Wiko SAS v Koninklijke Philips N.V., Supreme Court of the Netherlands

2 July 2021 - Case No. 19/04503

http://caselaw.4ipcouncil.com/dutch-court-decisions/supreme-court-netherlands/wiko-sas-v-koninklijke-philips-nv

A. Facts

This decision relates to patent EP1 623 511 for a Communication System (EP511) [1] held by Philips. EP511 is relevant to the HSDPA protocol as part of the UMTS/3G standard [2] . Philips submitted a FRAND commitment (FRAND stands for fair, reasonable and non-discriminatory terms and conditions) to the European Telecommunications Standards Institute (ETSI) with respect to EP511 as well as patents EP1 685 659 (EP659) and EP1 440 525 (EP525) [3] .

On 13 October 2014, Philips notified Wiko by letter about its UMTS and LTE portfolio of standard essential patents (SEPs) and indicated that a FRAND license was available [4] . In the letter, Philips invited Wiko to start licensing negotiations [5] . A few reminders were sent in vain [5] .

On 28 July 2015, Philips sent a draft license agreement and claim charts to Wiko, with a deadline for Wiko to indicate by 25 August 2015 whether it was ready to negotiate a licence [6] . Wiko did not react. Nonetheless, on 25 September 2015, Philips sent updated claim charts to Wiko, without, however, hearing back from Wiko afterwards [5] .

On 19 October 2015, Philips started court proceedings against Wiko in the Netherlands based on EP659, EP525 and EP511 [7] . Additionally, Philips filed infringement actions against Wiko in Germany and France [5] . Philips also sued HTC and Asus in the UK for infringement of EP511. The High Court of England and Wales considered EP511 to be new and inventive [8] .

On 25 August 2016, Wiko made a counteroffer to Philips [9] . Wiko also rendered accounts for worldwide sales in 2016 and made security payments on an escrow account for a total of 825,000 Euro [5] .

On 2 March 2018, the District Court (Landgericht) of Mannheim dismissed Philips’ action. It accepted Wiko’s FRAND defense [2] while it declared that Philips’ offer was not FRAND (Mannheim judgment). [10]

In the first instance proceedings in the Netherlands, the District Court of the Hague declared EP511 invalid and sentenced Philips to bear the cost of the proceedings [11] . Philips appealed and introduced three alternative patent claim formulations [12] . In the Dutch appeal proceedings, Wiko requested recognition of the Mannheim judgement [13] and raised a FRAND defense, arguing that Philips had not complied with its FRAND duties [14] and abused its dominant market position [15] . By judgment dated 2 July 2019, the Court of Appeals of The Hague (Court of Appeals) held that all specifications of claim 1 of EP511 as modified by the second alternative formulation introduced by Philips were incorporated in Wiko’s products, as Wiko did not challenge that its products implemented the UMTS standard [5] . It further rejected Wiko’s FRAND defense and Wiko’s claim of abuse of market dominance on the side of Philips. What is more, the Court of Appeals found that Wiko had not demonstrated willingness to obtain a FRAND licence before the start of the court proceedings, as it did not comply with its own FRAND duties [5] . Furthermore, Wiko did not justify why Philips’ offer was not FRAND [5] . Therefore, injunction, recall of products, and damages as lost profits and/or compensation for damages were ordered [5] . The Court of Appeals also rejected the recognition of the Mannheim decision as it related to a different patent [5] .

Wiko appealed this decision to the Dutch Supreme Court (Supreme Court). With the present judgment, the Supreme Court rejected further hearing of the appeal [16] . On 25 February 2022, the Supreme Court confirmed the rejection Wiko’s appeal and sentenced Wiko to process costs [17]
 

B. Court’s reasoning

The Supreme Court rejected all grounds of appeal raised by Wiko [18] . It did not find any flaw in the refusal of the Court of Appeals to recognize the Mannheim decision. The Supreme Court further found that Philips had not abused its dominant position in view of the circumstances of the case [19] . Moreover, Wiko did not demonstrate that Philips did not behave in a FRAND way [5] , and failed to prove its claims as well [5] . Furthermore, the Supreme Court held that there is no reason to exclude lost profits as compensation to SEP-holders [20] .

On the other hand, the Supreme Court left the question open whether implementer’s conduct duties are subject to a higher threshold after the start of court proceedings [21] respectively whether requesting from the SEP-holder to negotiate during the proceedings presupposes that the implementer behaves as a willing licensee [5] .
 

No recognition and enforcement of the Mannheim decision

Wiko claimed that the Mannheim decision should be recognised and enforced in the Netherlands (pursuant to Article 36 of the Brussels I Regulation), because the German and Dutch proceedings had the same subject matter: Philips’ offer [10] . The fact that different patents were asserted in these proceedings was not relevant, as the Mannheim decision was about whether Philips’ offer and Wiko’s counteroffer were FRAND [5] . Wiko added that it was a willing licensee that had followed its duties and that the Supreme Court could not conclude differently than the German court thereon [5] .

The Supreme Court rejected Wiko’s argument: the patent in suit in the German proceedings, EP744, did not relate to the HSDPA protocol [22] . Therefore, the involved patent rights were different and the Mannheim decision had no effect on the legal relationship between Philips and Wiko with respect to other patents [5] . Wiko’s FRAND defence for other patents was considered not relevant. Additionally, the Supreme Court added that the application of foreign law and the reasoning of foreign court decisions cannot be challenged before the Supreme Court. [5]
 

Abuse of a market dominant position

Furthermore, the Supreme Court agreed with the finding of the Court of Appeals that Philips had not abused a market dominant position.
 

Legal framework

The Supreme Court first highlighted that a dominant market position is -in itself- not forbidden [23] . An assessment of the context is required [5] . Afterwards, the Supreme Court reviewed prior case law and decisions regarding the application of Article 102 TFEU and injunctions based on SEPs, which in the Netherlands are assessed under precontractual reasonableness and fairness [24] . It recalled the Motorola and Samsung cases, where the European Commission decided that asking for an injunction against a potential licensee that was ready to take a FRAND license was abusive [25] .

Before the decision of the Court of Justice of the EU in Huawei v ZTE (Huawei decision), Dutch courts had expressed the view in Philips v. SK Kassetten that as long as there was no licence, there was no abuse of a dominant position, when the SEP-holder was looking for an injunction. It was up to the potential licensee to contact the SEP-holder. [26]

The Supreme Court also referred to the Apple/Samsung case, where the request for an injunction during FRAND negotiations was considered to violate precontractual good faith, as Apple was forced to negotiate terms and conditions that may not be FRAND. [27] In Germany, in Orange-Book-Standard, the German Federal Court of Justice had ruled that it is abusive to start an infringement action from the moment the potential licensee has made a FRAND offer, which the SEP-holder cannot decline without acting discriminatory, or the implementer behaves as a ‘willing’ licensee, exploiting the SEPs, rendering accounts and paying thereto [28] .

The Supreme Court reasoned that although the exercise of intellectual property rights is not abusive per se, it may lead to an abuse of a dominant position in specific cases [29] . According to the Huawei decision, there is no abuse of a dominant position, if a SEP-holder starts infringement proceedings against the implementer that exploits the patents but is not engaged in good faith negotiations towards the conclusion of a licensing agreement according to reasonable commercial practices but applies delaying tactics [30] . And it is not abusive to request for accounts for past use and compensation for damages [5] .

In the UK, in the Unwired Planet decision, the High Court of England and Wales (UK High Court) stressed that there is no abuse in requesting an injunction, if the SEP-holder complies with the steps established in the Huawei decision [31] . Even if this is not the case, though, it is not necessary that an abusive behaviour is given [5] .

In Sisvel v. Haier I, the German Federal Court of Justice considered that an implementer, who reacts months after receipt of a notification of infringement is not a ‘willing’ licensee [32] . In Sisvel v. Haier II, the same court added that such an implementer must undertake extra efforts to conclude a FRAND licence as soon as possible [33] . An offer from the SEP-holder marks the beginning of the negotiations [5] . The fact that SEP-holder’s offer is not FRAND does not mean there is automatically an abuse of a dominant position, since only the refusal to license or making it impossible for the implementer to license the SEPs under FRAND terms and conditions constitutes an abuse of a dominant position [5] .

The Supreme Court concluded that there are no substantial differences in the way, in which UK and German courts interpret the Huawei decision [34] : the ‘Huawei steps’ are guidelines imposing good faith negotiations duties on both sides, even after litigation is filed [5] . However, the Supreme Court highlighted that slight nuances exist: for the UK High Court, the defendant has to continue complying with the ‘Huawei steps’ during proceedings which remain the starting point. In Germany there is a broad range of factors considered with respect to good faith, including particularly the fact that the implementer was silent in the pre-litigation phase and reacted only after the initiation of court proceedings. [5]
 

Philips’ offer and Wiko’s counteroffer

The Supreme Court stressed out that the ‘Huawei steps’ are not to be interpreted strictly but in view of the circumstances of the case [35] . With respect to the circumstances of this case, the Supreme Court confirmed the position of the Court of Appeals which had considered that Philips had negotiated in good faith and did not abuse a dominant position. [36]

Wiko challenged the FRANDness of Philips’ offer. Philips had elaborated why its worldwide licensing offer at a compliant rate of $0.75 and non-compliant rate of $1.00 [37] per product was fair and non-discriminatory, based on a report and a declaration by its principal licensing counsel, Dr. Scott [38] . The Supreme Court took the view that Wiko had not sufficiently challenged the report, based on Philips’ share of SEPs on the whole standard [39] , publications on value of SEPs, and litigation history [40] . Furthermore, Philips declared towards Wiko that it was ready to negotiate in good faith [41] .

Furthermore, in the eyes of the Supreme Court, Wiko did not sufficiently explain why its counteroffer was FRAND. The simple fact that Wiko’s counteroffer relies on Philips’ number of SEPs is not sufficient to establish that the counteroffer is FRAND [40] .
 

Non-discrimination

Wiko argued that the non-discriminatory element of FRAND means that similarly situated licensees cannot be subject to different licensing terms and conditions [42] . Pursuant to the Supreme Court, such argument lacked factual grounds [43] . The Court of Appeals had not ruled that similar situations should be handled differently, even less that a SEP-holder could offer different rates to similarly situated implementers [5] . The Court of Appeal only stated that facts and circumstances can lead to different terms and conditions without this being discriminatory [5] . The simple fact that other licensees have been offered another deal does not presume discrimination [44] . Different facts and circumstances may lead to different licensing conditions [5] .

The Supreme Court further pointed out that the Court of Appeals did not rule that other licensees were not similarly situated [45] . According to Wiko, the fact that other companies sell the same products is sufficient to consider them similarly situated to Wiko and there is no need of a competitive disadvantage to assume discrimination, contrary to what Article 102 TFEU requires [5] . The Supreme Court rejected such claim, because it was introduced late [5] . Additionally, if even it were so, Wiko had not sufficiently demonstrated a presumption of discrimination [5] . Finally, Wiko alleged that it could not demonstrate that Philips’ offer was discriminatory, because it had no access to Philips’ other licences with third parties [46] . However, the Supreme Court reminded Wiko that it had concluded licences with other SEP holders (Qualcomm, Huawei, Nokia) and could have substantiated its claim that Philips’ offer was not FRAND in view of those licensing agreements [47] .
 

Amendment of patent claims and notification of infringement

Wiko argued that Philip’s notification of infringement was insufficient. The fact that it did not challenge Philips’ notification of infringement did not mean that Philips fulfilled its notification duty under the Huawei decision [48] . The Supreme Court found, however, that Philips’ letter was sufficient for the notification [49] . Wiko also claimed that the amendment of the claims of the patent in suit during the course of the appeal proceedings prevented the court from determining Philips’ abuse of a dominant position [50] . The Supreme Court rejected this claim as it was a new one that should have been introduced earlier and further lacked factual argument [5] . The Supreme Court also highlighted that all circumstances of the case must be assessed and did not believe that the limitation of the SEP was sufficient to influence the assessment of an abuse [51] .

Furthermore, Wiko argued that, since at the time of the filing of the present suit, the patent was not modified yet, Philips had not complied with its notification duty [52] . The Supreme Court stated this argument was lacking factual grounds and could have been introduced earlier by Wiko [53] . It also referred back to its earlier position, that it was not convinced whether one limitation of a SEP could influence an abuse assessment. [5] Additionally, the Supreme Court pointed out that it is for Wiko to support its claim. [54]
 

Parties’ behaviour after the filing and increased duties

The Supreme Court stressed that the Huawei decision does not include findings concerning potential duties after an infringement suit is filed [55] . Nevertheless, in the view of the Supreme Court, the SEP-holder has a duty to negotiate even after the start of proceedings, provided that the implementer is a ‘willing licensee’ [21] . On the other hand, the Supreme Court added that – in line with the German Sisvel v Haier ruling and the Unwired Planet decision in the UK – it is plausible to raise the threshold concerning the duties to which implementer is subject to after litigation has started, since otherwise implementers would have no intention to follow the ‘Huawei steps’ afterwards. [5] However, the Supreme Court expressly left this question open [5] . It did clarify that in any case (even absent a higher threshold), Wiko did not comply with its Huawei duties before the litigation started [56] .

As far as Wiko had focused on facts and circumstances that occurred after the start of the proceedings for claiming an abuse of market dominance on Philips’ side, the Supreme Court held that the respective claims were insufficiently supported [57] . It rejected Wiko’s suggestion that facts and circumstances after the filing of the case would lead to a rejection of Philips’ recall and injunction request, since Wiko had failed to demonstrate that Philips’ offer was not FRAND. [58] The Supreme Court also stressed that Wiko did not comply with its own FRAND duty as well [56] . The Supreme Court further rejected Wiko’s argument that an increased duty of justification lies on Philips in view of the facts and circumstances of the case before the filing of the present action [59] . The facts and circumstances of this case did not lead to an increased proof duty on Philips’ side: Each party has to demonstrate its claims. [60]

Based on these facts, the Supreme Court considered that Philips had not abused its dominant position, neither with respect to its licensing offer, nor with respect to the notification of infringement or the claims for recall and injunctive relief asserted in the pending proceedings, especially since Wiko did not follow its own Huawei duties. In this context, the Supreme Court noted that – contrary to Wiko’s view – the Court of Appeal did not rule that an implementer is deprived of the possibility to raise an abuse of dominance defence in case that it has not followed its Huawei duties [61] .
 

Burden of proof

The Supreme Court expressly stated it is up to the party that raises a claim to motivate its claim [62] . Given that Wiko had claimed that Philips abused its dominant position by filing an action including an injunction and recall request, Wiko had to demonstrate such claim. [63]

As far as Wiko had further alleged that Philips’ offer was not FRAND, it was on Wiko to establish its claims [64] . In view of the facts and circumstances of this case, no higher threshold applied to Philips: Wiko did not comply with its own duties [59] . In addition, since Wiko had concluded licensing agreements with other licensors, it could have developed its position in view of those agreements accordingly. [65]
 

Damages

The Court of Appeal allowed Philips to claim damages based on lost profits or compensation for damages to Philips’ choice and ordered Wiko to render account for profits [66] . Wiko argued that there is no right to claim lost profits, when it comes to FRAND [5] : The SEP-holder is solely entitled to compensation for damages mirroring FRAND licensing fees. [5]

The Supreme Court accepted the possibility to cumulate both lost profits and damages calculated on basis of (not collected) FRAND licensing rates [67] . It stated that the copyright case law produced by Wiko did not exclude cumulation and added that cumulation is made possible under the Dutch copyright and patent laws [68] . However, the cumulation between lost profits and compensation for damages is limited [69] . Indeed, compensation for damages can only be sought for damages from another nature than lost profits [5] . Finally, the Supreme Court added that it is often hard for the patent-holder to demonstrate the damages incurred and the infringer should not get any advantage out of the infringement, even in SEPs cases, where the infringer is made aware of the infringement by the SEP-holder’s notification. [70]
 

Patent validity

Wiko challenged patent validity based on the reformulated claims and raised a so-called ‘Gillette’s defense’ [71] . The Supreme Court held that Wiko failed to sufficiently substantiate these claims. [72]
 

• [1] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.3.
• [2] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.2
• [3] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.33.
• [4] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.34.
• [5] Ibidem
• [6] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.35
• [7] Supreme Court of the Netherlands, judgement dated 2 July 2021, page 2 and par. 1.36
• [8] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.36.
• [9] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 1.37.
• [10] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.3
• [11] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 2.3
• [12] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 2.4-2.5
• [13] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 2.9 (4.3)
• [14] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 2.7
• [15] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.2.9
• [16] Supreme Court of the Netherlands, judgement dated 2 July 2021, par.5
• [17] Supreme Court of the Netherlands, judgement dated 25 February 2022, par. 3.
• [18] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 5
• [19] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.3
• [20] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.78
• [21] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.10
• [22] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.5
• [23] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.13
• [24] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.8
• [25] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.15 et al.
• [26] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.18
• [27] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.19
• [28] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.21
• [29] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.28
• [30] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.26
• [31] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.43
• [32] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.47
• [33] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.48
• [34] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 3.49
• [35] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.4.13
• [36] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.15
• [37] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.2.9 (4.27) and
• [38] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.14
• [39] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.2.9 (4.27)
• [40] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.4.25
• [41] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.14-4.15
• [42] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.54
• [43] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.55
• [44] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.56
• [45] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.57
• [46] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.58
• [47] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.59
• [48] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.34
• [49] Supreme Court of the Netherlands, judgement dated 2 July 2021, p.4.35 et al.
• [50] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.26.
• [51] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.30
• [52] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.36
• [53] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.37
• [54] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.40
• [55] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.9
• [56] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.32
• [57] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.22
• [58] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.24 and 4.25.
• [59] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.51
• [60] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.41
• [61] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.33
• [62] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.43 et al.
• [63] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.47
• [64] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.50
• [65] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.52
• [66] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.70 and 4.73
• [67] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.75 et al.
• [68] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.76-4.78
• [69] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.77
• [70] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.78.
• [71] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.66 et al.
• [72] Supreme Court of the Netherlands, judgement dated 2 July 2021, par. 4.69