Case Law post CJEU ruling Huawei v ZTE

National Courts Guidance


Negotiating Licenses for Essential Patents in Europe

Increased clarity provided on the principles established by the Court of Justice of the European Union in Huawei v ZTE.

The Court of Justice of the European Union clarified, in Huawei v ZTE (Case No. C-170/13), European law relating to the availability of injunctive relief for infringements of FRAND-based standard essential patents. In doing so, the Court provided a legal framework focused on the good faith conduct to be expected of both parties. Since the Court’s decision in 2015, national courts have been steadily exploring the scope of these obligations, providing further clarity on what is or is not to be considered appropriate behaviour. Below is a summary of these steps drawn from 4iP Council’s post-Huawei v ZTE case search tool.

This information is not intended as legal advice and, in the event of dispute, independent advice should be sought. In addition, the precedential nature of these decisions depends on the jurisdiction and instance in which they were delivered.

Huawei v ZTE process


As of November 2018

Term
Country
Interpretation
Case reference

Step 1

Notification of infringement

Germany

SEP holder's notification of infringement does not have to contain either the original written FRAND declaration, nor proof that a FRAND declaration has been made during the development of the standard, provided that SEP holder leaves no doubt that it is bound by a FRAND licensing commitment.

Germany

SEP holder's notification of infringement has to (1) specify the infringed patent, including its number, (2) inform that the patent has been declared standard-essential, (3) name the relevant standard, (4) inform that the implementer uses patent’s teachings as well as (5) indicate which technical functionality of the challenged embodiment makes use of the patent. The level of detail depends on the specific circumstances of the case, particularly the technological knowledge of the implementer (or the availability of external expertise gained by reasonable efforts). However, the information does not need to be as substantiated as facts submitted with a statement of claim in patent litigation. As a rule, reference to claim charts succes.

Germany

SEP holder's notification of infringement has to take place before an action is filed, at the latest, prior to the advance payment on costs by the SEP holder. The notification must indicate, at least, (1) the number of the patent, (2) the contested embodiments and (3) the alleged acts of use performed by the implementer. The court did not rule on whether additional information, such as an interpretation of the patent claims or information regarding the part of the standard the patent reads, are also required. SEP holder is not obliged to notify the patent infringement to third parties (for instance to suppliers of the implementer), unless third parties submit a request for a license on FRAND terms to the SEP holder.

France

SEP holder's notification of infringement has to contain the following information: (1) an overview, including each SEP and its filing date, (2) the parts of the standard implementing the respective patented technology, (4) an indication of the devices embodying such use (4) an indication of the consequences of acts of unauthorized use as well as (5) information to the recipient about its option to contest both the communicated information and the validity of the patents at issue.

Italy

A notification of infringement towards the parent company of the implementer does not meet the Huawei requirements, if the SEP holder brings an action only against the implementer.

UK

The notification of infringement is a mandatory condition which the SEP holder must satisfy before initiating infringement proceedings against an implementer. The precise content of such a notification depends upon all circumstances of the particular case. In general, if an implementer is familiar with the technical details and the SEPs it may be infringing, but has no intention of taking a FRAND licence, the SEP holder should not be denied an injunction, simply because it had not made a formal notification prior to the initiation of infringement proceedings.

Claim charts

Germany

Presenting claim charts to the implementer, which according to commercial practice are also used in licensing negotiations, is an adequate way to give notification of infringement.

Germany

Presenting customary claim charts (containing the relevant patent claims and the corresponding passages of the standard) to the implementer is an adequate mean to give notification of infringement.

Term
Country
Interpretation
Case reference

Step 2

Willingness (to conclude licensing agreement)

UK

The Huawei requirement of "willingness to enter into a license" refers to a willingness which is unqualified. In other words, a willing licensee must be one willing to take a FRAND licence on whatever terms are in fact FRAND.

Germany

The declared willingness of a device manufacturer to enter into a FRAND license could preclude the granting of an injunction requested by SEP holder against the distributor of the same devices.

Without delay

Germany

The more detailed the infringement notification is, the less time is available to the implementer to express its willingness to conclude a FRAND licensing agreement. The implementer did not comply with the Huawei requirements, since it took more than five months to react to SEP holder's notification of infringement and its reaction consisted only in asking for proof of the alleged infringement.

Germany

The implementer did not suciently express its willingness to conclude a FRAND licensing agreement, since it took him more than three months to request a license from the SEP holder, after it had become aware of the court action brought by the SEP holder against the distributor of its products using the SEP in question.

Term
Country
Interpretation
Case reference

Step 3

SEP owner’s offer

Germany

SEP holder's offer made only towards the parent company of the implementer is in line with the Huawei requirements. It is not required that SEP holders submit an individual offer to each company within a group of companies.

Germany

SEP holder's offer must contain all essential contractual terms and specify the conditions in a way that, in order to conclude a licensing agreement, the implementer only has to accept the offer. The calculation of the license fee must be explained in a manner that enables the implementer to objectively assess its FRAND conformity. SEP holder meets the Huawei requirements, even if its offer lies slightly above the FRAND threshold. This is, however, no longer the case, if the SEP holder offers conditions to the implementer that are manifestly economically less favourable than the conditions offered to other licensees without objective justification. In this context, the court is only required to determine on the basis of a summary assessment, whether SEP holder’s licensing offer evidently violates FRAND. (In variance with the decision Pioneer v Acer, LG Mannheim, 8 January 2016, Case No 7 O 96/14)

Germany

If the implementer does not express its willingness to conclude a licensing agreement in due time, the SEP holder can submit a licensing offer on FRAND terms even in the course of ongoing litigation against the implementer.

Germany

SEP holder's offer has to fully qualify as FRAND. offers, which lie even slightly above the FRAND threshold, are not in line with the Huawei requirements. The court competent for the injunction proceedings has to finally assess the FRAND compatibility of SEP holder's offer. A summary assessment of whether SEP holder's offer is evidently non-FRAND does not suce.

Germany

SEP holder's offer must contain all essential contractual terms and specify the conditions in a way that, in order to conclude a licensing agreement, the implementer only has to accept the offer. The calculation of the license fee must be explained in a manner that enables the implementer to objectively assess its FRAND conformity. In the case of quota license agreements, it is not sucient to indicate the royalties per unit without substantiating their FRAND character. The royalty amount must be made suciently transparent, for instance by reference to an existing standard licensing program or by indicating other reference values allowing to deduce the royalty demanded, such as a pool license fee covering patents also relevant for the standard in question. The court repeated that in this context, the court competent for the injunction proceedings is only required to determine on basis of a summary assessment, whether SEP holder’s licensing offer evidently violates FRAND (and not to fully assess FRAND conformity as requested in OLG Karlsruhe, 31 May 2016, Case No. 6 U 55/16).

Italy

SEP holder's offer for a licensing agreement towards the parent company of the implementer does not need to meet the Huawei requirements, if SEP holder brings an action only against the implementer.

Recognised commercial practices

Germany

SEP holder's offer for a worldwide portfolio license addressed to the parent company of a group of companies complies with the Huwaei requirements, since it corresponds to the respective recognised commercial practice in the field of standards applicable worldwide.

Germany

Recognised commercial practice in the relevant sector has to be considered, when determining whether the (geographical) scope of the licensing agreement offered by the SEP holder complies with FRAND.

Portfolio license

Germany

SEP holder's offer for a (worldwide) portfolio license is in line with the Huawei requirements.

UK

SEP holder's offer for a (worldwide) portfolio license is not contrary to competition law.

Worldwide portfolio license

Germany

SEP holder's offer for a worldwide portfolio license addressed to the parent company of a group of companies complies with the Huwaei requirements, since it corresponds to the respective recognised commercial practice in the field of standards applicable worldwide.

Germany

SEP holder's offer for a (worldwide) portfolio license is in line with the Huawei requirements, unless the circumstances of the specific case (for instance, if the implementer limits its market activity to one geographical market) require a modification.

UK

SEP holder's offer for a worldwide portfolio license is not contrary to competition law. As willing and reasonable parties would agree on a worldwide portfolio licence, the insistence by the implementer on a license which was limited to a single market (UK) is not FRAND compliant.

UK

An offer for a worldwide licence may be FRAND. What is more, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND.

FRAND range

UK

In each individual case, there is only a single FRAND compliant set of terms (including royalty rates); the so-called "true FRAND" terms. However, the fact that an opening offered rate is higher than the "true FRAND" rate does not mean of itself that a SEP holder has failed to take a FRAND approach.

UK

A number of sets of terms may all be FRAND in a given set of circumstances. The court will normally declare one set of terms as FRAND; the patent holder would then have to offer that specific set of terms to the implementer. In case that the court finds two different sets of terms as being FRAND, then the SEP holder will satisfy its FRAND undertaking, if it offers either one of them to the implementer (In variance with the decision Unwired Planet v Huawei, UK High Court of Justice, 5 April 2017, [2017] EWHC 711(Pat) Case No. HP-2014-000005).

Non-discrimination

UK

The non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component, obliging the patent holder to offer the same rate to all potential licencees. The FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates.

Comparable agreements

Germany

In court proceedings, SEP holders relying upon existing comparable licensing agreements with third parties for specifying a FRAND licensing offer need to particularly justify the existence of confidentiality interests, in case they seek protection of confidential information contained in such agreements. In general, considering the non-discriminating element of SEP holders' FRAND undertaking, it is not directly apparent which interest worthy of legal protection SEP holders could have in keeping conditions agreed in comparable licensing agreements confidential.

UK

In infringement proceedings, existing comparable licensing agreements between the patent holder and third parties can, as a rule, not be subject to "external-eyes-only" restrictions, since such agreements can be highly relevant documents as comparators for determining Fair, Reasonable and Non-Discriminatory licensing terms.

Confidentiality

Germany

Parties to court proceedings seeking protection of confidential information, upon which they rely for specifying a FRAND licensing offer, must (1) identify such information and concretely explain why it constitutes a business secret; (2) present in detail which measures were taken so far for securing confidentiality with respect to the information in question; (3) demonstrate in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed and (4) explain, with which degree of certainty the said disadvantages are expected to occur.

UK

Unless the parties to the proceedings agree otherwise, the use of “external eyes only” mechanisms for protecting documents containing confidential information in litigation can be applied only to exceptional cases. Documents of limited, if any, relevance to the proceedings can be subject to “external eyes only”restrictions, if their disclosure could be unnecessarily damaging for the party seeking protection. On the other hand, documents key to the case cannot, as a rule, be subject to such a regime (Article 6 of the European Convention on Human Rights).

Non-disclosure agreement

Germany

Prior to disclosing confidential information in court proceedings, parties seeking protection of such information must undertake efforts to sign a Non-disclosure agreement (NDA) with the opposing party (and any intervener). If the opposing party (or an intervener) unjustifiably refuses to enter into an NDA, the party seeking protection of confidentiality can meet its obligation to specify its FRAND licensing offer just by making “merely indicative observations” in the trial, to the extent (and not beyond) that is required for protecting its justified confidentiality interests.

ETSI declaration / FRAND declaration

UK

A patent holder requested by the European Telecommunications Standards Institute (ETSI) to give a FRAND declaration is not under an obligation to make such declaration. The ETSI IPR Policy does not oblige ETSI members which do not hold patents to make a FRAND declaration. In case that the parent company of an ETSI member made a FRAND declaration towards ETSI, the ETSI member is not obliged under the ETSI IPR Policy to make sure that its parent company performed its FRAND commitment. Moreover, the fact that the parent company's FRAND declaration towards ETSI refers also to its “Affiliates” does not establish a FRAND obligation for subsidiaries which themselves do not hold patents subject to the declaration.

Term
Country
Interpretation
Case reference

Step 4

Obligation to respond

Germany

Even if SEP holder’s licensing offer is not FRAND, the implementer still has to react. (In variance with the decision Sisvel v Haier, OLG Düsseldorf, 13 January 2016, Case No. 15 U 65/15)

Germany

The implementer has to submit a FRAND counter-offer, irrespective of whether the preceding licensing offer made by the SEP holder is FRAND. Implementer's obligation is triggered, when SEP holder's offer formally contains all information (in particular regarding the royalty calculation) required for the implementer to make a FRAND counter-offer.

Germany

The implementer is not required to respond to a SEP holder's license offer, if the terms of such an offer are not FRAND.

Germany

The implementer is required to respond to SEP holder’s license offer, even if, in his view, this offer is not FRAND. This is not the case, when SEP holder's offer is evidently not FRAND on basis of a summary assessment. (Contrary to the decision Sisvel v Haier, OLG Düsseldorf, 13 January 2016. Case No. 15 U 65/15).

Without delay

Germany

Submitting a counter-offer only 1,5 years after receiving SEP holder's licensing offer and half a year after the SEP holder brought an action against the implementer is not in line with the Huawei requirements.

Recognised commercial practices

Germany

The implementer's obligation to respond to SEP holder's offer is a manifestation of its due diligence obligations arising from the principle of good faith as well as recognised commercial practice in the business field in question.

Germany

A counter-offer needs to be made in due course, which means as soon as possible, taking into account the recognised commercial practice in the field and the principle of good faith.

Implementer’s counter-offer

Germany

Implementer's counter-offer is not "specific" in terms of the Huawei requirements, when the royalty amount is not specified in the counter-offer itself, but shall be determined by an independent third party, instead.

Germany

Implementer' s counter-offer limited to a license for one single market (Germany) is non-FRAND, particularly if implementer (or the group of companies it belongs to) distributes products using the SEP in question also in other markets.

Germany

Implementer's counter-offer does not meet the Huawei requirements, when the royalty amount shall be determined by an independent third party and the counter-offer is limited to a license for one single market (Germany), although the implementer (potentially) infringes the SEP in question in several countries in which the SEP is protected.

FRAND-range

UK

In each individual case, there is only a single FRAND compliant set of terms (including royalty rates), the so-called "true FRAND" terms. However, the fact that an offered rate is lower than the "true FRAND" rate does not mean of itself that an implementer has failed to take a FRAND approach.

Term
Country
Interpretation
Case reference

Step 5 & 6

Provision of security

Germany

The implementer is obliged to both render accounts regarding acts of use and to provide security for potential royalties, both based on its counter-offer. The implementer has to fulfil this obligation after the rejection of its first counter-offer, regardless of whether subsequent offers and counter-offers were made. Fulfilling this obligation more than a month after implementer's first counter-offer was rejected, does not meet the Huawei requirements.

Germany

The fact that the implementer has - allegedly - terminated its use of the SEP, does not remove its obligation to provide security for past periods of use.

Germany

Security has to be provided after the rejection of the implementer's first counter-offer by the SEP holder, regardless of whether subsequent offers and counter-offers were made. Payment of security several months after implementer's first counter-offer was rejected does not meet the Huawei requirements. This is also true, if implementer provides security only with respect to acts of use in one market (Germany). The Huawei requirements are also not met, when the implementer only proposes to have the security - if requested by the SEP holder - determined by an arbitration tribunal or by a different (English) court.

Rendering of accounts

Germany

The fact that the implementer has - allegedly - terminated its use of the SEP, does not remove its obligation to render accounts for past periods of use.