Via Licensing v TCL

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

http://caselaw.4ipcouncil.com/german-court-decisions/olg-dusseldorf/licensing-v-tcl

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. [3]

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 [4] (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. [6] The District Court had followed the standard set forth by the German Federal Court of Justice (Bundesgerichtshof) in Sisvel v Haier I [7] and Sisvel v Haier II [8] , 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 [10] , 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). [12]

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. [13] 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. [14]

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. [15] 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. [16]

The Court also criticised TCL for requesting access to third-party licensing agreements more than three years after being first notified about the infringement. [17] 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. [18] The Court agreed with the District Court that this behaviour was an additional indication of ‘unwillingness.’ [18]

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. [19]

Furthermore, the Court confirmed that TCL’s counteroffer dated March 2021 did not suffice to show that TCL was willing to take a licence. [14] 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. [20] Against this background, the Court did not consider harmful the fact that the District Court had not examined whether TCL’s counteroffer was FRAND. [21] 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. [22]

The Court further said that the District Court had not erred by not examining whether the Claimant’s licensing offer to TCL was FRAND. [23] 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. [24]

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. [25]
 

• [1] Via Licensing v TCL, District Court Düsseldorf, judgment dated 11 May 2021, Case No. 4b O 23/20.
• [2] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, Case No. I-15 U 39/21 (cited by www.nrwe.de).
• [3] Ibid, para. 11.
• [4] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
• [5] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 12.
• [6] Ibid, paras. 13 et seqq.
• [7] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
• [8] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17.
• [9] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 16.
• [10] 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.
• [11] Via Licensing v TCL, Higher District Court of Düsseldorf, 20 July 2021, para. 20.
• [12] Ibid, para. 20.
• [13] Ibid, para. 21.
• [14] Ibid, para. 25.
• [15] Ibid, paras. 24 and 25.
• [16] Ibid, para. 24.
• [17] Ibid, para. 28.
• [18] Ibid, para. 30.
• [19] Ibid, para. 31.
• [20] Ibid, para. 36 and 39.
• [21] Ibid, paras. 35 et seqq.
• [22] Ibid, para. 38.
• [23] Ibid, paras. 34 and 44.
• [24] Ibid, para. 44.
• [25] Ibid, para. 48.