Case Law post CJEU ruling Huawei v ZTE

France Brevets v HTC, LG Düsseldorf

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

http://caselaw.4ipcouncil.com/german-court-decisions/lg-dusseldorf/france-brevets-v-htc-lg-dusseldorf

A. Facts

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

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

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

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

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


B. Court’s reasoning

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

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

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

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

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

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

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

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