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–  UKSC 37
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Sisvel v Wiko
4 September 2019 - Case No. 7 O 115/16
The Claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards under a commitment to be made accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (Standard Essential Patents or SEPs). Sisvel administrates a patent pool comprising patents of several SEP holders, including Sisvel’s own SEPs (patent pool).
The Defendants are the French parent company and the German subsidiary of the Wiko group (Wiko). Wiko sells mobile phones implementing the LTE standard –among other markets– also in Germany.
In June 2015, Sisvel informed Wiko about the patent pool and the need to obtain a licence. The parties entered into licensing discussions. Sisvel provided Wiko with information about the SEPs included in the patent pool, including claim charts illustrating the standard-essentiality of a number of these patents. On 1 June 2016, Sisvel made an offer for a licence covering the patent pool to Wiko. Agreement was, however, not reached.
On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko’s liability for damages on the merits, as well as information and rendering of accounts.
On 23 June 2016, Sisvel made an offer for a bilateral licence covering only its own SEPs to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).
On 4 October 2016, Sisvel amended its claims in the infringement proceedings. It raised, additionally, claims for injunctive relief as well as the removal and subsequent destruction of infringing products from the market.
On 11 November 2016, Wiko made a counteroffer to Sisvel. Subsequently, Wiko provided security as well as information to Sisvel in accordance with its counteroffer.
During the course of the proceedings, Sisvel made a new offer for a pool licence to Wiko which contained reduced royalty rates. Wiko rejected this offer as well. On 22 December 2017, Sisvel asked the Court to order a stay of the infringement proceedings, until the German Federal Patent Court rendered its decision on the validity of the SEP in suit in the parallel nullity proceedings. Wiko agreed with Sisvel’s motion. On 30 January 2018, the infringement proceedings were stayed by order of the Court.
On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing programme designed by Sisvel in the meantime (2018 offer).
Along with the 2018 offer, Sisvel provided Wiko –among other information– with claim charts regarding twenty selected patents as well as a list of existing licensees of both its new licensing programme and two pre-existing programmes. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.
Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, Wiko replied to Sisvel, without, however, providing any feedback on the content of the 2018 offer; it just referred back to its counteroffer dated 11 November 2016, instead. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees in the list that it had shared along with the 2018 offer.
In response to that claim, Sisvel sent a draft Non-Disclosure Agreement (NDA) to Wiko on 22 October 2018. Sisvel was willing to disclose the names of the existing licensees upon signing of the NDA by Wiko. Wiko refused, however, to sign the NDA proposed by Sisvel.
In October 2018, the German Federal Patent Court upheld the SEP in suit in part. Subsequently, the Court moved on with the infringement proceedings, discussing in particular the FRAND-related issues.
After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.
With the present judgment  , the Court granted an injunction against Wiko and ordered the removal and subsequent destruction of infringing products from the market. The Court also confirmed Wiko’s liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages.
B. Court’s reasoning
The Court further held that Article 102 of the Treaty for the Functioning of the EU (TFEU) does not prevent Sisvel from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings. Wiko had argued that by filing the present lawsuit, Sisvel had abused its dominant market position in violation of Article 102 TFEU.
In the Court’s eyes, this was not the case, since Sisvel had fulfilled the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE  (Huawei framework or obligations). Wiko, on the other hand, had, according to the Court, failed to comply with the Huawei framework.
In deviation from its earlier case-law, the Court expressed the view that the Huawei obligations can be remedied by the parties during the course of infringement proceedings  . This requires, however, that pressure-free negotiations between the parties are enabled, as requested by the CJEU. For this, the parties have to use available procedural instruments for a temporary suspension of the proceedings, such as a motion for suspension of the trial  or a consensual stay of the proceedings until the decision of the Federal Patent Court on a parallel nullity action  .
Against this background, the Court requested from a SEP holder, who seeks to remedy information obligations under the Huawei framework after the initiation of infringement proceedings, to file a motion for suspension of the trial  . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings  .
The Court observed that granting the parties the opportunity to remedy shortcomings concerning the Huawei obligations in the course of pending infringement proceedings is in line with the ‘safe harbour’ approach adopted by both the Court of Appeal of England and Wales in Unwired Planet v Huawei  and the Court of Appeal of The Hague in Philips v Asus  . These courts do not consider the Huawei framework as a mandatory formalistic procedure that needs to be executed strictly; accordingly, deviations from the negotiation framework established by the CJEU do not necessarily amount to abusive behaviour, barring the patent holder from asserting claims for injunctive relief  . Moreover, whether this is the case, needs to be assessed on a case by case basis  .
Notification of infringement
Having said that, the Court found that Sisvel had fulfilled its Huawei obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.
Regarding the content of SEP holder’s respective notification, the Court, basically, applied the same requirements set forth in previous decisions. The Court found that such notification must (1) name the patent in suit, including the patent number, (2) inform that the patent has been declared standard- essential towards the relevant standardisation body, (3) indicate for which standard the patent is essential and (4) explain which technical functionality of the user’s products or services implements the standard  . The appropriate level of detail should be determined on a case by case basis  . The Court confirmed that the patent holder will, as a rule, meet its notification duty by making claims charts customarily used in SEP licensing negotiations available to the implementer  . The Court further affirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework  .
SEP holder’s offer
The Court found that Sisvel had also complied with its Huawei obligation to make a written and specific FRAND licensing offer to Wiko. For the respective assessment, the Court considered only the 2018 offer, the last offer made by Sisvel to Wiko during the stay of the infringement proceedings  .
To begin with, the Court reiterated its position that infringement courts are not obliged to determine which concrete licensing fees and further contractual terms and conditions are ‘under objective aspects’ FRAND  . Contrary to the view previously taken by the superior Higher District Court of Karlsruhe, the Court maintained that the CJEU did not intend to ‘burden’ the proceedings concerning injunctive relief and the recall of products with the ‘precise mathematical determination’ of FRAND conditions  . Moreover, since there is a ‘range’ of potential FRAND conform terms and conditions, a request for injunctive relief could conflict with Article 102 TFEU only in case, in which – under consideration of the specific bargaining situation and market conditions – the SEP holder’s offer would amount to an ‘exploitative abuse’  . Insofar, the Court shared a similar understanding with the Court of Appeal of England and Wales in Unwired Planet v Huawei  .
Notwithstanding the above, the Court made clear that infringement courts should go beyond a just ‘superficial’ assessment of the FRAND conformity of SEP holder’s licensing offer. Infringement courts should examine, whether the overall structure of the concrete offer would require from an implementer acting in good faith to respond to that offer, irrespective of the – typical – initial divergence of the bargaining position of the parties  . As a rule, such a duty will emerge, when the SEP holder explains the royalty calculation in a way that demonstrates the reasons for which it considers that its offer is FRAND  . In case that a pool licensing programme or a standard licensing programme exists, it will usually be enough to demonstrate the acceptance of the respective programme in the market. If a sufficient number of licences has been granted by the pool, the patent holder will just have to outline the composition of the pool by presenting an adequate number of claim charts referring to patents included in the pool  .
In this context, the Court pointed out that any allegations raised by the implementer with respect to the FRAND conformity of the patent holder’s offer cannot, in principle, be based on the (alleged) unlawfulness of individual contractual clauses. Moreover, the FRAND compliance of an offer must be assessed based on a general overview of the overall agreement  . An exception only applies, when a specific clause has an ‚unacceptable effect’  . In the present case, the Court found that none of the clauses contained in the 2018 offer had such effect  .
In particular, the Court held that a clause placing the burden of proof with regard to the exhaustion of patents covered by the offered licence on the licensee (here: Wiko) is acceptable  . Contrary to the view taken by the District Court of Duesseldorf in a similar case, the Court argued that it is appropriate to request the licensee to establish the relevant facts, since it will be better situated to trace the licensing chain by engaging with its suppliers  .
Furthermore, the Court did not consider that a clause limiting the term of the offered licence to five years had an ‘unacceptable effect’ from an antitrust perspective. The Court found that a term of five years is in line with the prevailing practice in the wireless telecommunications industry, in which rapid technological developments are typical  .
The Court further pointed out that a clause establishing a right for the extraordinary termination of the licensing agreement in case of violation of reporting duties by the licensee or a delay of payments exceeding 30 days did not have an ‘unacceptable effect’ in the above sense  .
The Court did not raise any objections against the fact that the 2018 offer did not contain a clause stipulating an adjustment of the agreed royalty rates in case of changes in the number of covered patents during the term of the agreement. According to its view, including such a clause in a FRAND licence is not per se required  . An exception should be made, however, in cases, in which the pool predominantly consists of patents that will expire soon after the signing of the licence agreement  . In general, the absence of an ‘adjustment’ clause will not be problematic, especially when the licensing offer does not limit or exclude the statutory right of the parties to request an adjustment of the licence due to frustration of the contractual base (Sec. 313 para. 1 German Civil Code)  .
Non-discrimination / confidentiality
Referring to the non-discriminatory element of a FRAND licensing offer, the Court expressed the view that Art. 102 TFEU establishes a (secondary) duty of the patent holder to show in pending infringement proceedings that its offer to the defendant does not discriminate the latter in relation to similarly situated competitors  .
The Court made, nevertheless, clear that this duty does not legally entail ‘full transparency’ in every given case  . The antitrust obligations of the SEP holder do not always outweigh confidentiality interests of the latter that are worthy of legal protection; moreover, the special circumstances of the individual case can require protection of confidentiality  .
Looking particularly at information contained in existing licensing agreements of the SEP holder with third similarly situated licensees (comparable agreements), the Court took the view that the extent of the patent holder’s obligation to disclose such agreements shall be determined by the infringement court on a case by case basis under consideration of both parties’ pleadings in the proceedings  .
According to the Court, the patent holder will have to establish the existence of confidentiality interests worthy of protection; the mere fact that comparable agreements are subject to confidentiality clauses does not per se justify limitations regarding to the extent of patent holder’s disclosure obligations  . On the other hand, the defendant will need to explain to the court why the information requested is required for assessing the FRAND conformity of the patent holder’s licensing offer  . The defendant will have to establish concrete facts, indicating a potentially discriminatory conduct of the SEP holder  .
With this in mind, the Court disagreed with the view expressed by the Duesseldorf courts, according to which the SEP holder is in any case obliged to produce all existing comparable agreements in infringement proceedings  . Especially in cases, in which the patent holder has concluded only standard licensing agreements with implementers, the terms and conditions of which are publicly accessible, the Court saw no reason for obliging the patent holder to produce a (large) number of identical contracts in the proceedings. Insofar, it will be sufficient to disclose how many (standard) licensing agreements have been concluded so far  .
Accordingly, the Court found that the list of existing licensees produced by Sisvel to Wiko along with the 2018 offer was sufficient for establishing the FRAND conformity of this offer, even though the names of the licensees were redacted. In the Court’s eyes, Wiko had failed to explain the reasons why the identity of the existing licensees was needed to assess the FRAND conformity of the 2018 offer  . In addition, the Court also took into account the fact that Wiko had refused to sign the NDA offered by Sisvel during the stay of the proceedings for the purpose of disclosing the identities of the existing licensees  . Since it had no objections against the FRAND conformity of the 2018 offer, the Court did not rule on the question whether Wiko’s refusal to enter into an NDA could be considered as a sign of unwillingness to comply with the Huawei framework or not. The Court agreed, however, with the view taken by the Duesseldorf courts in this respect, according to which the implementer’s refusal to sign an adequate NDA is, in principle, a factor that should be considered in connection with the assessment of the SEP holder’s offer  .
Besides that, the Court also considered the possibility of facilitating the use of comparable agreements in infringement proceedings through document production orders issued by the competent court pursuant to Sec. 142 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO)  . This option should particularly be taken into account by infringement courts in individual cases, in which confidentiality clauses contained in comparable agreements allow for a disclosure of the agreement only upon court order. According to the Court, such confidentiality clauses do not per se violate antitrust law and should, therefore, be respected, unless the patent holder cannot establish a confidentiality interest worthy of protection in the proceedings  . If the patent holder, who is bound to a confidentiality clause, is willing to produce comparable agreements in trial, then the infringement court could – based on the concrete circumstances of each case– issue a document production order according to Sec. 142 ZPO  . In case that the patent holder refuses to comply with such order, the court could consider the respective behaviour as a signal of bad faith in its overall assessment of the parties’ conduct under the Huawei framework  . The same will apply also when the implementer does not agree with a stay of the proceedings, after it was granted access to comparable agreements based on a court order issued pursuant to Sec. 142 ZPO  .
The Court found that Wiko had failed to meet its Huawei obligation to make a FRAND counteroffer to Sisvel in due course. For the respective assessment, the Court focused on Wiko’s reaction to the 2018 offer  .
The Court made clear that an implementer has a duty to react to a licensing offer of the SEP holder, which is based on concrete facts, irrespective of whether it considers this offer to be FRAND, or not (which will usually be the case)  . Furthermore, the implementer must react as soon as possible, considering the facts of each case, the industry practice in the specific sector as well as the principle of good faith  .
Taking into account that Wiko did not react at all to the 2018 offer for more than three months, the Court held that it violated the above obligations  . In the Court’s eyes, Wiko engaged in delaying tactics  . The Court did not accept that French school holidays and/or the fact that – according to Wiko’s own statement– only two employees covered licensing-related matters can provide sufficient justification for the delay in Wiko’s reaction  . As a company engaging in international business, Wiko should ensure that it has sufficient staff resources to deal with respective issues in due course  .
C. Other important issues
Apart from Sisvel’s claims for injunctive relief and the removal and destruction of infringing products from the market, the Court also rendered a declaratory judgment, recognising Wiko’s liability for damages on the merits  .
The Court found that Wiko had culpably infringed the patent in suit. In particular, Wiko had acted, at least, negligently  . Wiko had argued that the high complexity of standardised technologies (especially the significant number of patents incorporated into a standard), made it difficult to assess the status regarding intellectual property rights (and, therefore, excluded negligence). The Court made, however, clear that a higher degree of complexity of the underlying technologies generates enhanced due diligence requirements on the implementers’ side  .
-  Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16.
-  Ibid, pages 17-31.
-  Ibid, page 46.
-  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
-  Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 42.
-  Ibid, page 43 and page 51 et seq.
-  Ibid, page 42.
-  Unwired Planet v Huawei, Court of Appeal of England and Wales, judgment dated 23 October 2018,  EWCA Civ 2344, para 282.
-  Philips v Asus, Court of Appeal of The Hague, 7 May 2019, Case-No. 200.221 .250/01.
-  Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 44.
-  Ibid, page 44.
-  Ibid, page 37.
-  Ibid, pages 47 and 53.
-  Ibid, page 38.
-  Ibid, pages 37 et seq.
-  Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 39.
-  Ibid, page 39.
-  Ibid, page 40.
-  Ibid, page 53.
-  Ibid, page 54.
-  Ibid, page 55.
-  Ibid, page 40 and 49.
-  Ibid, page 41.
-  Ibid, page 49.
-  Ibid, page 50.
-  Ibid, page 51.
-  Ibid, page 47.
-  Ibid, page 35.
-  Ibid, page 35 et seq.