) market, in which licences for the patent in question are offered [14] .

On this basis, the Court found that Sisvel was in a dominant market position: The patent in suit was essential to the practice of the GPRS standard and non GPRS compliant mobile phones could not compete in the (downstream) market, since neither the previous not subsequent standards generations allowed the same features [15] .

In this context, the FCJ was not convinced by Sisvel's argument that SEP holders' market dominance is restricted by the fact that standards implementers – compared to buyers in markets for goods and services – often have a stronger standing in negotiations [16] . The Court saw that –unlike buyers of goods and services– standards implementers are in the favourable position to be able to access protected technology needed for producing standard compliant products, even without an agreement with the patent holder [17] . According to the Court, however, this fact does not suffice to rule out market dominance. The extent of SEP holders' bargaining power towards individual implementers in licensing negotiations is not relevant [18] . A dominant market position is conferred by the patent holder's structural superior market power arising from the legal ability to exclude any implementer from the market by enforcing exclusivity rights [19] .

Similarly, the Court pointed out that the limitations imposed by the Huawei judgment with respect to the enforcement of SEPs likewise do not impair market dominance [20] . The Court noted that these limitations significantly weaken the bargaining position of the SEP holder, since the lever needed for negotiations on an equal footing is not available to the latter to the full extent [20] . Nevertheless, this does not suffice to question the dominant position of the patent holder, even in cases in which the implementer might engage in 'hold-out' by delaying negotiations until the patent expires [20] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [21] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [21] .

Abuse of market dominance

Looking at the parties' conduct, the Court found – in contrast to the Appeal Court – that Sisvel did not abuse its dominant market position [22] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [23] . The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position [23] . According to the FCJ, an obligation to allow the use of SEPs does, however, not exist, when the implementer is not willing to obtain a licence on FRAND terms. A patent holder –even with a dominant market position– is not obliged to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [24] .

Against this background, the Court identified two cases, in which the assertion of exclusivity rights (claims for injunctive relief and/or the recall and destruction of infringing products) by an SEP holder can amount to an abuse of market dominance:

1. The implementer has made an unconditional licensing offer on terms which the patent holder cannot reject, without abusing its dominance or violating its non-discrimination obligation (insofar the Court repeated its previous ruling in 'Orange-Book-Standard'; judgment dated 6 May 2009 – Case No KZR 39/06) [25] ;

2. the implementer is, basically, willing to take a licence, but the SEP holder has not made 'sufficient efforts' to facilitate the signing of an agreement in line with the 'particular responsibility' attached to its dominant position [26] .

Notification of infringement

Consequently, the Court took the view that the SEP holder has an obligation to notify the implementer about the infringing use of the patent in suit prior to filing an infringement action [27] . The FCJ seems to suggest that this obligation arises, only when the implementer is not already aware of the infringementIbid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission..

The Court explained that technology implementers are, in principle, obliged to make sure that no third party rights are infringed, before assuming the manufacturing or sales of products [29] . However, this task is often significantly challenging, especially in the Information and Communication Technology (ICT) sector, in which a product might be affected by numerous patent rights [29] . The patent holder, who will regularly have already examined infringement, should, therefore, inform the implementer about the use of the patent before initiating court proceedings, allowing the latter to assess the need to obtain a licence on FRAND terms and, consequently, avoid an injunction [30] .

In the eyes of the Court, it will usually be sufficient to address a respective notification of infringement to the parent company within a group of companies [31] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [32] . A detailed technical and legal analysis of the infringement is not required: the implementer should only be placed in a position to evaluate the infringement allegation, eventually by taking recourse to expert and/or legal advice [32] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [32] .

Furthermore, the FCJ added that a patent holder which has provided information about the patent infringed and the standard affected can expect that the implementer will indicate within a short period of time that the information received is not sufficient for the assessment of infringement [33] . This applies also to cases, in which a number of patents and standards are involved [33] .

Taking the above into consideration, the Court found that Sisvel had given proper notification of infringement to Haier. The letter dated 20 December 2012 and the following correspondence met the relevant requirements [34] .

Willingness

Considering Haier's conduct, on the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [35] . In this respect, the FCJ disagreed with the respective assessment of the Appeal Court which had reached the opposite conclusion.

The Court observed that the first response of Haier China to Sisvel's notification was belated, since Haier had waited for almost one year (December 2012 – December 2013) to react [36] . An implementer taking several months to respond to a notification of infringement typically sends a signal that there is no interest in taking a licence [36] . The fact that Sisvel made a FRAND commitment towards ETSI covering the patent in suit only after the first notification to Haier in December 2012 did not change anything in the assessment of timeliness: in its letter dated 20 December 2012, Sisvel had already declared that it is prepared to offer a FRAND licence to Haier [36] . The question, whether a late response made prior to the start of infringement proceedings (as it was the case with Haier's response from December 2013) shall, nevertheless, be taken into account, when assessing parties' compliance with the Huawei judgment (as the Appeal Court had assumed) was left undecided by the FCJ [37] . In the present case, this question was not relevant, since –in terms of content – none of Haier's responses could be seen as a sufficient declaration of willingness to obtain a licence [38] .

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' (citing High Court of Justice of England and Wales, judgment dated 5 April 2017, [2017] EWHC 711(Pat) - Unwired Planet v Huawei) [39] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [39] . On the contrary, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [39] .

On this basis, the Court found that Haier's response in December 2013, in which only the hope to have a 'formal negotiation' was expressed, was not a sufficient declaration of willingness: This declaration was neither clear not unambiguous in the above sense [40] .

Similarly, Haier's letter dated 16 January 2016 did not contain a sufficient declaration of willingness, since Haier had made the signing of a licence subject to the prior confirmation of the validity and infringement of the patent in suit by German courts [41] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of a licensing agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [41] .

Furthermore, the FCJ found that Haier did not sufficiently express its willingness by the letter dated 23 March 2016 either. Apart from the fact that Haier had not withdrawn the above unacceptable condition, the Court took the view that requesting the production of claim charts for all of Sisvel's patents almost three years after the receipt of the notification of infringement was an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [42] .

Since no adequate declaration of willingness by Haier was in place, the Court did not answer the question, whether it is possible for the implementer to fulfil this obligation after infringement proceedings have been initiated [43] .

SEP holder’s licensing offer

Having found that Haier did not act as a willing licensee, the Court explained that there was no need to examine whether Sisvel had made a FRAND licensing offer to Haier in the present case [44] . Nevertheless, the FCJ decided to address certain findings of the Appeal Court in this context, which were based on flawed assumptions.

In contrast to the Appeal Court, the FCJ questioned that Sisvel was obliged to make a FRAND licensing offer to Haier, since the latter did not adequately declare its willingness to enter into a licence [45] . Moreover, such an obligation would have arisen only after Haier had expressed its sincere willingness to sign an agreement with Sisvel [46] . Besides that, the FCJ also pointed out that – in contrast to the view taken by the Appeal Court – Sisvel’s offers to Haier were FRAND.

According to the Court, which terms are FRAND in each individual case depends on several factors [47] . The SEP holder is not obliged to apply a ‘standard tariff’ and offer all licensees identical terms [47] . Such an obligation does not arise from the FRAND commitment towards the relevant standardisation body, which only aims at securing access to the standard [47] . As a rule, reasonable conditions for a contractual relationship and especially the adequate price are not objectively fixed, but a result of market processes based on negotiations [47] . This is the reason why an implementer has to actively engage in licensing negotiations in a ‘target-oriented’ manner [47] .

The Court noted that an offer for a portfolio licence regularly does not raise concerns, as long as no obligation to pay fees also for non-essential patent is established and fees are calculated in a manner which does not discriminate against licensees that wish to develop products only for a limited geographical area [48] . Looking at the common practice, the Court highlighted that worldwide portfolio licences are – from an efficiency point of view – beneficial for both patent holders and implementers [48] .

In this context, the FCJ expressed the view that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [49] . In principle, implementers bear the weight to demonstrate (both in negotiations and in court proceedings) that a licensing request is discriminatory [49] . On the other hand, patent holders have to establish that there is a justification behind an unequal treatment of licensees [49] . In cases, in which an implementer willing to take a licence is not in a position to frame the content of FRAND licensing conditions, the SEP holder can be required to explain its offer in detail, in order to allow the implementer to assess the FRAND conformity of the offered conditions [49] . This is particularly the case, when a portfolio licence is offered [50] . The scope, level of detail and timing of the information needed shall be determined on a case-by-case basis, considering the conduct of the implementer [51] . The respective requirements will, however, usually not go beyond the information that should be shared with a notification of infringement [42] .

Focusing on the non-discrimination element of FRAND, the Court held that Sisvel had not discriminated against Haier by offering different (higher) rates than those previously agreed with another licensee (allegedly) as a result of undue pressure by foreign state authorities [52] . The Appeal Court had argued that this fact –irrespective of whether it was true or not– could per se not justify an unequal treatment between similarly situated licensees. The FCJ disagreed with this view and made clear that even dominant companies are, basically, not prohibited from safeguarding their business interests, if threatened [53] . In cases, in which –from the patent holder’s point of view– it was economically reasonable to accept unsatisfactory conditions due to the lack of realistic opportunities to enforce patent claims and for avoiding financial or personal disadvantages threatened by state authorities, offering market-based conditions to other similarly situated licensees might (under consideration of the mutual interests) be a justifiable exception from the non-discrimination obligation, as far as these conditions are reasonable and do not impact the competitiveness of the licensees [53] .

C. Other important issues

The Court made clear that the expiration of the patent in suit does not exclude claims for the recall and destruction of infringing products [53] . This fact only leads to a limitation of these claims to products that were in the possession of the infringer or had been manufactured and delivered until the patent lapsed [54] .

Claims for damages and the rendering of accounts are also limited in terms of time by the expiration of the patent (covering only infringing uses until the end of the patent’s term) [55] . Apart from that, the Court found, however, that Sisvel’s claim for damages against Haier was not subject to any limitations [56] .

The FCJ agreed with the finding of the Appeal Court that negligence establishing Haier’s liability for damages was given, even prior to the receipt of Sisvel’s notification of infringement in December 2012 [57] . In the Court’s view, the implementer is, in principle, obliged to make sure that no third party rights are infringed, before starting manufacturing or selling products [57] . The fact that in the ICT sector it might be challenging to gain an overview of all existing relevant rights does not lower the level of diligence required, since any information deficits are not rooted in the behaviour of the patent holder [57] .

On the other hand, the FCJ rejected the view taken previously by the Appeal Court, according to which Sisvel’s damage claims were limited to the amount of a FRAND licensing rate (‘licensing analogy’). The Court explained that this was not the case here: Claiming damages for the infringement of SEPs cannot constitute an abuse of dominant position [58] . Accordingly, the SEP holder is entitled to full damages, unless the implementer can assert an own counterclaim, requesting to be placed in the position, in which it would have been, in case that the SEP holder had fulfilled the obligations arising from its dominant market position [58] . In the view of the Court, an implementer is entitled to such (counter)claim, only when it adequately expressed its willingness to enter into a licence, requested the conclusion of a FRAND licence and the SEP holder ignored this request without justification [58] . In the present case, Haier could not assert such a (counter)claim against Sisvel, since it had failed to sufficiently express its willingness to sign a licence with the latter [56] .

• [2] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
• [3] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
• [4] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [5] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
• [6] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
• [7] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
• [8] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [9] Ibid, paras. 9 et seqq. and 59.
• [10] Ibid, para. 52.
• [11] Ibid, para. 54.
• [12] Ibid, para. 56.
• [13] Ibid, paras. 57 et seqq.
• [14] Ibid, para. 58.
• [15] Ibid, paras. 59 et seq.
• [16] Ibid, para. 61.
• [17] Ibid, para. 63.
• [18] Ibid, para. 62.
• [19] Ibid, paras. 61 et seqq. According to the FCJ, market entry barriers are created already by the fact that the respective legal obstacles make it unreasonable for any company to enter a market, without having taken a licence before, see para. 63.
• [20] Ibid, para. 64.
• [21] Ibid, para. 65.
• [22] Ibid, paras. 67 et seqq.
• [23] Ibid, para. 69.
• [24] Ibid, para. 70.
• [25] Ibid, para. 71.
• [26] Ibid, para. 72.
• [27] Ibid, paras. 73 et seqq.
• [28] Ibid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission.
• [29] Ibid, para. 74.
• [30] Ibid, para. 74 and 85.
• [31] Ibid, para. 89.
• [32] Ibid, para. 85.
• [33] Ibid, para. 87.
• [34] Ibid, paras. 86 et seqq.
• [35] Ibid, paras. 91 et seqq.
• [36] Ibid, para. 92.
• [37] Ibid, paras. 93 et seq.
• [38] Ibid, para. 94.
• [39] Ibid, para. 83.
• [40] Ibid, para. 95.
• [41] Ibid, para. 96.
• [42] Ibid, para. 98.
• [43] Ibid, para. 97.
• [44] Ibid, paras. 90 and 101.
• [45] Ibid, para. 90.
• [46] Ibid, para. 99.
• [47] Ibid, para. 81.
• [48] Ibid, para. 78.
• [49] Ibid, para. 76.
• [50] Ibid, para. 77.
• [51] Ibid, para. 79.
• [52] Ibid, paras. 101 et seq.
• [53] Ibid, para. 102.
• [54] Ibid, para. 105.
• [55] Ibid, para. 108.
• [56] Ibid, para. 112.
• [57] Ibid, para. 109.
• [58] Ibid, para. 111.

Sisvel v Haier

24 November 2020 - Case No. KZR 35/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (standard essential patents, or SEPs). Sisvel has made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendants are two European subsidiaries of the Haier group (Haier), which has its headquarters in China. The Haier group produces and markets -among other things- mobile phones and tablets complying with various standards, including the GPRS and UMTS standards developed by ETSI.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) that it offers licences for its SEPs and shared a list of approx. 235 patents included in its portfolio. In August and November 2013, Sisvel sent further letters with information about its licensing program to Haier China.

Haier China replied to Sisvel only in December 2013. It expressed 'hope' to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned in previous communi­cations.

In August 2014, Sisvel made an offer for a global portfolio licence to Haier, which was rejected.

Shortly after that, Sisvel filed infringement actions against Haier before the District Court of Duesseldorf (District Court). One of the actions was based on a SEP reading on the UMTS standard (patent in suit). The other action involved a patent reading on the GPRS standard. Haier filed nullity actions against both patents asserted before the German Federal Patent Court.

During the infringement proceedings, Haier made certain counteroffers to Sisvel. These offers had a limited scope, since they covered only the patents (patent families) asserted against Haier in court.

On 3 November 2015, the District Court decided in favour of Sisvel in both cases [59] . It granted injunctions against Haier and ordered the recall and destruction of infringing products. The District Court further recognised Haier's liability for damages on the merits and ordered Haier to render full and detailed account of the sales of infringing products to Sisvel. Haier appealed both decisions.

In the subsequent proceedings before the Higher District Court of Duesseldorf (Appeal Court), Haier argued –among other things– that the District Court had not adequately taken into account the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in the Huawei v ZTE ruling [60] (Huawei judgment) rendered after Sisvel had filed the infringement actions.

On 16 January 2016, during the course of the proceedings before the Appeal Court, Haier declared that it was willing to take a FRAND licence from Sisvel, however, only in case that the German courts would finally confirm the validity and infringement of the patent in suit. Haier also requested claim charts with respect to all patents included in Sisvel's portfolio.

In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

On 20 January 2017, that is a few weeks prior to the end of the oral arguments in the appeal proceedings, Haier made a further counteroffer to Sisvel. The licence offered would cover only the two subsidiaries of the Haier group sued in Germany. An agreement was not reached.

By two judgments dated 30 March 2017, the Appeal Court partially granted Haier's appeals in both parallel proceedings [61] . The claims for injunctive relief as well as the recall and destruction of infringing products were dismissed on the grounds that Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier.

Sisvel appealed the decisions of the Appeal Court.

In April 2020, the Federal Court of Justice (FCJ or Court) finally dismissed the invalidity action filed by Haier against the patent in suit [62] .

On 5 May 2020, FCJ rendered a judgment in the parallel proceedings pending between the parties concerning the patent reading on the GPRS standard [63] . The Court decided in favour of Sisvel and reversed the judgment of the Appeal Court. With the present judgment [64] , the Court reversed the decision of the Appeal Court also in the case involving the patent in suit.

B. Court's reasoning

The Court found that the patent in suit was essential to the UMTS standard and infringed [65] .

Contrary to the view previously taken by the Appeal Court, FCJ found that by initiating infringement proceedings against Haier, Sisvel had not abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [66] .

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [67] .

FCJ explained that a dominant market position is given, when a patent is technically essential for comply­ing with a standard developed by a standardisation body (or a de facto standard) and technical alterna­tives to the standard are not available for products brought on a downstream market [68] . Even when alternative (technical) options exist, market domi­nance can arise as long as products not using the teaching of the patent cannot compete in a (downstream) market. [68] According to the FCJ, this applied with respect to the patent in suit.

Abuse of market dominance

The Court found, however, that Sisvel had not abused its dominant market position by filing infringement actions against Haier [69] . An abuse of market dominance can occur, when the SEP holder

• refuses to grant a FRAND licence to an implementer willing to take such licence and brings a court action against the latter, asserting claims for injunctive relief (and/or the recall and destruction of infringing products), or
• has not made 'sufficient efforts' in line with the 'particular responsibility' attached to its dominant position to facilitate the signing of a licence agreement with an implementer, who is, basically, willing to take a licence [70] .

In the eyes of the Court, in both above scenarios, the filing of an action against a 'willing' implementer amounts to an abuse, only because the latter has a claim to be contractually allowed by the SEP holder to use the teachings of the patent under FRAND conditions [71] . On the other hand, an abuse is regularly not per se established by an offer made by the patent holder at the beginning of negotiations, even when the terms offered would unreasonably impede or discriminate the implementer, if contractually agreed. [71] An abuse would be given, if the SEP holder insisted on such conditions also at the end of licensing negotiations with the imple­menter. [71]

Notification of infringement

The Court explained that the 'particular responsibility' of a market dominant patent holder materializes in an obligation to notify the implementer about the infringement of the patent in suit prior to filing an action, in case that the implementer is (potentially) not aware that by complying with the standard said patent is used [72] .

In the present case, the Court found that by the letter dated 20 December 2012 and the following correspondence Sisvel had given proper notification of infringement to Haier [73] .

Willingness

On the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [74] . In this respect, FCJ disagreed with the Appeal Court, which had taken the opposite view.

In the Court's eyes, the implementer must 'clearly' and 'unambiguously' declare willingness to conclude a licence agreement with the SEP holder on FRAND terms and, subsequently, engage in negotiations in a 'target-oriented' manner [75] . By contrast, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [75] .

The Court reasoned that the willingness of the implementer to legitimise the unauthorized use of the patent for the future by creating a respective contractual base is a prerequisite for placing the burden on the SEP holder to negotiate a FRAND licence with the implementer. [76] What is more, willingness (on both sides) is essential, because an adequate solution balancing the opposing interests of the parties results, as a rule, from an interest-based negotiation. [77] The fact that a party fails to contribute in negotiations towards a FRAND agreement will regularly be considered to its detriment. [78] An implementer, who has not shown interest in a FRAND-licence over a longer period after receipt of an infringement notification will have to undertake 'additional efforts' to make sure, that despite the delay caused a licence can be signed as soon as possible. [79]

The Court highlighted particularly that implementers should not engage in 'patent hold-out' by exploiting the 'structural disadvantage', which SEP holders face due to the limitation of their right to assert patents in court. [80] Otherwise, competition could be distorted, because the infringer would gain unfair advantages over implementers that have taken a licence in a timely manner. [80]

FCJ took the view that the above interpretation of the requirements related to the implementers' obligation to demonstrate willingness to obtain a FRAND-licence is in line with the Huawei judgment; a new referral of the respective questions to the CJEU, as requested by Haier, was not needed. [81] The Huawei judgment created a 'safe harbour' against antitrust liability in the sense that compliance with the obligations established will regularly suffice to exclude an abuse of market dominance. [82] Under special circumstances, however, stricter or less strict conduct duties of the parties could be justified. [82]

The Court observed that the Huawei judgment supports the notion that the implementer should remain willing to obtain a licence throughout the course of negotiations. [82] The 'continuous' willingness is an 'indispensable condition' for successful negotiations or, in case negotiations fail, for a finding of abuse of market dominance on the side of the SEP holder. [83] The refusal of SEP holder to grant a FRAND licence would, indeed, have no relevance in antitrust terms, when the implementer is not objectively willing and able to obtain such licence. [84]

Accordingly, FCJ explained that willingness shall (still) be in place, also when the SEP holder makes a licensing offer. [85] In this regard, the Court disagreed with the District Court of Duesseldorf, which had expressed the opposite view in the recent referral of certain FRAND-related questions to the CJEU in the matter Nokia v Daimler. [86] According to FCJ, the offer of the SEP holder is just the 'starting point' of negotiations; since FRAND is a range, it is the goal of negotiations to reach a fair and reasonable result considering the interests of both sides. [87] The implementer has, therefore, a duty to examine the FRAND-conformity of the terms of the SEP holder's offer. [88] If the offer is 'obviously' not FRAND, it will be sufficient that the implementer explains the reasons why this is the case. [88]

In this context, the Court made clear that the implementer's duty to examine SEP-holder's licensing offer exists, irrespective of whether the offer is, in terms of content, FRAND-compliant in every respect. [89] If one would require from the SEP holder to make a 'perfect' FRAND offer right away, licensing negotiations would be obsolete. [90] It is also not possible to assess the FRAND-conformity of the offer in the abstract, without reference to the aspects which each side considers relevant. [91] The Court reiterated that an non-FRAND licensing offer does not per se amount to an abuse of market dominance. [92]

Having said that, FCJ noted that for the assessment of the willingness of the implementer its entire conduct (including its reaction to the SEP holder's licensing offer) must be taken into account. [93] Consequently, willingness can change in the course of time: a court action filed by the SEP holder could become abusive at a later point in time, if the implementer adequately raises a request for a FRAND-licence. [94] However, the longer the implementer waits with asserting such request, the higher the threshold for considering it as a willing licensee will be. [95] The Court again noted that the above inter­pretation is in line with the Huawei judgment, so that no additional referral to the CJEU is needed, as Haier had requested. [93]

Against this background, the Court observed that the first response of Haier China to Sisvel's notification almost one year after receipt of the infringement notification was belated [96] . An implementer taking several months to respond to a notification of infringement, typically, sends a signal that there is no interest in taking a licence [96] . Besides that, FCJ found that Haier's response in December 2013, in which only the 'hope' to have a 'formal negotiation' was expressed, was not a sufficient declaration of willing­ness, in terms of content [97] . Since it had reacted belatedly to the notification of infringement, Haier should have undertaken 'additional efforts' to demonstrate willingness, which had been, however, not the case. [98]

Similarly, Haier's letter dated 16 January 2016 did not contain a sufficient declaration of willingness, since Haier had made the signing of a licence subject to the prior confirmation of the validity and infringement of the patent in suit by German courts [99] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of an agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [100] . Besides that, requesting the production of claim charts for all patents of Sisvel's portfolio almost three years after the receipt of the notification of infringement was, according to the Court, an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [101] .

Furthermore, FCJ found that Haier's willingness to enter into a FRAND licence could also not be extracted from the counteroffers made during the infringement proceedings. [102] The fact that these counteroffers were, in terms of scope, limited only to the patents asserted by Sisvel in court indicated that Haier had not seriously addressed Sisvel's request for a worldwide portfolio licence. [103] Given that it had more than sufficient time to examine Sisvel's portfolio, one could expect from Haier to provide substantive grounds for such 'selective licensing'. [103]

What is more, the Court held that the counteroffer dated 20 January 2017, which Haier had made shortly before the end of the appeal proceedings, was no sufficient demonstration of willingness either. [104] The Court focused particularly on the fact that the licence would cover only the two affiliates of the Haier group sued in Germany. [105] According to FCJ, Haier had no 'legitimate interest' on such 'selective licensing'; on the contrary, a limited licence would offer no sufficient protection against infringement by other companies of the Haier group and force Sisvel to a cost-intensive assertion of its SEPs 'patent to patent and country-by-country'. [106]

In addition, the Court also criticised the proposed royalty regime. [107] Haier based the royalty calculation only on a small portion (four patent families) of the SEPs that should be included in the licence, which, in its eyes, were 'probably' essential. [108] The Court reasoned that the scope of the licence must be clarified in negotiations, whereas in the ICT-sector, due to the large number of relevant patents, it is common to rely on estimations regarding both essentiality and validity, which, on the one hand, allow to take 'necessary remaining uncertainties' adequately into account and, on the other hand, help to avoid disproportionate high transaction costs. [109]

Apart from that, the fact that the counteroffer was made only in the 'last minute' of the appeal proceedings allowed the conclusion that Haier was not actually aiming at signing a FRAND licence, but was rather motivated by tactical considerations with respect to the pending proceedings. [110]

SEP holder's licensing offer

Having found that Haier had not sufficiently demonstrated willingness to obtain a FRAND licence, the Court did not examine the FRAND-conformity of Sisvel's licensing offers to Haier in the present case [111] . According to FCJ, this question is not relevant, when the implementer has not adequately expressed willingness to sign a FRAND licence. [112]

The Court highlighted that -apart from the obligation to notify the implementer about the infringement- duties of the SEP holder (including the duty to make a FRAND licensing offer) arise only if the implementer has demonstrated willingness to obtain a licence on FRAND terms. [113] The FRAND-undertaking of the patent holder towards the relevant standardisation body does not change the fact that the user of a patent is, in principle, obliged to seek a licence from the right holder. [113]

C. Other important issues

Patent ambush

The Court dismissed Haier's defence based on the 'patent ambush' argument. [114] Haier argued that the patent in suit was unenforceable, because the initial patent holder, from whom Sisvel had acquired said patent, had failed to disclose the patent towards ETSI in due course during the development of the UMTS standard.

The Court did not examine whether a 'patent ambush' in the above sense indeed occurred in the present case. [115] FCJ took the view that an implementer can assert 'patent ambush' only against the patent holder that actually participated in the standard development process; on the contrary, such defence cannot be raised against its successor (here: Sisvel). [115]

Notwithstanding the above, the Court noted that a 'patent ambush' requires that the decision-making process within the relevant standardisation body was distorted by the withheld information. [116] Insofar, the implementer must establish at least some indication that the standard would have taken a different form, if the information considering the relevant patent application had been disclosed in time. [117] Haier had, however, failed to do so. [117]

Damages

Finally, the Court found that Sisvel's damage claims were given on the merits. Negligence establishing Haier's liability for damages was given: The implementer is, in principle, obliged to make sure that no third party rights are infringed, before starting manufacturing or selling products, which Haier had not done. [118]

What is more, Sisvel's claim for damages was not limited to the amount of a FRAND licensing rate ('licensing analogy'). [119] The SEP holder is entitled to full damages, unless the implementer can assert an own counterclaim, requesting to be placed in the position, in which it would have been, in case that the SEP holder had fulfilled the obligations arising from its dominant market position. [118] An implementer is, however, entitled to such (counter)claim, only when it adequately expressed its willingness to enter into a licence, which had not been the case here. [118]

• [59] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 144/14 (UMTS-related patent) and Case No. 4a O 93/14 (GPRS-related patent).
• [60] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [61] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 65/15 (UMTS-related patent) and Case No. I-15 U 66/15 (GPRS-related patent).
• [62] Federal Court of Justice, judgment dated 28 April 2020, Case No. X ZR 35/18.
• [63] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [64] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by juris.bundesgerichtshof.de).
• [65] Ibid, paras. 10-43.
• [66] Ibid, para. 44.
• [67] Ibid, paras. 48 et seqq.
• [68] Ibid, para. 49.
• [69] Ibid, para. 52.
• [70] Ibid, para. 53.
• [71] Ibid, para. 54.
• [72] Ibid, para. 55.
• [73] Ibid, para. 84.
• [74] Ibid, paras. 86 et seqq.
• [75] Ibid, para. 57.
• [76] Ibid, para. 58.
• [77] Ibid, para. 59.
• [78] Ibid, para. 60.
• [79] Ibid, para. 62.
• [80] Ibid, para. 61.
• [81] Ibid, para. 63.
• [82] Ibid, para. 65.
• [83] Ibid, para. 68.
• [84] Ibid, paras. 66 and 68.
• [85] Ibid, para. 69.
• [86] Ibid, para. 69. See Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
• [87] Ibid, paras. 70 and 71.
• [88] Ibid, para. 71.
• [89] Ibid, para. 72.
• [90] Ibid, para. 73.
• [91] Ibid, para. 74.
• [92] Ibid, para. 76.
• [93] Ibid, para. 77.
• [94] Ibid, paras. 79 et seqq.
• [95] Ibid, para. 83.
• [96] Ibid, para. 87.
• [97] Ibid, paras. 88 et seqq.
• [98] Ibid, para. 89.
• [99] Ibid, paras. 93 et seqq.
• [100] Ibid, para. 95.
• [101] Ibid, paras. 96-99.
• [102] Ibid, paras. 102 et seqq.
• [103] Ibid, para. 102.
• [104] Ibid, paras. 108 et seqq.
• [105] Ibid, para. 116.
• [106] Ibid, para. 118.
• [107] Ibid, paras. 124 et seqq.
• [108] Ibid, para. 124.
• [109] Ibid, para. 125.
• [110] Ibid, para. 126.
• [111] The Court had, however, undertaken such analysis in its earlier decision between the same parties dated May 2020. See Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17, especially paras. 76-81 and 101 et seqq.
• [112] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17, para. 107.
• [113] Ibid, para. 56.
• [114] Ibid, paras. 127 et seqq.
• [115] Ibid, para. 130.
• [116] Ibid, para. 131.
• [117] Ibid, paras. 131 et seq.
• [118] Ibid, para. 135.
• [119] Ibid, paras. 134 et seqq.

Cases from Higher Regional Court - OLG Düsseldorf

I-2 U 23/17

18 July 2017 - Case No.

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.

The court suggested that the unjustified refusal of a licensee to enter into a NDA does not release the SEP-holder from the obligations established by the Huawei judgement, namely the obligation to make a FRAND offer to the licensee and specify the underlying conditions (particularly the price calculation). An unjusti­fied refusal of the licensee to sign a NDA shall, however, lead to easing the SEP-holder’s burden to provide the licensee with detailed explanations regarding the justification of its licensing conditions, to the extent that this is required for protecting its justified confidentiality interests. Instead of detailed information, “merely indicative observations” would, basically, suffice. The licensee cannot object the FRAND con­formity of the SEP-holder’s offer based on the insufficient specification of the licensing terms.

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. LG Düsseldorf, 3 November 2015, File No. 4a O 93/14 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 Sisvel v Haier [2017], Higher Regional Court of Düsseldorf, para 32. and that the claimant had not made a license offer on FRAND conditions. [122] 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. [123] 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’). [124] 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). [125]

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. [126] 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. [127] 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. [127] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [128] because the patent in question was related to data transfer, an essential function of the GPRS standard. [129]

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). [130] 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. [131] 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. [131] 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 [132]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [133] 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’). [133]

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. [134] 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. [135] 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’). [135] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [135]

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. [136] 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. [137] 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’). [137] 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. [137] 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 [138] because it discriminated against the defendants. [139] 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. [140]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [141] SEP owners have discretion regarding the license fees that they charge. [142] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [143] Further, license conditions can be abusive only if they are significantly different between licensees. Ibid, para 257. The burden of proof for such substantially unequal treatment lies with the defendant, [144] whilst the onus is on the claimant to prove that this unequal treatment is justified. [144] 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. [144] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [145] without having a proper justification. [146] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [147] or that these discounts were a result of the particularities of the case. [148]

• [120] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
• [121] Sisvel v Haier [2017], Higher Regional Court of Düsseldorf, para 32.
• [122] Ibid, para 34.
• [123] Ibid, para 75.
• [124] Ibid, paras 74 and 175.
• [125] Ibid, para 47.
• [126] Ibid, paras 177 et seqq.
• [127] Ibid, para 182.
• [128] Ibid, para 185.
• [129] Ibid, para 186.
• [130] Ibid, para 202.
• [131] Ibid, para 203.
• [132] Ibid, para 215.
• [133] Ibid, para 213.
• [134] Ibid, para 220.
• [135] Ibid, para 240.
• [136] Ibid, para 244.
• [137] Ibid, para 245.
• [138] Ibid, para 242.
• [139] Ibid, para 251.
• [140] Ibid, para 249.
• [141] Ibid, para 254.
• [142] Ibid, paras 255 and 257.
• [143] Ibid, para 256.
• [144] Ibid, para 258.
• [145] Ibid, para 263.
• [146] Ibid, para 268.
• [147] Ibid, paras 270 et seqq.
• [148] Ibid, 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. Sisvel v Haier [2016], Higher Regional Court of Düsseldorf, para. 2
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. [150]
   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. [151]
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. [152]

• [149] Sisvel v Haier [2016], Higher Regional Court of Düsseldorf, para. 2
• [150] Ibid, para. 28
• [151] Ibid, para. 23-30
• [152] Ibid, 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. Sisvel v Haier [2016], Higher Regional Court of Düsseldorf, para. 4-5
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. [154]
   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. [155]
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. [156]

• [153] Sisvel v Haier [2016], Higher Regional Court of Düsseldorf, para. 4-5
• [154] Ibid, para. 20
• [155] Ibid, para. 17-20
• [156] Ibid, 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. [157] In consequence, Claimant is not obliged to present a licensing offer corresponding to FRAND terms. [158]
   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. [159]
   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. [160]

• [157] Ibid, para. 72 et seq.
• [158] Ibid, para. 74
• [159] Ibid, para. 48, 78 et seq.
• [160] Ibid, 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 For details, cf. OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16, para. 2, b, aa for its position the court stressed that the ECJ intended the Huawei framework to be fact-sensitive. [162]
      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. [163]
   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. [164]
      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. [165]
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. [166]
   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. [167]

• [161] For details, cf. OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16, para. 2, b, aa
• [162] Ibid, para. 2, b, aa
• [163] Ibid, para. 2, b, bb
• [164] Ibid, para. 2, b, cc
• [165] Ibid, para. 2, b, ff
• [166] Ibid, para. 2, b, ee
• [167] Ibid, 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.

I-2 U 31/16

14 December 2016 - Case No.

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. [168] 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). [169] 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. [169] 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. [170] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [171] 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. [172]
   
   Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [173] 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. [174] 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. [174]
   
   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.

• [168] Judgement dated 14th December 2016, para. 1
• [169] Ibid, para. 1
• [170] Ibid, para. 2
• [171] Ibid, para. 2
• [172] Ibid, para. 3
• [173] Bundesgerichtshof, Decision dated 19th February 2014, Case No. I ZR 230/12
• [174] Ibid, para. 5

I-2 W 8/18

25 April 2018 - Case No.

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). [175] A few days later, the Claimant entered into an NDA also with a third party, the Intervener . Shortly after signing the NDA, the Intervener [176] argued that several clauses of the agreement were void. [177]

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. [178]

In December 2017, the Intervener requested full access to the court files. [179] 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. [180] 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. [181] In particular, the Court requested from the District Court to (re-)examine whether the Claimant actually possessed confidential business information which needed protection. [181] 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. [182]

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. [183] 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. [184]

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. [185] 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. [186]

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. [187] 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. [188]

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. [189] The party also needs to present in detail which measures were taken so far for securing confidentiality with respect to the information in question. [189] 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. [189] It also needs to be explained, with which degree of certainty the said disadvantages are expected to occur. [189]

When protection of confidential information contained in comparable licences is sought, the existence of confidentiality interests requires, in general, special justification. [190] In the Court’s view, the SEP holder’s FRAND-undertaking entails transparency vis-à-vis interested stakeholders with respect to licensing conditions. [190] Moreover, knowledge of licensing conditions already accepted in the market can help potential licensees exercise their rights in infringement proceedings effectively. [190] 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. [190] In fact, several licensing pools (e.g. MPEG) publish their licensing agreements online. [190]

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. [191] 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. [182]

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. [192] In other words, in terms of detail, the party must again not present information going beyond “merely indicative observations”. [192] 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. [193] For this, it is required that the party’s behaviour has caused a high risk of a breach of confidentiality. [193] 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. [193]

• [175] Higher District Court of Düsseldorf, judgement dated 25 April 2018, Case No. I-2 W 8/18, para. 26
• [176] Ibid, para. 26
• [177] Ibid, para. 32
• [178] Ibid, para. 35
• [179] Ibid, para. 2
• [180] Ibid, para. 27
• [181] Ibid, para. 36 et seq
• [182] Ibid, para. 17
• [183] Ibid, paras 11 and 14
• [184] Ibid, para. 11
• [185] Ibid, para. 13
• [186] Ibid, para. 13
• [187] Ibid, para. 15
• [188] Ibid, para. 15 et seq
• [189] Ibid, para. 23
• [190] Ibid, para. 24
• [191] Ibid, para. 16
• [192] Ibid, para. 20
• [193] Ibid, para. 21

Unwired Planet v Huawei

22 March 2019 - Case No. I-2 U 31/16

A. Facts

The Claimant, Unwired Planet International Limited, acquired patents relevant to the 2G (GSM) and 3G (UMTS) wireless telecommunications standards developed by the European Telecommunications Standards Institute (ETSI).

The previous holder of the patents in question, Telefonaktiebolaget LM Ericsson (Ericsson), had made an undertaking towards ETSI to grant users access to its patents should they become essential to a standard (Standard Essential Patents or SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendants, China-based Huawei Technologies Co. Ltd (Huawei China) and its German affiliate Huawei Technologies Deutschland GmbH, offer for sale and sell devices in Germany complying with the 2G and 3G standards.

In March 2014, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court) based on one of its SEPs, asking for a declaratory judgement recognising the Defendants’ liability for damages on the merits, as well as information and the rendering of accountsUnwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 32 (cited by www.nrwe.de).. At the same time, the Claimant also initiated infringement proceedings against the Defendants in the UK (UK proceedings). During the course of the UK proceedings, the parties made certain licensing offers. However, an agreement was not reached.

By judgment dated 19th January 2016, the District Court found that the Defendants infringed the patent in suit, recognised the Defendant’s liability for damages on the merits and ordered the Defendants to render accounts to the Claimant [195] . The Defendants appealed the District Court’s ruling.

With the present judgment, the Higher District Court (Oberlandesgericht) of Düsseldorf (Court), basically, upheld the decision of the District Court. However, following a partial withdrawal of claims by the Claimant, the Court limited the Defendants’ obligation to render accounts by excluding information about production costs (broken down by single cost factors) and realised profits [196] .

The Court allowed for an appeal on points of law before the Federal Court of Justice (Bundesgerichtshof). The parties appealed the present decision.

B. Court’s reasoning

The Court confirmed the District Court’s finding that the Defendants had infringed the patent in suit by offering for sale and selling standard-compliant products in Germany [197] .

The Court also agreed with the District Court’s finding that the Claimant was entitled to assert claims against the Defendants: in its view, the patent in suit had been validly transferred to the Claimant [198] .

Transfer of SEPs

The Defendants had argued that the agreements underlying the transfer of said SEP to the Claimant had several flaws, which the District Court had not evaluated properly. In a lengthy reasoning, the Court dismissed this argument and confirmed the validity of the agreements in question [199] .

Besides that, the Defendants had claimed that the relevant agreements were void from an antitrust perspective, because they violated Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). The Court rejected these claims as well.

In the Court’s eyes, the – repeated – transfer of a SEP does not constitute an abuse of market power in violation of Article 102 TFEU [200] , since the FRAND undertaking, which – according to the Court – irrevocably limits the exclusion rights arising from a patent ‘in rem’ (‘dinglich’) [201] , is directly and indispensably binding for the new patent holder (irrespective of any contractual obligation assumed by the latter) [202] . Due to the ‘automatic’ transfer of the FRAND undertaking, there is no reason for prohibiting the transfer of SEPs or imposing limitations regarding to whom the SEP is assigned to; insofar, the patent holder has a free choice [203] .

Furthermore, the Court found that the transfer of the SEP in suit to the Claimant did not violate Article 101 TFEU [204] . Reciprocal agreements, as the agreements underlying the transfer of said patent, per se do not violate Article 101 TFEU, unless they contain side agreements which could impede competition [205] . According to the Court, this was not the case here. In this context, the Court explained that the fact that Ericsson had transferred only a part of its portfolio to the Claimant could not have any anti-competitive effect in terms of Article 101 TFEU [206] . Reason for this is that the FRAND-undertaking, to which both Ericsson and the Claimant are bound, sets the upper limit for the financial or other kind of burden from the licence that can be imposed on any licensee with respect to the entire patent portfolio [206] .

FRAND-undertaking

Having taken the view that the FRAND-undertaking is ‘automatically’ transferred to the new SEP holder, the Court suggested that it is binding for the latter not only ‘on the merits’ (‘dem Grunde nach’), but also in terms of ‘amount and content’ (‘der Höhe und dem Inhalt nach’) [207] . In other words: the new patent holder is not only – generally – obliged to offer access to the SEP on FRAND terms, it is, moreover, bound to the actual licensing practice of the previous patent holder [207] . The Court found that this is needed for ensuring that the SEP holder will not exempt itself of its FRAND commitment – especially the non-discrimination obligation – by transferring the SEP to a third party [208] .

Existing licensing agreements / Confidentiality

Accordingly, the Court held that existing licensing agreements of the previous patent holder (which have not expired yet) need to be considered for the assessment of the non-discriminatory character of licensing offers made by the new SEP holder [209] . Consequently, in the Court’s view, the SEP holder’s FRAND undertaking obliges the latter to provide its successor with information regarding to the content of licensing agreements which it had concluded with third parties [209] .

To be able to establish the non-discriminatory character of its licensing offer, the new SEP holder needs to make sure that it will be able to refer to and present licensing agreements of the prior SEP holder, particularly in court proceedings [210] . An exception could be made only when presenting such agreements would violate contractual confidentiality obligations. For this, the content of relevant confidentiality clauses must be presented in detail in trial, in order to allow an assessment of the extent of the patent holder’s obligations [211] . In addition, the party bound to respective clauses must demonstrate that it cannot release itself from its confidentiality obligations, by showing that all existing licensees have refused – upon request – to waive their rights arising from each clause in question [211] . Notwithstanding this, the Court expressed the view that agreeing to comprehensive confidentiality clauses will, as a rule, bar the SEP holder (and/or its successor) from invoking confidentiality with respect to existing licences in pending court proceedings: in this case, the refusal to present licences cannot be justified, since the patent holder acted culpably by agreeing to confidentiality with other licensees, regardless of its FRAND-obligation to provide information to its successor with respect to the licensing agreements it has signed [211] . Its unjustified refusal to present existing licences will, moreover, also affect the position of the new patent holder in trial (leading potentially to a dismissal of its claims for lack of evidence of the FRAND-conformity of its licensing offer) [211] .

In this context, the Court noted that presenting existing licensing agreements with third parties in trial does not raise antitrust concerns (especially under Article 101 TFEU) [212] . According to the Court, the fact that business secrets will be disclosed to potential competitors of the existing licensees is not harmful from an antitrust perspective, since measures to protect confidentiality in trial are available [212] . In particular, the addressee of confidential information is obliged to sign a Non-Disclosure Agreement (NDA), if the holder of such information (a) concretely explains why this information constitutes a business secret, (b) presents in detail which measures were taken so far for securing confidentiality with respect to the information in question, (c) demonstrates in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed and (d) also explains, with which degree of certainty the said disadvantages are expected to occur [212] . If these requirements are met, the opposing party’s refusal to sign an NDA would allow the party holding confidential information to limit its pleadings in trial to ‘general, indicative statements’ [212] . According to the Court, this was, however, not the case here.

Application of the Huawei framework

On the merits of the case, the Court made clear that the conditions established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE [213] (Huawei framework or obligations) apply only to claims for injunctive relief and the recall of infringing products, not to the patent holders’ claims for information, rendering of accounts and damagesUnwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 159 (cited by www.nrwe.de).. In particular, when deciding about the implementer’s liability for damages on the merits, courts do not have to consider whether the patent holder has met its Huawei obligations or not [215] .

This question is, however, relevant for deciding on the amount of damages owed to the patent holder. The non-compliance of the SEP holder with the Huawei framework can limit the amount of damages that it can claim to the amount of a FRAND royalty (for certain periods of time) [216] . Since the right to request the rendering of accounts serves the calculation of the amount of damages, the Court took the view that the SEP holder is barred from claiming information about production costs and/or realised profits for periods of time, in which it is not entitled to damages going beyond the FRAND royalty, because this information is not required for calculating the latterIbid, para. 402 et seq. Insofar the Court expressly disagreed with the District Court of Mannheim, which in a previous decision had denied any limitations of the patent holder’s right to demand the rendering of accounts, in case of non-compliance with the Huawei framework; cf. District Court of Mannheim, judgment dated 10 November 2017, Case No. 7 O 28/16, GRUR-RR 2018, 273..

SEP holder’s offer to the implementer

Looking at the present case, the Court held that the Claimant had not fulfilled its Huawei obligation to make a written and specific FRAND licensing offer to the Defendants [218] . In particular, in the offers made the Claimant failed to adequately specify both the calculation and the non-discriminatory nature of the royalties proposed [219] .

For allowing the implementer to assess the non-discriminatory character of the SEP holder’s licensing offer, the Court repeated that the latter is obliged to disclose whether other licensees exist and, if so, to which conditions they have been licensed [220] . This obligation extends also to licensing agreements concluded by the previous patent holder(s) [220] . Only agreements that have expired or have been terminated do not need to be considered in this respect [221] . As a result, the Claimant should have referred to both the licences covering the SEP in suit that it had concluded with third parties after the transfer of the patent, and to all licences, which Ericsson had concluded with licensees prior to the transfer of said patent and were still in force, when the Claimant made the respective licensing offer to the Defendants [222] .

The Court took the view that, prior to granting the very first FRAND licence, the SEP holder ought to select a specific ‘licensing concept’. This ‘concept’ is ‘legally binding’ for the future licensing conduct of the SEP holder and potential successors. In other words: the licensing conditions established by the first FRAND licence granted outline the leeway available to the SEP holder for future licensing negotiations [223] . This is also the case, when the royalties agreed for the first licence lie at the lower end of the FRAND scale available to the patent holder [224] . Accordingly, any deviation from the ‘licensing concept’ is allowed only and to the extent that (existing and new) licensees are not discriminated through less favourable conditions [223] .

The Court allowed SEP holders to select a new ‘licensing concept’ (within the available FRAND range), provided that all licensing agreements subject to the existing ‘concept’ will expire at the same point in time [225] . In the Court’s view, this could be achieved, for instance, by agreeing with all later licensees that their licence will expire at the same time as the first FRAND licence ever granted [221] . The Court recognised that this would require substantial efforts, particularly when considerable patent portfolios are involved; this fact did not, however, speak against binding the successor to the licensing practice of the previous SEP holder [226] .

C. Other important issues

According to the Court, the fact that the UK proceedings were directed towards setting the terms of a worldwide licence between the parties, covering all SEPs held by the Claimant did not require the Court to stay its own proceedings [227] . According to Article 27 of the Brussels I Regulation, the court later seized of the matter has to stay its proceedings until the jurisdiction of the court first seized of the case has been settled. The Court saw, however, no indication that the UK proceedings (had ever) concerned the claims asserted in the proceedings brought before it (claims limited to Germany) [227] .

Besides that, the Court confirmed that German courts have international jurisdiction for the claims brought against Huawei China [228] . If infringing products are offered over the internet, the international jurisdiction of German courts is established, when German patent rights are being affected and the website can be accessed in Germany [228] .

• [194] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 32 (cited by www.nrwe.de).
• [195] Ibid, para. 41. See District Court of Duesseldorf, judgement dated 19 January 2016, Case No. 4b O 49/14.
• [196] Ibid, paras. 139 et seqq.
• [197] Ibid, paras. 252-387.
• [198] Ibid, paras. 161 et seqq.
• [199] Ibid, paras. 169-199.
• [200] Ibid, para. 203 et seqq.
• [201] Ibid, para. 205.
• [202] Ibid, paras 205 et seqq.
• [203] Ibid, para 209.
• [204] Ibid, paras. 235 et seqq.
• [205] Ibid, para. 236.
• [206] Ibid, para. 242.
• [207] Ibid, paras. 212 et seqq.
• [208] Ibid, para. 214.
• [209] Ibid, paras. 216 et seq.
• [210] Ibid, para. 216.
• [211] Ibid, para. 218.
• [212] Ibid, para. 220.
• [213] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [214] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 159 (cited by www.nrwe.de).
• [215] Ibid, para. 396.
• [216] Ibid, para. 402.
• [217] Ibid, para. 402 et seq. Insofar the Court expressly disagreed with the District Court of Mannheim, which in a previous decision had denied any limitations of the patent holder’s right to demand the rendering of accounts, in case of non-compliance with the Huawei framework; cf. District Court of Mannheim, judgment dated 10 November 2017, Case No. 7 O 28/16, GRUR-RR 2018, 273.
• [218] Ibid, paras. 406 et seqq.
• [219] Ibid, para. 411.
• [220] Ibid, para. 419.
• [221] Ibid, para. 420.
• [222] Ibid, para. 423.
• [223] Ibid, paras. 413 et seq.
• [224] Ibid, para. 413.
• [225] Ibid, paras. 414 and 420.
• [226] Ibid, para. 421.
• [227] Ibid, para. 144.
• [228] Ibid, paras. 153 et seqq.

Via Licensing v TCL

20 July 2021 - Case No. I-15 U 39/21

A. Facts

The Claimant holds patents declared essential to practice the Advanced Audio Coding (AAC) standard (standard essential patents or SEPs). The Claimant made a commitment to two standardisation organisations — the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) — to make its SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions. The Claimant offers bilateral licences to its SEP portfolio and has also joined a patent pool administered by Via Licensing (Via Licensing pool). The defendant, TCL, is a manufacturer of electronic devices with headquarters in China. TCL produces and sells products implementing the AAC standard globally, including in Germany.

TCL had been a licensee to the Via Licensing pool, but its license was terminated in March 2007. Subsequently, an affiliated company of the TCL group manufacturing television took a bilateral SEP licence from the Claimant, which, however, did not cover smartphones and tablets. Between 2007 and 2016, TCL was in contact with the Via Licensing pool about a potential new licence. In early 2016, Via Licensing pool shared a copy of the standard licensing agreement with TCL. However, no agreement was signed.

In February 2017, the Claimant approached TCL and offered to license its SEPs, but TCL did not respond to the Claimant. TCL did also not respond to a further offer for a pool licence that Via Licensing made in April 2017.

In October 2019, the Claimant filed infringement proceedings against TCL before the District Court (Landgericht) of Düsseldorf (District Court).

In March 2021, while the proceeding was ongoing, TCL made a counteroffer to the Claimant, which, however, the Claimant rejected.

In May 2021, the District Court ruled in favour of the Claimant.Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 23/20. Among other remedies, the Court granted an injunction against TCL.

TCL appealed the decision and filed a motion to stay the enforcement of the injunction during the pendency of the appeal proceedings.

With the present ruling, the Higher District Court of Duesseldorf (Court) dismissed TCL’s motion for a stay of the enforcement of the injunction.Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, Case No. I-15 U 39/21 (cited by www.nrwe.de).
 

B. Court’s reasoning

Based on a summary examination of the reasoning underlying the first-instance decision, the Court concluded that there were no evident flaws, which would require to stay the enforcement of the injunction until the end of the appeal proceedings. [231]

The Court focused particularly on the District Court’s analysis that led to the dismissal of the so-called ‘FRAND-defence’ raised by TCL. TCL had argued that by filing infringement actions, the Claimant abused its dominant position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU) and should, therefore, be denied an injunction. The District Court found that TCL failed to sufficiently express willingness to obtain a FRAND licence in accordance with the requirements established by the European Court of Justice (CJEU) in the Huawei v ZTE [232] (Huawei decision, or framework) and could consequently not invoke its FRAND defence. The Court did not identify any obvious error in the respective findings of the District Court.Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 12.

Contrary to TCL’s view, the Court did not express any concerns with the standard applied by the District Court in assessing TCL’s willingness to obtain a FRAND licence. [234] The District Court had followed the standard set forth by the German Federal Court of Justice (Bundesgerichtshof) in Sisvel v Haier I [235] and Sisvel v Haier II [236] , according to which the implementer is expected to ‘clearly’ and ‘unambiguously’ declare that it is willing to sign a licence with the SEP holder ‘on whatever terms are in fact FRAND’ and, subsequently, engage in licensing negotiations in a ‘target-oriented’ manner (Sisvel v Haier standard).Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 16.

The Court noted that the fact that Duesseldorf Courts had previously applied a different standard for the examination of ‘willingness’ and had even requested from the CJEU to confirm their stance in this respect [238] , did not mean that by following the Sisvel v Haier standard the District Court had erred.Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 20. The Court explained that -even if one would not fully agree with the Sisvel v Haier standard- there is in any case no ‘evident error’ in adhering to the views expressed by the Federal Court of Justice (that is the highest judicial instance in Germany). [240]

Having said that, the Court confirmed that the District Court had properly applied the Sisvel v Haier standard, by comprehensively considering the entire conduct of TCL both prior and after the start of the infringement trial under the principle of good faith. [241] In particular, the Court found no flaws with respect to the District Court’s finding that TCL had continued its ‘unwilling’ behaviour also after the initiation of the infringement proceedings. Although, according to the Sisvel v Haier standard, TCL should have undertaken ‘additional efforts’ to compensate for the missing willingness in the pre-trial phase, it continued applying delaying tactics, instead. [242]

The Court agreed with the District Court’s view that taking more than three years (and waiting until after the start of the infringement trial) to respond to the Claimant’s notification letter and Via Licensing’s offer for a pool licence was an indication that TCL was not willing to take a FRAND licence. [243] This finding was reinforced by the fact that in these (late) responses TCL did not include constructive feedback that would advance the licensing negotiation, but mainly complained about the lack of information, which, however, were already either known or accessible to TCL. [244]

The Court also criticised TCL for requesting access to third-party licensing agreements more than three years after being first notified about the infringement. [245] Furthermore, after having reviewed third-party licences made accessible by the Claimant through an electronic data room, TCL refrained from a detailed discussion of the content of these licences and instead accused the Claimant of not fulfilling its disclosure obligations. [246] The Court agreed with the District Court that this behaviour was an additional indication of ‘unwillingness.’ [246]

The Court also agreed with the District Court that TCL’s choice to contest almost every fact introduced by the Claimant in the proceedings (e.g., concerning the agreements entered by the latter with third parties), without even remotely seeking to negotiate a FRAND licence, was another sign of ‘unwillingness’ given that, in the present circumstances, one would expect ‘additional efforts’ from TCL towards the signing of a licence. [247]

Furthermore, the Court confirmed that TCL’s counteroffer dated March 2021 did not suffice to show that TCL was willing to take a licence. [242] This offer was made only ten days before the oral hearing in the infringement trial and could, therefore, not have been the basis for serious negotiations. [248] Against this background, the Court did not consider harmful the fact that the District Court had not examined whether TCL’s counteroffer was FRAND. [249] It emphasized that under the Sisvel v Haier standard this analysis is not required in every case: moreover, an implementer can be seen as an ‘unwilling’ licensee, even if its counteroffer was FRAND. [250]

The Court further said that the District Court had not erred by not examining whether the Claimant’s licensing offer to TCL was FRAND. [251] The Court explained that the District Court had again followed the Sisvel v Haier standard, under which – in contrast to the previous case-law of the Duesseldorf courts – a detailed examination of the SEP holder’s offer is not required if the implementer failed to demonstrate willingness to take a FRAND licence, as it was the case for TCL. [252]

Finally, the Court did not consider the view taken by the District Court that SEP holders are not obliged to present expired third-party licensing agreements to the implementer as ‘evidently’ erroneous, considering that only active agreements can have an impact on the competitive position of the latter in the market. [253]
 

• [229] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 23/20.
• [230] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, Case No. I-15 U 39/21 (cited by www.nrwe.de).
• [231] Ibid, para. 11.
• [232] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
• [233] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 12.
• [234] Ibid, paras. 13 et seqq.
• [235] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [236] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17.
• [237] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 16.
• [238] See referral to the CJEU in the matter Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No 4c O 17/19. The case was settled before the CJEU rendered a decision.
• [239] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 20.
• [240] Ibid, para. 20.
• [241] Ibid, para. 21.
• [242] Ibid, para. 25.
• [243] Ibid, paras. 24 and 25.
• [244] Ibid, para. 24.
• [245] Ibid, para. 28.
• [246] Ibid, para. 30.
• [247] Ibid, para. 31.
• [248] Ibid, para. 36 and 39.
• [249] Ibid, paras. 35 et seqq.
• [250] Ibid, para. 38.
• [251] Ibid, paras. 34 and 44.
• [252] Ibid, para. 44.
• [253] Ibid, para. 48.

Philips v TCT

12 May 2022 - Case No. 2 U 13/21

A. Facts

The Claimant, Philips, owns patents declared as essential to the Advanced Audio Coding (AAC) standard. The AAC standard is part of the certification requirements for Google Mobile Services (GMS). GMS certification is needed for the use of Google applications available for smartphones and tablets.

Philips made a commitment towards the relevant standard development organisations (SDOs) [254] to make standard essential patents (SEPs) accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions. Philips joined a patent pool covering AAC-related SEPs administered by Via Licensing Corporation (Via Licensing, respectively Via Licensing pool).

The Defendants are a German and a French subsidiary of the TCT group (TCT) with headquarters in China. TCT manufactures and sells products implementing the AAC standard globally, including in Germany. In 2005, TCT signed an AAC licence with the Via Licensing pool, which was terminated in March 2007.

In December 2016, Philips informed TCT about the infringement of its patents and indicated that, generally, there was the possibility to sign a bilateral license agreement. TCT did not respond. In April 2017, TCT received an offer for a pool licence from Via Licensing but did not react either.

In 2019, Philips filed a lawsuit against TCT before the District Court of Düsseldorf (District Court), asserting – among other claims – also a claim for injunctive relief. In March 2020, TCT declared that it was prepared to take a licence from Philips on FRAND terms. In two subsequent letters sent in May and July 2020, TCT asked Philips to provide an offer for a (bilateral) licence.

In July 2020, Philips replied to TCT, expressing doubts about TCT's willingness to sign a licence and referred the latter to the Via Licensing pool. Philips added that is saw no reason for providing TCT with a bilateral license offer. In August 2020, TCT indicated that it would contact Via Licensing about a pool licence but reiterated that a bilateral offer from Philips was desirable. In October 2020, Philips responded that it considered a pool licence to be a sufficient offer under FRAND principles. In November 2020, TCT insisted again on a bilateral licence offer from Philips. The same request was voiced once again on 15 March 2021 and turned down by Philips on 18 March 2021.

On 1 April 2021, TCT made a (counter-)offer to Philips. Philips rejected this offer on 9 April 2021, during the oral hearing of the case before the District Court.

On 11 May 2021, the District Court granted an injunction against TCT.Philips v TCT, District Court of Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 83/19. TCT appealed. With the present judgment, the Higher District Court of Duesseldorf (Court) upheld the injunction.Philips v TCT, Higher District Court of Düsseldorf, judgment dated 12 May 2022, Case No. 2 U 13/21(cited by www.nrwe.de).
 

B. Court's reasoning

The Court confirmed that the patent in suit is infringed. [257]

Furthermore, the Court dismissed the so-called 'FRAND-defence' raised by TCT [258] . TCT had argued that by filing a lawsuit, Philips had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU) and should, therefore, be denied an injunction.
 

No abuse of market dominance

In the view of the Court, Philips holds a dominant market position within the meaning of Article 102 TFEU with respect to the patent in suit. [259] Market dominance does not per se result from the exclusionary rights arising from a patent; for this, several factors must be met. [260] Decisive for the respective assessment is the determination of the relevant market. For SEPs, an individual licensing market usually exists, provided that – from a technical viewpoint – the patent must be used for complying with a standard developed by an SDO (or a de facto standard), in a way that it is, regularly, not possible to work around the patent without losing functionalities important for a downstream product market [261] . Moreover, it should not be possible to substitute the teachings of the patent and the corresponding standard specification by a different technical design of the product. [261] Against this backdrop, the Court accepted that Philips has a dominant market position. [262] The AAC standard, to which that patent in suit is essential, is a compatibility requirement for Google services within the Android ecosystem. According to the perception of the members of the Court, mobile phones and tablets not supporting Google services are not saleable. [263] A study indicating that 70% of users would not buy mobile phones not compatible with Google services, would – according to the Court – reinforce this finding. [263] What is more, the Court noted that given the market share of the two dominant platforms Android and iOS (more than 99%), phone and tablet manufacturers cannot be expected to develop own operating systems, in order to circumvent the AAC standard. [264] Having said that, the Court stressed, however, that Philips had not abused its market dominant position. [265]

An abuse of market dominance occurs, when a patent owner, who has made a FRAND commitment towards the relevant SDO, (a) refuses to license a willing implementer and files a lawsuit requesting an injunction (and/or the recall and/or destruction of infringing products) against the latter, or (b) does not make sufficient efforts to allow a willing implementer to sign a license agreement on reasonable terms. [266] In the eyes of the Court, the above was not the case here, since TCT had not been willing to obtain a FRAND licence. [267]
 

Notification of infringement

The Court agreed with the District Court that Philips met its duty to provide TCT with an adequate notification of infringement. [268] Since this point was not subject to the appeal, the Court referred to the respective analysis of the first instance ruling. [268]
 

Willingness

Turning to TCT's conduct, the Court concluded that it lacked willingness to sign a FRAND licence. [267]

Regarding the notion of 'willingness' the Court explained that there should be a differentiation between 'general' and 'specific' willingness. [269] 'General' willingness refers to the fundamental willingness of the infringer to take a FRAND licence, as (mainly) expressed through a 'license request' made towards the patent owner. [269] On the other hand, 'specific' willingness refers to the infringer's willingness to accept a concrete license offer of the patent owner, which has been confirmed by the court as FRAND. [269] Lack of 'general' willingness leads to an injunction; in this case, it is not relevant (and should, thus, not be examined by the court), whether a license offer of the patent owner is FRAND or not. [269] Lack of 'specific' willingness can, on the contrary, have negative consequences on the infringer, only when the court has examined the patent owner's offer and established that it is FRAND. [269] If not, the missing 'specific' willingness has no impact. [269]

According to the Court, TCT failed to demonstrate 'general' willingness. [270] The Court highlighted that TCT had not made an adequate 'license request'. [267] A respective request can take the form of a 'blanket' and 'formless' declaration, or can even be made 'implicitly'. [271] The implementer must, however, clearly indicate towards the patent owner the 'general' intention to obtain a licence; according to the Court, mere 'lip service', which is evidently not rooted in the sincere will to sign a licence but rather serves delaying purposes, is not sufficient. [271] On the question of whether a 'license request' made with delay should be taken into account, the Court explained that this can be the case, provided that the request is accompanied by facts clearly showing an 'inner shift' on the side of the infringer away from the previous stalling behaviour. [271] Making a (counter)offer can be an indication of such 'shift', unless the offer is – in terms of content – 'un-FRAND' to a degree which makes clear that the infringer has not abandoned the delaying tactics previously applied. [271]

In the specific case, the Court first criticised the fact that for almost ten years (between the termination of pool licence in 2007 and Philips' notification letter of December 2016) TCT had not indicated towards Philips or Via Licensing that it is willing to sign a new license agreement or that (absent a licence) it does no longer use the AAC standard. [272] Furthermore, the Court considered the fact that TCT had not responded to either Philips' letter of notification or the offer received from Via Licensing in April 2017 as a sign of unwillingness. [273]

This lack of willingness could not be compensated by the letters, which TCT sent to Philips in March, May, and July 2020 (that is more than three years after receipt of the infringement notification in December 2016 and only after the lawsuit was filed). [274] The Court held that said letters do not express a 'shift' in TCT's behaviour, but serve the continuation of the delaying tactics applied up to that point in time. [275] After more than three years, a 'willing' licensee would have – unlike TCT – provided specific reasons why a bilateral licence is preferrable over a pool licence. [276] This holds particularly true when, as it was the case here, the infringer (respectively its parent company) had previously singed a pool licence without questioning this licensing model. [276]

What is more, the Court saw in TCT's insistence on receiving a bilateral license offer from Philips a further attempt to 'block' the enforcement of Philips' rights (and not a seriously meant declaration of willingness to sign a licence). [277] The Court reasoned that TCT could not justify this insistence solely by the – undisputed – fact that Philips is prepared to sign bilateral agreements with third parties. [278] The Court took the view that a patent owner is, in principle, under no obligation to offer a bilateral licence to the implementer besides a pool licence. [279]

The Court further rejected the argument that Philips' refusal to offer a bilateral licence to TCT was discriminating. [280] The Court stressed that the SEP owner can select a model offering both options in parallel, if access to either type of licence is granted based on objective criteria. [281] Philips offers bilateral licences only in exceptional circumstances, that is when the implementer has already signed bilateral agreements with other relevant SEP owners, the bilateral licence covers also other standards apart from the AAC standard, or when a pool licence proves to be unreasonable for other reasons. [282] The Court found that this practice per se raises no concerns. [283]

Moreover, the Court pointed out that Philips' willingness to grant bilateral licences in exceptional cases does not establish a general claim of TCT to be granted such a licence as well. [284] TCT should have demonstrated reasons why – according to Philips' licensing model – a pool licence is unreasonable in the present case, which TCT, however, failed to do. [284] The Court considered TCT's claim that a bilateral agreement would 'fully satisfy' the interests of both parties to be nothing more than an 'empty phrase', given that TCT had not mentioned any reason why this would be the case. [285] Furthermore, the Court was not convinced that TCT followed a 'general business practice' of signing bilateral SEP licences. [286] The Court noted that TCT did not produce a single bilateral license agreement covering the AAC standard signed with another patent owner. [286] Agreements regarding the AAC standard, which refer to different product segments (i.e., television sets) were – according to the Court – not relevant in this respect; it further made no difference that TCT and Phillips were engaged in bilateral negotiations regarding patent portfolios reading on other (wireless) standards. [286]

Apart from the above, the Court reasoned that TCT's counteroffer was no proper basis for negotiations, but a clear demonstration of its continuing intention to delay the trial and license discussions. [287] On the one hand, the Court could not identify a reason why TCT presented the offer only at a very late stage of the infringement proceedings, which did not allow either Phillips or the District Court to deal with the offer in depth, as required. [288] On the other hand, the Court took the view that TCT's offer was also insufficient in terms of content. [289] The offer provided for a lump sum payment, which was calculated based on sales figures for the year 2020 made available by a third-party business service provider. The Court doubted that using third party data instead of the actual sales figures was common practice in the market, since TCT had not offered concrete pleadings in this regard. [290] In addition, the Court criticised the fact that neither tablets nor so-called 'feature' phones (that is older models) were considered for the calculation of the lump sum payment, although they implemented the AAC standard. [291] Finally, the Court was not content with the exclusion of past sales for the period 2016 until 2020 from the royalty calculation either. [292] The Court expressed the view that after years of infringement and refusal to sign an agreement, TCT could obviously not expect to be granted a 'free licence' for past sales by Philips. [292]
 

SEP owner's offer

Having established that absent an adequate 'license request' TCT lacked 'general willingness' to obtain a FRAND licence, the Court found that Philips was under no obligation to present an offer to TCT. [293] In line with the above, the Court saw no need to deal with the FRAND-conformity of Via Licensing's pool license offer from April 2017. [293]
 

• [254] International Organisation for Standardisation (ISO) and International Electrotechnical Commission (IEC).
• [255] Philips v TCT, District Court of Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 83/19.
• [256] Philips v TCT, Higher District Court of Düsseldorf, judgment dated 12 May 2022, Case No. 2 U 13/21
• [257] Ibid, paras.168-250. The Court relied on the amended wording of the patent claims confirmed, in the meantime, by the German Federal Patent Court (Bundespatentgericht), paras.5, 164et seqq., and 249.
• [258] Ibid, paras.252 et seqq.
• [259] Ibid, paras.254 et seqq.
• [260] Ibid, para.257.
• [261] Ibid, para. 258.
• [262] Ibid, para.261.
• [263] Ibid, para.263.
• [264] Ibid, para.265.
• [265] Ibid, paras.269 et seqq.
• [266] Ibid, para.273. The Court pointed out that an offer of the patent owner made prior or at the beginning of negotiations cannot, in principle, by itself amount to an abuse of market dominance, even if the underlying terms would be unfair or discriminating, in case that they were agreed by the parties, para.274.
• [267] Ibid, para.278.
• [268] Ibid, para.276.
• [269] Ibid, para.338.
• [270] Ibid, para.339.
• [271] Ibid, para.280.
• [272] Ibid, para.282.
• [273] Ibid, para.284.
• [274] Ibid, para.286.
• [275] Ibid, paras.286 and 288 et seqq.
• [276] Ibid, para.288.
• [277] Ibid, paras.290 and 339.
• [278] Ibid, paras.292 etseqq.
• [279] Ibid, para.294.
• [280] Ibid, paras.296 et seqq.
• [281] Ibid, para.296.
• [282] Ibid, para.299.
• [283] Ibid, paras.298-300.
• [284] Ibid, para.302.
• [285] Ibid, para.310.
• [286] Ibid, para.312.
• [287] Ibid, paras.318 and 333.
• [288] Ibid, para.320.
• [289] Ibid, para.322.
• [290] Ibid, para.326.
• [291] Ibid, para.327.
• [292] Ibid, para.329.
• [293] Ibid, para.335.

Cases from Higher Regional Court - OLG Karlsruhe

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. [294] The claimant, a German non-practicing entity, Saint Lawrence, became owner of the respective SEP in August 2014. [295] The previous owner of the SEP had declared its willingness to grant licenses on FRAND conditions several times. [296] The defendant had shown no interest in such a license. [297] 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. [298] 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, [299] this was of no relevance for the relationship between the claimant and the defendant. [300]

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. [301] 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. [301]

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. [302] 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. [303] Since the District Court of Mannheim had dismissed the intervenors’ willingness as irrelevant for the case, the resulting decision was manifestly erroneous. [303] 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 [304] was the legal basis of its decision. [305]

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. [307] 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. [307] 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. [307] In addition, bringing proceedings against distributors whilst granting licenses to manufacturers in other cases is inconsistent behaviour. [307]

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. [308] 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. [308] 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. [309] 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. [310] As a result, the defendant’s interest in staying the execution outweigh the interests of the claimant.

• [294] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 2.
• [295] Landgericht Mannheim, 10 March 2015, 2 O 103/14, para 27.
• [296] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 3.
• [297] Ibid, para 3.
• [298] Ibid, 6 U 44/15, para 3.
• [299] Bundesgerichtshof, 6 May 2015, KZR 39/06.
• [300] Ibid, 6 U 44/15, para 6.
• [301] Ibid, para 17.
• [302] Ibid, 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.
• [303] Ibid, para 19.
• [304] GA Wathelet, 20 November 2014, C-170/13.
• [305] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 20.
• [306] Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06.
• [307] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 21.
• [308] Ibid, para 25.
• [309] Ibid, para 26.
• [310] Ibid, 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. [311] 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. [312] 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. [313] 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: [314] 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 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 – Ibid, para. 37 et seq. suspend the enforcement of the first instance-ruling.

• [311] Case No. 6 U 55/16, para. 24-28
• [312] Ibid, para. 26
• [313] Ibid, para. 27
• [314] Ibid, para. 29-36
• [315] 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 – Ibid, 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, [316] had made a FRAND-declaration to the “DVD-Forum” which administers the DVD standard. [317]
      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. [318] 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. [319] 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. [320] The defendant requested claim charts and rejected the calculation details as insufficient. [321]
      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) [322] to calculate the amount of compensation it owed. [323]
   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. [324] 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. [325]
      The applicant sought to stay the execution of the order of the District Court of Mannheim, [326] 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). [327] The Higher Regional Court of Karlsruhe dismissed the application. [325] 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. [328]
2. Court’s reasoning
   
   
   1. 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. [329] 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. [329] 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. [330] 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. [331] 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. [331]
   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. [332] 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. [333]

• [316] Case No. 6 U 57/16, para 5
• [317] Ibid, para 8
• [318] Ibid, para 10
• [319] Ibid, para 11
• [320] Ibid, para 12
• [321] Ibid, para 13
• [322] Ibid, paras 15-19
• [323] The decision omits further details on the decision first instance because they are not relevant for the application, see OLG Karlsruhe, 29 August 2016, para 14
• [324] Case No. 6 U 57/16, para 25
• [325] Ibid, para 25
• [326] Ibid, para 23
• [327] Ibid, para 23, 31
• [328] Ibid, para 26
• [329] Ibid, para 31
• [330] Ibid, para 32, 33
• [331] Ibid, para 43
• [332] Ibid, para 28
• [333] Ibid, para 30

6 U 58/16

8 September 2016 - Case No.

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. [334] In early 2013, the patent pool approached the defendant’s mother company about the use of the patent, but without making a license offer. [335]
      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. [335] 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. [336] It held that the defendant was liable for compensation [337] and ordered it to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [338] 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. [339]
   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. [340] 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. [340]
      The applicant sought to stay the execution of two elements of the resulting court order. [341] 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). [342] 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. [343]
      The Higher Regional Court of Karlsruhe granted the application to stay the execution in respect of the order to the recall of products. [344] 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. [344]
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. [345] 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. [346]
   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. [347] Further, the Huawei ruling did not contain any restrictions in respect of the SEP holder’s information claims. [348] 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). [349] 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
   1. 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. [350] 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. [351]
      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. [352] 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. [352]

• [334] 6 U 58/16, para 6
• [335] Ibid, para 7
• [336] Ibid, para 12-17
• [337] Ibid, para 25
• [338] Ibid, para 18-24
• [339] Ibid, para 26-28
• [340] Ibid, para 39
• [341] Ibid, para 33
• [342] Ibid, para 45
• [343] Ibid, para 35
• [344] Ibid, para 38
• [345] Ibid, para 51
• [346] Ibid, para 52
• [347] Ibid, para 62
• [348] Ibid, para 63
• [349] Ibid, para 63-64
• [350] Ibid, para 59-60
• [351] Ibid, para 61
• [352] Ibid, para 67

Philips v Wiko

30 October 2019 - Case No. 6 U 183/16

A. Facts

The Claimant, Philips, holds patents declared as (potentially) essential to the practice of wireless telecommunications standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI), including SEPs reading on the UMTS and LTE standards. Philips committed towards ETSI to make its SEPs accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendant is the German subsidiary of the Wiko group of companies, which has its headquarters in France (Wiko). Wiko sells mobile phones implementing the LTE standard in Germany.

In October 2014, Philips informed the parent company of the Wiko group about its SEP portfolio, but did not receive a response. In July 2015, Philips shared a draft licensing agreement for its SEP portfolio as well as claim charts referring to several of its SEPs with the parent company of the Wiko group, which again did not react at all. In September 2015, Philips shared further technical details regarding its SEPs.

On 19 October 2015, Philips brought an infringement action against Wiko before the District Court of Mannheim based on one of its SEPs, requesting for injunctive relief, information and rendering of accounts, destruction and recall of infringing products from the market as well as a declaratory judgment confirming Wiko’s liability for damages on the merits.

On the next day, 20 October 2015, Wiko sent a letter to Philips, in which it declared its willingness to enter into negotiations with the latter for a licence covering ‘valuable’ patents. In August 2016, during the course of the pending infringement proceedings, Wiko made a counteroffer to Philips. Philips did not accept this offer. Subsequently, Wiko provided security to Philips for the use of its patents, calculated on basis of its counteroffer.

By judgment dated 25 November 2016 [353] , the District Court of Mannheim granted Philips’ claims almost to the full extent. Wiko appealed the District Court’s judgement. In addition, by way of a counterclaim, Wiko requested disclosure of existing licensing agreements signed by Philips with similarly situated licensees (comparable agreements).

With the present judgment [354] , the Higher District Court of Karlsruhe (Court) overturned the ruling of the District Court in part. In detail, the Court confirmed Philips’ claims for information and the rendering of accounts as well as Wiko’s liability for damages on the merits. The Court, however, rejected Philips’ claims for injunctive relief, destruction and recall of infringing products from the market.

Apart from that, the Court also rejected Wiko’s counterclaim regarding the production of comparable agreements in the proceedings.

B. Court’s reasoning

The Court confirmed that Wiko’s products infringe the patent in suit [355] .

Contrary to the view taken previously by the District Court, the Court found, however, that Article 102 of the Treaty for the Functioning of the EU (TFEU) prevents Philips from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings for the time being [356] . In the Court’s eyes, Philips had failed to meet the conduct obligations established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [357] (Huawei framework or obligations) [358] .

Huawei framework

The Court explained that SEP holder’s failure to meet its Huawei obligations will – as a rule – render an infringement action resulting in an exclusion of the implementer from a downstream market (action for injunctive relief and/or recall and destruction of products) abusive in terms of Article 102 TFEU [359] . This will, however, not be the case, when the implementer himself fails to fulfil its duties under the Huawei framework; if the implementer acts in bad faith as an ‘unwilling’ licensee, then SEP holder’s Huawei obligations are ‘suspended’ [359] . As a result, asserting the rights to injunctive relief and/or the destruction and recall of infringing products in court could then be considered as a justified reaction of the SEP holder to the implementer’s unwillingness to enter into a FRAND licence [359] .

Having said that, the Court expressed the view that the parties can remedy potential flaws in their conduct under the Huawei judgment and/or even fulfil their Huawei obligations for the first time during the course of pending infringement proceedings [360] . The Court noted that in Huawei v ZTE, the CJEU did not require that the parties fulfil all conduct obligations established prior to the initiation of court proceedings [361] . In the Court’s eyes, denying the parties such possibility is not compatible either with the general principle of proportionality known to European law, nor with the German civil procedural law, according to which courts need to consider all facts relevant for their decision-making raised in the proceedings until the end of the oral arguments [362] .

Accordingly, an infringement action that did not give rise to any antitrust concerns at the time it was filed, can be considered as abusive at a later point in time, if the situation significantly changed, e.g. the implementer fulfilled its Huawei obligations in the meantime [363] . Vice versa, an action of an abusive nature can later on be ‘corrected’, if the patent holder performs its duties under the Huawei framework during the course of the pending proceedings [363] .

In the Court’s view, a SEP holder seeking to remedy (or fulfil for the first time) obligations under the Huawei framework after the initiation of infringement proceedings must make sure that pressure-free licensing negotiations between the parties are enabled, as required by the CJEU in Huawei v ZTE [364] . For this, the patent holder must use procedural tools available under German law, particularly a motion for suspension of the trial [364] . The SEP holder can also propose a consensual stay of the proceedings, especially when a parallel nullity action against the patent in suit is pending before the Federal Patent Court [364] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [364] .

On the other hand, the Court pointed out that fulfilment of Huawei obligations by the implementer after the beginning of infringement proceedings does not necessarily lead to a dismissal of the claims asserted by the SEP holder [365] . Indeed, if the implementer meets its Huawei duties at a very late point in time in the proceedings (e.g. shortly before the closing of the oral arguments), the Court could eventually neglect this fact in its decision [366] . This way, delays can be avoided. In this context, the Court also made clear that the implementer is not in a position to cause a unilateral suspension of the proceedings; in contrast to the opposite case (that is cases, in which a stay of the proceedings is suggested by the claimant), the SEP holder will usually not be required to agree to a suspension of the proceedings proposed by the implementer, in order to allow pressure-free negotiations to take place [366] . Insofar, the implementer bears the risk that the fulfilment of its obligations under the Huawei framework in the course of a pending infringement trial will have no impact [366] .

Notification of infringement

Looking at the specific conduct of the parties in the present case, the Court found that Philips had fulfilled its obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

The Court confirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [367] . In terms of content, the Court was satisfied by the fact that Philips’ letter from July 2015 named the patent in suit as well as the relevant part of standard document implementing the technical teachings of this patent [368] . The Court explained that the notification does not have to contain (further) information required for a final assessment of the validity and essentiality of the patent in suit [368] . Accordingly, the SEP holder is not obliged to share claims charts customarily used in SEP licensing negotiations with the implementer along with the notification of infringement [368] .

Willingness to enter into a licence

The Court further found that Wiko had sufficiently met its obligation to express its willingness to negotiate a licence with Philips [369] .

The Court agreed with the assessment of the District Court that Wiko’s initial reaction to Philips’ notification in July 2015 by letter dated 20 October 2015 was belated. According to the Court, the time available to the implementer for expressing its willingness to enter into negotiations for a licence will – as a rule – not exceed two months [370] . This period of time will usually be sufficient: since by declaring its willingness to enter into negotiations the implementer does not waive any rights (especially the right to contest the validity and/or infringement of the patents in question), it shall not be given more time than the time needed for an ‘initial overview’ of the SEP holder’s claims [370] . Delaying tactics potentially applied by the implementer must be prevented [370] . Against this background, Wiko’s letter dated 20 October 2015 was sent to Philips too late.

Nevertheless, the Court found that Wiko had remedied the belated response after the beginning of the infringement proceedings. On the one hand, Wiko’s letter dated 20 October 2015 had reached Philips at a very early stage of the proceedings, namely just some days after the action was filed [371] . In addition, Wiko had confirmed its willingness to enter into negotiations with Philips expressed in said letter during the course of the proceedings, by making a counteroffer, rendering accounts and providing security to Philips [371] .

SEP holder’s offer

On the other hand, the Court held that Philips had failed to comply with its obligation to make a FRAND licensing offer to Wiko. In particular, the Court took the view that Philips did not provide sufficient information to Wiko with respect to its licensing offer dated July 2015 [372] .

The Court argued that the ‘fairness’ element of the FRAND commitment establishes an ‘information duty’ (‘Informationspflicht’) of the SEP holder with respect to the content of its licensing offer to the implementer [373] . This duty exists besides the patent holder’s duty to make a FRAND licensing offer to the implementer [374] .

In terms of scope, the Court found that the information duty is, basically, not limited to the calculation of the offered royalty but also covers (objective) facts showing that the ‘contractual compensation factors’ (‘vertragliche Vergütungsfaktoren’) are not discriminatory [375] . The extent of the information to be shared depends on the circumstances of the specific ‘licensing situation’ [375] .

In case that the patent holder has already granted licences to third parties, the information duty will extend also towards its ‘licensing practice’, including comparable agreements [376] .

If the SEP holder uses exclusively a standard licensing programme, then it will be sufficient to show that said programme has been accepted in the market and that the offer made to the implementer corresponds with the standard licensing agreement used [376] .

On the other hand, if the SEP holder has concluded individual licensing agreements with third licensees, then it would be obliged to disclose – at least – the content of the key contractual terms in a way that would allow the implementer to identify whether (respectively why) the offer it received is subject to dissimilar conditions [376] . The Court made, however, clear that – contrary to the approach adopted by the Duesseldorf courts – the SEP holder is not obliged in any case to disclose the full content of all existing comparable agreements [376] . In the eyes of the Court, the information duty serves only the purpose of facilitating good will licensing negotiations. A full disclosure of comparable agreement is, however, uncommon in practice [376] .

In this context, the Court pointed out that the patent holder will have to adequately substantiate the content of ‘justified confidentiality interests’ that might hinder the disclosure of comparable agreements [376] . Furthermore, the SEP holder would need to facilitate the conclusion of a Non-Disclosure Agreement which would allow sharing further information with the implementer [376] .

Based on the above considerations, the Court found that Philips had not fulfilled its information duty at any time [377] . In particular, the Court criticized that Philips did not adequately explain the reasons for choosing to agree on a lump sum payment (instead of a running royalty) in an existing agreement with a third licensee [378] . The fact that companies of different size were affected did not relieve Philips from its information duty; according to the Court, the mere fact that two competitors in a downstream market are of different size does not per se offer sufficient ground for different treatment [379] .

Since the Court assumed that Philips had failed to meet its information duties, it did not examine whether Philips’ licensing offer to Wiko was FRAND in terms of content [380] . In this respect, the Court seemed to agree, however, with the notion that FRAND is a range providing parties with a degree of flexibility [381] .

Implementer’s claim for disclosure of comparable agreements

Referring to the counterclaim for full disclosure of Philips’ comparable agreements raised by Wiko in the appeal proceedings, the Court clarified that a respective right of Wiko does not exist [382] .

Such a right does not arise either from German civil law (Articles 809 and 810 German Civil Code) [382] or Article 102 TFEU [383] . Furthermore, a right for disclosure of comparable agreement can neither be extracted by the SEP holder’s FRAND commitment to ETSI [384] . The Court saw no indication that French law (which is applicable to the ETSI FRAND undertaking) establishes such a right in favour of standards implementers [385] .

C. Other important issues

The Court pointed out that the claims for damages as well as information and rendering of accounts also asserted by Philips in the present proceedings are not subject to the Huawei framework [386] . Moreover, the Court explained that the non-fulfilment of the Huawei obligations by the patent holder poses no limitations on these rights in terms of content [387] . This is particularly true with respect to SEP holder’s claim to request information about expenses and profits from the implementer5 [388] .

• [353] Philips v Wiko, District Court (Landgericht) of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16.
• [354] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16, cited by http://lrbw.juris.de.
• [355] Ibid, paras. 37-87.
• [356] Ibid, para. 88.
• [357] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C 170/13.
• [358] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, para. 108.
• [359] Ibid, para. 107.
• [360] Ibid, paras. 117 et seqq.
• [361] Ibid, para. 119.
• [362] Ibid, paras. 120 et seq.
• [363] Ibid, para. 120.
• [364] Ibid, para. 125.
• [365] Ibid, para. 126.
• [366] Ibid, para. 127.
• [367] Ibid, para. 111.
• [368] Ibid, para. 112.
• [369] Ibid, paras. 115 and 117.
• [370] Ibid, para. 115.
• [371] Ibid, para. 129.
• [372] Ibid, paras. 131 et seqq.
• [373] Ibid, paras. 132 et seq.
• [374] Ibid, para. 135.
• [375] Ibid, para. 133.
• [376] Ibid, para. 134.
• [377] Ibid, paras. 136 et seqq.
• [378] Ibid, para. 136.
• [379] Ibid, para. 138.
• [380] Ibid, para. 131.
• [381] Ibid, para. 106.
• [382] Ibid, paras. 157 et seqq.
• [383] Ibid, paras. 162 et seqq.
• [384] Ibid, paras. 160 et seq.
• [385] Ibid, para. 161.
• [386] Ibid, para. 143.
• [387] Ibid, para. 144.
• [388] Ibid, paras. 145 et seqq.

Sisvel v Wiko

9 December 2020 - Case No. 6 U 103/19

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards, which are subject to a commitment to be made accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions (standard-essential patents or SEPs). Sisvel also administrates a patent pool, comprising patents of several SEP holders, including Sisvel's own SEPs (patent pool).

The defendants are two companies that are part of the Wiko group (Wiko). [389] Wiko sells mobile phones complying with the LTE standard - among other markets- in Germany.

In June 2015, the patent pool informed Wiko for the first time about the need to obtain a licence. On 1 June 2016, Sisvel (as the patent pool's administrator) offered Wiko a portfolio licence, which also covered the patent in suit. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (District Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko's liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence limited to its own SEP portfolio to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

In October 2016, Sisvel extended the lawsuit. Claims for injunctive relief as well as the recall and destruction of infringing products were added to the other claims initially asserted.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Some days prior to the oral hearing in the infringement proceedings, Wiko informed the Court that it had provided information to Sisvel and had also deposited a security amount for past uses.

On 8 November 2017, Sisvel made a new offer to Wiko with reduced royalty rates. Wiko did not immediately react to this offer.

On 22 December 2017, Sisvel asked the District Court to order a stay of the infringement proceedings, until the decision of the Federal Patent Court in the parallel nullity proceedings. Wiko agreed with Sisvel's motion. On 30 January 2018, the infringement proceedings were stayed.

On 9 February 2018, Sisvel sent a reminder to Wiko regarding the offer made on 8 November 2017. Wiko responded on 16 February 2018, requesting further claim charts and more time to examine the patents covered by the offer.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing program (2018 offer). Along with the 2018 offer, Sisvel provided Wiko with claim charts regarding 20 selected patents and a list of existing licensees of both its new licensing program and two pre-existing programs. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, following a respective reminder sent by Sisvel on 14 September 2018, Wiko replied, without, however, commenting the 2018 offer; it just referred back to its counteroffer dated 11 November 2016. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees so far.

In response to that claim, Sisvel shared a draft Non-Disclosure Agreement (NDA) with Wiko on 22 October 2018, based on which it would be willing to disclose the names of the existing licensees. Wiko refused to sign the NDA proposed by Sisvel.

In October 2018, the Federal Patent Court upheld the SEP in suit in part. Subsequently, the District Court moved on with the infringement proceedings. After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

In the beginning of September 2019, Sisvel set up an electronic data room containing redacted versions of Sisvel's existing licensing agreements with third parties and granted Wiko respective access rights. Wiko did not make use of this data room at any point in time.

On 4 September 2019, the District Court granted an injunction against Wiko and ordered the removal and destruction of infringing products from the market. It also confirmed Wiko's liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages. Wiko appealed the decision of the District Court.

Shortly after the District Court rendered its decision, the term of the patent-in-suit expired. Sisvel, however, enforced the injunction granted by the District Court.

With the present judgment [390] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&GerichtAuswahl=Oberlandesgerichte&Art=en&sid=2b226ea73cc9637362d8e1af04a34d05), the Higher District Court (Oberlandesgericht) of Karlsruhe (Court) predominantly upheld the judgment of the District Court [391] .
 

B. Court's reasoning

The Court found that Wiko could not successfully raise a so-called 'FRAND-defence' based on an alleged abuse of market dominance (Article 102 TFEU) against the claims for injunctive relief and the recall and destruction of infringing products asserted by Sisvel. [392]

This question was still decisive in the present case, despite the fact that the patent-in-suit expired before the start of the appeal proceedings. The Court explained that the expiration of a patent affects only future acts of use (which, then, no longer constitute infringement): On the contrary, claims that had arisen prior to expiration based on acts of use during the lifetime of the patent are not impaired. [393] Whether claims were given before the expiration of the patent-in-suit is of particular importance, especially when the patent holder has enforced a (first-instance) judgment delivered in proceedings conducted within the term of protection of the patent, as it was the case here. [394]
 

Dominant market position

Having said that, the Court agreed with the finding of the District Court that Sisvel had a market dominant position in terms of Article 102 TFEU with respect to the patent-in-suit in the relevant time period prior to its expiration. [395]

The Court followed the District Court also insofar, as it confirmed that, by filing an infringement action, Sisvel had not abused its market dominance.
 

Notification of infringement

In the eyes of the Court, Sisvel had sufficiently notified Wiko about the infringement of the patent-in-suit prior to filing a court action. [396] The purpose of the notification of infringement is to draw the implementer's attention to the infringement and the necessity of taking a license on FRAND terms and conditions. [397] In terms of content, the notification must identify the patent infringed, the form of infringement and also designate the infringing embodiments. [397] Detailed technical or legal analysis of the infringement allegation is not required. [397] The production of so-called 'claim charts', which is common in practice, will, as a rule, suffice, but is not mandatory. [397] If the patent holder offers a portfolio licence, respective extended information duties occur. [397]

In the present case, it was not disputed that Sisvel had notified Wiko about the patent-in-suit prior to litigation. [398] As far as Wiko complained that no claim charts were presented before trial, the Court reiterated that no respective obligation of Sisvel existed. [399] What is more, the Court held that the court action initially filed by Sisvel, which did not include claims for injunctive relief and the recall and destruction of infringing products, could also be seen as an adequate notification of infringement. [398]
 

Willingness to obtain a licence

The Court then found that Wiko behaved as an unwilling (potential) licensee both prior and during the infringement proceedings [400] . The Court agreed with the assessment of the District Court that Wiko delayed the licensing negotiations between the parties with the goal to avoid taking a licence for as long as possible, in order to gain economic benefits. [401]

According to the Court, the 'expression of a general willingness to license' is not sufficient for assuming that an implementer is a 'willing licensee'. [402] Moreover, the implementer must 'clearly and unambiguously' declare willingness to conclude a license agreement on FRAND terms, 'whatever FRAND terms may actually look like" [402] . The respective declaration must be 'serious and unconditional'. [402]

The Court highlighted that for the assessment of willingness the overall facts and the particular conduct of the implementer shall be taken into account. [402] Willingness is not 'static': the finding that an implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [402]

The implementer must always be willing to obtain a licence and participate in negotiations in a 'target-oriented manner'; since implementers might be inclined to delay negotiations until the expiration of the patent-in-suit, there is a need to make sure that their behaviour in negotiations will not lead to delays. [403] Moreover, it should be expected that a willing implementer would seek a license as soon as possible, in order to shorten the period, in which it makes use of the patent-in-suit or the SEP holder's portfolio without authorisation and without paying licensing fees. [404] Accordingly, a willing licensee would not consider the 'negotiation obligations' of the SEP holder primarily as a means to defend itself against a court action, but as a means to utilize in order to reach a FRAND agreement, if needed. [404]

In the view of the Court, the above requirements are in line with the Huawei v ZTE judgment (Huawei judgment or Huawei) [405] of the Court of Justice of the EU (CJEU). [406] In Huawei, CJEU focused on the will of the infringer to conclude a license agreement on FRAND terms and emphasized that the latter must not pursue 'delaying tactics'. The Court explained that, although in Huawei the requirement to refrain from 'delaying tactics' is expressly mentioned only with respect to the duty of the implementer to react to a licensing offer of the SEP holder, it applies 'at all times' as long as the implementer uses the patents without a licence; otherwise, the suspension of SEP holder's right to the injunctive relief cannot be justified. [407]

In this context, the Court pointed out that not every 'reluctant involvement' of the implementer in licensing discussions will necessarily allow for the assumption of unwillingness. [408] Such behaviour could be justified in individual cases, especially when the SEP holder does not act in a 'target-oriented' manner itself. [408] Nevertheless, implementers must, as a rule, react timely even to a belated action of the SEP holder. [408] Furthermore, implementers must, in principle, inform the SEP holder of any objections at an early stage and should not wait to raise those much later in court proceedings. [408]

Looking at Wiko's conduct, the Court criticized especially the fact that it became active mostly as a reaction to new developments in the pending infringement proceedings. [409] A willing implementer would have, however, sought a licence independently of the initiation of legal steps and independently of the course of litigation. [410] As an example, the Court highlighted the fact that Wiko's counteroffer dated 11 November 2016 was made only shortly after Sisvel extended the infringement suit by adding a claim for injunctive relief. [411] Wiko also provided information on past acts of infringement only a few days prior to the first oral hearing in February 2017 (and refrained from constantly updating this information afterwards, as it would be expected by a willing licensee). [412]

The Court identified also further facts that indicate that Wiko engaged in delaying tactics. [413] Wiko reacted to Sisvel's licensing offers made during the course of the proceedings always belatedly and only after a reminder by Sisvel (for instance, it took Wiko more than three months to react to the 2018 offer) [414] . It also demanded further claim charts in February 2018, years after the action was filed. [415]

Wiko's refusal to sign the NDA offered by Sisvel -despite multiple reminders of the latter- without providing any reasons was also considered as a sign of unwillingness. [416] According to the Court, it should be expected by a willing licensee, who is not interested in delaying negotiations, to swiftly raise any criticisms regarding an NDA proposed by the SEP holder in writing or by e-mail, and not wait to raise any concerns several months later in the infringement proceedings, as Wiko had done here. [417] The Court also considered the fact that Wiko did not access the electronic data room set up by Sisvel containing redacted versions of Sisvel's third party agreements as an additional indication of unwillingness. [418]

Furthermore, the Court clarified that -contrary to Wiko's view- school holidays and/or staff shortages cannot provide sufficient justification for delays in negotiations. [419] Even if such circumstances occur, a willing implementer would have communicated any obstacles immediately. [419] Wiko failed to do so.
 

SEP holder's offer

Since Wiko was found to have been an unwilling licensee, the Court explained that the question whether Sisvel fulfilled its duty to make and adequately elaborate a FRAND licensing offer, was no longer decisive. [420] In fact, no such duty had arisen in the present case, due to Wiko's unwillingness to obtain a licence. [420] Notwithstanding the above, the Court provided guidance on the content and extend of the respective obligation of the SEP holder.

The Court first explained that FRAND is a 'range', which leaves room for flexibility. [421] As a rule, FRAND is determined in bilateral good faith negotiations between SEP holders and implementers, taking into account the specific circumstances of each individual case [421] ; indeed, parties are best situated to determine the exact content of FRAND in a specific setting. [421]

In order to meet its obligation, an SEP holder must present an offer to a willing licensee, which 'in general' complies with FRAND requirements and is fair, reasonable and not discriminatory with respect to the 'average licensee'. [422] The SEP holder shall further explain its offer in a way that permits the licensee to understand the assumptions, on which the offered rate and further conditions are based. [423] The rationale behind this obligation is to create a sufficient basis of information for the implementer for assessing the offer and eventually formulating a counteroffer. [424]

In this context, the Court made clear that implementers should not expect that the SEP holder individually adapts its (first) offer to the specific circumstances of each particular case. [425] The SEP holder's FRAND commitment does not give rise to such obligation. [425] The (first) offer is intended to launch the negotiations and provide an adequate information basis to the implementer, who will then be in a position to suggest necessary amendments by means of a counteroffer. [425] Accordingly, it will regularly be acceptable that the SEP holder's offer is 'not clearly and evidently' non-FRAND and sufficient information was provided to the implementer. [426]

The Court dismissed the notion that the implementer is obliged to negotiate (and eventually) make a counteroffer, only when the SEP holder's offer was fully FRAND-compliant. [426] This would bring the negotiations to a stand-still and, therefore, conflict with the spirit of the Huawei judgment, which is to encourage the parties to reach agreement on the licensing terms. [427] Moreover, the Court explained that –irrespective of whether the offer triggers an obligation of the implementer to submit a counter-offer– the latter will be regularly required, at least, to analyse the SEP holder's offer in due course and express any objections and queries without delay. [428]

Against this background, the Court found that none of the offers made to Wiko during the infringement proceedings was 'clearly and evidently' non-FRAND. [429] The fact that the offers did not define the start of the contract or the amount of royalties payable for past uses was not considered problematic. [430] The Court also found that the royalty rates offered were not 'evidently non-FRAND', since they were sufficiently substantiated by reference to existing licensing agreements and calculated on basis of a 'top-down' method. [431] A need to calculate royalties on grounds of the costs that incurred for the creation of the patented invention (cost-based approach) was not given, since this factor was not relevant for establishing value. [432]

In addition, the Court did not raise any concerns against the fact that Sisvel's offer concerned a worldwide portfolio licence: On the one hand, agreements with such scope are common in the telecommunications industry. [433] On the other hand, Wiko had worldwide activities, so that a licence with a limited scope would not provide sufficient coverage. [433]

The fact that some of the patents included in Sisvel's portfolio were -allegedly- not standard-essential did not render the offers 'un-FRAND'. [434] The Court stressed that, for the purpose of licensing negotiations and the conclusion of a licence, it is not necessary to conclusively clarify whether each portfolio patent is standard-essential. [435] Implementers can reserve the right to challenge the validity and essentiality of affected patents even after the conclusion of a licensing agreement. [435]

Similarly, the Court had no objections against a clause placing the burden of proof with regard to the exhaustion of licenced patents on Wiko. [436] This rule corresponds with the common allocation of the burden of proof under German law and does not place unreasonable weight on the licensee, since it will be better situated to trace the licensing chain by engaging with its suppliers. [437]

The question whether an adjustment clause is necessary for an offer to be considered FRAND was left unanswered by the Court. [438] Such clause would allow the implementer to adapt the agreed royalties, in case that patents fall out of the scope of the licence (e.g. due to expiration or invalidation). The Court saw no need for a respective contractual provision, since the licences offered by Sisvel would expire and, therefore, be re-negotiated after five years. [438] The Court did not express any concerns against the term of the offered licence or the termination clauses contained therein, either. [439]

Furthermore, the Court made clear that Sisvel had adequately elaborated the licensing rates offered to Wiko. [440] In the infringement proceedings, Sisvel responded to the 'top-down' calculation of Wiko in detail and made relevant clarifications. [441] According to the Court, Sisvel was under no circumstances obliged to elaborate on a cost-based calculation of royalties, as requested by Wiko; such demand was considered just another means to delay negotiations. [442]
 

Implementers' counteroffer

The Court also found that the counteroffers made by Wiko during the course of the first instance infringement proceedings were not FRAND. [443]

The Court highlighted that the obligation of the implementer to submit a FRAND counteroffer to the SEP holder is already triggered, when the previous licensing offer of the latter is not 'clearly and evidently' non-FRAND and sufficient information was provided, enabling the implementer to formulate its counteroffer. [444]

Having said that, the Court took the view that the royalty rates which Wiko offered were very low and, thus, not FRAND-compliant. [445] The Court criticized especially the fact that the rates were significantly lower than the rates which were considered to be adequate in previous court decisions. [446] Notwithstanding the above, the Court explained that, even if Wiko's counteroffer had been FRAND, this would not change the conclusion that Wiko had acted as an unwilling licensee. [447] According to the Court, a willing licensee would not have submitted a counteroffer around one year after receipt of the SEP holder's offer, as Wiko did. [448]
 

C. Other important issues

The Court stressed that for generating pressure-free licensing negotiations during pending infringement proceedings, it will, as a rule, be sufficient, if the proceedings are stayed with a view to parallel nullity proceedings concerning the patent-in-suit. [449] This is particularly true, when the SEP holder takes the respective initiative, as it was the case here. [449] Nevertheless, even if a pressure-free negotiation situation is not given, the infringers is not released from the obligation to act in good faith and engage in licensing negotiations, for instance by analysing a licensing offer of the SEP holder. [449] The refusal of the infringer to act accordingly could, in the eyes of the Court, allow the conclusion that it is an unwilling licensee. [449]

Apart from that, the Court confirmed that Wiko had no legal ground for requesting full disclosure of Sisvel's third party agreements [450] . Even if one would recognize a duty of the SEP holder to share information about the core content of existing licensing agreements (that are still in force), it is questionable whether this duty would also extend to agreements signed by previous patent holders. [451] The Court expressed particular doubts that this applies in cases in which a portfolio was assembled from patents acquired from different patent holders, since the relevance of bilateral or pool licensing agreements of the former patent holder can be limited in this case. [452]

Furthermore, the Court expressed the view that under German law a so-called 'covenant not to sue' does not have the effect of a (royalty-free) licence: such agreements will, as a rule, have only a procedural effect in terms of a pactum de non petendo, excluding only the initiation of court proceedings. [453]

Finally, the Court denied Wiko's motion to order a stay in the appeal proceedings due to the recent referral of several questions regarding the interpretation of the Huawei framework to the CJEU by the District Court of Düsseldorf in the matter Nokia v Daimler [454] . [455] According to the Court, it appears unlikely that the CJEU will establish criteria, by which SEP-based court actions against implementers engaging in delaying tactics would amount to an abuse of market dominance. [456]
 

• [389] The action was extended to a third defendant, an individual person, who had served as a managing director for both aforementioned companies.
• [390] Sisvel v Wiko, Higher Regional Court Karlsruhe, judgment dated 9 December 2020, Case-No. 6 U 103/19
• [391] The claims for injunctive relief, rendering of accounts and damages asserted against the former managing director of the two Wiko companies were limited to the period of time until the end of its tenure; ibid, paras. 265-288.
• [392] Ibid, para. 289.
• [393] Ibid, paras. 284 et seqq.
• [394] Ibid, para. 287.
• [395] Ibid, paras. 290 et seq. Insofar, the Court made clear that a market dominant position ceases to exist after the expiration of the relevant patent.
• [396] Ibid, paras. 292 et seqq.
• [397] Ibid, para. 293.
• [398] Ibid, para. 297.
• [399] Ibid, paras. 297 et seq.
• [400] Ibid, para. 299.
• [401] Ibid, para. 299 and paras. 320 et seqq.
• [402] Ibid, para. 301.
• [403] Ibid, para. 302.
• [404] Ibid, para. 303.
• [405] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
• [406] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 304.
• [407] Ibid, para. 304.
• [408] Ibid, para. 305.
• [409] Ibid, paras. 321 et seqq.
• [410] Ibid, para. 321.
• [411] Ibid, para. 322.
• [412] Ibid, paras. 323 et seq.
• [413] In addition, the Court found that Wiko’s lack of willingness to obtain a license is also manifested in the fact that it (i) attempted to impede the enforcement of the first instance ruling of the District Court by questionable means (para. 335) and (ii) did not accept the offer of the District Court of The Hague, in which proceedings between the parties were pending in parallel, to engage in settlement negotiations (para. 336).
• [414] Ibid, paras. 325, 328 and 331.
• [415] Ibid, para. 327.
• [416] Ibid, paras. 333 et seqq.
• [417] Ibid, paras. 334 and 338.
• [418] Ibid, paras. 337 and 341 et seqq.
• [419] Ibid, para. 330.
• [420] Ibid, para. 342.
• [421] Ibid, para. 307.
• [422] Ibid, para. 308.
• [423] Ibid, paras. 308 and 310.
• [424] Ibid, para. 309.
• [425] Ibid, para. 310.
• [426] Ibid, paras. 311 et seqq.
• [427] Ibid, paras. 311 and 313 et seqq.
• [428] Ibid, paras. 316 et seqq.
• [429] Ibid, para. 352.
• [430] Ibid, para. 353.
• [431] Ibid, paras. 354 et seqq.
• [432] Ibid, para. 358.
• [433] Ibid, para. 359.
• [434] Ibid, para. 360.
• [435] Ibid, para. 361.
• [436] Ibid, para. 362.
• [437] Ibid, para. 363.
• [438] Ibid, paras. 365 et seqq.
• [439] Ibid, paras. 367 et seqq.
• [440] Ibid, para. 366.
• [441] Ibid, para. 344.
• [442] Ibid, para. 346.
• [443] Ibid, paras. 379 et seqq.
• [444] Ibid, para. 311.
• [445] Ibid, paras. 379 et seqq.
• [446] Ibid, para. 380.
• [447] Ibid, para. 378.
• [448] Ibid, para. 384.
• [449] Ibid, para. 348.
• [450] Ibid, para. 389.
• [451] Ibid, paras. 389 et seq.
• [452] Ibid, para. 391.
• [453] Ibid, paras. 260 et seqq.
• [454] Nokia v Daimler, District Court of Düsseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
• [455] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 395.
• [456] Ibid, para. 395.

Nokia v Daimler

12 February 2021 - Case No. 6 U 130/20

A. Facts

The claimant is part of the Nokia group with headquarters in Finland (Nokia). Nokia is a major provider of telecommunication services and holds a significant portfolio of patents declared as (potentially) essential to the practice of various wireless telecommunication standards (standard essential patents, or SEPs) developed by the European Telecommunications Standards Institute (ETSI).

The defendant, Daimler, is a German car manufacturer with a global presence. Daimler produces and sells cars in Germany with connectivity features which implement standards developed by ETSI.

Nokia declared the patent involved in the present case as essential for the 4G/LTE Standard towards ETSI. ETSI requires patent holders to commit to make patents that are or might become essential to the practice of a standard accessible to users on fair, reasonable and non-discriminatory (FRAND) terms.

In June 2016, Nokia informed Daimler about its SEP portfolio. In November 2016, Nokia made a first licensing offer to Daimler. In December 2016, Daimler replied that it would be more efficient to license suppliers manufacturing the so-called 'Telematics Control Units' (TCUs), which are built into Daimler's cars. From January 2017 until February 2019, Daimler did not engage in further negotiations with Nokia.

In February 2019, Nokia made a second licensing offer to Daimler which was also rejected.

In March 2019, Nokia filed infringement actions against Daimler before the District Court of Mannheim (District Court). Further cases were filed before the District Courts of Munich and Duesseldorf.

On 9 May 2019, shortly after the infringement proceedings were initiated, Daimler made a counteroffer to Nokia (first counteroffer) which was rejected. On 10 June 2020, Daimler made a further counteroffer that did not include specific royalty rates (second counteroffer). Nokia would be granted the right to unilaterally determine the royalties payable under the licence, whereas Daimler would have the option to contest Nokia's royalty determination before court. An agreement on these terms was not signed.

On 18 August 2020, the District Court granted an injunction against Daimler and further recognised Daimler's liability to pay damages on the merits. [1] The Court also ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.

Daimler appealed the decision of the District Court. It also filed a request for a stay of the enforcement of the injunction granted until the conclusion of the appeal proceedings.

With the present judgment [2] (cited by http://lrbw.juris.de), the Higher District Court of Karlsruhe (Appeal Court) found in favour of Daimler, ordering a stay of the enforcement of the injunction.
 

B. Court's reasoning

The Appeal Court placed particular focus on the reasoning, on which the District Court relied upon for dismissing the so-called 'FRAND-defence' raised by Daimler against Nokia's claim for injunctive relief. Daimler had argued that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU and should, therefore, be denied an injunction. The District Court held that Daimler could not invoke this argument, since it had failed to sufficiently express willingness to obtain a FRAND licence from Nokia in accordance with the requirements established by the European Court of Justice (CJEU) in the matter Huawei v ZTE [3] (Huawei decision, or framework).
 

Willingness

The Appeal Court did not contest the standard applied by the District Court for the assessment of willingness: the implementer is expected to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner. [4] The Appeal Court also agreed with the view expressed by the District Court that the declaration of willingness cannot be made subject to conditions. [5] Furthermore, it reasoned that willingness is not a 'one-off event', meaning that the implementer is required to constantly engage in negotiations in a 'serious and target-oriented' manner and to avoid 'delaying tactics'. [5]
 

Implementer's counteroffer

The Appeal Court also confirmed that the implementer's counteroffer is a factor that can be considered for the assessment of willingness [6] . On the one hand, a FRAND-compliant counteroffer could, in principle, 'heal' the initial 'unwillingness' of the implementer. [7] On the other hand, a counteroffer that is not FRAND can reinforce the finding of missing willingness. [7] Having said that, the Appeal Court held that the District Court erred as far as it assumed that Daimler's second counteroffer was not sufficient to 'heal' the unwilling behaviour displayed by Daimler up to the point in time, in which this counteroffer was made. [8] The Appeal Court pointed out that – contrary to the District Court's view – a counteroffer which does not specify concrete licensing fees but instead grants the patent holder the right to unilaterally determine the royalties and – at the same time – allows the implementer to challenge such determination before court in subsequent proceedings (Sec. 315 of the German Civil Code), should regularly be considered as a sufficient declaration of willingness to sign a licence 'on whatever terms are in fact FRAND'. [9] According to the Appeal Court, the fact that by such counteroffer the implementer does not back down from the own perception of how FRAND terms should look like and will, therefore, most likely contest the royalties unilaterally determined by the SEP holder is, as a rule, not harmful: the SEP holder will in any case receive either the royalties it determined or the royalties deemed to be reasonable by the court which will be called upon by the implementer to examine the royalty determination undertaken by the patent holder. [10]

In the eyes of the Appeal Court, the fact that in the above scenario the (final) determination of FRAND royalties is postponed to subsequent proceedings following the patent infringement trial does not per se suffice to question the willingness of the implementer. [11] The Appeal Court rather highlighted that it would regularly serve the interests of the SEP holder to 'unburden' the infringement trial from the FRAND determination, which would lead to a quicker judgment on the infringement issues. [11]

Furthermore, the Appeal Court disagreed with the view previously taken by the District Court, according to which a counteroffer without specific royalty calculation could be (mis-)used by implementers as a means for delaying the signing of an agreement until after the expiration of the patent in suit, in order to secure a more favourable position in negotiations absent the threat of an injunction. [12] The Appeal Court pointed out that, if a licence stipulating a unilateral royalty determination right in favour of the SEP holder is concluded, the latter will receive royalties for the use of its patents; in the court proceedings following the infringement trial only the actual amount of the royalties payable will be determined. [12]

Notwithstanding the above, the Appeal Court made, however, clear that a counteroffer containing no specific royalties can, nevertheless, be an indication of unwillingness in individual cases, especially when it is belated. [13] This could be true, when the counteroffer is made only after infringement proceedings have been initiated by the patent holder. Although it is, in principle, thinkable to remedy flaws during pending infringement proceedings, a counteroffer made after the trial has begun would be unacceptable, if it is part of delaying tactics on the side of the implementer. [14] The Appeal Court found that this approach is in line with the Huawei judgment. [15]

In this context, the Appeal Court pointed out that a counteroffer without specific royalty calculation, which could be sufficient for establishing willingness, does not necessarily also suffice for complying with the further going obligation of the implementer under the Huawei framework to make an own offer on FRAND terms to the SEP holder, if it chooses to reject the licensing offer of the latter. [16] In the present case, the Appeal Court did not take a closer look at this question, since the District Court had not examined whether Daimler had been obliged to make a FRAND counteroffer after rejecting Nokia's licensing offers. [16]

• [1] Nokia v Daimler, District Court (Landgericht) of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19.
• [2] Nokia v Daimler, Higher District Court (Oberlandesgericht) of Karlsruhe, judgment dated 12 February 2021, Case-No.6 U 130/20.
• [3] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [4] Nokia v Daimler, Higher District Court of Karlsruhe (footnote No. 2), para.43.
• [5] Ibid, para. 43.
• [6] Ibid, paras. 45 et seq.
• [7] Ibid, paras. 46.
• [8] Ibid, para. 47.
• [9] Ibid, para. 51.
• [10] Ibid, para. 52.
• [11] Ibid, para. 53.
• [12] Ibid, para. 54.
• [13] Ibid, para. 55.
• [14] Ibid, para. 56.
• [15] Ibid, para. 57.
• [16] Ibid, para. 61.

IP Bridge v HTC

25 November 2020 - Case No. 6 U 104/18

A. Facts

The Claimant, IP Bridge, owns patents declared as (potentially) essential to the cellular standard 4G/LTE developed by the European Telecommunications Standards Institute (ETSI). The patent in suit was acquired from a company, which had made an undertaking towards ETSI to make the patent accessible to users on fair, reasonable and non-Discriminatory (FRAND) terms and conditions.

The Defendant is a German subsidiary of HTC (HTC), a global electronics company with headquarters in Taiwan, which sells mobile phones complying with the 4G standard – among other countries – also in Germany.

In December 2014, IP Bridge notified the parent company of the HTC group (parent company) about its portfolio of standard essential patents (SEPs). Subsequently, the parties engaged in negotiations. License offers were exchanged; however, no agreement was signed.

In September 2016, IP Bridge brought an action against HTC before the District Court of Mannheim (District Court). IP Bridge sought a declaratory judgment confirming HTC’s liability for damages and requested information as well as the rendering of accounts.

In April 2018, after the parent company signed a Non-Disclosure Agreement, IP Bridge presented existing licences with third parties concerning its patent portfolio.

On 15 May 2018, IP Bridge extended the pending lawsuit by adding claims for injunctive relief as well as the recall and the destruction of infringing products.

In June 2018, HTC made a counteroffer, which IP Bridge rejected.

On 28 September 2018, the District Court ruled that HTC infringed the patent in suit and is liable for damages. [457] The District Court also ordered HTC to render accounts and to provide relevant information to IP Bridge. On the other hand, the claims for injunctive relief, the recall and the destruction of infringing products were dismissed. The parties appealed the decision.

In March 2019, the appeal proceedings were suspended to allow licensing negotiations on IP Bridge’s offers to proceed. During the subsequent discussions, IP Bridge submitted an amended license offer to HTC. Along with this offer IP Bridge shared agreements signed, in the meantime, with chipset manufacturer that either partly covered the portfolio at issue here or included a so-called ‘covenant to be sued last’ with respect to certain patents.

In February 2020, IP Bridge made another license offer to HTC. HTC was given the choice between a running royalty and a lumpsum payment. For both options, the royalties were determined according to the so-called ‘top-down’ method. The rates were calculated based on an annual, industry-wide (partly forecasted) average selling price (ASP) of handsets. The running royalty option included a clause, allowing both parties to request an adjustment of the annual ASP, in case that the forecasted value would deviate for at least 5% from the actual ASP.

The appeal proceedings were then suspended once again for a period of approx. two months. The parent company rejected IP Bridge’s offer of February 2020. Afterwards, the parent company made two further counteroffers to IP Bridge. However, no agreement was signed.

With the present judgment, the Higher District Court of Karlsruhe (Appeal Court) overturned the ruling of the District Court, as far as the claims for injunctive relief, the recall and the destruction of infringing products were concerned. [458] In contrast to the first instance decision, the Appeal Court granted these claims as well.
 

B. Court’s reasoning

The Appeal Court confirmed that the patent-in-suit is infringed. [459]

In the eyes of the Appeal Court, the ‘FRAND-defence’ raised by HTC, which had led to the dismissal of the claims for injunctive relief, the recall and destruction of infringing products in first instance, does no longer stand in the way of the enforcement of these claims. [460]

HTC had argued that by asserting exclusionary claims, IP Bridge abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU). The Appeal Court found that the District Court had rightly assumed that IP Bridge held a dominant position in the relevant market. [461] Nevertheless, IP Bridge did not abuse its market dominance: The last license offer that IP Bridge made during the appeal proceedings was, in any case, FRAND. [462] On the contrary, HTC’s subsequent counteroffers were, according to the Appeal Court, ‘clearly and evidently’ not FRAND’. [462]
 

Huawei duties during pending proceedings

The Appeal Court reiterated that, in principle, both parties can fulfil the negotiation duties under the Huawei v ZTE judgment (Huawei judgment) [463] of the Court of Justice of the EU (Huawei duties) also during the pendency of infringement proceedings. [464] Similarly, courts shall consider in appeal proceedings acts performed for the first time after the end of the first instance trial, particularly license offers made. [465]

In this context, the Appeal Court noted that the implementer is regularly obliged to react properly to acts, by which the SEP owner met its Huawei duties, irrespective of whether the latter took action with delay or only gradually. [466] A ‘hesitant behaviour’ on the side of the patent owner does not permanently preclude the right to injunctive relief; the enforcement of this right is only ‘suspended’, until the patent owner fulfils its duties and a reasonable period given to the implementer to react lapsed. [466] The Appeal Court pointed out that, conversely, delaying tactics on the side of the implementer will be sanctioned through exclusionary measures, even when the SEP owner fulfilled its duties ‘only hesitantly’. [467]
 

Notification of infringement

Looking at the individual Huawei duties, the Appeal Court confirmed that IP Bridge had made an adequate infringement notification to HTC. [461] Insofar, the Appeal Court found no flaws in the reasoning of the District Court.
 

SEP owner’s offer

The Appeal Court then ruled that – at least – the last license offer of IP Bridge to HTC of February 2020 was FRAND (or, in any case, ‘not clearly and evidently non-FRAND’). [468] The Appeal Court made a comprehensive assessment of FRAND conformity, affirming its earlier stance that courts cannot perform just a limited ‘summary examination’ of the patent owner’s offer. [469]

In the view of the Appeal Court, the SEP owner regularly meets the Huawei duty to submit a FRAND license offer to a ‘willing’ licensee, when the offer is ‘in general terms’ FRAND with respect to the 'average licensee’. [470] The implementer cannot expect that the (first) offer, which is rather the ‘starting point’ of negotiations, is already adapted to the specific individual circumstances. [471] The Appeal Court stressed that FRAND is a ‘range’, meaning that not only one single set of terms and fees corresponds to FRAND requirements. [472] Particularly the notions of ‘fairness’ and ‘reasonableness’ offer flexibility to the parties, who are best situated to form FRAND in good faith bilateral negotiations based on the circumstances of each case. [472]

Regarding the last license offer of IP Bridge, the Appeal Court first observed that the timing was not problematic. Indeed, the fact that IP Bridge gradually developed and made this offer only during the appeal proceedings was not harmful. [473] Furthermore, the Appeal Court stressed that said offer had not ‘lapsed’, so that HTC had been required to react. [474] HTC argued that the offer was no longer binding after the deadline set by IP Bridge for a response had expired. The Appeal Court disagreed: The respective deadline only indicated until when IP Bridge expected to receive an answer from HTC and did not prevent the latter from accepting the offer afterwards. [474] This understanding was reinforced by the fact that IP Bridge had again requested a response from HTC after the deadline had expired. [474] According to the Appeal Court, even if one would assume that the license offer had ‘lapsed’, HTC would have still been obliged to either make a counteroffer or ask IP Bridge whether it could accept the offer, despite the expiration of the deadline to respond. [474]
 

Royalty calculation / Content of the license offer

Moving on to the license fees, the Appeal Court took the view that the royalty rates contained in IP Bridge’s last offer were FRAND. [475] The ‘top-down’ methodology applied for the royalty calculation raised no legal concerns. [476] The same is true also with respect to the royalty base used for the calculation, that is the annual (partly forecasted) industry-wide ASP of handsets. [477]

The Appeal Court dismissed HTC’s view that the use of the industry-wide ASP of all 4G-enabled handsets was per se unreasonable. [478] On the one hand, the Appeal Court emphasized that the assessment of FRAND-conformity does not consist in an ‘isolated review of individual calculation parameters’ but should focus on whether the amount of the final license rate is FRAND, which was the case here. [478] On the other hand, the fact that the industry-wide ASP takes features into consideration that are not linked to the wireless technology (such as the manufacturer’s prestige, brand, design, or high production quality) was acceptable, since at the same time also particularly low-priced handsets are taken into account, such as devices sold on dumping prices, or prices not considering SEP license fees. [479] Apart from that, the Appeal Court remarked that the industry-wide ASP was not considerably higher than the ASP of HTC’s own handsets. [480] In addition, the Appeal Court found that the aggregate total royalty burden used by IP Bridge for the royalty calculation was not problematic either, because it moved within the range (6% - 10%) previously accepted as FRAND by other courts. [481] The fact that other SEP owners apply a lower percentage, was no indication that the aggregate rate, to which IP Bridge referred, was exploitative. [481]

Furthermore, the Appeal Court saw no flaws in the way, in which IP Bridge calculated its own share of 4G-related SEPs. [482] IP Bridge had formed an average based on figures derived from two different SEP landscape studies. The Appeal Court found that this was acceptable, not least because both studies delivered similar results; what is more, IP Bridge was under no obligation to rely on the study with the lowest result. [482]

The Appeal Court further expressed no concerns against the fact that IP Bridge did not offer different rates for specific countries/regions, depending on the extent of patent coverage. [483] The uniform global rates proposed by IP Bridge did not render the license offer per se exploitative, since there were good reasons for choosing this option, for instance, an easier contract management. [484] The Appeal Court explained that it was irrelevant, whether an offer on such conditions could disfavour implementers, which have high sales in regions with low patent coverage: As already mentioned, the SEP owner meets the duty to negotiate, if its offer is FRAND with respect to the 'average licensee’. [485] Only when the absence of different rates per country/region leads, in general, to ‘exploitative’ rates, an abuse could occur. [485] In the eyes of the Appeal Court, there were no indications that this was the case here, particularly since other licensees, who signed agreements with IP Bridge, had accepted the offer in the respective form. [485] Besides that, the Appeal Court held that the volume discounts suggested by IP Bridge were in line with FRAND. [486] SEP owners are, in principle, not obliged to offer a ‘uniform tariff’ to all licensees. [487] Discounts based on sales volumes result in higher per-unit fees for implementers with lower sales, but are, nevertheless, allowed when ‘factual justification’ exists. [487] The Appeal Court recognised that the SEP owner can have an interest to incentivise implementers to strive for higher sales with the objective to achieve a broader dissemination of the standard and, consequently, acquire more licensees. [487] It can also be justified to offer particularly favourable discounts to ‘large and reputable’ implementers, since agreements entered into with such companies could motivate other licensees to sign agreements as well. [487] The fact that the volumes discounts used in the present case would lead to higher rates for HTC compared to another existing licensee did not render IP Bridge’s offer discriminatory. [488] The Appeal Court repeated that the SEP owner’s duty to submit a FRAND offer is met, when its offer is non-discriminatory with regard to the ‘average licensee’; HTC did not plead that this occurred here, but only argued that the discount regime was discriminatory towards HTC or smaller manufacturers in general. [489]

Having said that, the Appeal Court reiterated that, ultimately, it is not relevant whether the individual calculation parameters are ‘FRAND-compliant’; decisive is whether the final royalty payments are FRAND. [490] The Appeal Court had no doubts that the royalties offered by IP Bridge are FRAND, particularly because the latter concluded agreements on the same rates (including the identical volume discount regime) with two other licensees. [490] The respective licences could be used as a benchmark, given that they were signed without litigation. [491] The fact that the existing licensees, which had different sales figures (one higher and one lower than HTC), both accepted the volume discount regime of IP Bridge indicated that it was neither exploitative nor discriminatory. [492] Furthermore, the Appeal Court did not consider the fact that one of the licences covered also infrastructure patents (which the offer made to HTC did not) as discriminatory, since such patents accounted for only 1% of the licensed portfolio and, thus, carried limited weight with respect to the assessment of FRAND-conformity. [493]

Apart from the royalty calculation, the Appeal Court further found that the other provisions of IP Bridge’s last license offer were FRAND as well. [494] The royalty adjustment clause included in the offer allowed the licensee to contest the validity, essentiality and use of licensed patents and provided for a royalty adjustment, when ‘substantial changes’ (in both directions) occurred with respect to the licensed portfolio. That the adjustment mechanism was triggered only in case of ‘substantial changes’ was justified by the interest of the parties to avoid modification of the agreement on negligible grounds, which the Appeal Court considered as worthy of protection. [495]
 

Information regarding the license offer

Considering the related duty to explain the license offer to the implementer, the Appeal Court required from the SEP owner to elaborate the offer in a way, which would allow the specific licensee to comprehend both the assumptions, on which the rates and the other contractual provisions are based, and the reasons why the patent owner considers the offer as non-exploitative and non-discriminatory. [470]

In the view of the Appeal Court, IP Bridge met the above requirements with regards to the last offer made to HTC. [496] As far as IP Bridge had previously provided input on elements which had remained unchanged, the Appeal Court explained that there was no duty to repeat information, as this would just be a ‘useless formalism’. [497]

The Appeal Court added that it had neither been necessary to expand on a comprehensive ‘proud-list’ to demonstrate the standard-essentiality of IP Bridge’s portfolio. [498] In any case, the 24 claims charts shared by IP Bridge with HTC were considered as sufficient (the portfolio comprised of 48 patents in total). [499]

Moreover, the Appeal Court pointed out that IP Bridge could rely on the two (external) landscape studies for determining its share of 4G-related SEPs; no obligation existed to carry out an own study in this respect. [500] IP Bridge had not been under a duty to share these two studies with HTC, since both were accessible. [500] According to the Appeal Court, it did not appear unreasonable for HTC to purchase the studies, even though access to one of them was associated with costs amounting to GBP 50,000 (or an annual subscription of GBP 75,000). [500]

The Appeal Court also held that IP Bridge had complied with the duty to inform HTC about the ‘essential content' of license agreements already concluded. [501] IP Bridge had shared agreements signed with three other licensees. The question of whether a SEP owner is obliged to present also agreements signed by previous patent owners was left open by the Appeal Court: In the present case, IP Bridge’s portfolio consisted of patents acquired from several patent owners, so that there were no previous agreements covering the portfolio in its current structure. [502] Previous individual license agreement could rather have limited informative value. [503] In any case, the respective duty did not expand to expired license agreements. [502]
 

‘Pressure-free’ negotiations

Besides from the above, the Appeal Court found that ‘pressure-free’ negotiations concerning the offers made by IP Bridge during the appeal trial were possible, given that the proceedings were suspended twice. [504] The period, in which the proceedings were suspended, had been sufficient to allow HTC to review the offers carefully, as it was obliged to. [505]

Furthermore, the Appeal Court explained that IP Bridge had not been under a duty to also suspend infringement proceedings launched against an affiliate of the HTC group in China. [506] Under EU competition law, asserting exclusionary rights arising from a SEP can be abusive, only if court measures (e.g., an injunction) would exclude products from the EU Single Market. [507] Actions filed in other markets do not have such effect and, thus, cannot stand in the way of the enforcement of exclusionary claims asserted in Germany. [508] Whether the SEP owner is obliged to suspend parallel pending German infringement proceedings was not decided by the Appeal Court, as the only other trial between the parties before German courts was ‘on-hold’ since November 2017. [509]
 

Implementer’s counteroffer

The Appeal Court further held that HTC’s counteroffers made prior and during the appeal proceedings were not FRAND. [508]

In the eyes of the Appeal Court, the implementer’s duty to make a counteroffer is already triggered, when the SEP owner has made an offer that is not ‘clearly and evidently un-FRAND’ and the offer was elaborated towards the implementer in a manner, which allows the latter to set up a counteroffer on FRAND terms. [510] Assuming that the Huawei duties are ‘not an end in themselves’ but aim at motivating the parties to reach agreement on license terms, the Appeal Court reasoned that requesting from the implementer to respond only to a FRAND offer of the SEP owner would lead to a stillstand in negotiations. [511] This interpretation would also conflict with the Huawei judgment, given that the CJEU made the duty to submit a FRAND counteroffer solely subject to the condition that the implementer rejects SEP owner’s offer, without additionally requiring that said offer is actually FRAND. [512]

Looking particularly at HTC’s counteroffers, the Appeal Court focused on a clause providing that IP Bridge should guarantee that all licensed patents are essential to at least one cellular standard. According to the Appeal Court, this clause was non-FRAND. [513] Implementers are, indeed, allowed to preserve the right to contest the validity, essentiality, and use of licensed patents in the agreement. [514] It can, however, not be required from the patent owner to provide the guarantee laid down in the above clause. [514] The Appeal Court noted that the violation of this clause (in case a licensed patent would prove to be non-essential) would – at least – create a liability for damages on the side of the SEP owner. [515] By that, the nature of the license agreement as a ‘transaction entailing risk’ for the implementer would be lifted and the SEP owner would assume an (increased) risk in form of a liability for damages. [515] The Appeal Court also considered in this context that HTC had failed to establish that contractual provisions of that kind are common in practice. [515]
 

Willingness to obtain a licence

Finally, the Appeal Court found that HTC’s overall behaviour showed that it was not willing to obtain a licence. [516]

Following the case-law of the German Federal Court of Justice (Bundesgerichtshof) in Sisvel v Haier [517] , the Appeal Court explained that an implementer must ‘clearly and unambiguously’ declare its willingness to obtain a licence on whatever terms are in fact FRAND and, subsequently, engage in negotiations in a ‘target-oriented’ manner. [518] Demonstrating ‘general willingness’ is not enough; the implementer’s declaration must be ‘serious’ and ‘unconditional’, whereas ‘mere lip service’ is not sufficient. [467]

In the eyes of the Appeal Court, ‘willingness’ is no ‘static’ position: the finding that the implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [519] What is more, a ‘continuous willingness’ to obtain a licence is required. [519] Particularly relevant is the question of how an ‘upright and willing’ licence seeker would behave, who is interested in signing an agreement and does not strive after procedural tools to fend off a lawsuit filed by the SEP owner. [519]

Against this background, the Appeal Court criticised the fact that HTC engaged with IP Bridge only ‘hesitantly’, especially in the last phase of the negotiations. [520] Indeed, HTC submitted a counteroffer just three weeks prior to the oral hearing in the appeal proceedings and shared an amended version with IP Bridge only two days before the hearing. [520] What is more, in the eyes of the Appeal Court, a ‘willing’ licensee would not have insisted on the SEP owner accepting the guarantee regarding the essentiality of the licensed portfolio patents included in HTC’s counteroffers. [520]
 

C. Other issues

The Appeal Court dismissed the defence raised by HTC based on the notion of ‘patent ambush’. [521] The Appeal Court explained that the required ‘wilful fraudulent conduct’ on the side of the rights owner cannot be established by only showing that the (previous) patent owner was aware of its disclosure duties under ETSI IPR Policy or that it refrained from disclosing, or belatedly disclosed relevant patents in other instances. [522] Moreover, the Appeal Court agreed with the District Court and requested from the party raising a ‘patent ambush’ defence to – at least – establish the ‘concrete possibility’ that an alternative technology to the solution integrated into the standard actually existed. [523] HTC had failed to do so here.

Regarding the legal consequences, the Appeal Court clarified that a ‘patent ambush’ does not bar the claims arising from a patent. [524] There is no legal basis supporting the suspension of the effects of a patent in this situation. [524] Such suspension would be disproportionate for sanctioning a ‘simple breach of a rule’ and also conflict with the ‘spirit and the objectives’ of the disclosure duties established by the ETSI IPR Policy, which aim at ensuring that the patent owner will make a FRAND undertaking and that the best technical solutions are adopted into the standard, irrespective of whether they are protected by patents or not. [524]

The Appeal Court further dismissed HTC’s argument that the so-called ‘covenants to be sued last’ agreed with certain chipset manufacturers prevented IP Bridge from asserting the patent-in-suit. [525] The Appeal Court stressed that under German law ‘covenants to be sued last’ do not lead to an exhaustion of patent rights, since the possibility to bring an action based on the patent is not ruled out, but just temporarily suspended (in terms of a standstill agreement). [526]

In addition, the Appeal Court highlighted that under German law the (broader) agreements in form of so-called ‘covenants not to sue’ do not cause exhaustion of patent rights either. [527] This type of agreement does not have the effect of either a licence or a consent to place patent compliant products on the market. [528] With respect to German patents, ‘covenants no to sue’ regularly do not have further going effects than (procedural) standstill agreements. [529]

• [457] IP Bridge v HTC, District Court of Mannheim, judgment dated 28 September 2018, Case No. 7 O 165/16.
• [458] IP Bridge v HTC, Higher District Court of Karlsruhe, judgment dated 25 November 2020, Case No. 6 U 104/18 (cited by GRUR-RS 2020, 56869).
• [459] Ibid, paras. 58-98.
• [460] Ibid, para. 117.
• [461] Ibid, para. 134.
• [462] Ibid, para. 133.
• [463] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [464] IP Bridge v HTC, Higher District Court of Karlsruhe, judgment dated 25 November 2020, para. 118.
• [465] Ibid, para. 119.
• [466] Ibid, paras. 121 et seqq.
• [467] Ibid, para. 124.
• [468] Ibid, para. 136.
• [469] Ibid, paras. 136 and 130.
• [470] Ibid, para. 127.
• [471] Ibid, para. 128.
• [472] Ibid, para. 126.
• [473] Ibid, para. 137.
• [474] Ibid, para. 138.
• [475] Ibid, paras. 139 et seqq.
• [476] Ibid, para. 140.
• [477] Ibid, paras. 141 et seqq.
• [478] Ibid, para. 143.
• [479] Ibid, para. 145.
• [480] Ibid, para. 146.
• [481] Ibid, para. 147.
• [482] Ibid, para. 148.
• [483] Ibid, paras. 152 et seqq.
• [484] Ibid, para. 153.
• [485] Ibid, para. 154.
• [486] Ibid, paras. 155 et seqq.
• [487] Ibid, para. 156.
• [488] Ibid, paras. 157 et seq.
• [489] Ibid, para. 158.
• [490] Ibid, para. 160.
• [491] Ibid, para. 164.
• [492] Ibid, para. 161.
• [493] Ibid, para. 163.
• [494] Ibid, paras. 166 et seqq.
• [495] Ibid, para. 168.
• [496] Ibid, paras. 169 et seqq.
• [497] Ibid, para. 169.
• [498] Ibid, para. 170.
• [499] Ibid, para. 171.
• [500] Ibid, para. 173.
• [501] Ibid, para. 174.
• [502] Ibid, para. 178.
• [503] Ibid, paras. 178 et seq.
• [504] Ibid, paras. 180 et seqq.
• [505] Ibid, paras. 182 et seq.
• [506] Ibid, para. 185.
• [507] Ibid, para. 186.
• [508] Ibid, para. 187.
• [509] Ibid, para. 184.
• [510] Ibid, para. 129.
• [511] Ibid, para. 131.
• [512] Ibid, para. 132.
• [513] Ibid, paras. 188 et seqq.
• [514] Ibid, para. 189.
• [515] Ibid, para. 190.
• [516] Ibid, para. 193.
• [517] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [518] IP Bridge v HTC, Higher District Court of Karlsruhe, judgment dated 25 November 2020, paras. 124 et seq.
• [519] Ibid, para. 125.
• [520] Ibid, para. 194.
• [521] Ibid, paras. 103 et seqq.
• [522] Ibid, para. 104.
• [523] Ibid, para. 105.
• [524] Ibid, para. 106.
• [525] Ibid, para. 108.
• [526] Ibid, paras. 110 and 114 et seqq.
• [527] Ibid, paras. 111 et seqq.
• [528] Ibid, paras. 111 and 113.
• [529] Ibid, para. 113.

IP Bridge v TCT

2 February 2022 - Case No. 6 U 149/20

A. Facts

The Claimant, IP Bridge, declared the patent-in-suit as (potentially) essential to the practice of the 4G/LTE cellular standard, which was developed by the European Telecommunications Standards Institute (ETSI). ETSI requires that right holders commit to make standard essential patents (SEPs) accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendants are the parent company and a German affiliate of the TCT group (TCT) with headquarters in China. TCT distributes and sells 4G-enabled cell phones globally, including in Germany.

On 15 December 2014, IP Bridge informed the parent company of the TCT group (parent company) about its SEP portfolio. In the respective letter, two US patents – but not the (German) patent-in-suit – were exemplary mentioned. TCT did not respond. IP Bridge sent reminders to the parent company in January and April 2015, which, however, remained unanswered. The patent-in-suit was not mentioned in these reminders either.

In July 2015, IP Bridge filed an infringement suit against companies of the TCT group in the United States (US proceedings).

On 1 February 2016, IP Bridge sent a (first) license offer to the parent company. Attached to the offer was a list of patents which included the patent-in-suit. IP Bridge also provided a claim chart concerning the patent-in-suit (along with further claim charts referring to other portfolio patents).

On 29 February 2016, IP Bridge filed an action against TCT before the District Court of Mannheim (District Court).

On 11 March 2016, the parent company informed IP Bridge that negotiations could start after the parties had exchanged infringement and invalidity contentions in the US proceedings and requested more information about the portfolio of IP Bridge. On 22 March 2016, legal counsel representing TCT in the German proceedings rejected IP Bridge’s license offer but indicated that TCT was ‘nevertheless’ willing to ‘negotiate, respectively conclude’ a licence on FRAND terms.

On 19 May 2017, IP Bridge made another (second) license offer to TCT. No agreement was signed.

On 30 April 2018, IP Bridge provided TCT with an amended (third) offer. IP Bridge offered TCT a choice between a running royalty and a lumpsum payment. For both options, the royalties were determined according to the so-called ‘top-down’ method. The price per unit offered to TCT was calculated in US Dollars on basis of a global, industry-wide average selling price (ASP) of handsets during the period 2011-2016. TCT rejected this offer as well.

On 7 August 2018, TCT received another (fourth) offer by IP Bridge with almost identical content. This offer was also rejected.

In May 2019, shortly after it had prevailed in the US proceedings, IP Bridge made a further (fifth) offer to TCT, to which the latter did not respond.

In October 2019, the District Court communicated to the parties that according to its (preliminary) view the global industry-wide ASP for the years 2011-2016 could not serve as a basis for the calculation of royalties for future uses.

On 12 December 2019, IP Bridge shared a modified (sixth) offer with TCT. In this offer, IP Bridge relied again on the ‘top-down’ method and a global industry-wide ASP. In contrast to the previous offers, the ASP should be determined separately for each calendar year, in which the licence would be in force. TCT rejected this offer.

On 31 January 2020, the parent company made a (first) counteroffer to IP Bridge. Apart from the fact that the royalty was calculated based on the actual annual global ASP of TCT’s own handsets, and that a lower total aggregate royalty burden was used, the counteroffer was, basically, to a large extend identical to IP Bridge’s last offer.

On 4 March 2020, IP Bridge made an amended (seventh) offer to TCT, which particularly took the sales figures mentioned in TCT’s counteroffer into account.

On 11 March 2020, TCT made a slightly modified (second) counteroffer to IP Bridge, which was based on the same royalty calculation as the previous counteroffer of 31 January 2020. On 19 March 2020, IP Bridge rejected this counteroffer. On 7 April 2020, TCT placed security for past uses in form of a bank guarantee.

On 7 August 2020, IP Bridge made a further (eighth) offer to TCT. On 18 August 2020, TCT rejected this offer and shared another (third) counteroffer with IP Bridge. No agreement was, however, reached.

On 21 August 2020, the District Court dismissed the claims for injunctive relief, recall and destruction of infringing products asserted by IP Bridge. [530] (cited by juris; summary available here) IP Bridge filed an appeal before the Higher District Court of Karlsruhe (Appeal Court).

With the present judgment, the Appeal Court overturned the ruling of the District Court, granted an injunction against TCT, and ordered the recall and destruction of infringing products. [531] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&Art=en)
 

B. Court’s reasoning

The Appeal Court confirmed the finding of the District Court that the patent-in-suit is infringed. [532]

In contrast to the District Court, the Appeal Court found, however, that TCT could not raise a so-called ‘FRAND’-defence in the present case. [533] TCT had argued that by asserting claims for injunctive relief as well as the recall and destruction of infringing products, IP Bridge abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU).

The Appeal Court agreed with the District Court’s view that IP Bridge had a dominant position in the market for the licensing of the patent-in-suit. [534] From a technical viewpoint, it is necessary to use the patent for complying with the relevant standard; it was not shown in the trial that a technical alternative to the teachings of the patent-in-suit existed. [534]

Nevertheless, in the eyes of the Appeal Court, IP Bridge had not abused its market dominance. [535] The fact that IP Bridge was not prepared to enter into an agreement on terms other than those offered to TCT, did not entail an abuse in terms of Article 102 TFEU, since TCT had been unwilling to sign a FRAND licence. [535]
 

Notification of infringement

The Appeal Court held that IP Bridge made a proper notification of infringement by the letter dated 1 February 2016. [536] The preceding letters sent to TCT in 2014 and 2015 were deemed as insufficient, as they did not contain an explicit reference to the patent-in-suit. [536]

In view of the great number of SEPs needed for complying with the standard at hand, the notification should call infringer’s attention to the infringement of the specific patent-in-suit. [536] The Appeal Court explained that the patent holder should narrow down the information in both factual and territorial terms, so that the implementer is allowed to assess the merits of the infringement allegation. [536] These requirements were met – for the first time – by the letter of 1 February 2016, which expressly mentioned the patent-in-suit and included a claim chart concerning this patent. [536]
 

Willingness

Contrary to the view taken by the District Court, the Appeal Court found that TCT did not adequately express willingness to obtain a licence. [537]

Following the case-law of the German Federal Court of Justice (Bundesgerichtshof) in Sisvel v Haier [538] (Sisvel v Haier summary available here, Sisvel v Haier II summary available here), the Appeal Court explained that an implementer must ‘clearly and unambiguously’ declare its willingness to obtain a licence on whatever terms are in fact FRAND and, subsequently, engage in license negotiations in a ‘target-oriented’ manner. [539]

According to the Appeal Court, ‘willingness’ is no ‘static’ position: the finding that the implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [540] What is more, a ‘continuous willingness’ to obtain a licence is required. [540] Absent such ‘continuous willingness’ on the side of the implementer, the allegation that the SEP holder abused its market dominance would be ‘devoid of meaning’. [540]

The Appeal Court explained that the concrete, detailed requirements of ‘willingness’ cannot be made subject to a ‘general definition’. [541] The relevant criterion is the following: What would a ‘reasonable party’ interested in a successful outcome of the negotiations serving the mutual interests do in the specific negotiation phase to achieve this objective. [541] For the respective assessment, a case-by-case analysis is needed. [541] The Appeal Court noted that expressing willingness to negotiate does by itself not guarantee that the respective statement is meant seriously; on the contrary, it can be part of ‘delaying tactics’ applied by the implementer. [542] To safeguard the interests of both the patent holder and the implementer’s competitors, ‘delaying tactics’ cannot be tolerated. [542]

Whether the implementer engaged in delaying tactics must be assessed based on ‘objective criteria’ under consideration of its behaviour following the infringement notification or a license offer received from the SEP holder. [543] A ‘willing and upright’ implementer would seek to sign a licence as soon as possible, to shorten the time, in which the patent (or portfolio) is used without payment of fees. [543] Such implementer would rather ‘urge’ the patent holder to fulfil its obligations and not think how the SEP holder’s duties could be utilised for defensive purposes in infringement proceedings. [543]

Accordingly, the Appeal Court found that an implementer is obliged to react even to an ‘un-FRAND’ license offer of the patent holder. [544] In ‘complex’ circumstances, like those typically present in SEP licensing, it is regularly not clear which terms are reasonable, so that it is the task of negotiations to ‘articulate’ the mutual interest of the parties and address any legal issues. [544] This is particularly true, given that FRAND is a ‘range’ and that the SEP holder can, as a rule, take the ‘justified interests’ of the implementer into account, only after respective insights are gained in negotiations. [544] The Appeal Court highlighted that the implementer should communicate any concerns as early as possible and not wait until proceedings are launched. [544]

In this context, the Appeal Court stressed that the implementer is (still) obliged to engage in the negotiation process, even when the SEP holder’s offer is ‘evidently’ not in line with FRAND. [545] In this case, it is, however, sufficient to indicate the reasons why the offer is ‘evidently’ not FRAND. [545] The implementer must address all concerning aspects towards the SEP holder. [545] The principle of good faith requires that all open issues are placed ‘on the table’ promptly; the implementer cannot focus on one ‘evident’ element which conflicts with FRAND and stay silent with respect to other aspects it equally considers as ‘un-FRAND’. [545] This applies especially to obvious aspects, e.g., the basic structure of the royalty calculation. [545]

Exceptionally, the implementer is not obliged to react at all, when the SEP holder’s offer conflicts with FRAND principles to a degree that – from an objective viewpoint – one can assume that it was ‘not meant seriously’. [546] For this, however, it will regularly not suffice that one single clause of the offer is ‘evidently’ non-FRAND; the Appeal court requires an ‘overall assessment’ considering all relevant facts. [546]

Against this background, the Appeal Court held that TCT had not been willing to sign a FRAND licence. [537] Although TCT had claimed that it was prepared to do so, its subsequent behaviour showed that the respective statements were not meant seriously and that TCT’s intention had been to delay negotiations and the signing of a licence for as long as possible. [537] In the view of the Appeal Court, the overall behaviour of TCT indicated that it gradually raised concerns against the offers received based on purely tactical considerations with the goal to delay the proceedings. [547]

The Appeal Court noted that TCT criticized the basic royalty calculation used by IP Bridge only after the (third) license offer of 30 April 2018, even though it had received a detailed presentation on the relevant parameters along with the first offer dated 1 February 2016, which was followed by further information afterwards. [548] According to the Appeal Court, there were no reasons why concerns against the royalty calculation were raised only (more than) two years after the first license offer was made. [549] The fact that the (third) offer of 30 April 2018 introduced the ‘top-down’ approach did not mark a new starting point in the negotiations, given that several calculation parameters (e.g., ASP, uniform rate for all licensees) remained the same. [550] Moreover, every new offer cannot ‘reset’ the negotiations back to the start, making the conduct of the implementer up to that point in time irrelevant for the assessment of willingness. [550]

What is more, the fact that, initially, TCT predominantly contested just one contractual provision concerning the adjustment of royalty rates was seen by the Appeal Court as a sign of unwillingness. [551] The Appeal Court did not finally decide whether said adjustment clause was FRAND or whether a single problematic provision could render the entire offer ‘un-FRAND’ (what the Appeal Court doubts), because an implementer like TCT, whose criticism of the SEP holder’s offer is limited to a single clause, violates the duty to engage in negotiations. [551] TCT was under such duty in the present case, irrespective of the fact that the District Court had indicated during the first instance proceedings that the adjustment clause in dispute was not FRAND. [551] The District Court’s remark did not release TCT from the duty to engage in negotiations with IP Bridge. [551]

Looking at TCT’s counteroffers, the Appeal Court observed that the latter was not prepared to negotiate with IP Bridge respectively to make economic concessions. [552] TCT used the (lower) ASP of its own handsets as the basis for the royalty calculation in all counteroffers made to IP Bridge. By insisting on this ‘maximum position’, TCT confirmed that it was not seriously willing to take a licence. [553] This did not change by the fact that in the first instance proceedings and ruling the District Court had supported TCT’s approach on the ASP: TCT was, nevertheless, not released from the duty to negotiate. [554]
 

SEP holder’s offer

The Appeal Court explained that, even if one would – for argument’s sake – consider TCT as a willing licensee, an abusive behaviour in terms of Article 102 TFEU on the side of IP Bridge would be ruled out anyway, since the (seventh) license offer of IP Bridge dated 4 March 2020 was, in any case, FRAND. [555]

First, the ‘top-down’ methodology applied for the royalty determination raised no legal concerns. [556] The same is true, according to the Appeal Court, also with the running royalties calculated on a per-unit basis offered by IP Bridge. [557] Licensing fees calculated based on the sales results of the licensee (price per-unit; fees based on revenue or earnings) are, in principle, ‘neutral’ from a competition law angle and, thus, acceptable. [557]

On the contrary, the Appeal Court stressed that ‘cost-based’ methods are rather unsuitable for the calculation of FRAND rates. [558] On the one hand, it is difficult to assess the costs associated with the development of a patent or a bundle of patents. [558] On the other hand, the costs incurred for the development of an invention are, in general, not appropriate for measuring its value: ‘Cost-based’ methods ignore that a decisive factor leading to an invention is mostly the ‘creative act’ of the inventor, not the costs. [558] The Appeal Court noted in this context that the price paid for the acquisition of an SEP cannot be qualified as costs for the production of the patent. [558]

Furthermore, the Appeal Court emphasized that the assessment of FRAND-conformity does not consist in an ‘isolated review of individual calculation parameters’ but should focus on whether the final license rate is FRAND. [559] The Appeal Court had no doubts that the rates offered by IP Bridge are FRAND, particularly since IP Bridge had concluded agreements on the same rates (including the identical volume discount regime) with three licensees. [560] The respective licences could be used as a benchmark, given that they were signed without litigation. [561] The fact that all existing licensees, which had very different sales figure, accepted the volume discount regime indicated that it was neither exploitative nor discriminating. [562]

In addition, the Appeal Court explained that the individual calculation parameters used by IP Bridge were FRAND as well. In contrast to the District Court, the Appeal Court raised no objection against the fact that IP Bridge used the annual worldwide industry-wide ASP as basis for the royalty calculation. [563] Features not linked to the wireless technology, such as the manufacturer’s prestige, brand, design, or high production quality are, indeed, included in the industry-wide ASP. However, particularly low-priced handsets are included as well, such as devices sold on dumping prices, or prices not considering SEP license fees. [564] The aggregate total royalty burden used for the royalty calculation was also not problematic, since it moved within the range previously accepted as FRAND by other courts. [565] Even if other SEP holders apply a lower percentage, there were no indications that the aggregate rate used by IP Bridge was exploitative. [565]

Furthermore, the Appeal Court saw no flaws in the way, in which IP Bridge calculated its own share of 4G-related SEPs. [566] IP Bridge had formed an average based on two different SEP landscape studies. The Appeal Court found that this was acceptable, given that both studies delivered similar results; what is more, IP Bridge was not under an obligation to rely on the study with the lowest result. [566]

The Appeal Court further accepted the fact that IP Bridge did not offer different rates for specific countries/regions, depending on the extent of patent coverage. [567] The uniform global rates proposed by IP Bridge did not render the license offer per se exploitative, since there were good reasons for choosing this option, for instance, an easier contract management. [568] The Appeal Court noted that it was irrelevant, whether an offer on such conditions could disfavour implementers, which have high sales in regions with low patent coverage: The SEP holder meets the duty to negotiate, if its offer is FRAND with respect to the 'average licensee’. [569] Only when the absence of different rates per country/region leads, in general, to ‘exploitative’ rates, an abuse could occur. [569] In the eyes of the Appeal Court, there were no indications that this was the case here, particularly since IP Bridge’s three other licensees had accepted the offer in the respective form. [569]

Besides that, the Appeal Court held that the volume discounts suggested by IP Bridge were also FRAND. [570] SEP holders are not obliged to offer a ‘uniform tariff’ to all licensees. [571] Discounts based on sales volumes lead to higher fees per-unit for implementers with lower sales, are, however, allowed when ‘factual justification’ exists. [571] The Appeal Court recognised that the SEP holder can have an interest to incentivise implementers to strive for higher sales, to achieve a broader dissemination of the standard and, consequently, acquire more licensees. [571] It can also be justified to offer particularly favourable discounts to ‘large and reputable’ implementers, since agreements signed with such companies could motivate other licensees to sign agreements as well. [571]

Looking at the royalty adjustment clause included in IP Bridge’s offer, the Appeal Court confirmed that this clause was FRAND. [572] Said clause allowed the licensee to contest the validity, essentiality and use of licensed patents and provided for a royalty adjustment, when ‘substantial changes’ (in both directions) occurred with respect to the licensed portfolio. That the adjustment mechanism was triggered only in case of ‘substantial changes’ was justified by the interest of the parties to avoid adjustments for negligible grounds, which the Appeal Court considered as worthy of protection. [572] Based on similar considerations, the Appeal Court accepted that a clause providing for an adjustment of the annual industry-wide ASP underlying the running-royalty fee model offered to TCT was equally in line with FRAND. [563]
 

Implementer’s counteroffer

Finally, contrary to the view taken by the District Court, the Appeal Court found that TCT’s counteroffer dated 11 March 2020 was ‘evidently’ not FRAND. [573]

In the present case, IP Bridge had repeatedly outlined its ‘general licensing model’ based on a per-unit royalty regime throughout the several offers made to TCT and had also shown that it had signed respective agreements with third licensees. [574] The Appeal Court held that, in such constellation, a counteroffer which requires from the SEP holder to fundamentally change the ‘licensing model’ is not FRAND. [574] In the license contracts signed, the SEP holder has agreed to specific conditions, which it must consider in negotiations with new licensees, in order to adhere to its dominant market position. [574] Indeed, according to the Appeal Court, the SEP holder could be accused of discriminating existing licensees, if it would agree a fee structure with a new licensee, which is fundamentally different than the model offered and used in license agreements so far. [574] Moreover, due to its dominant market position, the SEP holder could be obliged to offer the new license fee structure also to existing licensees, what would cause a complete shift of the ‘licensing model’. [574] The Appeal Court expressed the view that the SEP holder is under no duty to accept such fundamental change. [574]

Moreover, the Appeal Court noted that implementers do not need additional protection in this context. On the one hand, the acceptance of SEP holder’s ‘licensing model’ by other licensees indicates prima facie that it is in line with market conditions. [574] On the other hand, the SEP holder’s ‘licensing model’ must be FRAND with view to the specific licensee. This means that the implementer can contest all conditions of the ‘licensing model’, irrespective of whether other licensees have agreed to them already. [574] The implementer cannot, however, demand that the patent holder accepts a fundamentally different type of licence fees, even if its own (counter)offer is otherwise FRAND. [574]
 

• [530] IP Bridge v TCT, District Court of Mannheim, judgment dated 21 August 2020, Case No. 2 O 136/18.
• [531] IP Bridge v TCT, Higher District Court of Karlsruhe, judgment dated 2 February 2022, Case No. 6 U 149/20.
• [532] Ibid, paras. 116-170.
• [533] Ibid, para. 171.
• [534] Ibid, para. 172.
• [535] Ibid, para. 174.
• [536] Ibid, para. 173.
• [537] Ibid, para. 184.
• [538] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17, summary available here; Sisvel v Haier II, Federal Court of Justice, judgment 24 November 2020, Case No. KZR 35/17, summary available here.
• [539] IP Bridge v TCT, Higher District Court of Karlsruhe, judgment dated 2 February 2022, para. 176.
• [540] Ibid, para. 177.
• [541] Ibid, para. 178.
• [542] Ibid, para. 179.
• [543] Ibid, para. 180.
• [544] Ibid, para. 181.
• [545] Ibid, para. 182.
• [546] Ibid, para. 183.
• [547] Ibid, para. 185.
• [548] Ibid, paras. 186 et seq.
• [549] Ibid, paras. 188 and 190.
• [550] Ibid, para. 190.
• [551] Ibid, para. 193.
• [552] Ibid, paras. 197 et seq.
• [553] Ibid, para. 199.
• [554] Ibid, paras. 199 et seqq.
• [555] Ibid, paras. 203 et seq.
• [556] Ibid, para. 206.
• [557] Ibid, para. 207.
• [558] Ibid, para. 208.
• [559] Ibid, para. 210.
• [560] Ibid, paras. 220 and 210.
• [561] Ibid, para. 223.
• [562] Ibid, para. 221.
• [563] Ibid, para. 209.
• [564] Ibid, para. 211.
• [565] Ibid, para. 212.
• [566] Ibid, para. 213.
• [567] Ibid, paras. 215 et seqq.
• [568] Ibid, para. 216.
• [569] Ibid, para. 217.
• [570] Ibid, paras. 218 et seqq.
• [571] Ibid, para. 218.
• [572] Ibid, para. 228.
• [573] Ibid, para. 232.
• [574] Ibid, para. 234.

Nokia v Oppo

14 September 2022 - Case No. 6 U 212/22

A. Facts

The Claimant, Nokia, owns patents essential to various wireless telecommunications standards (standard-essential patents, or SEPs), developed by the European Telecommunications Standards Institute (ETSI). ETSI requires that patent owners commit to make SEPs available to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The Defendants are part of the China-based Oppo group (Oppo), which manufactures and markets devices implementing wireless standards worldwide, including in Germany.

The parties signed a patent cross-license agreement. Prior to the expiration of the agreement, Nokia and Oppo discussed about the conclusion of a further contract without success.

After the licence expired, Nokia filed a lawsuit against Oppo before the District Court of Mannheim (Mannheim Court) based on a German patent. Among other claims, Nokia requested an injunction as well as the recall and destruction of infringing products.

In July 2022, the Mannheim Court delivered a judgment in favour of Nokia, granting – among other relief – an injunction against Oppo (Mannheim injunction). [1] Oppo filed an appeal against this ruling before the Higher District Court of Karlsruhe (Court). In addition, Oppo filed a motion with the Court, requesting for a stay of the enforcement of the Mannheim injunction until the end of the appeal proceedings.

With the present order, the Court dismissed Oppo's motion. [2] (cited by lrbw.juris.de). At the time this order was issued, the (main) appeal proceedings had not been concluded yet.
 

B. Court's reasoning

Following settled case-law in Germany, the Court undertook a summary assessment of the decision of the Mannheim Court focusing on 'obvious errors'. [3] Under German law, a stay of the enforcement of a first-instance ruling can be ordered only exceptionally, when on basis of a summary review the court can assume that the ruling will likely be overturned in appeal. [4] Furthermore, the defendant is required to demonstrate that the enforcement of the decision would cause harm going beyond the 'regular' impact of an injunction. [5]

According to the Court, the above requirements were not fulfilled in the present case. [6]

The Court was not able to identify 'obvious errors' in the first-instance ruling. [7] On the one hand, the Court found that the Mannheim Court's interpretation of the scope of protection granted by the patent in suit (and, consequently, the finding of infringement) had no evident flaws. [8] On the other hand, the Court found no obvious mistakes in the finding of the Mannheim Court that Oppo could not invoke a so-called 'FRAND-defence' against Nokia's claim for injunctive relief, since Oppo had failed to sufficiently demonstrate willingness to obtain a FRAND-licence to Nokia's portfolio. [9]
 

Willingness

The Court disagreed with Oppo's contention that the Mannheim Court's assessment of willingness was erroneously 'one-sided'. [10] Oppo had argued that the Mannheim Court focused solely on Oppo's behaviour as a licensee in the negotiations, without considering that the SEP owner should be continuously prepared to grant a licence and move discussions forward as well. [10] The Court held that the Mannheim injunction followed the relevant legal standard established by German case-law, which recognises that the conduct duties of the SEP owner and the implementer are 'inter-related'. [11] The SEP owner is under a duty to allow a 'fundamentally willing' implementer to sign a FRAND license agreement. [12] Notwithstanding this, the implementer has an obligation to engage in negotiations, even when a license offer of the SEP owner is 'obviously' not FRAND-compliant. [11] The implementer's 'duty to react', which also includes a duty to raise any 'evident objections' against the offer 'at once', is exceptionally excluded only if the license offer is 'un-FRAND' to an extend that – from an objective viewpoint – it can be seen as an offer that is 'not seriously meant'; according to the Court, this is, however, not always already the case when just a single clause is obviously non-FRAND. [11] On the contrary, an overall assessment of all circumstances at hand is required. [11]

Furthermore, the Court did not follow Oppo's argument that the Mannheim Court evidently erred by disregarding that Nokia was 'unwilling' to take a cross-licence to Oppo's SEP portfolio. [13] German higher courts have not finally answered the question of whether, respectively how the fact that a cross-licence is or should be sought by the parties plays a role in the assessment of willingness. [14] A party seeking a licence must, however, demonstrate willingness to obtain a licence on FRAND-conditions in whatever form they actually take. [15] In the Court's eyes, this likely means that Oppo is not in a position to make its willingness to obtain a licence to Nokia's portfolio subject to the condition that Nokia accepts a cross-licence or is willing to sign such agreement. [15] What is more, the Court explained that – contrary to Oppo's view – the Mannheim Court had not ignored the fact that the parties had agreed to a cross-licence before; the terms of the former cross-licence between the parties were one of the factors used by the Mannheim Court for assessing the FRAND-conformity of certain counteroffers that Oppo had made to Nokia. [15]

The Court further doubted that the previous cross-license agreement between the parties had legal effect to the extent that it compelled the Mannheim Court to disregard Oppo's behaviour prior to the expiration of the licence in its assessment of willingness. [15] In any case, the Court saw no evident flaw in the decision of the Mannheim Court to take Oppo's overall conduct into account in this regard. [15]

Apart from the above, the Mannheim Court's decision to consider Oppo's reaction to Nokia's license offer as a factor relevant for the assessment of willingness was not obviously erroneous either. [16] In the view of the Court, it could well be argued that whether, when and how a user communicates 'constructive objections' against an offer of the patent owner can be seen as an indication of (lacking) willingness. [17]

The Court was also not convinced that Oppo had no duty to respond to Nokia due to (alleged) formal shortcomings of Nokia's offer. [17] Nokia had attached the draft licence agreement in question as an annex to a document containing an offer to engage in alternative dispute resolution with Oppo. While Oppo contested that an offer in this form was sufficient, the Mannheim Court found that it was 'specific' (and, thus, triggered a duty to react on Oppo's side). [17] The Court explained that a 'purely formal' standpoint – as the one taken by Oppo – was likely not decisive here. [17] What is more, an 'exchange of views' between the parties can rather be expected as a demonstration of 'willingness', irrespective of whether the patent owner shared the draft terms in a form that would enable the conclusion of the license agreement through sole acceptance of the terms by the implementer. [17]
 

Balance of interests

The Court further held that – in absence of an indication that the (main) appeal will be successful – Oppo's interest in avoiding the consequences attached to the enforcement of the Mannheim injunction could not override Nokia's interest in enforcing its rights. [18] The Court explained that, as a rule, claimant's interest to enforce a ruling regularly outweighs defendant's opposing interest to stay enforcement, unless the enforcement would cause severe, irreparable harm to the latter, which would exceed the 'normal' impact of an injunction and threaten its existence. [19] This principle applies to patent cases as well, including cases involving standard-essential patents. [20]

According to the Court, the enforcement of the first-instance ruling would cause no harm to Oppo going beyond the regular consequences of an injunction: A decline in sales or loss of trust towards customers are 'normal' effects of an injunction, which Oppo must accept. [21] The Court also noted that considering Oppo's share in the German market there was no risk that Oppo would lose a 'long-established and outstanding' market position in Germany. [22] What is more, looking at Oppo's sales abroad, the Court held that the loss of its share in the German market could not endanger Oppo's existence. [22] The general volatility of the smartphone market and the fact that Oppo had before managed to gain market shares within a few years indicated, on the contrary, that Oppo would be in a position to regain market shares in Germany in the short term, if the ruling of the Mannheim Court would, indeed, be overturned in appeal. [22]

Moreover, the Court disagreed with Oppo's contention that enforcement should be stayed, since Nokia's sole interest was to secure licensing income. [23] The fact that the claimant is a 'patent exploitation entity' could – according to the Court – play a role in weighing the parties' interest against each other, as the injunction would not protect the own position in the market (since the claimant does not manufacture compliant products itself); what is more, the claimant rather benefits when products implementing the protected invention remain available in the market, since claims for damages rise. [23] The Court noted, however, that even when an injunction is not directed at protecting own products against infringing competitors, enforcement can be of particular importance for existing licensees of the claimant: considering that licensing fees are a cost that impacts the price and, consequently, the competition in the (downstream) market, licensees have an interest that the patent owner prevents unlicensed competitors from entering or remaining in the market by means of a SEP injunction. [23]

Having said that, the Court pointed out that Nokia could not be considered as a (pure) 'patent exploitation entity': Nokia has indirectly commercial interests in the handset market, in which Oppo is also active, because licensed products are sold under the Nokia brand. [24]

Furthermore, the fact that Nokia justified the present lawsuit against Oppo – among other reasons – also by claiming that absent licensing income no research activities are possible, was not considered harmful by the Court. [25] The Court noted that relying on an injunction for stimulating an unwilling implementer to obtain a licence is no 'illegitimate objective', but a means endorsed by the law. [25] The Court also pointed out that the fact that the patent owner monetizes a 'patent pool' does not by itself suffice for setting aside SEP owner's interest to enforce an injunction. [25]
 

• [1] Nokia v Oppo, District Court of Mannheim, judgment dated 5 July 2022, Case No. 2 O 75/21.
• [2] Nokia v Oppo, Higher District Court of Karlsruhe, order 14 September 2022, Case No. 6 U 212/22
• [3] Ibid, paras. 6-8.
• [4] Ibid, paras. 7 et seq.
• [5] Ibid, para. 8.
• [6] Ibid, para. 9.
• [7] Ibid, paras. 11 et seqq.
• [8] Ibid, paras. 11-40.
• [9] Ibid, paras. 41 et seq.
• [10] Ibid, para. 43.
• [11] Ibid, para. 45.
• [12] Ibid, para. 44.
• [13] Ibid, para. 46.
• [14] Ibid, para. 47.
• [15] Ibid, para. 48.
• [16] Ibid, paras. 50 et seq.
• [17] Ibid, para. 50.
• [18] Ibid, para. 59.
• [19] Ibid, paras. 59 and 66.
• [20] Ibid, para. 66.
• [21] Ibid, paras. 66 et seqq.
• [22] Ibid, para. 67.
• [23] Ibid, para. 61.
• [24] Ibid, para. 62.
• [25] Ibid, para. 63.

Cases from Higher Regional Court - OLG Munich

Continental v Nokia

12 December 2019 - Case No. 6 U 5042/19

A. Facts

Nokia holds a number of patents declared essential to the practice of 3G and 4G wireless telecommuni- cations standards (Standard Essential Patents, or SEPs). Daimler is one of the world’s largest motor car manufacturers. Continental, a worldwide group of companies with headquarters in Germany, is a supplier of Daimler.

In March 2019, Nokia filed ten patent infringement actions against Daimler before the District Courts of Munich, Duesseldorf and Mannheim in Germany based on several of its German SEPs (German infringement proceedings). Following third-party notices issued by Daimler, two companies of the Continental group joined the German infringement proceedings as interveners (the German subsidiary Continental Automotive GmbH and the Hungarian subsidiary Continental Automotive Hungary Kft.).

On 10 May 2019, a further subsidiary of the Continental group based in the United States, Continental Automotive Systems Inc. (Continental US), brought an action against Nokia and others before the US District Court for the Northern District of California (US Court), accusing Nokia of antitrust violations.

On 12 June 2019, Continental US also filed a motion for an anti-suit injunction, asking the US Court to enjoin Nokia from prosecuting the German infringement proceedings (US motion for anti-suit injunction). The US Court gave Nokia the possibility to respond to the motion for an anti-suit injunction within a deadline expiring on 24 July 2019.

On 9 July 2019, Nokia filed a motion for a preliminary injunction before the District Court of Munich (District Court). Nokia requested the District Court to order Continental US to withdraw the US motion for an anti-suit injunction and to refrain from applying for an anti-suit injunction or similar measures in the future. In addition, Nokia requested an order against the German parent company of the Continental group (Continental Germany), enjoining -among other things- the latter to ensure that Continental US will withdraw the US motion for anti-suit injunction.

On 11 July 2019, the District Court granted Nokia’s request for a preliminary injunction against Continental US [575] .

On 30 July 2019, the District Court issued also an injunction against Continental Germany, ordering the latter to make sure that its affiliate will withdraw the US motion for anti-suit injunction [576] . Continental Germany appealed this decision.

On 3 September 2019, Continental US withdrew the US motion for anti-suit injunction. On 8 October 2019, however, Continental US filed a motion for a Temporary Restraining Order (TRO) against Nokia before the US Court, asking the court to enjoin Nokia from asserting its patents in Germany against companies of the Continental group and their clients. This motion was rejected.

With the present judgment dated 12 December 2019 [577] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2019-N- 33196?hl=true&AspxAutoDetectCookieSupport=1)., the Higher District Court of Munich (Appeal Court), dismissed the appeal of Continental Germany and confirmed the injunction granted by the District Court on 30 July 2019.

B. Court’s reasoning

The Appeal Court found that Nokia was entitled to an injunction against Continental Germany, in order to prevent a direct unlawful threat to its property rights.

Under German law, an anti-suit injunction or a TRO granted by the US Court would unlawfully infringe Nokia’s property rights: Nokia would be deprived of its right to enforce the exclusivity arising from its patents against Daimler in the pending German infringement proceedings [578] .

The threat to Nokia’s property right emerging from such measures is still urgent, although Continental US had withdrawn the US motion for anti-suit injunction in the meantime. In the Appeal Court’s eyes, the new motion for a TRO filed by Continental US against Nokia indicated that the former had not abandoned the respective strategy yet [579] .

The fact that Continental US – and not Continental Germany – had initiated both motions, did not exclude an injunction against the latter [580] . The Appeal Court confirmed the District Court’s view that Continental Germany was to be considered as ‘co-perpetrator’ of the motions filed by its affiliate in the US, since it had not provided any evidence to counter Nokia’s pleadings suggesting that Continental US acted with the knowledge/consent of its German parent company [581] .

Furthermore, the Appeal Court made clear that the ‘anti-anti-suit injunction’ granted by the District Court in first instance was legally admissible [582] . Continental Germany had, basically, argued that the District Court’s injunction should not have been granted in Germany, since it had the same effect as the US anti- suit injunction, namely depriving Continental US from asserting its rights in court proceedings in the US.

Insofar, the Appeal Court disagreed with the District Court, which had ruled that a German anti-anti-suit injunction was admissible, because it concerned only an auxiliary motion filed by Continental US (motion for an anti-suit injunction) and, thus, had no effect on the main proceedings initiated against Nokia in the US [583] . The Appeal Court held that, as a rule, it is not justified to prevent a party from pursuing even auxiliary motions by court order [584] .

The Appeal Court took, however, the view that the German anti-anti-suit injunction was admissible, since it was -as Nokia had argued- the ‘only effective means of defence’ against an US anti-suit injunction [585] . Moreover, in the present case, it was justified to allow Nokia’s interest to defend itself against an unlawful legal measure to prevail over the interest of Continental US to preserve its freedom to act [586] .

Furthermore, the fact that Nokia was, in principle, in the position to participate in the US proceedings for an anti-suit injunction did not speak against granting an anti-anti-suit injunction to Nokia in Germany. Reason for that was, according to the Appeal Court, that the implications of an anti-suit injunction on Nokia’s right to proceed with the German infringement proceedings would not have been a factor considered by the US Court, when deciding on the motion for an anti-suit injunction filed by Continental US [587] . Nokia, would, therefore, not be able to sufficiently defend its rights in the proceedings before the US Court.

Equally irrelevant for the present case was the fact that the US anti-suit injunction would most likely not be enforceable in Germany [587] . The Appeal Court pointed out that the penalties which Nokia would be required to pay in the US in case of non-compliance with an anti-suit injunction would, in fact, force Nokia to stop asserting its patents in the German infringement proceedings [588] .

In addition, the Appeal Court found that the ‘anti-anti-suit injunction’ granted by the District Court in Germany did not violate international law, since it did not have any direct impact on the jurisdiction of the US courts and, accordingly, did not question US sovereignty [589] .

Finally, the Appeal Court highlighted that the decision of the District Court did neither violate European law. European law was not even applicable here, since the case involved the infringement of German patent rights by a domestic entity [590] .

• [575] Nokia v Continental, District Court of Munich, Order dated 11 July 2019, Case-No. 21 O 3999/19.
• [576] Nokia v Continental, District Court of Munich, Order dated 30 July 2019, Case-No. 21 O 9512/19.
• [577] Nokia v Continental, Higher District Court of Munich, decision dated 12 December 2019, Case-No. 6 U 5042/19
• [578] Ibid, para. 55.
• [579] Ibid, para. 56.
• [580] Ibid, paras. 76 et seqq.
• [581] Ibid, paras. 81 et seqq.
• [582] Ibid, paras. 58 et seqq.
• [583] Ibid, paras. 59 et seqq.
• [584]  Ibid, paras. 59 et seqq.
• [585] Ibid, paras. 69 and 72.
• [586] Ibid, para. 69.
• [587]  Ibid, para. 70.
• [588] Ibid, para. 71.
• [589] Ibid, para. 73.
• [590] Ibid, para. 74.

Cases from Regional Court - LG Düsseldorf

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, [591] 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). [592]
       
   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. [593] 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. [594] 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. [595]
       
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. [596] 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. [597]

• [591]  Case No. 4a O 93/14, para. 90-94
• [592]  Ibid, para. 96-98, 125
• [593]  Ibid, para. 98-101
• [594]  Ibid, para. 14, 103-109
• [595]  Ibid, para. 103-111
• [596]  Ibid, para. 37-40
• [597]  Ibid, 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, [598] 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). [599]
   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. [600] 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. [601] 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. [602]
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. [603] 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. [604]

• [598] Case No. 4a O 93/14, para. 90-94
• [599] Ibid, para. 96-98, 125
• [600] Ibid, para. 98-101
• [601] Ibid, para. 14, 103-109
• [602] Ibid, para. 103-111
• [603] Ibid, para. 37-40
• [604] Ibid, 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, 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. 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. [2] The court declared the Huawei rules applicable to claims for the recall of products. [3] 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. [4] 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. [5] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [6] 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. [7] 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. [8] 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. [9] 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. [10] 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. Ibid, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Ibid, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Ibid, para. 249-255. 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. [12] 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. [13] 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. [14]
   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. [15] Whether the Intervener satisfied the ECJ criteria was left undecided. [16] 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. [17] 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. [18] 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. [19] 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. [20] 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. [21] 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. [22] 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. [23]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [24] 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. [25] 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. [26]

• [1] 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.
• [2] Case No. 4a O 73/14, para. 184
• [3] Ibid, para. 187
• [4] Ibid, para. 195 et seq.
• [5] Ibid, para. 208-210
• [6] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [7] Case No. 4a O 73/14, para. 193
• [8] Ibid, para. 270 et seq.
• [9] Ibid, para. 222 et seq.
• [10] CIbid, para. 225 et seq.
• [11] Ibid, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Ibid, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Ibid, para. 249-255.
• [12] Ibid, 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.
• [13] Ibid, para. 256 et seq.
• [14] Ibid, para. 279 et seq.
• [15] Ibid, para. 214-220
• [16] Ibid, para. 214-220; 278
• [17] Ibid, para. 266
• [18] Ibid, para. 185 et seq.; 262 et seq.
• [19] Ibid, para. 264
• [20] Ibid, para. 291 et seq.
• [21] Ibid, para. 278
• [22] Ibid, para. 267 et seq.; 299 et seq.
• [23] Ibid, para. 304
• [24] Ibid, para. 189
• [25] Ibid, para. 309-313
• [26] Ibid, 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. [1]
   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. [2] 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. [3] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [4]
   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. [4]
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. [5] 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. [6]
   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. [7] 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. Cf. for details LG Düsseldorf, 19 January 2016 - Case No. Ibid, para. I, 4, b, bb

• [1] Case No. 4b O 120/14, para. VII, 6, a
• [2] Ibid, para. VII, 6, b, aa, bb
• [3] Ibid, para. VII, 6, b, dd
• [4] Ibid, para. VII, 6, b, ee
• [5] Ibid, para. VII, 4
• [6] Ibid, para. VII, 5
• [7] Ibid, para. I, 4, b, aa
• [8] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. Ibid, 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, 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. 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. [606] The court declared the Huawei rules applicable to claims for the recall of products. [607]
      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. [608] 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. [609] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [610]
      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. [611]
      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. [612] 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. [613]
      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. [614] 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. Ibid, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Ibid, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Ibid, para. 249-255. 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. [616]
      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. [617]
      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. [618]
   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. [619] Whether the Intervener satisfied the ECJ criteria was left undecided. [620]
      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. [621] 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. [622] 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. [623]
      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. [624] 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. [625]
      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. [626] 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. [627]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [628]
   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. [629]
   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. [630]

• [605] 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.
• [606] Ibid, para. 184
• [607] Ibid, para. 187
• [608] Ibid, para. 195 et seq.
• [609] Ibid, para. 208-210
• [610] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [611] Case No. 4a O 73/14, para. 193
• [612] Ibid, para. 270 et seq.
• [613] Ibid, para. 222 et seq.
• [614] Ibid, para. 225 et seq.
• [615] Ibid, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Ibid, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Ibid, para. 249-255.
• [616] Ibid, 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.
• [617] Ibid, para. 256 et seq.
• [618] Ibid, para. 279 et seq.
• [619] Ibid, para. 214-220
• [620] Ibid, para. 214-220; 278
• [621] Ibid, para. 266
• [622] Ibid, para. 185 et seq.; 262 et seq.
• [623] Ibid, para. 264.
• [624] Ibid, para. 291 et seq.
• [625] Ibid, para. 278
• [626] Ibid, para. 267 et seq.; 299 et seq.
• [627] Ibid, para. 304
• [628] Ibid, para. 189
• [629] Ibid, para. 309-313
• [630] Ibid, para. 317 et seq.

France Brevets v HTC

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

A. Facts

The Claimant is a patent assertion entity established by the French State [631] . 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) [632] . 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 [633] . The LL standard enables applications of the so-called “Near field Communication” (NFC) technology to run on smartphones over the phone’s SIM-card [634] . NFC-applications can alternatively be implemented on smartphones also by a so-called “Smartcard”, or so-called “embedded secure elements” [635] .

The Defendant is the German subsidiary of an international manufacturer of smartphones that incorporate a so-called “NFC-controller” implementing the LL standard [636] The Defendant promotes the offering and sale of smartphones manufactured by its parent company in Germany [637] .

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 [638] . The Claimant also sought for a declaratory judgment on the Defendant’s liability for damages on the merits [638] .

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) [639] . 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 [640] .

The Court dismissed the Defendant’s request to order a stay of the proceedings [641] 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) [642] , before the final decision of the CJEU was delivered on 16th July 2015 [643] .

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 [644] .

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 [645] .

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 [646] . In the Court’s view, not every SEP confers market power relevant from an antitrust perspective to its holder [646] . 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 [646] .

Further, the Court held that ownership of a SEP does not give rise to the presumption that market power exists [647] . 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 [647] . Insofar, the party asserting the existence of market power must plead and establish the relevant facts in trial [647] .

With respect to IPRs, the relevant market from an antitrust perspective is not the licensing market, but the downstream product market [648] . Looking at SEPs, relevant is the market in which products implement-ing the respective standard are offered [649] . 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 [650] .

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 [651] .

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 [652] . 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 [652] .

• [631] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 18
• [632] Ibid, paras. 19, 20, 24 and 26
• [633] Ibid, para. 22
• [634] Ibid, para. 212
• [635] Ibid, para. 213
• [636] Ibid, para. 22.
• [637] Ibid, paras. 151 et seq
• [638] Ibid, para. 3
• [639] Ibid, para. 46
• [640] Ibid, para. 38
• [641] Ibid, para. 219
• [642] Opinion of Advocate General Wathelet delivered on 20 November 2014, ECLI:EU:C:2014:2391
• [643] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 197 et seqq
• [644] Ibid, para. 61
• [645] Ibid, para. 197
• [646] Ibid, para. 199
• [647] Ibid, para. 201
• [648] Ibid, para. 204
• [649] Ibid, para. 205
• [650] Ibid, para. 206
• [651] Ibid, para. 208
• [652] Ibid, para. 217

4c O 81/17

11 July 2018 - Case No.

A. Facts

The Claimant holds a patent essential to the data communication standards ADSL2+ and VDSL2 (Standard Essential Patent or SEP) District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.. The previous holder of the patent in question had declared towards the standardization organisation International Telecommunication Union (ITU) its willingness to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [654] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [655] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [655] .

In January 2016, the Claimant brought an action against the Defendant before the District Court (Landgericht) of Düsseldorf (Court) requesting for a declaratory judgement recognizing Defendant’s liability for damages arising from the infringement of its SEP as well as the provision of information and the rendering of accounts (liability proceedings) [656] . During the course of these proceedings, the Claimant made two offers for a licensing agreement to the Defendant. The Defendant made a counter-offer to the Claimant and provided security for the use of the SEP [657] . The parties failed to reach an agreement.

In June 2016, the Defendant filed an action for a declaratory judgement against the Claimant before the Dublin High Court in Ireland, requesting the High Court to declare that both Claimant’s offers were not FRAND and that Defendant’s counter-offer was FRAND [658] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [658] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [659] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [657] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [660] .

B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [661] , it found that the Claimant cannot enforce its patent rights for the time being [662] , since it failed to fully comply with the obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTEHuaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13. (Huawei obligations or framework) with respect to dominant undertakings in terms of Article 102 of the Treaty for the Functioning of the EU (TFEU) [660] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [664] .

In the Court’s eyes, the relevant market for assessing dominance with regards to SEPs is, as a rule, the (downstream) market for products or services implementing the standard, to which the SEP refers [665] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [666] . Since the Court held that, in the present case, none of the existing technological alternatives to the standards ADSL2+ and VDSL2 (e.g. HFC networks, LTE, HDSL, SHDSL, ADSL, SDSL, VDSL, fibre optic networks, radio relay technology or internet services via satellite) offers an equivalent solution to users [667] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [668] .

Regarding to the subsequent question of whether the Claimant has a dominant position in the above market, the Court first made clear that ownership of a SEP does not per se establish such condition [669] . The fact that a patent is essential to a standard does neither give rise to the (rebuttable) presumption that the SEP holder can distort competition in downstream markets, because products complying with the standard need to use the SEP [669] . Since a high number of patents is usually declared as standard essential, not every SEP can actually (significantly) affect the competitiveness of products or services in downstream markets; the effect of each SEP on a downstream market has, therefore, to be established on a case-by-case basis by taking into account the circumstances of each individual case [669] .

The Court explained that a dominant market position is given, when the use of the SEP is required for entering the market, particularly for securing the general technical interoperability and compatibility of products or services under a standard [669] . The same is true, if the patent user could not market competitive products or services without a licence (for instance, because only a niche market exists for non-compliant products) [669] . No market dominance exists, however, when the SEP covers a technology which is only of little importance to the majority of the buyers in the relevant market [669] .

According to the Court, the latter was not the case here; on the contrary, the Defendant cannot offer competitive products or services in the market for DSL internet connections, without using the SEP in suit [670] .

2. Huawei framework

In the Court’s view, the parties to SEP licensing negotiations need to fulfill the mutual conduct obligations under the Huawei framework step by step and one after another [671] . The Court did not see any flaws in the parties’ conduct with respect to the first two steps of the Huawei framework (SEP holder’s notification of infringement and SEP user’s declaration of willingness to obtain a licence), held, however, that the Claimant did not meet its consequent obligation to make a FRAND licensing offer to the Defendant [672] .

Notification of infringement

The Court found that the Claimant had fulfilled its obligation to notify the Defendant about the infringing use of the SEP in suit prior to the commencement of the injunction proceedings [673] .

First, the Court pointed out that a respective notification (as well as a later licensing offer) can be made by the SEP holder itself, or by any other affiliated company within the same group of companies, especially by the patent holder’s parent company [674] . On the other hand, it is not required that the infringement notification is addressed to the company that will later be party to the infringement proceedings; in general, it is sufficient to address the notification to the parent company within a group of companies [674] .

In terms of content, the notification of infringement must name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [675] . A detailed (technical and/or legal) explanation of the infringement (particularly an analysis of how the individual features of the patent claims are infringed) is not required; the addressee needs just to be put in the position to assess the infringement allegations, if necessary by seeking expert advice [675] . In this context, the Court disagreed with the District Court of Mannheim which had requested the SEP holder to inform the user about the essentiality of the patent to the standard and/or attach claim charts to the notification of infringement [675] .

In terms of timeliness, the Court took the view that the notification of infringement can be made alongside with SEP holder’s offer for a FRAND licence to the user (prior to the initiation of court proceedings) [676] . In this case, the second step under the Huawei framework will be skipped (that is the SEP user’s declaration of its willingness to obtain a licence). According to the Court, this fact does not, however, have an impact on the SEP holder’s position: If the SEP user is willing to enter into a licence, this approach would safe time (although the SEP user should be granted more time than usual to assess and react to both the notification of infringement and the FRAND offer) [676] . If, on the other hand, the SEP user is unwilling to obtain a FRAND licence, then the SEP holder will just have made a licensing offer absent a respective obligation under the Huawei framework [676] .

In the present case, the fact that the Claimant did not make a separate notification of infringement prior to the initiation of the injunction proceedings, was not considered problematic. The Court pointed out that the Defendant was fully informed about the infringement allegation by the action for damages raised by the Claimant long before the injunction proceedings, so that a separate notification was not required [677] .

Willingness to obtain a FRAND licence

The Court further found that the Defendant had fulfilled its Huawei obligation to express its willingness to obtain a FRAND licence [678] .

In terms of content, no high demands should be placed on the SEP user’s respective declaration; it is not subject to formal requirements and can be of a general nature, as long as the willingness to obtain a licence is clearly stated [679] . Given the circumstances of the specific case, even an implicit behaviour can suffice [679] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [680] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [680] . If the SEP holder’s notification of infringement contains only the minimum required information, a reaction within a period of five or even three months at the most could be expected [680] . In case that the infringement notification contains information going beyond the required minimum, an even quicker reaction could be required from the SEP user under certain circumstances [680] .

In the present case, the Court held that the Defendant has implicitly declared its willingness to enter into a FRAND licence with the Claimant at the latest at the point in time, in which the injunction proceedings were initiated [681] . At that time, the Defendant had already made a counter-offer for a FRAND licence to the Claimant and had also provided security for the use of Claimant’s patents [682] .

In this context, the Court noted that neither the fact that the Defendant contested Claimant’s claims in the parallel liability proceedings not the fact that it raised an action for declaratory judgement against the Claimant before the Dublin High Court can support the argument that the Defendant has deviated from its previous declaration of willingness [683] .

SEP holder’s licensing offer

The Court held that the offer which the Claimant made to the Defendant in course of the injunction proceedings was not FRAND [684] . Since the Claimant expressly relied only on this offer to establish its compliance with the Huawei framework, the Court did not assess the FRAND conformity of the two previous offers of the Claimant to the Defendant [657] .

In terms of timeliness, the Court stressed out that the SEP holder must make a FRAND licensing offer to the user before the initiation of infringement proceedings [685] . Under German procedural law, proceedings are initiated after the claimant has made the required advance payment on costs, even if the statement of claims has not been served to the defendant, yet [686] .

The Court did not rule out that SEP holder’s failure to fulfil its Huawei obligations prior to the commencement of infringement proceedings can be remedied during the course of the proceedings [687] . Depending on the circumstances of each case, the SEP holder should be given the opportunity – within the limits of procedural deadlines – to react to (justified) objections of the SEP user and eventually modify its offer [687] . Denying the SEP holder this opportunity without exceptions would be contrary to the principle of procedural economy; the patent holder would be forced to withdraw its pending action, make a modified licensing offer to the patent user and, subsequently, sue the latter again [687] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [688] . Notwithstanding the above, the Court made, however, clear that the possibility of remedying a flawed licensing offer is subject to narrow limits; the CJEU intended to relieve licensing negotiations between SEP holder and SEP user from the burden imposed on parties by ongoing infringement proceedings, and particularly the potential undue pressure to enter into a licensing agreement which such proceedings can put on the SEP user [689] .

Against this background, the Court expressed doubts that the Claimant’s licensing offer, which was made in the course of the pending injunction proceedings could be considered as timely [659] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [690] .

The Court did not deem necessary to decide whether the FRAND conformity of the SEP holder’s offer must be fully assessed in infringement proceedings, or whether only a summary assessment of its compatibility with FRAND suffices [691] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [692] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [693] .

First, the terms did not adequately consider the effects of patent exhaustion [694] . As a rule, FRAND requires licensing offers to contain respective provisions [695] . The clause contained in Claimant’s offer, establishing the possibility of a reduction of the royalties owed by the Defendant in case of the exhaustion of licensed patents, is not fair, because it puts the burden of proof regarding to the amount of the reasonable reduction of the royalties on the Defendant’s shoulders [696] .

Second, the clause, according to which Defendant’s payment obligations regarding to past uses of the SEP in suit should be finally settled without exceptions and/or the possibility to claim reimbursement, was also considered not fair [697] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [698] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [699] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [700] . In the present case, however, excluding a significant part of the Defendant’s overall business, namely the wholesale business, from the licensing offer, hinders a fair market access [700] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [701] .

To begin with, the Court stressed out that FRAND refers to a range of acceptable royalty rates: As a rule, there is not only a single FRAND-compliant royalty rate [691] . Furthermore, as far as a corresponding commercial/industry practice exists, offers for worldwide portfolio licences are, in general, in line with the Huawei framework, unless the circumstances of the individual case require a different approach (for instance a limitation of the geographical scope of the licence, in case that the user is active only in a single market) [702] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [703] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [703] . In any case, SEP holders are obliged to specify the royalty calculation in a manner that allows the user to assess whether the offered conditions are non-discriminatory or not. The respective information needs to be shared along with the licensing offer; only when the SEP user has obtained this information a licensing offer triggering an obligation of the latter to react is given [704] .

In the Court’s view, presenting all existing essential licensing agreements concluded with third parties, covering the SEPs in suit or a patent portfolio including said SEPs (comparable agreements), has priority over other means for fulfilling this obligation [705] . In addition, SEP holders have to produce also court decisions rendered on the FRAND-conformity of the rates agreed upon in the comparable agreements, if such decisions exist [706] .

Whether presenting comparable agreements (and relevant case law) suffices for establishing the non-discriminatory character of the offered royalty rates depends on the number and the scope of the available agreementsI [707] . In case that no or not enough comparable agreements exist, SEP holders must (additionally) present decisions referring to the validity and/or the infringement of the patents in question and agreements concluded between other parties in the same or a comparable technical field, which they are aware of [708] . If the SEP in suit is part of a patent portfolio, SEP holders must also substantiate the content of the portfolio and its impact on the offered royalty rates [709] .

Having said that, the Court pointed out that an unequal treatment resulting in a discrimination in antitrust terms is not only at hand, when a dominant patent holder grants preferential terms to specific licensees, but also when it chooses to enforce its exclusion rights under a SEP in a selective manner [710] . The latter is the case, when the SEP holder brings infringement actions only against certain competitors and, at the same time, allows other competitors to use its patent(s) without a licence [710] . However, such a conduct is discriminatory only if, depending on the overall circumstances of each case (for instance, the extend of the infringing use and the legal remedies available in the country, in which claims need to be asserted), it would have been possible for the SEP holder with reasonable efforts to enforce its patent rights against other infringers (which it was or should have been aware of) [710] . In favour of an equal treatment of competitors, the level of action which must be taken by the SEP holder in this respect should not be defined narrowly [710] . However, it has to be taken into account, that – especially in the early stages of the implementation of a standard – the SEP holder will usually not have the means required to enforce its rights against a large number of infringers; in this case, the choice to enforce its rights only against infringers with market strength first appears reasonable [711] .

Based on the above considerations, the Court ruled that the Claimant’s choice to sue only the Defendant and its two main competitors, without asserting the SEP in suit against the rest of their competitors, respectively against their suppliers, was discriminatory [712] . The Claimant should have already, at least, requested the companies, against which no action was filed, to obtain a licence, particularly since the remaining period of validity of the SEP in suit is limited [713] . Furthermore, the Court found that the Claimant’s refusal to make a licensing offer to the Intervener, although the latter had requested for a licence, was also discriminatory; in the Court’s view, the Claimant failed to provide an explanation justifying this choice [714] .

Since the Claimant’s offer was found to be non-compliant with FRAND, the Court refrained from ruling on the conformity of Defendant’s counter-offer and the security provided with the Huawei framework [715] .

C. Other issues

The Court ruled that in accordance with Article 30 para. 3 of the German Patent Law (PatG) the registration in the patent register establishes the presumption of ownership, allowing the entity which is registered as patent holder to assert the rights arising from the patent before court [716] .

• [653] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
• [654] Ibid, para. 13.
• [655] Ibid, para. 12.
• [656] Ibid, paras. 14 and 211.
• [657] Ibid, para. 15.
• [658] Ibid, para. 16.
• [659] Ibid, para. 236.
• [660] Ibid, paras. 140 and 313 et seqq.
• [661] Ibid, paras. 114 et seqq.
• [662] Ibid, paras. 60 and 140.
• [663] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [664] Ibid, para. 142.
• [665] Ibid, para. 148.
• [666] Ibid, paras. 153 and 146.
• [667] Ibid, paras. 159 - 181.
• [668] Ibid, para. 158.
• [669] Ibid, para. 147.
• [670] Ibid, paras. 183 et seqq.
• [671] Ibid, para. 191.
• [672] Ibid, para. 188.
• [673] Ibid, paras. 195 et seqq.
• [674] Ibid, para. 199.
• [675] Ibid, para. 198.
• [676] Ibid, para. 200.
• [677] Ibid, para. 203.
• [678] Ibid, para. 205.
• [679] Ibid, para. 208.
• [680] Ibid, para. 207.
• [681] Ibid, para. 210.
• [682] Ibid, para. 212.
• [683] Ibid, paras. 215 et seq.
• [684] Ibid, para. 220.
• [685] Ibid, paras. 222 et seqq.
• [686] Ibid, para. 225.
• [687] Ibid, para. 233.
• [688] Ibid, para. 228.
• [689] Ibid, para. 230.
• [690] Ibid, para. 237.
• [691] Ibid. para. 241.
• [692] Ibid, para. 242.
• [693] Ibid, paras. 283 et seqq.
• [694] Ibid, para. 285.
• [695] Ibid, para. 288.
• [696] Ibid, paras. 292 et seq.
• [697] Ibid, paras. 298 et seqq.
• [698] Ibid, para. 301.
• [699] Ibid, para. 306.
• [700] Ibid, para. 311.
• [701] Ibid, para. 271.
• [702] Ibid, para. 250.
• [703] Ibid, para. 248.
• [704] Ibid, para. 267.
• [705] Ibid, paras. 256 and 259 et seq.
• [706] Ibid, para. 262.
• [707] bid, paras. 258 and 264.
• [708] Ibid, paras. 263 and 265.
• [709] Ibid, para. 265.
• [710] Ibid, para. 273.
• [711] Ibid, para. 274.
• [712] Ibid, para. 276.
• [713] Ibid, para. 277.
• [714] Ibid, para. 281.
• [715] Ibid, para. 315.
• [716] Ibid, paras. 75 et seq.

Fraunhofer-Gesellschaft (MPEG-LA) v ZTE

9 November 2018 - Case No. 4a O 15/17

A. Facts

The Claimant, Fraunhofer-Gesellschaft zur Förderung der Angewandten Forschung, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent of SEP) [717] . The patent holder committed towards the relevant standardization body to make this patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant contributed the SEP in question to a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [718] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones manufactured by its parent company (parent company) which practise the AVC/H.264 standard in Germany [719] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [720] . It has signed licensing agreements with approx. 1,400 implementers [720] .

By e-mail dated 8 September 2011, MPEG LA sent a copy of its standard licensing agreement to the Defendant’s parent company and informed the latter that its “mobile handset and tablet products” infringe patents included in its “AVC patent portfolio” (without indicating, however, either the concrete patent numbers or the specific infringing products) [721] .

On 15 September 2011, the parent company asked MPEG LA to send any relevant documents by mail to its IPR Manager [722] . A copy of MPEG LA’s standard licensing agreement reached the parent company in late September 2011 [723] .

In 2012, the parent company acquired patents included in the MPEG LA pool [718] .

Since MPEG-LA and the parent company could not reach an agreement on a licence covering the MPEG LA pool [724] , the Claimant brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [725] .

During the proceedings, the Defendant declared its willingness to obtain a licence for the patent in suit and other SEPs of the Claimant referring to the AVC/H.264 standard [726] . Moreover, the Defendant sent to MPEG LA two signed copies of MPEG LA’s standard licensing agreement, along with a statement of accounts of its past sales and a bank guarantee [727] . MPEG LA did not countersign this agreement. It insisted, instead, on a licence that would cover all companies belonging to the same group as the Defendant [728] .

With the present judgment, the Court granted Claimant’s requests.

B. Court’s reasoning

The Court held that the mobile phones sold by the Defendant in Germany infringe Claimant’s SEP in suit [729] . It also found that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [730] (Huawei obligations or framework) with respect to dominant undertakings [731] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [732] .

The Court defined the relevant market for the assessment of dominance as the market for licences for any given patent [733] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [733] .

The Court made, however, clear that ownership of a SEP does not per se establish market dominance [734] . A dominant market position is given, when the use of the SEP is required for entering the market [734] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [734] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no “realistic” alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [735] .

2. Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [736] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [737] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [738] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [739] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [740] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement [741] . The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [742] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the nevertheless existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [743] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [744] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [745] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counter-offer to the Claimant. Since an adequate counter-offer was missing, the Court did not take up the question whether the bank guarantee provided by the Claimant to MPEG LA constitutes an adequate security in terms of the Huawei framework [746] .

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the e-mail sent by MPEG LA to the parent company on 8 September 2011 [747] .

The fact that this e-mail was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries con­cerned [748] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [748] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [749] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant [750] . The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [751] . In addition, the Defendant’s parent company was also aware of MPEG LA’s capacity to act on behalf of the Claimant, since it joined the MPEG LA pool as a patent holder in 2012 [752] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [753] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [754] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [754] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [754] . The respective test is, however, subject to strict conditions [754] .

Based on the above considerations, the Court found that MPEG LA’s e-mail to the parent company dated 8 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [755] . The overall circumstances of the case (especially the fact that the parent company acquired patents included in the MPEG LA pool in 2012 and had also previously been in contact with MPEG LA regarding a standard licensing agreement) [756] , give rise to the assumption that the parent company had already been aware of the MPEG LA pool and the fact that AVC/H.264-compliant products need to be licensed [757] .

Willingness to obtain a FRAND-licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the e-mail sent to MPEG LA on 15 September 2011 [758] .

In the eyes of the Court, this e-mail indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard. This is sufficient under the Huawei framework [759] . The implementer is not required to refer to a specific licensing agreement [759] .

SEP holder’s licensing offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [760] .

The fact that the offer was addressed to the parent company and not to the Defendant was not relevant, since the parties were discussing about a licensing agreement on group level and the parent company had itself requested to receive the draft agreement [761] .

Furthermore, the fact that the draft agreement sent to the parent company did not directly provide for the licensing of all subsidiaries (including the Defendant) was also not considered as harmful [762] . Insofar, the Court held that under the Huawei framework it is, as a rule, acceptable that the patent holder enters into licensing negotiations only with the parent company within a group of companies [763] . Whether subsidiaries can (or should) also be licensed, will be the object of these negotiations [764] . An exception would apply only then, when it is made clear already at the beginning of the licensing negotiations that the offer made to the parent company cannot include its subsidiaries [765] . This was, however, not the case here, since the standard licensing agreement sent to the parent company indicates MPEG LA’s willingness to grant licences also to the subsidiaries of the former [766] .

Besides that, the Court did not consider the fact that the standard licensing agreement sent to the parent company did not cover the sale of licensed products to wholesalers and retailers (but regarded only sales to end users) to be in conflict with the Huawei framework, although the Defendant was engaged also in this business [767] . According to the Court, sales to wholesalers and retailers would be covered by the effects of patent exhaustion, even without an express provision in a potential licensing agreement [768] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company does not contain detailed explanation of the way the royalties were calculated [769] . In the Court’s view, the respective explanation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [770] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [770] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [770] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [771] .

Against this background, the Court did not consider it to be harmful that the standard licensing agreement sent to the parent company by MPEG LA did not include a detailed explanation of the royalty calculation in the above sense [772] . On the one hand, the parent company was aware that this (standard) agreement had been accepted in the market by a great number of licensees [772] . On the other hand, the parent company was also adequately aware of the way the offered royalties were calculated, since it held patents included in the MPEG LA pool itself [773] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content.

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [774] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [774] . The Court made clear that in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [774] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [774] .

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases; an unequal treatment is allowed, as long as it is objectively justified [775] . Limitations in this context may especially occur, when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive only when it uses the patent’s teachings [775] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [776] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [776] .

Looking at the standard licensing agreement sent to the parent company, the Court observed that the fact the MPEG LA sought for a licence covering all companies within the group, to which the Defendant belonged, was not violating FRAND principles [777] . In the electronics and mobile communications industries, licences covering a group of companies are in line with the industry practice [778] . Patent holder have a special interest in concluding such licences particularly in cases, in which – as in the present case – the parent company manufactures products which are sold worldwide by its subsidiaries. This is because licences at group level makes sure that patent holders can enforce their rights effectively, without having to distinguish between licenced and unlicenced products within a group of companies [779] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are appropriate under the Huawei framework [780] . An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [781] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [781] .

Implementer’s counter-offer

The Court found that the Defendant failed to make a FRAND counter-offer [782] .

Sending signed copies of MPEG LA’s standard licensing agreement back to MPEG LA can be regarded as a counter-offer [783] . The fact, however, that this offer concerned a licence limited to the Defendant and, thus, not covering the parent company (and all further companies belonging to the same group) was not FRAND conform [784] . The Court accepted that licences at group level mirror the industry practice in the field in question; accordingly, no objections can be raised when a patent holder contributing its patents to a pool is willing to grant only licences covering all group companies [785] .

Since the counter-offer was not FRAND in terms of content, the Court did not have to decide, whether it was made in due time, or not [786] .

• [717] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, para. 56.
• [718] Ibid, para. 58
• [719] Ibid, para. 57
• [720] Ibid, para. 59
• [721] Ibid, paras. 61 et seqq. and 340
• [722] Ibid, para. 65
• [723] Ibid, para. 66
• [724] Ibid, para. 73
• [725] Ibid, para. 42
• [726] bid, para. 74
• [727] Ibid, paras. 75 et seq
• [728] Ibid, para. 75
• [729] Ibid, paras. 127 – 254
• [730] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13
• [731] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, Ibid, para. 280
• [732] Ibid, para. 283 and paras. 291 et seqq
• [733] Ibid, para. 286
• [734] Ibid, para. 287
• [735] Ibid, paras. 291 et seqq
• [736] Ibid, para. 296
• [737] Ibid, para. 300
• [738] Ibid, para. 302
• [739] Ibid, para. 308
• [740] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06
• [741] Ibid, para. 305
• [742] Ibid, paras. 306 et seqq
• [743] Ibid, para. 310
• [744] Ibid, para. 311
• [745] Ibid, para. 312
• [746] Ibid, para. 421
• [747] Ibid, para. 314
• [748] Ibid, para. 320
• [749] Ibid, para. 318
• [750] Ibid, para. 329
• [751] Ibid, paras. 336 et seq
• [752] Ibid, para. 338
• [753] Ibid, para. 198
• [754] Ibid, para. 315
• [755] Ibid, paras. 340 et seq
• [756] Ibid, paras. 342 et seqq
• [757] Ibid, para. 344
• [758] Ibid, para. 346
• [759] Ibid, para. 348
• [760] Ibid, para. 352
• [761] Ibid, para. 367
• [762] Ibid, para. 369
• [763] Ibid, para. 370
• [764] Ibid, para. 378
• [765] Ibid, para. 371
• [766] Ibid, para. 374
• [767] Ibid, para. 376
• [768] Ibid, para. 377
• [769] Ibid, para. 380
• [770] Ibid, para. 381
• [771] Ibid, para. 386
• [772] Ibid, para. 382
• [773] Ibid, para. 387
• [774] Ibid, para. 391
• [775] Ibid, para. 392
• [776] Ibid, para. 393
• [777] Ibid, para. 397
• [778] Ibid, para. 398
• [779] Ibid, para. 399
• [780] Ibid, para. 402
• [781] Ibid, para. 404
• [782] Ibid, para. 410
• [783] Ibid, para. 413
• [784] Ibid, para. 416
• [785] Ibid, para. 417
• [786] Ibid, para. 411

Tagivan (MPEG-LA) v Huawei

15 November 2018 - Case No. 4a O 17/17

A. Facts

The Claimant, Tagivan II LLC, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent, or SEP). The patent in question is subject to a FRAND commitment (FRAND stands for Fair, Reasonable and Non-Discriminatory terms and conditions) made towards the relevant standardisation body. It was included into a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [787] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones in Germany that practise the AVC/H.264 standard [788] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [789] . Since 2004, MPEG-LA has signed approx. 2,000 agreements with implementers [790] , 1,400 of which are still in force [789] .

In 2009, MPEG LA and the Defendant’s parent company (parent company) started discussions about a potential licence covering other standards, especially the MPEG-2 standard. On 6 September 2011, MPEG LA informed the parent company about the possibility to obtain a licence also regarding the AVC/H.264 standard, by sending PDF-copies of its standard licensing agreement to the parent company via email [791] . On 15 September 2011, the parent company suggested to arrange a call on this issue [792] . In February 2012, MPEG LA sent the pool’s standard licensing agreement for the AVC/H.264 standard to the parent company also by mail [793] .

In November 2013, the discussions between MPEG LA and the parent company ended without success [794] . The parties resumed negotiations in July 2016; again, no agreement was reached [794] .

The Claimant then brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [795] .

In November 2017, during the course of the present proceedings, the Defendant made a counteroffer to the Claimant for a licence, which – in contrast to MPEG LA’s standard licensing agreement – was limited to the Claimant’s patent portfolio and established different royalty rates for different regions, in which the Defendant sold products [796] .

In March and September 2018 (again during the proceedings), the Defendant provided bank guarantees to the Claimant covering past and future sales of (allegedly) infringing products. The security amounts were calculated based on the Defendant’s counteroffer dated November 2017 [797] . Furthermore, the Defendant made a second counteroffer to the Claimant shortly after the last oral hearing before the Court [798] .

With the present judgment, the Court granted Claimant’s requests.

B. Court’s reasoning

The Court found that the patent in suit was valid [799] , standard essential [800] and infringed by the products sold by the Defendant in Germany [801] . Furthermore, the Court held that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [802] (Huawei obligations or framework) with respect to dominant undertakings [803] .

Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [804] .

The Court defined the relevant market for the assessment of dominance as the market, in which licences for any given patent are offered [805] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [805] .

The Court made clear that ownership of a SEP does not per se establish market dominance [806] . A dominant market position is given, when the use of the SEP is required for entering the market [807] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [808] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no ‘realistic’ alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [809] .

Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [810] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [811] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [812] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [813] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [814] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement. The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [815] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the, nevertheless, existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [816] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [816] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [817] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written FRAND licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counteroffer to the Claimant. Since an adequate counteroffer was missing, the Court did not take up the question whether the bank guarantees provided by the Defendant constitute an adequate security in terms of the Huawei framework.

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the email sent by MPEG LA to the parent company on 6 September 2011 [818] .

The fact that this email was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries concerned [819] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [820] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [821] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant. The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [822] . In addition, the Defendant’s parent company was most likely aware of MPEG LA’s capacity to act on behalf of the Claimant, since it had entered into direct negotiation with MPEG LA already in 2009, that is almost two years prior to the notification of infringement [823] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the infringed patent (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [824] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [824] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [824] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [824] . The respective test is, however, subject to strict conditions [824] .

Based on the above considerations, the Court found that MPEG LA’s email to the parent company dated 6 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [825] . The overall circumstances of the case (especially the fact that the parent company had been in negotiations with MPEG LA already since 2009 and, therefore, should have been aware that MPEG LA has granted licences for the AVC/H.264 standard to the implementers mentioned at its website), give rise to the assumption that the parent company had been conscious of the fact that AVC/H.264-compliant products need to be licensed [826] .

Willingness to obtain a licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the email sent to MPEG LA on 15 September 2011 [827] .

In the eyes of the Court, this email indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard, especially if it is seen in the context of the negotiations between MPEG LA and the parent company that had commenced in 2009 [827] . This is sufficient under the Huawei framework: A general, informal statement suffices [828] . The implementer is not required to refer to a specific licensing agreement (on the contrary, this could be considered harmful under certain circumstances) [828] .

SEP holder’s offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company in February 2012 presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [829] .

The fact that the standard licensing agreement was not tailored to the parent company but was designed for use towards a large number of (potential) licensees (the name of the licensee ought to be added in each case separately), was not criticized by the Court. MPEG-LA had made clear that the documents sent by mail in February 2012 would serve as the basis for negotiations and a future agreement with the parent company [830] .

In addition, the Court did not take an issue with the fact that the offer was addressed to the parent company and not to the Defendant, since the parties were discussing about a licensing agreement on group level and the parent company had been involved in the communications from the beginning [831] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company did not contain a detailed explanation of the way the royalties were calculated [832] . The Court found that, in the present case, it was sufficient that the parent company was aware that the (standard) agreement presented to her had been accepted in the market by a great number of licensees [833] . In the Court’s view, the explanation of the royalty calculation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [834] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [834] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [834] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [835] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content [836] .

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [837] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [837] . The Court made clear that, in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [837] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [837] .

Non-discrimination

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases [838] . Even then, an unequal treatment is allowed, as long as it is objectively justified [838] . Limitations may, nevertheless, occur, especially when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive, only when it uses the patent’s teachings [838] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may, however, seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [839] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [839] .

Against this background, the Court found that the offer made by MPEG LA to the parent company was not discriminatory. The Defendant had argued that seeking a licence also covering sales in China violated FRAND, since not every other competitor in the Chinese market was licensed by MPEG LA [840] . The Court observed that the selective assertion of patents against only a part of the competitors in a downstream market might, in principle, be discriminatory [841] . This was, however, not the case here, because the Claimant had already sued another company active in China and was attempting to persuade other companies to obtain a licence [842] . Due to the high cost risk associated with court proceedings, the patent holder is not obliged to sue all potential infringers at once; choosing to assert its patents against larger implementers first was considered by the Court as reasonable, since a win over a large market player could motivate smaller competitors to also obtain a licence (without litigation) [843] .

Furthermore, the Court did not consider the fact that the offered standard licensing agreement contained a cap for the annual licensing fees payable to the MPEG LA pool to be discriminatory [844] . The Defendant had argued that the respective cap disproportionally favoured licensees with high volume sales which offered not only mobile phones, but also other standard compliant products in the market. The Court made, however, clear that Art. 102 TFEU does not establish a ‘most-favoured-licensee’ principle (meaning that the patent holder must offer the same conditions to all licensees) [845] . It is not per se discriminatory to use sale volumes as a criterion for discounts, especially if a company has managed to open up a larger market than its competitors [846] . Discounts can further hardly be discriminatory, if they are offered to every (potential) licensee under the same conditions [846] .

Besides that, the Court dismissed the Defendant’s argument that MPEG LA’s standard licensing agreement is discriminatory, because it is offered to both MPEG LA pool members and third licensees. The Court found that the share of the licensing income paid to pool members, who have also signed a MPEG LA licence, reflects their contribution to the pool and, therefore, does not discriminate the latter against third licensees (who have not contributed any patents to the pool) [847] . In this context, the Court also pointed out that the clauses contained in MPEG LA’s standard licensing agreement, providing for deductions or instalment payments are not discriminatory, particularly because they are offered to all licensees [848] .

The Court was further not convinced that the parent company was discriminated by MPEG LA’s offer, because the MPEG LA pool had refrained from requesting a licence at group level from a competitor, but had only granted a licence to a subsidiary within the respective group, instead. In the Court’s eyes, the Claimant had managed to establish that this exception was objectively justified, since only the subsidiary granted a licence had activities concerning the patents included in the pool [849] .

Fair and reasonable terms

With respect to the assessment of whether MPEG LA’s offer to the parent company was also fair and reasonable, the Court placed particular emphasis on the existing licensing agreements between the MPEG-LA pool and third licensees. The Court took the view, that existing licences can establish the actual presumption that the terms offered (as well as the scope of the licence) are fair and reasonable [850] . Moreover, the fact that licences regarding the same patent portfolio have already been granted for similar products prima facie suggests that the selection of the patents included in the pool was adequate [850] .

Based on these premises, the Court found that the approx. 2,000 standard licensing agreements concluded by the MPEG LA pool provide a ‘strong indication’ (‘erhebliche Indizwirkung’) that the underlying licensing terms are fair and reasonable [851] . In the Court’s view, the Defendant had failed to show sufficient facts that could rebut this indication.

In particular, the Court did not accept Defendant’s claim that, as a rule, licences for products sold in the Chinese market are subject to special conditions. On the contrary, the Court found that the existing MPEG LA pool licences allow the assumption that setting worldwide uniform licence fees corresponds to industry practice [852] . Accordingly, the Court rejected Defendant’s argument, that the royalties offered by MPEG LA to the parent company would hinder the Defendant from making profits with its sales in China, since the overall licensing burden (including licences needed from third parties) would be too high. The Court noted that the price level for Defendant’s sales in China does not significantly differ from the price level in other regions [853] . What is more, the Defendant did not show that further licences are needed with respect to the AVC/H.264 standard [854] . The Court further did not recognise a need to apply special conditions for the Chinese market, because – compared to patents from other regions – a lower number of Chinese patents is contained in the MPEG LA pool. According to the Court, the number of patents in a specific market should not be ‘overestimated’ as a factor for assessing the FRAND conformity of an offer, since even a single patent can block an implementer from a market, generating, therefore, the need for obtaining a licence [855] .

Apart from the above, the Court did not criticise that MPEG LA’s standard licensing agreement did not contain an adjustment clause. Such clauses can secure that the agreed licensing fees remain reasonable, in case that the number of patents contained in the pool changes during the term of the licensing agreement. They are, however, in the Court’s view, not the only mean to reach this goal: Moreover, the clause contained in MPEG LA’s standard licensing agreement, according to which the agreed royalties will not be adjusted either when more patents are added to the pool or when patents are withdrawn from the pool, offers an adequate balance of risk and is, therefore, FRAND compliant [856] . This assumption is also confirmed by the fact that all existing licensees have accepted this clause [857] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are, in general, appropriate under the Huawei framework. An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [858] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [858] .

An offer for a pool licence can, nevertheless, violate FRAND in ‘special circumstances’ [859] , for instance, if not all patents included in the pool are used by the licensee [860] . According to the Court, the fact that the Defendant – as well as mobile phone manufacturers in general – usually use only one of four available profiles of the AVC-Standard does not, however, render the standard licensing agreement offered by MPEG LA unreasonable [861] . This is particularly the case, since Defendant’s products – and especially its latest smartphones – have the technical capability to implement more than one available profile [862] . Besides that, it is reasonable to offer one single licence covering all profiles, since modern products incorporate functionalities of several types of devices (e.g. smartphones offer also digital television functionalities) [862] .

In this context, the Court dismissed Defendant’s arguments that the licence offered by MPEG LA was not FRAND, because it allegedly covered both standard-essential and non-essential patents. The Court recognised that the ‘bundling’ of essential and non-essential patents in a patent pool could, in principle, be incompatible with FRAND, if it is done with the intention to extract higher royalties from licensees by increasing the number of patents contained in the pool [863] . The Defendant failed, however, to present any reliable evidence that this was the case with the MPEG-LA pool [864] .

In the Court’s eyes, the Defendant also failed to establish that the rates offered by MPEG LA would lead to an unreasonably high total burden of licensing costs (‘royalty stacking’) [865] . The theoretical possibility that the Defendant might need to obtain licences also for patents not included in a pool does not per se lead to royalty stacking; the Defendant would have been obliged to establish that the total amount of royalties actually paid does not allow to extract any margin from the sale of its products [866] .

The Court further pointed out that MPEG-LA’s offer did not violate FRAND principles, because it referred to a licence covering all companies within the group, to which the Defendant belonged [867] . In the electronics and mobile communications industries, licences on a group level are in line with the industry practice and, therefore, FRAND-compliant [868] .

Implementer’s counteroffer

Having said that, the Court found that the Defendant failed to make a FRAND counteroffer [869] .

In particular, the counteroffer made in November 2017 after the commencement of the present proceedings violated the FRAND principles in terms of content, because it was limited to a licence covering solely the Claimant’s patent portfolio and not all patents included in the MPEG LA pool [870] . Furthermore, the counteroffer established different licensing rates for different regions (especially for China) without factual justification [871] .

Furthermore, the second counteroffer made by the Defendant after the end of the last oral hearing was belated and, therefore, not FRAND. The Court held that the Claimant was not given sufficient time to respond to that counteroffer, so that there was no need for any further assessment of its content [798] . On the contrary, the Court expressed the view that the purpose of this counteroffer was most likely to delay the infringement proceedings [798] .

Provision of security

Since Defendant’s counter-offers were not FRAND in terms of content, the Court did not have to decide, whether the security provided in form of bank guarantees was FRAND or not. The Court noted, however, that the amounts provided were insufficient, since they were calculated on basis of Defendant’s counteroffer from November 2017, which itself failed to meet the FRAND requirements [872] .

• [787] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, para. 36.
• [788] Ibid, para. 35.
• [789] Ibid, para. 37.
• [790] Ibid, para. 453.
• [791] Ibid, para. 39.
• [792] Ibid, para. 43.
• [793] Ibid, para. 44.
• [794] Ibid, para. 53.
• [795] Ibid, para. 2.
• [796] Ibid, para. 54.
• [797] Ibid, para. 65.
• [798] Ibid, para. 716.
• [799] Ibid, paras. 143-208.
• [800] Ibid, paras. 209-293.
• [801] Ibid, paras. 295-302.
• [802] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [803] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, paras. 304 et seqq.
• [804] Ibid, para. 307.
• [805] Ibid, para. 310.
• [806] Ibid, para. 310. In this respect, the Court pointed out that – vice versa – also a non-essential patent might confer a dominant position, if the patented invention is superior in terms of technological merit and/or economical value, para. 312.
• [807] Ibid, paras. 310 et seq.
• [808] Ibid, para. 311.
• [809] Ibid, paras. 315 et seqq.
• [810] Ibid, para. 321.
• [811] Ibid, para. 326.
• [812] Ibid, para. 327.
• [813] Ibid, para. 330.
• [814] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06.
• [815] Ibid, paras. 331 et seqq.
• [816] Ibid, para. 335.
• [817] Ibid, para. 337.
• [818] Ibid, para. 339.
• [819] Ibid, para. 343.
• [820] Ibid, para. 345.
• [821] Ibid, para. 356.
• [822] Ibid, paras. 357 et seqq.
• [823] Ibid, paras. 366 et seqq.
• [824] Ibid, para. 340.
• [825] Ibid, para. 341.
• [826] Ibid, paras. 395 et seqq.
• [827] Ibid, paras. 400 et seqq.
• [828] Ibid, para. 399.
• [829] Ibid, para. 405.
• [830] Ibid, paras. 411-417.
• [831] Ibid, para. 419.
• [832] Ibid, para. 421.
• [833] Ibid, para. 425.
• [834] Ibid, para. 422.
• [835] Ibid, paras. 426 et seqq.
• [836] Ibid, para. 429.
• [837] Ibid, para. 431.
• [838] Ibid, para. 432.
• [839] Ibid, para. 433.
• [840] Ibid, para. 438.
• [841] Ibid, para. 443.
• [842] Ibid, para. 444.
• [843] Ibid, para. 445.
• [844] Ibid, para. 579.
• [845] Ibid, para. 582.
• [846] Ibid, paras. 583 et seqq.
• [847] Ibid, para. 564.
• [848] Ibid, paras. 568 et seqq.
• [849] Ibid, paras. 573 et seqq.
• [850] Ibid, para. 451.
• [851] Ibid, para. 449.
• [852] Ibid, para. 454.
• [853] Ibid, paras. 487 et seqq.
• [854] Ibid, para. 491.
• [855] Ibid, para. 495.
• [856] Ibid, paras. 591 et seqq., particularly para. 596.
• [857] Ibid. para. 597.
• [858] Ibid. para. 504.
• [859] Ibid. para. 508.
• [860] Ibid. para. 514.
• [861] Ibid. paras. 511 et seqq.
• [862] Ibid. para. 524.
• [863] Ibid, para. 528.
• [864] Ibid, paras. 531-543.
• [865] Ibid, paras. 545 et seqq.
• [866] Ibid, para. 546.
• [867] Ibid, para. 599.
• [868] Ibid, para. 600.
• [869] Ibid, para. 603.
• [870] Ibid, paras. 605 et seqq.
• [871] Ibid, paras. 617 et seqq.
• [872] Ibid, para. 625.

HEVC (Dolby) v MAS Elektronik

7 May 2020 - Case No. 4c O 44/18

A. Facts

The claimant, Dolby, operates in the field of audio and video innovation and is the owner of a portfolio of related patents, including a European Patent concerning the encoding and decoding as well as the sequence of digital images. This patent reads on the HEVC standard (Standard Essential Patent, or SEP). Dolby has contributed the patent in question to a pool administered by HEVC Advance, which offers licences to standards users for a significant portfolio of related SEPs of several patent holders.

The Defendant, MAS Elektronik AG (MAS), operates in the home entertainment field and sells articles such as television sets and receivers (set-up boxes, or STBs). These devices are compatible with the DVB-T/T2 standard that, in turn, makes use of the encoding method according to the HEVC standard.

In 2017, HEVC Advance sent a notification informing MAS about the infringement of SEPs included in the pool. On 7 November 2017, HEVC Advanced offered a licence to MAS on basis of its standard licensing agreement.

Since no agreement was reached, Dolby filed a lawsuit against MAS before the District Court of Düsseldorf (Court). Dolby initially moved for a declaratory judgement confirming MAS' liability for damages on the merits and also asserted relevant claims for information. The action was later extended. Additionally, Dolby requested injunctive relief as well as recall and destruction of infringing products.

On 11 July 2018, after the action was filed, Dolby directly approached MAS as well. It shared a list of patents included in its SEP portfolio as well as 'claim charts', mapping a number of patents to the relevant parts of the standard. Dolby also submitted an offer for a bilateral portfolio licence to MAS which the latter did not accept.

In January 2019, MAS presented a counteroffer to HEVC Advance, which included an amount for settlement the past uses. However, MAS did not render accounts for past uses nor provided security.

On 7 May 2020, the Court rendered a decision in favour of Dolby and ordered MAS to (i) refrain from offering or supplying devices and/or means that infringe Dolby's patent in Germany, under penalty up to EUR 250,000 for each case of infringement; (ii) render accounts and information regarding infringing products; (iii) surrender for destruction any infringing product in its possession and (iv) recall infringing products from the market. The Court also recognised MAS' liability to pay for past and future damages.

B. Court's reasoning

The Court found that Dolby was entitled to assert claims arising from the patent-in-suit. The respective patent application was transferred before grant and Dolby was registered as owner in the Patent Register at the moment the patent was granted. MAS did not present any reason to question the validity of the transfer of the patent application to Dolby.HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18 (cited by www.nrwe.de), paras. 75 et seqq.

Furthermore, the Court held that the patent-in-suit is essential (and not only optional) to the improvement process of encoding and decoding of images under the HEVC standard and, therefore, infringed by the devices manufactured and sold by MAS. [874]

Abuse of dominant market position

Having said that, the Court explained that by asserting claims for injunctive relief as well as recall and destruction of infringing products before court, Dolby had not abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [875] .

In the eyes of the Court, Dolby holds a dominant position [876] . The Court highlighted that owning a patent, even a standard-essential patent, does not constitute per se a condition for market dominance [877] . That must be assessed case by case. A dominant position will be, as a rule, given if the use of a SEP is considered a pre-requisite to enter a downstream market. This is true also when the SEP is needed for offering competitive products in the downstream market. [877] In the present case, the implementation of the HEVC was required to make a competitive offering in the STB market [878] .

Notwithstanding the above, the Court found that Dolby had not abused its dominant market position, considering that it had fulfilled the obligations set forth by the Court of Justice the EU (CJEU) in the matter Huawei v ZTE (Huawei judgment or framework) [879] .

Notification of infringement

The required notification of the infringement by the patent holder was properly done. The Court understood that HEVC Advance, as the pool administrator, was entitled to do such notification on behalf of the patent holders that contributed patents to the pool. There is nothing in the Huawei judgment that suggests otherwise.HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18, paras. 213 et seqq and paras. 221 et seqq.

The Court explained that the notification must, at least, include the publication number of the patent-in-suit and also indicate the infringing products and the infringing act(s) of use. [881] The notification does not need to contain a detailed (technical or legal) analysis, with reference to standards or claim features, but only present sufficient information that enables the other party to assess the infringement accusation made against it. [881]

In this case, the notification initially sent by HEVC Advance to MAS was sufficient in terms of content, since it specified the infringing products, and referred to HEVC Advance's patent portfolio and its website containing additional information. The fact that no patent numbers were mentioned was not considered harmful, since this information is publicly available in the pool's website. [882] Moreover, the Court highlighted that the notification can be a mere formality, if knowledge of the infringement by the implementer can be assumed. In such case, arguing that the notification was flawed, can be considered abusive, as it was the case here. [883]

Besides the notification made by HEVC Advance, the Court found that Dolby had also made a sufficient notification itself by the letter sent to MAS on 11 July 2018. [884] The letter fulfilled all requirements in terms of content. The fact that it was sent only after the action was filed was not harmful, since MAS had been already adequately informed by HEVC Advance before. [884]
 

Willingness to obtain a licence

Looking at the conduct of MAS after receipt of the notifications of infringement, the Court reached the conclusion that MAS had sufficiently declared willingness to enter into a pool licence with HEVC Advance. [885] On the contrary, the Court took the view that MAS had not acted as a willing licensee with respect to Dolby's subsequent offer for a bilateral licence. [886]

The Court explained that, in its licensing request towards the SEP holder, the standards implementer must express its 'serious' willingness to conclude a licensing agreement on FRAND terms [887] . For this, no strict requirements apply, in terms of content or form; moreover, also an 'implicit behaviour' can suffice [888] . The implementer is, however, required to react in due course. [889] Furthermore, 'willingness' must still exist when the patent holder makes his licensing offer [887] .

The Court held that MAS had expressed willingness to take a pool license from HEVC Advance –although no express request was made–, since "immediately" after receipt of the notification of infringement, MAS started a correspondence with HEVC Advance with the goal to initiate negotiations. [890]

On the other hand, MAS had not been willing to obtain a bilateral licence from Dolby. [884] The Court emphasized that the whole conduct of the implementer must be assessed; a 'genuine' willingness to obtain a license must be demonstrated. [891] This is not given, when -as it had been the case here- the implementer only poses repetitive questions that do not present any constructive remarks and, therefore, do not lead to any progress in the negotiation. [892] In addition to that, it could be expected that a licensee willing to sign a bilateral agreement with an individual pool member, will have an interest to also engage in discussions with further pool members, especially for assessing the total 'economic burden' for its products, in comparison with a pool licensing agreement. [893] MAS refrained from doing that. What is more, it made clear in the proceedings that it was only interested in a pool licence. [893]
 

SEP holder's offer

Since the Court held that MAS had adequately expressed willingness to sign a pool licence with HEVC Advance, it moved on to examine, whether HEVC Advance's licensing offer to MAS based on its standard licensing agreement was in line with the Huawei framework. Since the Court reached the conclusion that MAS had not been willing to enter into a bilateral licence with Dolby, it refrained from examining the compliance of Dolby's offer with the Huawei judgment in detail.

The Court found that the offer made by HEVC Advance met the Huawei requirements. In terms of form, the fact that the standard agreement sent to MAS had not been signed did not cause any concerns. [894] In the Court's view, the CJEU requires that the SEP holder's offer contains all usual terms of a licensing agreement, however, no binding offer that could lead to the conclusion of a licence through sole acceptance by the implementer is needed. [895]

Furthermore, HEVC Advance had sufficiently explained the royalty calculation, in line with the Huawei judgment. [896] If the patent holder has previously granted licenses to third parties, it has to give more or less substantiated reasons, depending on the circumstances of the individual case, why the royalty it envisages is Fair, Reasonable and Non-Discriminatory (FRAND). [897] In case that the SEP holder offers licences exclusively based on a standard licensing agreement, it will, as a rule, suffice to establish the adoption of the licensing programme in practice and to show that the specific offer corresponds to the standard licensing agreement. [898] The more standard licensing agreements signed are shared by the patent holder, the stronger the assumption is, that the offered rates are FRAND. [899]

The Court emphasized that is not necessary to present the full content of all the licensing agreements already concluded, but only the relevant ones, considering clearly delineated product categories. [900] Existing licences with cross-licensing-elements, are not relevant in this context, especially, when the implementer does not have any patents himself, as it was the case here. [901] Accordingly, the Court found that the forty third party agreements disclosed by Dolby in the proceedings were enough in the present case. [902]

Fair and reasonable terms

Looking at the content, the Court found that the terms of the standard licensing agreement offered by HEVC Advance are fair and reasonable. [903] As fair and reasonable can be considered terms offered to a willing party, without exploiting a dominant position. [904] Apart from the royalties, the offer must also prove reasonable with regard to the other terms as well (scope, territory etc.). [904]

Having said that, the Court held that the royalties charged by HEVC Advance's standard licensing agreement are fair and reasonable. [905] An indication of that is the fact, that up to January 2020, more than forty licensees selling products in the same category as MAS had taken a license on the same terms, modified sometimes by 'blended rates'. [906] On the other hand, the fact that lower royalties are charged by a competing patent pool (MPEG LA) does not make the HEVC Advance's rate unreasonable, as FRAND is considered rather to be a range than a specific amount. [907]

Furthermore, the Court took the view that the limitation of the offered licence to 'practised claims' only (that is those claims of the licenced patents that are essential to the practice of the HEVC standard), is not unreasonable. [908] This limitation does not present any adverse effect on MAS' business, since the royalty payments correspond to the claims that are actually used by the licensee (and, vice versa, no obligation to pay for claims not used is established). [909]

Also, in the eyes of the Court, MAS was not able to prove that the lack of an adjustment clause is unreasonable [910] . MAS failed to establish that respective clauses are common in industry practice; on the contrary, the fact that at least forty parties had signed a licence with HEVC Advance without such clause indicated the opposite. [911] What is more, the royalty clause is constant. That means that the rate charged will not change if licenced patents expire, but also will remain the same in the case of addition of new patents to the pool that will be automatically covered by the agreement. Insofar, an economic risk for both parties exists. [912]

Regarding the choice of forum clause contained in the standard licensing agreement, establishing the jurisdiction of courts in New York as well as granting HEVC Advance the right to also choose other venues at its discretion, the Court was not able to conclude any unfair disadvantage for MAS. [913] The same clause was agreed in many other licensing agreements signed by HEVC Advance with third parties. [914] In fact, MAS agreed to a similar one in its license agreement with the MPEG LA pool. [914]

Non-discrimination

Besides that, the Court was unable to establish any discrimination against MAS through the licence offered by HEVC Advance. [915] The obligation of equal treatment applies only to aspects that are comparable; even a market dominant undertaking must be allowed to respond differently to different market conditions. [916] An unequal treatment is to be assessed based on the specific circumstances of each individual case under the goals of competition and can be accepted as lawful, if objectively justified. [917] Therefore, not every difference in the terms and conditions of a licence can be seen as abusive. [918] According to the Court, the same principle also applies to the licensing of SEPs. [919]

Against this background, the Court found that the fact that the pool administered by HEVC Advance updated its terms in a way that an 'uniform licensing regime' no longer exists, since for certain licensees the previous version of the agreement still applies, does not mean that the new standard licensing agreement offered to MAS was discriminatory. [920] Although, according to the case-law of the Higher District Court of Düsseldorf, a patent holder (and its assignees) is bound to the 'licensing concept' underlying the first ever licence granted, it is allowed to deviate from such 'concept', if this does not lead to a discrimination of either past nor future licensees. [921] In the Court's view, this was not the case here: The old licensees were offered the possibility to shift to the new terms, and there is no evidence that MAS would be treated worse by the terms of the new standard licensing agreement. [921] On the contrary, the new royalty calculation leads to a lower licensing burden. [921]

The Court also took the view, that there is also no discrimination in the way the patent-in-suit is enforced. [922] MAS argued that it was discriminated, because its competitors or large companies were not sued by members of the HEVC Advance pool for patent infringement. The Court highlighted that refraining from enforcement does not necessarily mean discrimination: the phase of adoption of the relevant standard, the costs and procedural risks involved, the knowledge of the holder regarding the infringement and its extent are factors to be considered. [923] In the case of HEVC Advance, the initial phase of its existence and limitation of resources are relevant for this assessment. [924]

Moreover, no discrimination with respect to the amount of the royalty rate or the scope offered was found. [925] The Court pointed out that the fact that some of the existing licensees have agreed on rates higher than those offered to MAS, could not be used in favour of the latter: as a rule, only those who are treated less favourably can invoke discrimination. [926]

The Court further held that the 'blended rates' agreed with certain other licensees, did not render the offer made to MAS by HEVC Advance discriminatory either. [927] These rates mirrored variations due to the difference in products and implementer's profiles and were either offered to MAS or not applicable to his business model. [928]

Furthermore, the Court found that the 'incentive programme' offered by the HEVC Advance pool, which under specific conditions (especially the signing of a licence at an early point in time) results in discounted rates, is lawful and non-discriminatory. [929] The same is true with respect to discounts offered for past uses prior to the signing a licence, as it is the case for HEVC Advance [930] .

Finally, a 10% discount offered by HEVC Advance when a licensee also takes a trademark licence, allowing for the labelling of products with the HEVC trademark, was equally offered to the MAS, so that the Court could not see a discrimination of MAS by such provision in the standard licensing agreement. [931]

Implementer's counteroffer

The Court found that MAS' counteroffer was not FRAND. [932] The offer made by MAS failed to present sufficiently an explanation of why its terms would be FRAND, in view of the terms offered by HEVC Advance. MAS presented only a royalty rate, without making any reference to the rest of the clauses contained in the offer previously made by HEVC Advance, which it alleged to be discriminatory or unreasonable. [933]

Having found that MAS' counteroffer had not been FRAND, the Court explained that the fact that MAS neither rendered accounts nor provided security did not play any role for its decision. [934]

C. Other issues

By the facts of the case, the Court concluded that MAS acted culpably, or at least negligently, and, therefore, owes compensation for past and future damages caused by its actions. Moreover, damages should not be limited to a FRAND royalty. [935] The quantification of the damages will be possible with the rendering of accounts by MAS. [936]

The lawsuit for revocation of the patent, arguing lack of inventive step, that had not been decided yet, had no likelihood of success, according to the Court's analysis. Therefore, the request for staying the proceedings until a decision on the validity is delivered by the Federal Patent Court was denied. [937]

• [873] HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18 (cited by www.nrwe.de), paras. 75 et seqq.
• [874] Ibid, paras. 157-184.
• [875] Ibid, paras. 186 et seqq.
• [876] Ibid, paras. 189 et seqq.
• [877] Ibid, paras. 194 et seqq.
• [878] Ibid, para. 197.
• [879] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [880] HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18, paras. 213 et seqq and paras. 221 et seqq.
• [881] Ibid, para. 210.
• [882] Ibid, paras. 229 et seqq.
• [883] Ibid, para. 233.
• [884] Ibid, para. 759.
• [885] Ibid, paras. 236 et seqq.
• [886] Ibid, paras. 760 et seqq.
• [887] Ibid, para. 237.
• [888] Ibid, para. 237 and para. 761.
• [889] Ibid, para. 760.
• [890] Ibid, para. 238.
• [891] Ibid, para. 763.
• [892] Ibid, para. 764.
• [893] Ibid, para. 765.
• [894] Ibid, paras. 241 et seqq.
• [895] Ibid, para. 242.
• [896] Ibid, paras. 244 et seqq.
• [897] Ibid, para. 245.
• [898] Ibid, para. 248.
• [899] Ibid, para. 255.
• [900] Ibid, para. 250.
• [901] Ibid, para. 253.
• [902] Ibid, para. 249.
• [903] Ibid, paras. 257 and 258.
• [904] Ibid, para. 260.
• [905] Ibid, paras. 264 et seqq.
• [906] Ibid, para. 268.
• [907] Ibid, paras. 271 et seqq.
• [908] Ibid, paras. 280 et seqq.
• [909] Ibid, para. 284.
• [910] Ibid, paras. 286 et seqq.
• [911] Ibid, para. 295.
• [912] Ibid, para. 298.
• [913] Ibid, paras. 301 et seqq.
• [914] Ibid, para. 304.
• [915] Ibid, paras. 306 et seqq. and paras. 314 et seqq.
• [916] Ibid, para. 308.
• [917] Ibid, paras. 308 et seq.
• [918] Ibid, para. 310.
• [919] Ibid, para. 311.
• [920] Ibid, paras. 314 et seqq.
• [921] Ibid, para. 318.
• [922] Ibid, para. 321.
• [923] Ibid, para. 322.
• [924] Ibid, para. 323.
• [925] Ibid, paras. 325 et seqq. as well as paras. 443 et seqq.
• [926] Ibid, para. 326.
• [927] Ibid, paras. 328 et seqq.
• [928] Ibid, paras. 329 et seqq.
• [929] Ibid, paras. 334 et seqq.
• [930] Ibid, paras. 526 et seqq.
• [931] Ibid, paras. 665 et seqq.
• [932] Ibid, paras. 751 et seqq.
• [933] Ibid, paras. 754.
• [934] Ibid, para. 756.
• [935] Ibid, para. 773.
• [936] Ibid, para. 774.
• [937] Ibid, paras. 781 et seqq.

Conversant v Huawei

27 August 2020 - Case No. 4b O 30/18

A. Facts

The plaintiff, Conversant, is a non-practicing entity that holds a portfolio of patents declared as (potentially) essential to the practice of various wireless telecommunication standards (standard essential patents, or SEPs) developed by the European Telecommunications Standards Institute (ETSI). Conversant offers bilateral licences to its SEP portfolio and is also member of the “Multi-Generation-Pool”, a patent pool administered by Via Licensing.

The defendants are the parent company as well as two German subsidiaries of the Huawei group (Huawei), which is headquartered in China and is active worldwide.

Conversant made a commitment towards ETSI that it will make SEPs, including the patent in suit, accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

On 29 April 2014, Conversant notified Huawei of the infringement of its patents. It presented examples of allegedly infringing products and indicated the patents used by such products. After that initial notice, the parties had negotiations between 2015 and 2017.

In July 2017, Conversant brought an action before the High Court of England and Wales (UK High Court) against Huawei. It requested from the High Court, inter alia, to set the terms for a worldwide license on FRAND terms for Conversant’s SEP portfolio and grant an injunction against Huawei, in case that the latter refused to commit to the court-determined terms. At the same time, Conversant sent an offer to one of the German affiliates of Huawei, in which the royalties were calculated as a percentage of the net sales price of the standard-compliant end-products. Different rates were offered based on the implemented standards (2G, 3G and/or 4G) and the geographical markets (‘Major Markets’ and ‘Other Markets’, which included China). Conversant explained that this offer was FRAND, since it corresponded to terms previously confirmed as such by the UK High Court in the matter Unwired Planet v Huawei. [938]

In the beginning of 2018, Huawei filed an action against Conversant before the Nanjing Intermediate People’s Court (Nanjing Court) in China, requesting the Nanjing Court -among other things- to determine the rates for the Chinese part of Conversant’s SEP portfolio.

Subsequently, Conversant brought an infringement action against Huawei before the District Court of Duesseldorf (Court). In September 2019, the Nanjing Court delivered a decision, in which several Conversant’s Chinese patents were found to be either invalid or not infringed. The Nanjing Court also determined the rates payable for the Chinese SEPs held by Conversant. Conversant appealed this decision.

On 12 March 2020, Huawei shared so-called ‘Key Offer Terms’ with Conversant. According to Huawei, the rates included in those terms were extracted from a licensing agreement with a third party. Huawei denied further information regarding the proposed royalties with reference to a Non-Disclosure Agreement (NDA) entered with the respective licensee.

With the present judgement, the Court found in favour of Conversant and -inter alia- granted an injunction against Huawei [939] .
 

B. Court’s reasoning

The Court found that the patent in suit was infringed and standard-essential. [940]

It further rejected Huawei’s ‘FRAND’ defence under competition law. [941] Huawei had argued that by asserting claims for injunctive relief, Conversant abused its dominant market position in violation of Art. 102 of the Treaty on the Functioning of the EU (TFEU), especially since it had failed to meet the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in Huawei v ZTE [942] (Huawei decision or framework).
 

Market dominant position

The Court held that Conversant had a dominant market position. [943]

It pointed out that the mere ownership of a patent, even a standard-essential patent, does not automatically confer a dominant position to the patentee: for this, accessing patent should be necessary for entering a (downstream) market. This was the case here with respect to Huawei’s standard-compliant mobile phones. [944]

In this context, the Court explained that Conversant’s FRAND commitment towards ETSI does not restrict its dominant market position. Although it is true that the ETSI FRAND undertaking limits market power as far as the SEP holder is obliged to license its patent on FRAND terms, this limitation has no real effect until a licence has actually been granted. [945] The alternative licensing option offered by the ‘Multi-Generation-Pool’ could not, in the eyes of the Court, per se exclude Conversant’s dominant market position either. [946]
 

Abuse of dominant position

The Court held, however, that Conversant had not abused its dominant market position in violation of Art. 102 TFEU. [947] Conversant had complied with its obligations under the Huawei framework, whereas Huawei had failed to do so. [948]

In the eyes of the Court the Huawei framework establishes mutual conduct duties for SEP holders and implementers that build upon one another. Accordingly, the consequent duty is only triggered, when the other party has fully met its preceding obligation. [949]
 

Notification of infringement

Having said that, the Court found that Conversant’s letter to Huawei dated 29 April 2014 constitutes a sufficient notification of infringement. [950] In terms of content, the notification should indicate the patent infringed (including the patent number), the infringing embodiment and the infringing use; a detailed technical or legal analysis is, however, not required at this stage. [951] The Court clarified that the SEP holder is not obliged to provide claim charts with the notification of infringement. [952] What is more, if the implementer is already aware of the infringement, a respective notification could be dispensable (‘useless formality’): however, courts should apply a strict standard when assessing whether a notification was needed at all or not. [953]

Looking at Conversant’s aforementioned letter to Huawei, the Court did not consider the fact that the patent in suit was not explicitly mentioned therein to be harmful. In the letter, Conversant had referred to the infringement of its entire portfolio and indicated several patents as examples. This made clear to Huawei that Conversant assumed that other patents not mentioned in the letter were infringed as well. [954] In addition, the Court took into account the fact that Huawei had already concluded a licensing agreement with the legal predecessor of Conversant, so that it should have been aware of the patent portfolio in question in detail. [954]
 

Willingness to obtain a licence

Considering Huawei’s overall behaviour, the Court found that even though, at first, Huawei appeared to have been willing to get a licence, its subsequent actions evidenced the opposite [955] . At the end of the infringement proceedings, it could no longer be assumed that Huawei was willing to obtain a FRAND licence from Conversant. [956]

The Court explained that, in terms of content, the implementer’s declaration of willingness should not be made subject to ‘high standards’; even a ‘blanket’ and ‘informal’ declaration can suffice. [957] The implementer’s behaviour should, in any case, indicate the ‘clear intention’ to sign a licence. This intention should ‘guide’ the implementer throughout the subsequent licensing negotiations. [957]

Given that after receipt of Conversant’s notification of infringement the parties exchanged claim charts and held several meetings to discuss the technical merits of Conversant’s SEP portfolio, the Court was satisfied that Huawei had, initially, been willing to take a FRAND licence. [958] However, Huawei’s later behaviour contradicted this assumption.

The Court saw an indication of missing willingness in the fact that Huawei had made the signing of a licence subject to the condition that pending patent infringement proceedings against two other mobile phone manufacturers in the US would be decided in favour of Conversant.Ibid, paras. 239 & 241. The Court said that even though the implementer has an interest to be informed about rulings concerning the validity and essentiality of patents included in the negotiated license, it is not acceptable to make the outcome of such proceedings a precondition for the conclusion of a licence, especially since it is possible to address court rulings invalidating portfolio patents by means of an adjustment mechanism integrated in the agreement with the SEP holder. [960]

Furthermore, the Court criticized the fact that Huawei did not sufficiently elaborate the (extremely low) rates (counter-)offered to Conversant on 12 March 2016, which -according to Huawei- were based on a licence with a third licensor. [961] Huawei had insofar invoked an NDA entered with the third licensor. The Court held that Huawei’s behaviour was insofar inconsistent as it had disclosed the royalty rate agreed with the third licensor but refused to share further information, particularly with respect to cross-licensing elements of the respective agreement. [962] It further highlighted that confidentiality concerns could be addressed by an NDA between Huawei and Conversant, which the latter had been willing to sign. [963]

Another indication of unwillingness was the fact that, approximately three years after the beginning of the negotiations with Conversant, Huawei had made the continuation of the negotiations subject to the conclusion of an NDA. [964] Considering that Huawei had itself stopped discussions on a draft NDA back in 2013, the Court held that by insisting on the signing of an NDA several years later, Huawei primarily intended to delay the licensing negotiations. [965]

Additionally, the Court noted that Huawei attached complementary conditions to the conclusion of a licensing agreement with Conversant without justification [966] . In particular, Huawei had denied to take a licence to the Chinese part of Conversant’s SEP portfolio before at least ten other large Chinese mobile phone manufacturers had respectively done so. [967]

Based on Huawei’s overall conduct, the Court rejected the notion that Huawei’s statements during the pending proceedings that it was (still) prepared to obtain a licence to ‘valid’ SEPs could ‘undo’ the missing willingness demonstrated by Huawei up to that point in time. [968] The same was true with respect to Huawei’s counteroffer dated 12 March 2020, which did not contain a sufficient justification with regard to the clearly low licensing rates suggested. [969]
 

SEP holder’s offer

Since Huawei failed to adequately express willingness to obtain a licence, the Court explained that Conversant’s obligation under the Huawei framework to make a FRAND licensing offer had not been triggered in the present case. [970] Notwithstanding this, the Court found that Conversant’s offer of July 2017 met the respective requirements in terms of both form and content. [971]

According to the Court, in terms of form, SEP holder’s offer must be in writing and specify the royalty, the relevant calculation parameters (e.g. licensing rate, reference value) and the method of calculation. [972] A ‘mathematical derivation’ of the rates is not needed; the SEP holder can rely on assumptions and valuations. [972] Regarding the non-discrimination (ND) element of FRAND, the SEP holder shall demonstrate that the defendant is treated equally as other existing licensees, or elaborate the reasons why a different treatment is justifiable in the individual case. [973]
 

Comparable agreements

The Court highlighted that comparable licensing agreements are an ‘important indicator’ of the reasonableness of the terms offered. [972] The patentee is, however, not obliged to produce all licensing agreements at its possession: in particular, agreements, which are not relevant for the assessment of whether the terms offered are unreasonable and/or discriminatory, do not have to be disclosed. [974] The Court could not identify that a comprehensive disclosure of all third-party agreements is common in practice. [975]

Against this background, the Court held that Conversant had provided sufficient information on truly relevant comparable agreements. [976]

On the other hand, the Court found that Conversant was not obliged to elaborate on the terms of agreements that were not comparable to the licence offered to Huawei. [977] 44 This was true with regards to licences covering implementation patents (and not SEPs) held by Conversant. [978] Agreements entered (on relatively low rates) by Conversant with implementers that were about to exit the market were not considered to be comparable either. [979] In any case, the Court found that there was no need to disclose such agreements, since they could have no impact on Huawei’s competitiveness, given that the licensees were no longer direct competitors of Huawei in the relevant product markets. [980] The same applies to licensing agreements that have expired: such contracts cannot impair the position of Huawei towards its competitors in the market anymore either. [981] The Court also noted that agreements with cross-licensing elements are, as a rule, not directly comparable with licences which shall not include such considerations. [981]

Furthermore, the Court held that, in the present case, Conversant was not obliged to elaborate on licensing agreements signed by the previous holder of the SEPs at stake. [981] The case-law of the Duesseldorf courts indicates that the FRAND commitment of the legal predecessor of the SEP holder is binding for the latter also in terms of the conditions offered to licensees. However, there was no need to provide Huawei with information on the terms of agreements previously entered into by Conversant’s predecessor, because Huawei had itself concluded an agreement with the latter. [981] What is more, Huawei had formed the counteroffer made to Conversant in March 2017 on basis of said agreement. [981]
 

Relevant court decisions

In addition to the above, the Court found that Conversant had properly presented court decisions concerning the validity and standard-essentiality of its patents as well as the FRAND-conformity of its licensing agreements during the trial. [982]

The Court reiterated the position expressed by Duesseldorf courts that –in addition to the relevant comparable agreements– SEP holders shall, as a rule, also present decisions dealing with existing licensing agreements. [983] Conversant had done so by pointing out to certain court proceedings involving patents included in its portfolio and providing information on their outcomes.
 

Fair and reasonable terms

Having said that, the Court further confirmed that Conversant’s licensing offer was FRAND in terms of content as well. [984]

The Court explained that not only the licensing rates, but all terms of the licence (e.g. covered patents, territorial scope, etc.) must be fair and reasonable. [985] Looking particular at the licensing rates, the Court highlighted that not every rate exceeding the objectively fair rate is considered exploitative and unreasonable under Art. 102 TFEU; there must be an evident gap between the two fees that hinders the competitiveness of the licensee in the downstream market. [985]

In this regard, the Court took the view that a considerable number of already concluded licences with identical terms can be an indication that the terms offered are, indeed, fair and reasonable, unless said agreements were concluded under exploitation of a market dominant position. [985]

Court-determined licensing terms and conditions (although they lack evidentiary effect) are also an aspect to be considered for the assessment of FRAND-conformity, if the court which delivered the respective decision comprehensively considered all relevant factors. [986] Court rulings originating from other European jurisdictions are, in any case, relevant as expert opinions. [987] It is, however, required to ‘trace-back’ the FRAND assessment criteria derived from court decisions to the actual facts of the individual case, since those mirror the value of the SEP portfolio to be actually licensed. [988]

Taking the above into account, the Court found that Conversant had presented sufficient indications that its offer to Huawei was fair and reasonable. [989] Conversant had particularly elaborated that the calculation of the royalties offered to Huawei followed the method used by the High Court of Justice of England and Wales (UK High Court) in a 2017 decision originating from a dispute between Huawei and a third SEP holder. [990] Given that the portfolios involved in both cases were comparable [991] and that Huawei had not substantially contested the further calculation parameters considered by the UK High Court [992] , the Court found that the aforementioned ruling offers sufficient indications confirming that Conversant’s offer was reasonable. [993]

In this context, the Court noted that there is a presumption that all patents included in a portfolio are valid. Consequently, patent validity is no decisive factor for the royalty calculation, unless there are decisions at hand, which invalidate a portfolio patent. [994] However, the invalidation of a portfolio patent does not necessarily make the offer ‘unreasonable’; for this, a ‘noticeable’ change in the portfolio is required. [995]

The Court held that Huawei had not shown that the invalidation of eight Chinese patents included in Conversant’s portfolio rendered the offer of the latter ‘unreasonable’. [996] 69 It had further failed to show which patents have expired (if any) and how this would have been significant for the licensing rate calculation [997] , or to which extent portfolio patents were not actually standard-essential. [998] Since Conversant had presented a significant number of claim charts, Huawei should have provided detailed pleadings contesting essentiality of relevant patents, which had not been the case: insofar, it was not sufficient to just to take recourse to foreign court decisions dealing with essentiality. [999]

Moreover, the Court was satisfied by the fact that Conversant’s offer contained an ’adjustment clause’ providing for a mechanism for reducing royalties, in case that the number of portfolio patents decreases. [1000] The Court noted insofar, that a FRAND offer requires such mechanism. [1001] Including an ’adjustment clause’ is, however, not mandatory: changes in the portfolio can also be addressed by agreeing on a shorter duration of the licensing agreement, so that the expiration of portfolio patents during the term of the contract can be considered. [1001]

The Court further took the view that Conversant’s offer could not be considered as unreasonable, because it did not take into account the parallel proceedings pending in Nanjing, China, subject matter of which was the determination of FRAND-compliant royalties. [1002] Foreign court decisions determining FRAND royalties have not necessarily a formal binding effect, either when they refer to the ‘national’ market of the court rendering the decision or (and particularly) when they refer to other markets abroad. [1003] Accordingly, the Court highlighted that it is not prevented from deciding whether the terms of a global portfolio licence covering also foreign jurisdictions were FRAND or not. [1004]
 

Implementer’s counteroffer

Finally, the Court pointed out that Huawei’s ‘Key Offer Terms’ dated 12 March 2020 did not constitute a FRAND-compliant counteroffer, particularly since those terms did not address all elements, on which the parties must agree in order for a licensing agreement to be concluded. [1005]
 

• [938] Unwired Planet v Huawei, High Court of Justice, 5 April 2017, [2017] EWHC 711(Pat).
• [939] Conversant Wireless v Huawei Technologies, District Court of Düsseldorf, judgment dated 27 August 2020, Case-No. 4b O 30/18 (cited by Düsseldorfer Entscheidungen, Nr. 3055, www.D-Prax.de).
• [940] Ibid, para. 124 and paras. 129-210.
• [941] Ibid para 124.
• [942] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2017, Case No. C-170/13.
• [943] Conversant Wireless v Huawei Technologies, District Court of Düsseldorf, judgment dated 27 August 2020, paras. 221 et seqq.
• [944] Ibid, para. 217.
• [945] Ibid, para. 223.
• [946] Ibid, para. 224. The parallel option to license the same patents through a pool could, however, eventually rule out an abuse of a dominant market position, particularly when the terms offered by the patent pool are FRAND.
• [947] Ibid, paras. 212 and 225 et. seqq.
• [948] Ibid, para. 225.
• [949] Ibid, para. 227.
• [950] Ibid, para. 231.
• [951] Ibid, paras. 231-232.
• [952] Ibid, para. 235.
• [953] Ibid, para. 232.
• [954] Ibid, para. 234.
• [955] Ibid paras. 236 and 238.
• [956] Ibid paras. 236 and 266.
• [957] Ibid, para. 237.
• [958] Ibid, para. 238.
• [959] Ibid, paras. 239 & 241.
• [960] Ibid, para. 241.
• [961] Ibid, para. 245.
• [962] Ibid, para. 245. The Court further questioned that Huawei could successfully withhold relevant information by invoking confidentiality obligations, see paras. 385 et seqq.
• [963] Ibid, para. 246; see also paras. 389 et seqq.
• [964] Ibid, para. 251.
• [965] Ibid, para. 257.
• [966] Ibid, para. 258.
• [967] Ibid, paras. 259 et seq.
• [968] Ibid, paras. 261-266.
• [969] Ibid, paras. 266.
• [970] Ibid, para. 269.
• [971] Ibid, para. 267.
• [972] Ibid, para. 272.
• [973] Ibid, para. 273.
• [974]  Ibid, para. 296.
• [975] Ibid, para. 297.
• [976] Ibid, para. 275.
• [977]  Ibid, paras. 277 et seqq. and 296.
• [978] Ibid, para. 280.
• [979] Ibid, para. 282.
• [980] Ibid, paras. 286 et seqq.
• [981] Ibid, para. 300.
• [982] Ibid, para. 304.
• [983] Ibid, para. 305.
• [984] Ibid, paras. 308 et seqq.
• [985] Ibid, para. 311.
• [986] Ibid, para. 363.
• [987] Ibid, para. 365.
• [988] Ibid, para. 367.
• [989] Ibid para 368.
• [990] Ibid, paras.378 et seqq.
• [991] Ibid, para. 379.
• [992] Ibid, paras. 393 et seqq.
• [993] Ibid, para. 374.
• [994] Ibid, para. 396.
• [995] Ibid, para. 396 et seq.
• [996] Ibid, para. 414.
• [997] Ibid, para. 420.
• [998] Ibid, paras. 414 et seqq.
• [999] Ibid, para. 419.
• [1000] Ibid, para. 397.
• [1001] Ibid, para. 423.
• [1002] Ibid, paras. 457 et seqq.
• [1003] Ibid, para. 460.
• [1004] Ibid, para. 461.
• [1005] Ibid, paras. 464 et seqq.

Via Licensing v TCL

11 May 2021 - Case No. 4b O 23/20

A. Facts

The Claimant holds patents declared essential to practice the Advanced Audio Coding (AAC) standard (standard essential patents or SEPs). The Claimant made a commitment towards two standardisation bodies — the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) — to make its SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions. The AAC standard is part of the compatibility requirements for the operating system (OS) Android that is available for smartphones and tablets. Implementation of ACC is needed for the certification for ‘Google Mobile Services’ (GMS) which, in turn, is required for the use of Google applications, such as Google Play App Store, Google Maps etc.

The Claimant offers bilateral licences to its SEP portfolio and has also joined a patent pool administered by Via Licensing (Via Licensing pool), which mainly operates based on a standard pool licensing agreement.

The defendant, TCL, is a manufacturer of electronic devices with headquarters in China. TCL produces and sells Android-compatible products implementing the ACC standard globally, including in Germany. In 2005, TCL signed a licence with the Via Licensing pool, which was however terminated in March 2007. Subsequently, an affiliated company of the TCL group manufacturing televisions took a bilateral SEP licence from the Claimant, which, however, did not cover smartphones and tablets.

Between 2007 and 2016, TCL was in contact with the Via Licensing pool about a potential new licence. In early 2016, Via Licensing pool shared a copy of the standard licensing agreement with TCL. However, no agreement was signed.

On 13 February 2017, the Claimant offered a bilateral SEP licence covering ACC-compliant smartphones and tablets to TCL. Attached to the offer were six claim charts concerning SEPs contributed to the Via Licensing pool, including the patent in suit. TCL did not directly respond to the Claimant.

On 13 April 2017, TCL also received a copy of the standard licensing agreement offered by Via Licensing pool. TCL did not directly provide feedback to this offer either.

In October 2019, the Claimant filed infringement proceedings against TCL before the District Court (Landgericht) of Düsseldorf (Court), asserting -among other claims- also claims for injunctive relief.

On 17 June 2020, TCL responded to the Claimant’s offer from February 2017, stating that it is willing to take a licence, but requesting further information on the suggested licensing fees as well as disclosure of agreements signed by the Claimant with third licensees.

On 16 July 2020, the Claimant provided TCL with an updated list of AAC-relevant patents and supported a proposal to grant access to third-party licensing agreements to TCL upon signing of a non-disclosure agreement (NDA).

On 17 August 2020, TCL responded also to the offer from Via Licensing pool dated 13 April 2017. Again, TCL said that it was prepared to sign a licence, but requested further information on the fees as well as access to existing pool licensing agreements. On the same day, TCL sent an e-mail to the Claimant, arguing that the information concerning the bilateral licence offer received was not sufficient.

In October and November 2020, the parties had discussions about an NDA, which was finally signed in mid-November, after the Court had dismissed a request for the production of third-party agreements filed by TCL in the meantime. On 23 November 2020, the Claimant offered TCL access to a special data room containing existing third-party agreements. Subsequently, TCL downloaded and reviewed various existing third-party licences.

On 13 March 2021, that is ten days prior to the oral hearing of the case, TCL made a counteroffer to the Claimant. The Claimant rejected the counteroffer during the oral hearing. Afterwards, TCL provided a bank guarantee that was intended to cover past uses of Claimant’s SEPs.

With the present judgment, the Court ruled in favour of the Claimant,Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 23/20 (cited by www.nrwe.de). and, among other remedies, issued an injunction against TCL.
 

B. Court’s reasoning

The Court found that the patent in suit is infringed. [1007] TCL had not contested that its products use the ACC standard (and, accordingly, also the patent in suit) as part of the Android compliance requirements. [1008]

Having established infringement, the Court explained that the claims asserted were well founded. The Court dismissed the so-called ‘FRAND-defence’ raised by TCL [1009] . TCL had argued that by filing an infringement action, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. The Court disagreed.
 

No abuse of market dominance

The Court found that the Claimant had a dominant market position within the meaning of Article 102 TFEU with respect to the (downstream) markets for smartphones and tablets. [1010]

The exclusionary rights arising from a patent – even a standard-essential patent – do not per se establish market dominance. [1011] For this, the patent must be – from a technical viewpoint – necessary for complying with a standard developed by a standardisation body (or a de facto standard), so that it would not be possible to work around the patent without losing important functionalities for products competing in a downstream market [1011] .

According to the Court, this applied with respect to the patent in suit. Even though alternatives to the ACC standard, the OS Android and GMS-certified applications exist, non-compliant products could not compete in the market. [1012] The Court found that alternative App-stores available for Android could not equally meet the expectations of end-users as the Google Play App Store. [1013] The Court also highlighted that OS Android has a market share of approx. 78% in the smartphone and tablet market, so that outside the Android ecosystem only a niche market exists. [1014] Consequently, the court added that one cannot except that smartphone and tablet manufacturers would develop their own operating systems to circumvent the ACC standard. [1015]

However, the Court explained that the Claimant had not abused its market dominant position. [1016] In particular, the Claimant had met the conduct requirements established by the European Court of Justice (CJEU) in the matter Huawei v ZTE [1017] (Huawei decision, or framework), whereas TCL had failed to sufficiently express willingness to conclude a FRAND licence.Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, para. 200.
 

Huawei framework

The Court confirmed that the Huawei framework is applicable. [1019] The question whether different conduct duties exist, depending on whether the relevant standard is a ‘de jure’, or a ‘de facto’ standard was left open. [1020] The Court said that the existence of a dominant position, which is contingent upon the actual circumstances in the market, is decisive for the establishment of conduct duties; how these circumstances emerged was of no relevance. [1021] According to the Court, the same constellation that gave rise to the Huawei duties was given here: The fact that ACC became market dominant through its inclusion in the certification requirements for the OS Android did not change this conclusion. [1022]
 

Notification of infringement

Turning to the parties’ conduct, the Court found that the Claimant had met its duty to provide TCL with an adequate notification of infringement. [1023]

In terms of content, an infringement notification must name the relevant patent including the patent number and identify the infringing products as well as the infringing use. [1024] Detailed technical or legal analysis is not required. [1024] Exceptionally, the notification can even be omitted, if it constitutes only a ‘pointless formality’, that is when there is certainty that the implementer is already aware of the infringement; in this respect, a strict threshold must, however, apply. [1024]

Although the Court questioned whether an infringement notification was needed at all here, especially since TCL had signed a licence with the Via Licensing pool in 2005, it did not examine this issue in detail, given that Claimant’s letter dated 13 February 2017 was considered as a proper notification: TCL’s AAC-compliant products were mentioned and a list of relevant patents as well as six claim charts, covering also the patent in suit were attached. [1025] The fact that the letter was addressed to the parent company of the TCL group raised no concerns in the Court’s view, particularly because the latter was the entity responsible for licensing negotiations in the telecom field. [1026]
 

Willingness

The Court found that TCL had not demonstrated willingness to sign a FRAND licence: rather, the overall conduct of TCL indicated that it had not been willing to enter into a licensing agreement both prior and during the pendency of the infringement proceedings. [1027]

The Court applied the standard established by the German Federal Court of Justice (Bundesgerichtshof) in Sisvel v Haier I [1028] and Sisvel v Haier II [1029] , according to which the implementer is expected to ‘clearly’ and ‘unambiguously’ declare that it is willing to sign a licence on FRAND terms with the SEP holder and, subsequently, demonstrate ‘continuous’ willingness in negotiations.Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, para. 224. The Court made clear that willingness must be given also when the SEP holder provides the implementer with a licensing offer, even if this offer is not fully FRAND-compliant in every possible aspect. [1031] What is more, willingness shall be demonstrated in a timely manner: taking several months to react to an infringement notification is usually an indication of the opposite. [1032] The longer it took the implementer to declare willingness, the stricter the applicable threshold should be: particular caution is required, if willingness was declared after an infringement action was filed. [1032]

Against this backdrop, the Court found that taking more than three years (and waiting until after the start of the infringement trial) to respond to the Claimant’s notification letter and offer dated 13 February 2017 and Via Licensing’s offer dated 13 April 2017 was an indication that TCL had not been actually willing to take a FRAND licence. [1033] Moreover, the fact that in these (late) responses TCL did not provide constructive feedback that would promote licensing negotiations but mainly complained about the lack of information, which, however, was to a large extent already known or accessible to TCL, was a sign that TCL aimed at delaying the licensing negotiations. [1034]

For instance, the Court criticized the fact that in the response dated 17 June 2020, TCL complained about the lack of information needed for the assessment of Claimant’s offer, although another group company had previously taken a licence from the Claimant with respect to television products; thus, it would have been possible for TCL to access information about Claimant’s SEP portfolio within the TCL group. [1035] The Court also equally criticized TCL’s similar response to Via Licensing by letter dated 17 August 2020. Since TCL had already evaluated and signed a pool licence in the past, it should have provided detailed feedback to Via Licensing’s offer rather than just requesting more information. [1036] As far as TCL had asked in the same letter for a list of patents relevant for the AAC standard, the Court identified delaying tactics from TCL’s side, especially considering that Via Licensing had shared such list along with the letter dated 13 April 2017. [1037] The same was true with respect to TCL’s request to be provided with an updated draft pool licensing agreement, given that the current version of Via Licensing’s standard agreement was available online. [1038]

Furthermore, the Court saw another indication of missing willingness in TCL’s request to receive claim charts concerning any new patent added to the portfolio after 2017. [1039] Given that the Claimant had shared claim charts allowing for a first assessment of the standard-essentiality of portfolio patents already with the notification of infringement, the Court could not identify a reason why the obtainment of further claim charts was relevant. [1040] Moreover, it noted that there was no industry practice creating an obligation to present claim charts for new portfolio patents; claim charts usually cover only a ‘proud-list’ of patents. [1040] In any case, repeated requests to ‘update’ an offer made by ‘particularly reluctant’ implementers, like TCL, could be used as an excuse to keep the SEP holder ‘busy’. [1041]

In addition, the Court found that TCL’s behaviour with respect to the disclosure of third-party agreements indicated its intention to delay negotiations. [1042] TCL requested by letter dated 17 June 2020 (that is more than three years after receipt of the infringement notification) to be granted access to third-party licensing agreements. Subsequently, TCL refused to sign a draft NDA prepared by the Claimant and filed a motion requesting the Court to order production of relevant agreements instead. [1043] Three weeks after the Court dismissed this motion encouraging the parties to conclude an NDA, TCL approached the Claimant and it was agreed to set-up a respective agreement, which was finally signed after almost a month. [1044] Considering the fact that TCL had engaged ‘extremely hesitantly’ in licensing negotiations for more than three years, the Court found that TCL’s motion for document production – although admissible for a procedural viewpoint – demonstrated its (still present) ‘unwillingness’. [1045]

Similarly, the Court criticized the fact that TCL did not review and assess the third-party agreements made accessible by the Claimant in due course. [1046] Approximately ten days after the signing of the NDA, the Claimant provided access to a data room to TCL, in which relevant pool licensing agreements were placed. Initially, TCL’s representatives accessed the data room only very briefly and started downloading documents only two and a half weeks after access to the data room was granted. In the eyes of the Court, it could be expected from a ‘willing’ implementer to start reviewing relevant third-party contracts immediately, especially after years of inactivity. [1047]

Apart from the belated access to the data room, the Court also pointed out the fact that, after having reviewed the documents, TCL refrained from a constructive substantive discussion on the content of the agreements and, basically, just argued again that the Claimant did not fulfil its information duties. [1048] Constructive negotiations cannot take place, if the party solely contests information shared by its counter-part, without making use of available information sources to the extent possible. [1049] For instance, TCL could have engaged respective service providers in order to access sales numbers of third-party licensees, with which agreements were in place, or use public websites for confirming information about the fee structure of pools comparable to Via Licensing, to which the Claimant had referred. [1050] On the other hand, the Court noted that TCL denied providing figures concerning past sales to the Claimant, while – at the same time – it complained about allegedly discriminatory discounts previously granted to third-party licensees for so called ‘release payments’ for past infringement. [1051] Given that the Claimant could not access such information by itself, TCL’s refusal illustrated, according to the Court, the need to seriously engage in negotiations, as otherwise the SEP holder will lack information needed to adequately take implementer’s interests into consideration. [1052]

The Court further underlined that TCL’s behaviour outside of the proceedings offered no indication of serious efforts towards the execution of a licence. [1053] Indeed, TCL had not engaged in negotiations with the Claimant in parallel to the proceedings, even though it had claimed to be prepared to do so, in order to justify a request for the extension of a deadline filed with the Court. [1054] What is more, TCL had not entered into bilateral licences with another holder of AAC-relevant SEPs, despite the fact that it implemented the ACC standard as a whole. [1055]
 

Implementer’s counteroffer

Besides that, the Court found that TCL’s counteroffer dated 13 March 2021 did not suffice for assuming that TCL was adequately willing to take a licence. [1056] Its offer was made only ten days before the oral hearing and , therefore, could not be the basis for serious negotiations. [1057] This was also true, since in the counteroffer TCL insisted on the same conditions agreed with a third licensee, although the Claimant had provided justification for the different treatment of said licensee, which TCL had just ignored. [1058] At the same time, TCL refused to disclose information about own past sales, which could prove that it is similarly situated to the third licensee in question. [1058]
 

SEP holder’s conduct

Finally, the Court expressed no doubt that the high threshold applied above for the assessment of TCL’s willingness to obtain a licence was justified, particularly considering that the Claimant had been prepared to grant a FRAND licence to TCL. [1059]

In particular, the Claimant had swiftly provided an updated patent list to TCL in June 2020 and had taken initiative to draft an NDA, which would allow the latter to access third-party licensing agreements. [1060] Upon signing of the NDA, the Claimant also provided access to such agreements in due course and to the extent necessary. [1061]

In the eyes of the Court, it was not harmful that bilateral agreements signed by the Claimant were made available approx. three weeks after TCL was granted access to the data room set up for this purpose (initially, only pool licensing agreements were uploaded). [1062] The Claimant had reasonably explained that this time was needed to inform third licensees, respectively to ask for their consent. [1062] Furthermore, TCL had shown no interest in reviewing the agreements as soon as possible, since it used the data room with delay. [1063]

The Court further disagreed with TCL’s view that the Claimant had not fully disclosed all relevant third-party agreements. [1064] The Claimant was not under an obligation to present licensing agreements covering other products than smartphones and tablets, for which a licence was offered to TCL, since such agreements can have no impact on the competitive position of TCL in the market. [1065] The same was true with respect to expired agreements, which the Claimant had not disclosed as well. [1066] Expired agreements have no relevance from an non-discrimination standpoint, even if the licence offered to the implementer shall also cover past sales. [1066]
 

C. Other issues

The Court refused to stay the present proceedings pending a referral of certain questions concerning the interpretation of the Huawei decision to the CJEU, which another chamber of the Duesseldorf District Court had launched in November 2021 in the matter Nokia v Daimler [1067] . The Court took the view that the standard developed by the Federal Court of Justice in the Sisvel v Haier cases, which the Court applied here particularly for the assessment of TCL’s willingness to obtain a licence, does not lead to a different outcome compared to the standard used by German District and Higher District Courts prior to the Sisvel v Haier decisions.Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, paras. 341-355.
 

• [1006] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 23/20 (cited by www.nrwe.de).
• [1007] Ibid, paras. 123-138.
• [1008] Ibid, para. 136.
• [1009] Ibid, paras. 174 et seqq.
• [1010] Ibid, paras. 177 and 184.
• [1011] Ibid, para. 181.
• [1012] Ibid, para. 186 et seqq.
• [1013] Ibid, para. 190.
• [1014] Ibid, para. 193.
• [1015] Ibid, paras. 187 and 192 et seqq.
• [1016] Ibid, para. 199 et seqq.
• [1017] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
• [1018] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, para. 200.
• [1019] Ibid, para. 207.
• [1020] Ibid, paras. 208 et seqq.
• [1021] Ibid, para. 208.
• [1022] Ibid, paras. 209 et seq.
• [1023] Ibid, paras. 215 et seqq.
• [1024] Ibid, para. 216.
• [1025] Ibid, para. 218.
• [1026] Ibid, para. 219.
• [1027] Ibid, paras. 221 et seq. The Court explained that the entire conduct of the implementer needs to be considered for the assessment of willingness, para. 226.
• [1028] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [1029] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17.
• [1030] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, para. 224.
• [1031] Ibid, para. 224.
• [1032] Ibid, para. 225.
• [1033] Ibid, paras. 230 et seqq.
• [1034] Ibid, para. 232.
• [1035] Ibid, paras. 236 et seqq.
• [1036] Ibid, para. 244.
• [1037] Ibid, para. 245.
• [1038] Ibid, para. 247.
• [1039] Ibid, paras. 239 et seqq.
• [1040] Ibid, para. 240.
• [1041] Ibid, para. 241.
• [1042] Ibid, para. 249.
• [1043] Ibid, para. 251.
• [1044] Ibid, para. 252.
• [1045] Ibid, para. 254.
• [1046] Ibid, paras. 256 et seqq.
• [1047] Ibid, para. 263.
• [1048] Ibid, paras. 265 et seqq.
• [1049] Ibid, para. 274.
• [1050] Ibid, paras. 270 and 278.
• [1051] Ibid, paras. 280 et seqq.
• [1052] Ibid, para. 281.
• [1053] Ibid, para. 285.
• [1054] Ibid, para. 286.
• [1055] Ibid, para. 287.
• [1056] Ibid, paras. 290 et seqq.
• [1057] Ibid, para. 291.
• [1058] Ibid, para. 296.
• [1059] Ibid, paras. 299 and 301.
• [1060] Ibid, para. 303.
• [1061] Ibid, para. 306.
• [1062] Ibid, para. 310.
• [1063] Ibid, para. 311.
• [1064] Ibid, paras. 313 et seqq.
• [1065] Ibid, para. 316.
• [1066] Ibid, para. 322.
• [1067] Order dated 26.11.2020, Case No. 4c O 17/19. The case was settled before the CJEU rendered a decision.
• [1068] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, paras. 341-355.

GE (Access Advance) v Vestel

21 December 2021 - Case No. 4c O 42/20

A. Facts

The Claimant, GE Video Compression (GE), holds patents essential to the practice of the High Efficiency Video Coding (HEVC) standard (standard essential patents, or SEPs). GE made an undertaking towards the relevant standardisation body (International Telecommunication Union, ITU) to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The Defendant, Vestel, is a global company with headquarters in Turkey, which manufactures electronic devices, including television sets and set-top-boxes. Vestel’s products sold in the German market support DVB-T2, which uses the encoding process of the HEVC standard.

GE offers bilateral licences to its SEP portfolio and has also joined a patent pool administered by Access Advance (Access Advance or Access Advance pool). The website of Access Advance contains general information about the licensing program and the fee structure, claim charts and the standard pool license agreement. Also available on the website is the so-called ‘Duplicate Royalty Policy’ addressing cases, in which patents contributed to the pool are covered by third party licences as well. This policy is linked to the document entitled ‘Duplicate Royalty Implementation Process’ that describes the procedure for dealing with potentially duplicate payments with regards to pool patents. Approximately 225 licensees have signed agreements with the Access Advance pool.

On 3 April 2017, Access Advance notified the parent company of the Vestel group via e-mail about the fact that several products make use of the HEVC standard. For further information, Vestel was directed to Access Advance’s website. Specific patents were not expressly mentioned in said e-mail.

Following a face-to-face meeting in December 2017, Access Advance provided claim charts to Vestel on 11 January 2018 and particularly elaborated that 17 pool patents were considered to be infringed.

On 15 May 2018, Access Advance sent a first license offer to Vestel. On 11 June 2018, Access Advance and Vestel had a meeting in person focusing on technical questions, in which further claim charts were shared. On 11 July 2018, Access Advance highlighted that further pool patents were infringed and pointed out that it was also possible for Vestel to obtain bilateral licences from the individual SEP holders that joined the pool.

In December 2018, Vestel signed a licence with a patent pool administered by MPEG LA (MPEG LA pool), which covers HEVC-related SEPs as well. Between the portfolios of the Access Advance pool and the MPEG LA pool there is a partial overlap.

In January 2019, Vestel made a counteroffer to Access Advance. At the same time, Vestel filed an action against Access Advance and a pool member before the High Court of England and Wales (High Court), requesting the High Court to declare that the rates contained in said counteroffer were FRAND (UK court proceedings). The UK court proceedings ended after both the High Court and the Court of Appeal dismissed Vestel’s action due to lack of jurisdiction.

In April 2019, GE made a bilateral license offer to Vestel. Vestel did not sign an agreement with GE (or with any other SEP-holder that is a member of the Access Advance pool).

In July 2020, Vestel filed another action against both Access Advance and certain pool members before the District Court of the Hague in the Netherlands, requesting for the determination of FRAND rates based on its previous counteroffer (Dutch court proceedings). These proceedings were not concluded by the time the case at hand was decided.

In August 2020, GE filed the infringement action against Vestel before the District Court of Duesseldorf (Court). Other members of the Access Advance pool launched infringement proceedings against Vestel before the same court as well.

After the actions were filed in Germany, further offers for both a pool licence and a bilateral licence were made to Vestel by Access Advance and GE respectively in October and November 2020 as well as in March 2021. Vestel made an updated counteroffer in September 2021. No agreement was, however, reached.

With the present judgmentGE (Access Advance) v Vestel, District Court of Düsseldorf, judgment dated 21 December 2021, Case No. 4c O 42/20 (cited by www.nrwe.de)., the Court recognised Vestel’s liability for patent damages on the merits and ordered Vestel to render accounts for sales in Germany since January 2017. On the other hand, GE’s claims for injunctive relief and the recall and destruction of infringing products were dismissed.
 

B. Court’s reasoning

The Court held that the patent-in-suit is infringed and essential to the HEVC standard. [2]

Nevertheless, the claims for injunctive relief (as well as the recall and destruction of infringing products) asserted by GE were dismissed for the time being, since – in the eyes of the Court – Vestel could successfully invoke a ‘FRAND-defence’ based on Article 102 of the Treaty on the Functioning of the EU (TFEU), which prohibits an abuse of a dominant market position [3] . For the respective assessment, the Court relied on the standard established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE (Huawei judgment) [4] , as it was further fleshed out by two rulings of the German Federal Court of Justice (Bundesgerichtshof) in the matter Sisvel v Haier [5] .GE (Access Advance) v Vestel, District Court of Düsseldorf, judgment dated 21 December 2021, para. 216.
 

Abuse of dominant market position

The Court found that GE had abused its dominant market position in violation of Article 102 TFEU. [7]

The Court accepted that GE holds a dominant position in the relevant market that is the market, in which licences for the patent-in-suit are offered. [8] Owning a patent, even a standard-essential patent, does not constitute per se a condition for market dominance; that must be assessed on a case-by-case basis. [9] As a rule, a dominant position will, however, be given, if the use of an SEP is a pre-requisite for entering a downstream market. This applies also when – from a technical viewpoint – functionalities relevant for the downstream market are not available without the use of the patent and ‘general interoperability / compatibility' is endangered. [9]

Against this backdrop, the Court reasoned that the patent-in-suit conferred market dominance to GE: Although practicing the HEVC standard is no market entry requirement, compliance with said standard is an ‘essential factor’ for offering competitive products in the downstream market. [10] On the one hand, only the HEVC standard allows for streaming of large data volumes in good quality, which is a ‘must-have’ feature for the average user. [11] On the other hand, end-device manufacturers, such as Vestel, usually have to offer products supporting every current coding standard, taking into account that producers of video content use different standards. [12]

The Court noted that the burden of pleading and proof concerning the existence of a market dominant position rests on the defendant. [13] Notwithstanding that, the Court did not consider the fact that Vestel did not plead specific facts establishing the market dominant position of GE to be harmful. [14] Vestel had just invoked previous judgments in parallel proceedings, in which the Court had established that GE held such position.

Exceptionally, this was deemed to be sufficient, because there were no indication suggesting that the commercial position of GE was different in the present case. [14]
 

Parties’ conduct obligations

The Court then took the view that GE had failed to fully meet the FRAND obligations arising from its dominant market position. [15]

A patent holder, who made a FRAND commitment towards a standardisation body, abuses its market dominance, when it refuses to license an infringer willing to obtain a licence and files a suit for injunctive relief (and/or the recall and/or destruction of infringing products) instead. The same is true, when the patent holder has not lived up to the ‘particular responsibility’ to facilitate the conclusion of a licensing agreement on FRAND terms with a ‘willing’ infringer, to which the latter is entitled. [16]

In each individual case, courts shall, on the one hand, examine the conduct obligations of the SEP holder, which originate from competition law and are eventually influenced by the (contractual) FRAND commitment. [17] On the other hand, courts must also examine whether the infringer acted in ‘good faith’ as a potential licensee: Insofar, the infringer must request a FRAND-licence, whereby mere ‘lip service’ is not sufficient. [17] Indeed, a sole request to be granted a licence is not enough, when – from an objective point of view – the further behaviour of the infringer demonstrates without doubt that no ‘serious will’ to sign a licence exists, but the only goal of such request was to ‘hold-out’ the SEP-holder and delay infringement litigation in order to continue the use of the patent. [17]
 

Notification of infringement

Looking at the parties’ behaviour in detail, the Court confirmed that an adequate notification of infringement was made. [18]

The purpose of such notification is to call infringer’s attention to the patent infringement and the possibility (and necessity) to obtain a licence. The patent, the way it is infringed, as well as the infringing embodiments should be designated; detailed technical and legal analysis is, however, not required. [19] Reference to the standard-essentiality of the patent or a ‘mapping’ of the claims to the relevant specifications of the standard are not needed either. [19]

According to the Court, Access Advance’s e-mail dated 11 January 2018 in conjunction with the first e-mail previously sent to Vestel on 3 April 2017 constitute a proper infringement notification. [20] The fact that the first e-mail did not designate specific patents, but just referred to the patent list that was available on Access Advance’s website was problematic, since this way the infringement allegation was not sufficiently specified; this flaw was, however, corrected by providing Vestel with 17 claim charts by the e-mail dated 11 January 2018. [21]

Furthermore, the Court noted that it was acceptable to address the notification of infringement to the parent company of the Vestel group, since this corresponds to common practice, and it can regularly be expected that the parent company will inform the affected affiliates respectively. [22]
 

Willingness

Considering Vestel’s behaviour, the Court concluded that, prior to litigation, Vestel had – at least – implicitly requested to be granted a licence and this request could not be seen as mere ‘lip service’. [23]

The Court explained that, in its ‘licensing request’ towards the SEP holder, the implementer must express its ‘serious’ willingness to conclude a license agreement on FRAND terms [24] . For this, no strict requirements apply, in terms of form; the willingness to sign a licence can be expressed in a ‘blanket’ and ‘informal‘ manner, as well as through ‘implicit behaviour’. [24] The infringer shall be given sufficient time to respond, depending on the level of detail of the infringement notice; delaying tactics are, however, prohibited. [24]

It is required that – from the SEP holder’s point of view – the implementer’s willingness is ‘clearly’ articulated; the patent holder must be certain throughout the negotiations that the implementer is seriously interested in a licence. [24] Accordingly, the entire conduct of the infringer throughout the licensing negotiations must be taken into account; this could mean that an initial willingness can be ‘undone’ by the subsequent behaviour of the implementer. [25] In other words, the (general) willingness to sign a licence must be given ‘permanently’. [25]

In the eyes of the Court, the ‘licensing request’ shall, nevertheless, not be subject to strict conditions in terms of content. [26] It will be sufficient to indicate whether the infringer is, in principle, prepared to take a licence or whether this is entirely ruled out. [26] At this stage, it cannot be expected from the infringer to deal with specific licensing conditions, or to make a counteroffer (as this would be incompatible with the procedure established by the Huawei judgment). [27]

Should the infringer make a counteroffer, then only the circumstances and the fact that such counteroffer was made can be considered for the assessment of willingness as part of the negotiation history; not, however, the FRAND-conformity of individual contractual clauses in terms of content. [28] The same is true also with respect to a license offer made by the SEP holder: the content of such offer can equally play no role in the assessment of willingness and lower, for instance, the requirements on the infringer’s conduct (e.g., if the offer is deemed to be ‘evidently un-FRAND’). [29] In the eyes of the Court, the actual FRAND-conformity of licensing terms is a question that is linked to the examination of SEP holder’s offer and shall have no impact on the assessment of willingness. [30]

Based on of the above considerations, the Court found that Vestel sufficiently indicated its willingness to obtain a licence towards Access Advance and remained ‘willing’ both before and during the trial. [31]

First, the Court found that Vestel had ‘underlined the fundamental willingness to stay in contact’ with Access Advance after receipt of the first infringement notification in April 2017, particularly by making arrangements for a face-to-face meeting, which then took place in December 2017. [32] In January 2018, Vestel received claim charts, started technical examinations and informed Access Advance respectively. [32] In further correspondence with Access Advance in the spring of 2018, Vestel asked Access Advance to provide a license offer, which the Court considered to be an additional indication of willingness, notwithstanding that the standard license agreement was available on Access Advance’s website, so that it could have been accessed long before it was sent to Vestel on 15 May 2018. [33]

Furthermore, the Court considered in favour of Vestel that after receipt of the offer in May 2018, Vestel continued discussions with Access Advance both on technical and commercial grounds (including in person meetings in November 2018) which – also from Access Advance’s viewpoint – were constructive. [34] The fact that it took Vestel usually several weeks to respond was not seen as harmful, as this was common practice of both parties since the beginning of the negotiations. [35] No objections were raised by the Court against the counteroffer which Vestel made in January 2019 either, although the parties had agreed that Vestel should provide the counteroffer months earlier (October 2018). [36]

The Court saw also no indication of ‘unwillingness’ in the fact that – after having sued Access Advance in the UK in January 2019 – Vestel requested, henceforth, that also outside legal counsel should be present in the negotiations with Access Advance. [37] Similarly, no concerns were expressed by the Court against the temporary stop of the negotiation with Access Advance in the period between May and October 2020. During this time, Vestel had bilateral discussions with GE and other SEP holders, which was seen as acceptable, since Vestel had a legitimate interest to have such parallel negotiations, in order to take an informed decision based on commercial considerations (that is whether and under which conditions a series of bilateral licences was preferrable over a single pool licence). [38] What is more, Vestel had informed Access Advance about these bilateral discussions with SEP holders, so that the latter could hardly assume that Vestel had no longer interest in signing a licence. [38] The further offer made by Access Advance in October 2020 as well as the fact that afterwards it kept contact with Vestel more or less until the oral hearings scheduled by the Court in September/October 2021 indicated this understanding as well. [39]

In addition, the Court found that neither the UK nor the Dutch court proceedings filed by Vestel against Access Advance and certain pool members were sufficient for assuming that Vestel was (no longer) ‘willing’. [40]

Proceedings launched by an implementer are not necessarily an indication that willingness to obtain a licence is missing. [41] As long as the implementer still engages in discussions with the SEP holder in a target-oriented manner during the pending infringement trial, the new lawsuit filed does not ’block’ the negotiations of the parties. [42] Given that Vestel had discussions with Access Advance and individual SEP holders also after the respective actions was filed, the Court could not identify any delays caused by the UK court proceedings with respect to the licensing negotiations. [43] The fact that it should have been obvious also to Vestel that UK courts lacked jurisdiction, was not considered as relevant by the Court in this context. [44] On the contrary, the Court assumed that an implementer could have a justified interest in such parallel litigation, e.g., for confirming the FRAND-conformity of its counteroffer, especially when the (other) court dealing with patent infringement will not address this issue. [45]

The fact that in both UK and Dutch court proceedings Vestel had (also) filed a request for an ‘anti-suit injunction' (ASI) was not seen as harmful by the Court either. [46] Contrary to the view taken by the District Court of Munich, the Court reasoned that the Huawei judgment does not impose an obligation on the implementer to either ’add’ a statement that no ASI will be filed to its declaration of willingness, or to confirm without reason that such measures will not be taken. [47] The implementer is obliged to declare whether a motion for an ASI will be filed or not, only upon specific inquiry on the side of the SEP holder. [48] This had not been, however, the case here, since Access Advance had not raised such a question towards Vestel. [49] Irrespective of this, the Court took the view that the SEP holder did not need ‘additional protection’ here, since the motions for an ASI filed in the UK and the Netherlands were inadmissible due to violation of EU procedural law, so that the infringement trial in Germany could not be impacted. [49]
 

Offer for a pool licence

The Court then moved on to examine, whether Access Advance’s licensing offer to Vestel that was based on its standard pool license agreement was in line with the Huawei framework. [50]

In terms of form, the fact that the draft agreement shared with Vestel had not been signed, did not cause any concerns. [51] In the Court’s view, the CJEU requires only that the SEP holder’s offer contains all usual terms of a license agreement; a binding offer that would lead to the conclusion of a licence through sole acceptance by the implementer is, however, not needed. [51]

Considering that Access Advance offered comprehensive information about the calculation of the royalty rates on its website, the Court further found that the respective duty under the Huawei judgment was met. [52] It was not harmful that the information was not provided along with the actual (written) offer but was separately available online. [53]

In this context, the Court noted that if the patent holder has previously granted licences to third parties, it has to give – depending on the circumstances of the individual case – ‘more or less’ substantiated reasons, why the royalty it envisages is FRAND. [54] When the SEP holder offers licences exclusively based on a standard license agreement, it will, as a rule, suffice to establish the adoption of the licensing programme in practice and to show that the specific offer corresponds to the standard licensing terms. [55]

Having said that, the Court found that Access Advance’s licensing offer was not FRAND in terms of content. [56] In particular, the Court criticized that although the offer covered a considerable number of patents already licensed through the MPEG LA pool, it did not contain a fair and reasonable mechanism for the reimbursement of duplicate royalty payments. [57]

In the eyes of the Court, the fact that an offer includes a ‘not just negligible’ number of patents, to which the implementer is already licensed, is a source of concern, since fee payments would be due also for patents which the implementer is already allowed to use. [58] Even if one would accept that this cannot be avoided under specific circumstances, a fair reimbursement mechanism is required; according to the Court, the mechanism provided by Access Advance did not live up to this requirement. [59]

Whether a reimbursement mechanism addressing the abstract risk of duplicate royalty payments is, generally, needed in pool license agreements was left open by the Court. [60] In any event, such a mechanism was required here, since there was an overlap between the patents licensed under the Access Advance pool and the patents which Vestel had licensed over the MPEG LA pool. [61] To what extend this overlap actually existed was not finally determined by the Court, given that even at the lowest possible end the overlap was deemed to be considerable. [62]

When – as in the present case – a reimbursement regime is needed, then it should be binding for the licensor and allow the licensee to identify both the calculation basis and the approximate amount of compensation for duplicate royalty payments. [63] Apart from pointing out to (and eventually establishing) the existence of duplicate payments, the licensee should not carry the entire burden of seeking an agreement with every individual SEP holder receiving duplicate payments, because this way part of the FRAND obligations of the pool administrator would be ‘passed on’ to the licensee. [64]

The fact that neither the ‘Duplicate Royalty Policy’ nor the ‘Duplicate Royalty Implementation Process’ were incorporated in the text of the standard license agreement was, in the eyes of the Court, not per se harmful. [65] The reimbursement mechanism was, however, not laid down in a uniform and transparent manner. [66]

Apart from that, the Court held that Access Advance’s reimbursement regime was not adequate in terms of content, since the full risk of repayment of duplicate fees was imposed on Vestel. [67] First, the Court noted that safeguards for avoiding duplicate payment in the first place were not in place. [68] Furthermore, three different options for the reimbursement of royalties were provided for (net distribution received from Access Advance; or net distribution received from another pool; or any mount agreed with SEP holder) without, however, any indication of which option would apply in each case. [68] Patent holders were given the choice between those three options. Objective criteria that would make that choice (and, consequently also the amount of the expected reimbursement) reliably transparent to the licensee prior to signing a pool agreement were, however, missing. [68] What is more, a refund of duplicate payments required pro-active measures taken by the licensee (potentially including court action), whereas the pool would assume no task in this direction. [69]

In the view of the Court, the reimbursement mechanism adopted by Access Advance lacks objective justification that could lift the conflict with Article 102 TFEU. [70] The fact that Access Advance had signed agreements with other licensees based on the same standard license agreement was not sufficient for showing that the underlying terms where reasonable also with regards to Vestel. [71] The Court accepted that comparable license agreement can primarily be used to establish the ‘reasonableness’ of individual contractual terms; especially if a large number of contracts has been signed, further going pleadings would likely not be necessary. [71] For this, it is required that the contracts were signed on identical terms and cover the same product market. [71] In the present case, Access Advance had not been able – according to the Court – to sufficiently plead that it had concluded identical license agreements including the reimbursement regime for duplicate payments offered to Vestel in comparable scenarios. [72]

Furthermore, the Court saw no objective justification for Access Advance’s reimbursement mechanism in the fact that duplicate payments can very likely play only a limited role in the future, considering that an increasing number of SEP holders leave the MPEG LA pool and join Access Advance. [73]

In this context, the Court also explained that Vestel can invoke the non-FRAND character of the reimbursement regime also against GE, even though the latter is no recipient of double royalty payments. [74] By joining Access Advance, GE ‘utilizes’ the pool for complying with its FRAND obligations and is, thus, accountable for the pool’s conduct, not least because the pool acts on behalf of every member. [75]
 

SEP holder’s bilateral license offer

The Court added that GE cannot invoke the bilateral relation with Vestel (particularly the bilateral license offer made to Vestel) for enforcing the claims arising from the patent infringement. [76] By choosing to license its patents through the pool, GE is bound – from a competition law angle – to the respective ‘licensing practice’, from which it could only deviate, if ‘express substantive grounds’ can be demonstrated. [77]

SEP holders are, in principle, expected to offer potential licensees also the option to sign a bilateral license agreement; implementers are, on the other hand, allowed to engage in negotiations both bilaterally and with the pool. [78] However, the Court felt that when the ‘actual licensing practice’ of the patent holder is directed towards one ‘licensing form’ (here: licensing through the pool), the SEP holder’s ‘right of choice’ is limited to this ‘practice’. [78] Such ‘contractual limitation of the right of choice’ is justified, according to the Court, by the fact that a ‘customary practice’ to grant pool licences has emerged in the specific industry. [78] A change towards a different ‘licensing practice’ is not ruled out; the SEP holder must, however, present ‘substantive grounds’ for such change, which could be, e.g., given, if the implementer uses only the patents of the specific patent holder, or intends to sign bilateral agreements with other relevant SEP holder as well. [79]

In the eyes of the Court, GE failed to show ‘substantive grounds’, justifying the conclusion of a bilateral licence with Vestel. [80] The Court placed particular weight on the fact that the parties invested a considerably shorter amount of time in the bilateral negotiations compared with the negotiations between Vestel and the Access Advance pool. [81] This indicates, according to the Court, that GE had no continuing interest in signing a bilateral licence with Vestel, respectively that ‘substantive grounds’ for deviating from the current ‘licensing practice’ were not given. [81]
 

C. Other issues

Having concluded that Access Advance had not fully met the conduct obligations under Article 102 TFEU, the Court ruled that Vestel was entitled to a claim for damages. [82] As a consequence, Vestel could not be held liable for paying damages for patent infringement to GE that would exceed the amount of a FRAND-compliant royalty rate. [83]

Following the case-law of the Federal Court of Justice, the Court explained that a respective damage (counter-)claim is given when the implementer had been willing to obtain a licence and the SEP holder has either denied signing a licence or offered terms that were not FRAND. [84] These conditions were met here. [85] The Court reiterated in this context, that GE should be held accountable for Access Advance’s conduct. [86]
 

• [1] GE (Access Advance) v Vestel, District Court of Düsseldorf, judgment dated 21 December 2021, Case No. 4c O 42/20 (cited by www.nrwe.de).
• [2] Ibid, paras. 128-215.
• [3] Ibid, para. 216.
• [4] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
• [5] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17; Sisvel v Haier II, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17.
• [6] GE (Access Advance) v Vestel, District Court of Düsseldorf, judgment dated 21 December 2021, para. 216.
• [7] Ibid, para. 217.
• [8] Ibid, para. 223.
• [9] Ibid, para. 224.
• [10] Ibid, para. 228.
• [11] Ibid, paras. 228 et seq.
• [12] Ibid, paras. 228 and 230.
• [13] Ibid, para. 225.
• [14] Ibid, para. 227.
• [15] Ibid, para. 233.
• [16] Ibid, paras. 234 et seq.
• [17] Ibid, para. 236.
• [18] Ibid, paras. 240 et seqq.
• [19] Ibid, para. 242.
• [20] Ibid, paras. 244 et seqq.
• [21] Ibid, paras. 249 et seq.
• [22] Ibid, paras. 246 et seq.
• [23] Ibid, para. 252.
• [24] Ibid, para. 254.
• [25] Ibid, para. 261.
• [26] Ibid, para. 255.
• [27] Ibid, para. 256.
• [28] Ibid, para. 259.
• [29] Ibid, para. 260.
• [30] Ibid, paras. 257, 258 and 261.
• [31] Ibid, para. 263.
• [32] Ibid, para. 265.
• [33] Ibid, paras. 266 et seq.
• [34] Ibid, paras. 269 et seq.
• [35] Ibid, para. 271.
• [36] Ibid, paras. 271 et seq.
• [37] Ibid, para. 274.
• [38] Ibid, para. 276.
• [39] Ibid, paras. 277-279.
• [40] Ibid, paras. 283 et seqq.
• [41] Ibid, para. 285.
• [42] Ibid, para. 286.
• [43] Ibid, paras. 287 et seq.
• [44] Ibid, para. 288.
• [45] Ibid, para. 289.
• [46] Ibid, paras. 292 et seqq.
• [47] Ibid, para. 294.
• [48] Ibid, para. 295.
• [49] Ibid, para. 296.
• [50] Ibid, paras. 304 et seqq.
• [51] Ibid, para. 308.
• [52] Ibid, paras. 313 et seqq.
• [53] Ibid, para. 314
• [54] Ibid, para. 309
• [55] Ibid, para. 310.
• [56] Ibid, paras. 304 and 317 et seqq.
• [57] Ibid, para. 318.
• [58] Ibid, para. 324.
• [59] Ibid, paras. 330 and 333.
• [60] Ibid, para. 330.
• [61] Ibid, paras. 330 et seq.
• [62] Ibid, para. 331.
• [63] Ibid, para. 337.
• [64] Ibid, para. 338.
• [65] Ibid, paras. 341 et seq.
• [66] Ibid, para. 343.
• [67] Ibid, para. 340.
• [68] Ibid, para. 349.
• [69] Ibid, para. 350.
• [70] Ibid, paras. 388 et seqq.
• [71] Ibid, para. 391.
• [72] Ibid, paras. 392-398.
• [73] Ibid, para. 406.
• [74] Ibid, paras. 414 et seq.
• [75] Ibid, para. 415.
• [76] Ibid, para. 423.
• [77] Ibid, para. 424.
• [78] Ibid, para. 428.
• [79] Ibid, paras. 429 et seq.
• [80] Ibid, para. 432.
• [81] Ibid, para. 433.
• [82] Ibid, paras. 478 et seqq.
• [83] Ibid, para. 495.
• [84] Ibid, para. 481.
• [85] Ibid, paras. 483 et seqq.
• [86] Ibid, paras. 489 et seqq.

Cases from Regional Court - LG Mannheim

7 O 24/14

4 March 2016 - Case No.

A. Facts

Case No. 7 O 24/14 [1069] 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’). [1070] 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. [1071] 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. [1072] 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. [1073] 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. [1074]

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. [1075] 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. [1076] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [1077]

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. [1078] 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. [1073] 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. [1079] 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. [1080]

The offer needs to include the calculation method in respect of the royalties. [1079] However, the CJEU did not elaborate on the level of detail required. [1081] 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. [1082]

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. [1081] 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. [1083] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [1083] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [1084]

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. [1081]

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. [1085] 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. [1086] 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. [1086]

• [1069] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
• [1070]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
• [1071] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
• [1072] Ibid, p. 22.
• [1073] Ibid, p. 23.
• [1074] Ibid, p. 34/35.
• [1075] Ibid, p. 26.
• [1076] Ibid, pp. 27-30.
• [1077] Ibid, p. 33.
• [1078] Ibid, p. 21.
• [1079] Ibid, p. 24.
• [1080] Ibid, p. 37.
• [1081] Ibid, p. 25.
• [1082] Ibid, p. 35/36.
• [1083] Ibid, p. 38.
• [1084] Ibid, pp. 38-40.
• [1085] Ibid, p. 43.
• [1086] Ibid, p. 44.