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Saint Lawrence v Deutsche Telekom, Regional Court (Landgericht) of Manheim

27 November 2015 - Case No. 2 O 106/14

  1. Facts
    Since 28 August 2014, the Claimant, a non-practicing entity established under German law, is registered as the current proprietor of the European patent EP 1.125.284 B1, originally granted to applicant “V” (Voiceage Corporation). Whether “V” validly transferred the patent to the Claimant is disputed between the parties. The Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices. The patent has been found to be essential to ETSI’s AMR-WB standard by IPEC. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001 “V”, who joined ETSI only after the standard had been set, repeatedly—on 29 May 2001, 26 October 2004 and 7 January 2010—declared its readiness to grant licenses on FRAND terms for the respective patent.
    After initiating the present action—the Defendant having been served with the claim on 7 August 2014—the Claimant informed the Defendant by letter as of 31 July 2014 (including a copy of the statement of claims as of 23 July 2014) that it was ready to grant licenses on FRAND terms for the patent-in-suit and five other German patents allegedly used by the Defendant. Inviting the Defendant to discuss such a licensing agreement the Claimant offered, in addition, to communicate a draft licensing agreement by letter as of 9 December 2014. The Defendant did not show any interest in acquiring a license regarding the patent-in-suit.
    Prior to the infringement action, the Claimant neither tried to contact nor to make a licensing offer to the Defendant’s supplier “H”(HTE) which, knowing about the lawsuit since August 2014, acted as an intervener in the present proceedings. Subsequent to the Defendant’s third-party notice, “H” started licensing negotiations with the Claimant on 9 December 2014. After “H” had signed a non-disclosure agreement provided by the Claimant on 22 December 2014, the Claimant submitted a draft licensing agreement on 12 January 2015, being corrected on 26 January 2015. Talks took place on 9 February 2015. By letter as of 23 February 2015 “H” made a supplemented proposal for the determination of the licensing conditions. In an e-mail as of 6 March 2015 “H” declared its willingness to take a license for Germany alone and specified conditions. As a reaction to the Claimant’s offer as of 25 March 2015 concerning a worldwide license “H” submitted, on 2 April 2015, a counter-offer that was limited to Germany and suggested third party determination of royalties by the High Court of England and Wales. While the Claimant rejected the counter-offer by letter as of 19 April 2015, “H” declared to adhere to its offer by letter as of 8 June 2015. On 3 September 2015 “H” sent an additional letter according to which a bank guaranteed, under certain conditions, payment of royalties for past use of the relevant patents in Germany. As the Claimant criticized the letter as incomprehensible by e-mail of 13 September 2015, the Defendant subsequently (inter alia by submitting documents to the court on 23 September 2015) explained in greater detail how the royalties were to be calculated.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court finds, in any case, no abuse of (potential) market power, as H behaved tactically motivated causing delay and made its own offers linked to unacceptable conditions. However, the court leaves open the questions (1) of whether the SEP conveyed actual market power to the Claimant, (2) of whether—even absent actual market dominance—the FRAND declaration subjected the Claimant to the conduct requirements for a market dominant SEP proprietor, (3) of whether the Claimant is to be treated as if it had made the FRAND declaration itself, and (4) of whether a refusal to grant FRAND licenses to the Defendant’s device suppliers entitled the Defendant to a FRAND defense regardless of its own readiness to take a license. [1] The court made however clear that enforcing the right of injunction is not a misuse when the infringer, even after the complaint has been raised and despite a reasonable timeframe, does not show any interest in getting a license.
      As regards the Huawei requirement to alert the standard user of the infringement, the court focused on different aspects. Since, in the present case, the Defendant refrained from expressing its willingness to conclude a licensing agreement on FRAND terms it was left undecided whether the Claimant complied with its obligation to notify prior to the initiation of court proceedings by sending, after bringing the action but before the statement of claims was served to the Defendant, a letter from which the Defendant could recognize that an action had already been brought.
      The Mannheim court did also not determine whether the Claimant, in order to avoid a violation of Article 102 TFEU, had to inform “H” about the patent infringement because the latter learned or could have easily learned about the possible violation of the SEP during a phone call with the Defendant in August 2014. [2] However, “H” did not sufficiently express its willingness to conclude a licensing agreement on FRAND terms because it took “H” more than three months to submit a license request after it had become aware of the court action. “H” could have objected a violation of Article 102 TFEU if it had expressed such willingness and complied with the subsequent Huawei obligations. However, “H” failed to do so also because it refrained from submitting a satisfying counter-offer. [3]
    2. The SEP owner’s licensing offer
      The court seems to favor FRAND-compatibility of worldwide licenses as it clarifies that limiting the counter-offer to Germany was “unacceptable” but does not decide on the issue. Also, the court left undecided whether the royalty rate offered by the Claimant satisfied FRAND. [4]
    3. The standard implementer’s reaction
      Considering the subsequent conduct obligation of the standard user, the district court found that a FRAND counter-offer has to be submitted irrespective of whether the preceding licensing offer made by the SEP proprietor itself is FRAND. In order to trigger the counter-offer obligation it is sufficient that the licensing offer contains—as in the present case—all information, in particular regarding royalty calculation, which is necessary for the Defendant to submit a counter-offer corresponding to FRAND terms. The Huawei obligation to diligently respond does not merely arise where a licensing offer is FRAND but it has to be considered as an expression of the sincere willingness of the Defendant to conclude a licensing agreement. If such willingness is given, the patent proprietor will not be allowed to present a subsequent FRAND licensing offer after the initiation of proceedings. [5]
      The court then analyzed whether the Defendant’s counter-offer met the ECJ requirements in terms of content, but left it undecided whether a limitation to Germany could be in compliance with FRAND terms. It denied the existence of a “specific” counter-offer in the present case because the amount of the royalty was not specified in the document itself but was intended to be determined by an independent third party. [6] In consequence, “H” could not fulfill its obligation to provide appropriate security because it was not possible to anticipate which amount of royalty would have been stipulated by the “independent third party”. [7]
  3. Other important issues
    In the course of licensing negotiations, the standard user is neither prevented from challenging validity, standard-essentiality or effective use of the patent in question nor to reserve its right to do so. [8]
    As regards ownership and the transfer of the patent from the original patent proprietor to the non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes the 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 the Defendants. [9]
    No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [10] the Defendant and Intervener could establish neither collusion of “V” and “N” (a participant in the setting of the AMR-WB standard) nor bad faith of “N” regarding “V” ’s patents. Hence, non-declaration by “N” did not amount to a patent ambush. Nor could non-declaration by “V” constitute a patent ambush since “V” was no member of ETSI—and, hence, not bound by a duty to disclose resulting from ETSI’s IP policy—when the AMR-WB standard was being set. Furthermore, the Defendant and Intervener could not show why they should have been adversely affected by “V” ’s alleged violation of the ETSI IPR Policy, given that the Claimant had declared its willingness to grant a license on FRAND terms. [11] In particular, they could not substantiate that a different form of the standard, avoiding “V” ’s patents, would have been set, had the standard-setting participants known about these patents. Cf. Ibid, para. 131, i.a. on the mechanism of “blind selection” among technological alternatives, (initially) irrespective of existing patents and their ownership situation. Given these deficiencies in the attempt to establish a patent ambush the court left open whether such an ambush would result in an obligation to grant a royalty free- or “only” a FRAND license but indicated to favor the FRAND license-sanction. [13]
  • [1] Ibid, para. 133
  • [2] Ibid, para. 139-144
  • [3] Ibid, para. 146-149
  • [4] Ibid, para. 152-153
  • [5] Ibid, para. 153-160
  • [6] Ibid, para. 158-164
  • [7] Ibid, para. 167-169
  • [8] Ibid, para. 146
  • [9] Ibid, para. 78-80
  • [10] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
  • [11] Ibid, para. 118-131
  • [12] Cf. Ibid, para. 131, i.a. on the mechanism of “blind selection” among technological alternatives, (initially) irrespective of existing patents and their ownership situation.
  • [13] Ibid, para. 198