Nokia v Oppo

14 September 2022 - Case No. 6 U 212/22

http://caselaw.4ipcouncil.com/german-court-decisions/olg-karlsruhe/nokia-v-oppo

A. Facts

The Claimant, Nokia, owns patents essential to various wireless telecommunications standards (standard-essential patents, or SEPs), developed by the European Telecommunications Standards Institute (ETSI). ETSI requires that patent owners commit to make SEPs available to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The Defendants are part of the China-based Oppo group (Oppo), which manufactures and markets devices implementing wireless standards worldwide, including in Germany.

The parties signed a patent cross-license agreement. Prior to the expiration of the agreement, Nokia and Oppo discussed about the conclusion of a further contract without success.

After the licence expired, Nokia filed a lawsuit against Oppo before the District Court of Mannheim (Mannheim Court) based on a German patent. Among other claims, Nokia requested an injunction as well as the recall and destruction of infringing products.

In July 2022, the Mannheim Court delivered a judgment in favour of Nokia, granting – among other relief – an injunction against Oppo (Mannheim injunction). [1] Oppo filed an appeal against this ruling before the Higher District Court of Karlsruhe (Court). In addition, Oppo filed a motion with the Court, requesting for a stay of the enforcement of the Mannheim injunction until the end of the appeal proceedings.

With the present order, the Court dismissed Oppo's motion. [2] (cited by lrbw.juris.de). At the time this order was issued, the (main) appeal proceedings had not been concluded yet.
 

B. Court's reasoning

Following settled case-law in Germany, the Court undertook a summary assessment of the decision of the Mannheim Court focusing on 'obvious errors'. [3] Under German law, a stay of the enforcement of a first-instance ruling can be ordered only exceptionally, when on basis of a summary review the court can assume that the ruling will likely be overturned in appeal. [4] Furthermore, the defendant is required to demonstrate that the enforcement of the decision would cause harm going beyond the 'regular' impact of an injunction. [5]

According to the Court, the above requirements were not fulfilled in the present case. [6]

The Court was not able to identify 'obvious errors' in the first-instance ruling. [7] On the one hand, the Court found that the Mannheim Court's interpretation of the scope of protection granted by the patent in suit (and, consequently, the finding of infringement) had no evident flaws. [8] On the other hand, the Court found no obvious mistakes in the finding of the Mannheim Court that Oppo could not invoke a so-called 'FRAND-defence' against Nokia's claim for injunctive relief, since Oppo had failed to sufficiently demonstrate willingness to obtain a FRAND-licence to Nokia's portfolio. [9]
 

Willingness

The Court disagreed with Oppo's contention that the Mannheim Court's assessment of willingness was erroneously 'one-sided'. [10] Oppo had argued that the Mannheim Court focused solely on Oppo's behaviour as a licensee in the negotiations, without considering that the SEP owner should be continuously prepared to grant a licence and move discussions forward as well. [10] The Court held that the Mannheim injunction followed the relevant legal standard established by German case-law, which recognises that the conduct duties of the SEP owner and the implementer are 'inter-related'. [11] The SEP owner is under a duty to allow a 'fundamentally willing' implementer to sign a FRAND license agreement. [12] Notwithstanding this, the implementer has an obligation to engage in negotiations, even when a license offer of the SEP owner is 'obviously' not FRAND-compliant. [11] The implementer's 'duty to react', which also includes a duty to raise any 'evident objections' against the offer 'at once', is exceptionally excluded only if the license offer is 'un-FRAND' to an extend that – from an objective viewpoint – it can be seen as an offer that is 'not seriously meant'; according to the Court, this is, however, not always already the case when just a single clause is obviously non-FRAND. [11] On the contrary, an overall assessment of all circumstances at hand is required. [11]

Furthermore, the Court did not follow Oppo's argument that the Mannheim Court evidently erred by disregarding that Nokia was 'unwilling' to take a cross-licence to Oppo's SEP portfolio. [13] German higher courts have not finally answered the question of whether, respectively how the fact that a cross-licence is or should be sought by the parties plays a role in the assessment of willingness. [14] A party seeking a licence must, however, demonstrate willingness to obtain a licence on FRAND-conditions in whatever form they actually take. [15] In the Court's eyes, this likely means that Oppo is not in a position to make its willingness to obtain a licence to Nokia's portfolio subject to the condition that Nokia accepts a cross-licence or is willing to sign such agreement. [15] What is more, the Court explained that – contrary to Oppo's view – the Mannheim Court had not ignored the fact that the parties had agreed to a cross-licence before; the terms of the former cross-licence between the parties were one of the factors used by the Mannheim Court for assessing the FRAND-conformity of certain counteroffers that Oppo had made to Nokia. [15]

The Court further doubted that the previous cross-license agreement between the parties had legal effect to the extent that it compelled the Mannheim Court to disregard Oppo's behaviour prior to the expiration of the licence in its assessment of willingness. [15] In any case, the Court saw no evident flaw in the decision of the Mannheim Court to take Oppo's overall conduct into account in this regard. [15]

Apart from the above, the Mannheim Court's decision to consider Oppo's reaction to Nokia's license offer as a factor relevant for the assessment of willingness was not obviously erroneous either. [16] In the view of the Court, it could well be argued that whether, when and how a user communicates 'constructive objections' against an offer of the patent owner can be seen as an indication of (lacking) willingness. [17]

The Court was also not convinced that Oppo had no duty to respond to Nokia due to (alleged) formal shortcomings of Nokia's offer. [17] Nokia had attached the draft licence agreement in question as an annex to a document containing an offer to engage in alternative dispute resolution with Oppo. While Oppo contested that an offer in this form was sufficient, the Mannheim Court found that it was 'specific' (and, thus, triggered a duty to react on Oppo's side). [17] The Court explained that a 'purely formal' standpoint – as the one taken by Oppo – was likely not decisive here. [17] What is more, an 'exchange of views' between the parties can rather be expected as a demonstration of 'willingness', irrespective of whether the patent owner shared the draft terms in a form that would enable the conclusion of the license agreement through sole acceptance of the terms by the implementer. [17]
 

Balance of interests

The Court further held that – in absence of an indication that the (main) appeal will be successful – Oppo's interest in avoiding the consequences attached to the enforcement of the Mannheim injunction could not override Nokia's interest in enforcing its rights. [18] The Court explained that, as a rule, claimant's interest to enforce a ruling regularly outweighs defendant's opposing interest to stay enforcement, unless the enforcement would cause severe, irreparable harm to the latter, which would exceed the 'normal' impact of an injunction and threaten its existence. [19] This principle applies to patent cases as well, including cases involving standard-essential patents. [20]

According to the Court, the enforcement of the first-instance ruling would cause no harm to Oppo going beyond the regular consequences of an injunction: A decline in sales or loss of trust towards customers are 'normal' effects of an injunction, which Oppo must accept. [21] The Court also noted that considering Oppo's share in the German market there was no risk that Oppo would lose a 'long-established and outstanding' market position in Germany. [22] What is more, looking at Oppo's sales abroad, the Court held that the loss of its share in the German market could not endanger Oppo's existence. [22] The general volatility of the smartphone market and the fact that Oppo had before managed to gain market shares within a few years indicated, on the contrary, that Oppo would be in a position to regain market shares in Germany in the short term, if the ruling of the Mannheim Court would, indeed, be overturned in appeal. [22]

Moreover, the Court disagreed with Oppo's contention that enforcement should be stayed, since Nokia's sole interest was to secure licensing income. [23] The fact that the claimant is a 'patent exploitation entity' could – according to the Court – play a role in weighing the parties' interest against each other, as the injunction would not protect the own position in the market (since the claimant does not manufacture compliant products itself); what is more, the claimant rather benefits when products implementing the protected invention remain available in the market, since claims for damages rise. [23] The Court noted, however, that even when an injunction is not directed at protecting own products against infringing competitors, enforcement can be of particular importance for existing licensees of the claimant: considering that licensing fees are a cost that impacts the price and, consequently, the competition in the (downstream) market, licensees have an interest that the patent owner prevents unlicensed competitors from entering or remaining in the market by means of a SEP injunction. [23]

Having said that, the Court pointed out that Nokia could not be considered as a (pure) 'patent exploitation entity': Nokia has indirectly commercial interests in the handset market, in which Oppo is also active, because licensed products are sold under the Nokia brand. [24]

Furthermore, the fact that Nokia justified the present lawsuit against Oppo – among other reasons – also by claiming that absent licensing income no research activities are possible, was not considered harmful by the Court. [25] The Court noted that relying on an injunction for stimulating an unwilling implementer to obtain a licence is no 'illegitimate objective', but a means endorsed by the law. [25] The Court also pointed out that the fact that the patent owner monetizes a 'patent pool' does not by itself suffice for setting aside SEP owner's interest to enforce an injunction. [25]
 

• [1] Nokia v Oppo, District Court of Mannheim, judgment dated 5 July 2022, Case No. 2 O 75/21.
• [2] Nokia v Oppo, Higher District Court of Karlsruhe, order 14 September 2022, Case No. 6 U 212/22
• [3] Ibid, paras. 6-8.
• [4] Ibid, paras. 7 et seq.
• [5] Ibid, para. 8.
• [6] Ibid, para. 9.
• [7] Ibid, paras. 11 et seqq.
• [8] Ibid, paras. 11-40.
• [9] Ibid, paras. 41 et seq.
• [10] Ibid, para. 43.
• [11] Ibid, para. 45.
• [12] Ibid, para. 44.
• [13] Ibid, para. 46.
• [14] Ibid, para. 47.
• [15] Ibid, para. 48.
• [16] Ibid, paras. 50 et seq.
• [17] Ibid, para. 50.
• [18] Ibid, para. 59.
• [19] Ibid, paras. 59 and 66.
• [20] Ibid, para. 66.
• [21] Ibid, paras. 66 et seqq.
• [22] Ibid, para. 67.
• [23] Ibid, para. 61.
• [24] Ibid, para. 62.
• [25] Ibid, para. 63.