Case Law post CJEU ruling Huawei v ZTE

OLG Karlsruhe

8 September 2016 - Case No. 6 U 58/16

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

  1. Facts
    1. Decision First Instance
      The proceedings related to the defendant’s application to the Higher Regional Court of Karlsruhe for a stay of execution of the decision of the District Court of Mannheim (Case No. 7 O 23/14). Case No. 7 O 23/14 related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard. The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used a DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. [1] In early 2013, the patent pool approached the defendant’s mother company about the use of the patent, but without making a license offer. [2]
      On 30 May 2014, the defendant offered a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license for the claimant’s German patents. It was also willing to have a third party determine the royalties owed. [2] On 25 July 2014, the claimant suggested to change the license offer to a world-wide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 of the number of respective computers they put into circulation between July 2013 and June 2014 in Germany. It also made a deposit of EUR 12.972,- with the Düsseldorf Magistrates Court.
      On 13 March 2015, the claimant made another offer for a world-wide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details on how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. Instead, the claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s mother company on 3 September the parties were unable to come to a conclusion.
      The District Court of Mannheim granted an injunction order on 4 March 2016. [3] It held that the defendant was liable for compensation [4] and ordered it to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [5] to calculate the amount of compensation it owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels. [6]
    2. The Ensuing Application for Stay Proceedings
      Under the German rules of civil procedure, the Higher Regional Court can grant a stay of execution only if an appeal is pending and it is probable that the challenged decision will be overturned because it appears manifestly erroneous. [7] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant (now: the applicant) can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [7]
      The applicant sought to stay the execution of two elements of the resulting court order. [8] First, the applicant challenged the order to render full account. It contended that it was only necessary to render information required to calculate the amount of compensation owed via license analogy (i.e. time of sale and number of units sold). [9] Secondly, the applicant contended that the recall order was based on the District Court’s summary assessment of the offered license conditions, which was an insufficient standard of review. [10]
      The Higher Regional Court of Karlsruhe granted the application to stay the execution in respect of the order to the recall of products. [11] However, it dismissed the application in respect of the order to render accounts because the decision of the District Court of Mannheim was not manifestly erroneous. [11]
  2. Court’s reasoning
    1. SEP Owner’s Licensing Offer
      Regarding the order to recall and remove the infringing products, the Higher Regional Court held that the District Court’s interpretation of the Huawei ruling in respect of the SEP owner’s license offer was manifestly erroneous. The Higher Regional Court reiterated its view that the Huawei ruling required a full review of the conditions of the license (see the previous decision of the Higher Regional Court of Karlsruhe, 31 May 2016, Case No. 6 U 55/16). A reduced standard of review as applied by the District Court was not in line with the fundamentals of the Huawei ruling. The CJEU had held that the SEP owner’s refusal to grant a license on FRAND terms is the main reason why an injunction cannot be granted by an infringement court. Accordingly, the Higher Regional Court reasoned that any arguments raised by the applicant as to why an offer is not FRAND needs to be taken into consideration by the court. This requires a full review of the license offer and not just a summary review as to whether the offer is not obviously non-FRAND. [12] However, the Higher Regional Court conceded that the SEP owner has a wide discretion in determining the FRAND conditions because there might be a number of different license conditions that are FRAND. [13]
    2. Rendering Accounts and Compensation Claims
      Regarding the order to render accounts, the Higher Regional Court held that the decision of the District Court was not manifestly erroneous. The CJEU had reasoned that a court order to render accounts does not have implications as to whether products enter the market or can stay on the market. Thus, the Higher Regional Court concluded that a claim to render accounts cannot be abusive under Art. 102 TFEU. [14] Further, the Huawei ruling did not contain any restrictions in respect of the SEP holder’s information claims. [15] The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts how the amount of compensation owed is exactly calculated (and accordingly, what information the infringer must disclose to enable the SEP holder to carry out this calculation). [16] Accordingly, the order to render accounts in full detail (thus enabling the claimant to calculate the compensation owed in different ways) was not erroneous.
  3. Other Important Issues
      The Higher Regional Court held that the District Court’s interpretation of Art. 101 TFEU (anticompetitive conduct) was not manifestly erroneous. The District Court of Mannheim had been of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. [17] The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts whether the commencement of patent infringement proceedings by an SEP holder constituted a breach of Art. 101 TFEU. However, even if the commencement did constitute a breach, this defence would only be relevant against injunctions, but not in respect of compensation and rendering of accounts claims. [18]
      In relation to the order to render accounts, the Higher Regional Court acknowledged that the information that is required for calculating the amount of compensation will generally be a trade secret. [19] It is in the applicant’s legitimate interest to keep them secret. However, the court held that this interest alone does not constitute an irreversible detriment that is so severe that the execution of the court order needs to be stayed. [19]
  • [1] 6 U 58/16, para 6
  • [2] 6 U 58/16, para 7
  • [3] 6 U 58/16, para 12-17
  • [4] 6 U 58/16, para 25
  • [5] 6 U 58/16, para 18-24
  • [6] 6 U 58/16, para 26-28
  • [7] 6 U 58/16, para 39
  • [8] 6 U 58/16, para 33
  • [9] 6 U 58/16, para 45
  • [10] 6 U 58/16, para 35
  • [11] 6 U 58/16, para 38
  • [12] 6 U 58/16, para 51
  • [13] 6 U 58/16, para 52
  • [14] 6 U 58/16, para 62
  • [15] 6 U 58/16, para 63
  • [16] 6 U 58/16, para 63-64
  • [17] 6 U 58/16, para 59-60
  • [18] 6 U 58/16, para 61
  • [19] 6 U 58/16, para 67