Case Law post CJEU ruling Huawei v ZTE

Sisvel v Xiaomi, Court of The Hague

1 August 2019 - Case No. C/09/573969/ KG ZA 19-462

http://caselaw.4ipcouncil.com/dutch-court-decisions/sisvel-v-xiaomi-court-hague

A. Facts

In 2012, the Claimant, Sisvel International (Sisvel), acquired from Nokia patents EP 1 129 536 B1 (EP 536) and EP 1 119 997 B1 (EP 997) [1] . EP 536 and EP 997 that have been declared standard essential patents (SEPs). EP 536 relates to the EGPRS/EDGE functionality of the GSM standard, while EP 997 has been declared essential to the LTE standard [2] .

On 10 April 2013, Sisvel made a FRAND commitment to the ETSI with a list of patents declared as essential, including EP 536 and EP 997 [3] .

Sisvel contacted the Defendant, Xiaomi, on 15 October 2013 for a license under the Sisvel Wireless Patents [4] , under which patents EP 536 and EP 997 are licensed.

Sisvel sent a further letter dated 16 July 2014 and followed up by emails on 3 December 2014, 4 December 2014 and 5 March 2015 inviting Xiaomi to contact Sisvel to negotiate a FRAND license [5] .

On 21 November 2018, Belsimpel (a Dutch online retailer) announced on its website that Xiaomi had selected Belsimpel as its official partner in the Netherlands [6] .

On 29 March 2019, Xiaomi prepared to enter the Dutch market by opening physical stores and online shops [7] .

On 23 April 2019, Sisvel filed proceedings against Xiaomi in London, seeking a declaration that the terms and conditions of the MCP Pool License (under which EP 536 and EP 997 are licensed) are FRAND or, in the alternative, the determination of a FRAND rate, and that three of the MCP patents (including EP 536 and EP 997) are valid and infringed [8] .

In the current proceedings before the Court of The Hague (the Court), launched on 29 May 2019, Sisvel sought a preliminary injunction against Xiaomi; a preliminary injunction to be imposed until Xiaomi agrees on Sisvel’s offer to go to arbitration, or alternatively the removal of the EGPRS/EDGE and LTE functionalities in Xiaomi’s products [2] . The Court rejected Sisvel’s injunction request, considering the urgency requirement was not fulfilled [9] and concluded that the removal of standardised functionalities or standard-compliant products from the market would be too damaging to Xiaomi [10] .

B. Court’s reasoning

Urgency

Xiaomi challenged the adequacy of a preliminary ruling for this case in view of the complexity of the matter and the balance of parties’ interests [9] . The Court accepted this argument and referred to the circumstances of the case to reject the preliminary injunction [11] .

The Court stated that FRAND licensing disputes are not well suited to preliminary rulings. As the SEP-holder has committed to license its SEPs on FRAND terms and conditions, the damages it suffers from the infringement is the absence of a FRAND license and related compensation [12] . The Court further added that in compliance with the CJEU ruling in Huawei v. ZTE, [13] a SEP-holder is not prevented from seeking an injunction against an infringer [12] . However, the urgency requirement for an injunction on SEPs is higher than for a common patent infringement cases [11] .

When assessing each party’s interests, the Court considered that the damage to Xiaomi, active in the Netherlands since March 2019, would be high: Xiaomi would either have to remove the EGPRS/EDGE and LTE functionality from its phones or stop selling the relevant phones on the Dutch market [14] . On Sisvel’s side, the Court found a lack of urgency in view of the circumstances of the case: Sisvel was looking for an international FRAND license and negotiations had lasted for 6 years, that the Court considered as a counterindication of urgency [11] . The Court declared, however, that the fact EP 997 was due to expire soon was irrelevant for the assessment of urgency, as Sisvel holds other SEPs in its portfolio that will last for longer term [11] .

Another factor that the Court found important, in balancing the interests of each side, was that Sisvel had, in parallel to the Dutch proceedings, also asked the High Court in London to declare that Sisvel’s FRAND rate was indeed FRAND or, in the alternative, to set an international FRAND rate for Sisvel’s portfolio. Sisvel had committed to comply with the rate the High Court would set, even in the Dutch proceedings [15] .

The Court concluded that Sisvel was seeking an injunction which could simply be avoided through the payment of a FRAND rate [11] . And if the Court determined a FRAND rate in a preliminary ruling which turned out to be higher than a FRAND rate determined in a full trial on merits in the High Court in London or the Netherlands, then legal uncertainty would follow [11] . The Court also stated that Sisvel’s sole interest was to receive FRAND compensation. It thus considered the preliminary injunction proceedings to be more a means for Sisvel to force Xiaomi to the negotiations table and to pay a compensation that may not necessarily be FRAND [16] . The Court therefore refused to grant Sisvel injunctive relief.

  • [1] Court of The Hague, judgement dated 1 August 2019, par. 2.2.
  • [2] Court of The Hague, judgement dated 1 August 2019, par. 3.1.
  • [3] Court of The Hague, judgement dated 1 August 2019, par. 2.9.
  • [4] Court of The Hague, judgement dated 1 August 2019, par. 2.11.
  • [5] Court of The Hague, judgement dated 1 August 2019, par. 2.12.
  • [6] Court of The Hague, judgement dated 1 August 2019, par. 2.14.
  • [7] Court of The Hague, judgement dated 1 August 2019, par. 2.15.
  • [8] Court of The Hague, judgement dated 1 August 2019, par. 2.16.
  • [9] Court of The Hague, judgement dated 1 August 2019, par. 4.2 and following.
  • [10] Court of The Hague, judgement dated 1 August 2019, par. 4.4
  • [11] Ibidem
  • [12] Court of The Hague, judgement dated 1 August 2019, par. 4.3.
  • [13] Court of Justice of the European Union, Huawei v ZTE, judgment dated 6 July 2015.
  • [14] Court of The Hague, judgement dated 1 August 2019, par. 4.4.
  • [15] Court of The Hague, judgement dated 1 August 2019, par. 4.5.
  • [16] Court of The Hague, judgement dated 1 August 2019, par. 4.6.