Case law search

Updated 26 January 2017

Sisvel v Haier

LG Düsseldorf
3 November 2015 - Case No. 4a O 93/14

1. Facts
   Claimant, a non-practicing entity, is the proprietor of European patent EP B, originally granted to the applicant “A”, allegedly covering a feature of the GPRS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market GPRS-based devices. On 10 April 2013, Claimant made a commitment towards ETSI declaring to grant a license on FRAND terms with regard to, inter alia, patent EP B. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014 Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Patent Program” and made an offer but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by Defendant “J” without a counter-offer. By letter as of 12 August 2015 Defendants submitted a counter-offer regarding patent EP B which was, in turn, refused by Claimant on 24 August 2015. After Claimant had brought an action against “I” and “J”, Defendants made yet another licensing offer in their court filing as of 21 September 2015 which was refused as well. In the course of the oral hearings on 29 September 2015, Defendants submitted a security in the amount of € 5000 and rendered account in respect of acts of use in the past.
2. Court’s reasoning
   1. Market power and notice of infringement
      The court left open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power (cf. below). As to the infringement notification, [1] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules. In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.
      
      
   2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [2]
      
      
   3. The standard implementer’s reaction
      According to the court even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [3] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [4] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [5]
      
      
3. Other important issues
   In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes 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 Defendants. [6] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [7]

• [1]  Case No. 4a O 93/14, para. 90-94
• [2]  Case No. 4a O 93/14, para. 96-98, 125
• [3]  Case No. 4a O 93/14, para. 98-101
• [4]  Case No. 4a O 93/14, para. 14, 103-109
• [5]  Case No. 4a O 93/14, para. 103-111
• [6]  Case No. 4a O 93/14, para. 37-40
• [7]  Case No. 4a O 93/14, para. 118-123

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Updated 23 January 2018

Saint Lawrence v Deutsche Telekom

OLG Karlsruhe
23 April 2015 - Case No. 6 U 44/15

A. Background

1. Facts

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. 2 O 103/14, 10 March 2015). The background was the alleged infringement of patent EP 1.125.276.B1, which covered technology for coding broadband signals which is essential for the ETSI AMR-WB standard.

The defendant was a major German telecommunications company (Deutsche Telekom). Intervenor 1 and intervenor 2 were smartphone manufacturers (HTC and others) whose products used the AMR-WB standard. These phones were supplied to the defendant and then sold to consumers as part of the defendant’s contract plans. [19] The claimant, a German non-practicing entity, Saint Lawrence, became owner of the respective SEP in August 2014. [20] The previous owner of the SEP had declared its willingness to grant licenses on FRAND conditions several times. [21] The defendant had shown no interest in such a license. [21] After commencing infringement proceedings in the District Court of Mannheim, the claimant contacted intervenor 2 for the first time. Intervenor 2 signed a confidentiality agreement on 23 February 2015, rejected an initial offer made by the claimant, and made a counter offer. On 25 March 2015 (after the decision of the District Court of Mannheim), the claimant made another offer, which intervenor 2 also rejected.

2. Ensuing Decisions

On 10 March 2015, the District Court of Mannheim granted an injunction. Inter alia, it held that the defendant had not attempted to enter into negotiations for a license. [21] In particular, the court considered it irrelevant that intervenor 2 might have demonstrated its willingness to enter into a license on FRAND conditions. In the eyes of the court, the relevant issue was whether the claimant had a right to demand an injunction to stop the defendant using the patent. Even if an intervenor could successfully raise a competition law based defence relying on the Federal Court of Justice decision Orange Book Standard, [22] this was of no relevance for the relationship between the claimant and the defendant. [23]

The defendant and intervenor 1 applied to the Higher Regional Court of Karlsruhe to stay the execution of the District Court decision. 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 on the basis that it appears manifestly erroneous. [24] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [24]

The Higher Regional Court of Karlsruhe granted the defendant’s application to stay the execution regarding the smartphones manufactured by intervenor 2, but dismissed the application made by intervenor 1. [25] It held that it would be sufficient for a successful competition law based defence that an intervenor is willing to enter into a license agreement. [26] Since the District Court of Mannheim had dismissed the intervenors’ willingness as irrelevant for the case, the resulting decision was manifestly erroneous. [26] Significantly, the Higher Regional Court required the defendant to make a deposit of EUR 5 million into the court to safeguard the claimant’s financial interests.

B. Court’s Reasoning

Importantly, the decision was handed down in April 2015 and thus several months prior to the CJEU Huawei/ZTE ruling. The Higher Regional Court stated that the final opinion of Advocate General Wathelet [27] was the legal basis of its decision. [28]

The Higher Regional Court reasoned that a patent holder could seek injunction orders against any business in the supply chain of the product that infringes the respective SEP – which includes manufacturers (such as the intervenors) and distributors (such as the defendant). In principle, according to the Federal Court of Justice decision Tripp-Trapp-Stuhl,Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06. the decision against whom to bring proceedings lies with the patent holder. [30] However, according to the Higher Regional Court, this was not the issue in this case. The issue was whether the patent holder was abusing its dominant market position by commencing proceedings against the defendant. The only relevant question is whether this is conduct that deviates from ‘normal’ competition behaviour, being detrimental to consumer interests. If the SEP holder has made a FRAND declaration in the past and is typically entering into license agreements with manufacturers, then the court could see no objective reason why the SEP holder would only bring proceedings against the distributor. [30] In contrast, there is a reasonable expectation that the SEP holder makes an offer to the manufacturer of the relevant product first. Bringing proceedings against distributors would put significant pressure on the manufacturer. This can distort the license negotiation because distributors will have little interest in legal arguments with patent holders. If a patent holder is a dominant undertaking, exerting such pressure constitutes an abuse of market power. [30] In addition, bringing proceedings against distributors whilst granting licenses to manufacturers in other cases is inconsistent behaviour. [30]

C. Other Important Issues

The Higher Regional Court pointed out that the claimant was a non-practising entity. Accordingly, by exercising its patent rights it is not protecting its own market share in the market for smartphones. [31] In contrast, it is in the claimant’s objective interest that as many mobile phones using its SEP from numerous manufacturers are present in this market. Moreover, it is unlikely that a stay of execution would jeopardise the claimant’s financial interests. A deposit made by the defendant into the court should be a sufficient safeguard. [31] On the other hand, an execution of the decision at first instance would cause considerable harm to the defendant. As a telecommunications company, the defendant relies on a comprehensive portfolio of mobile phones that it can offer to consumers. [32] Removing the devices manufactured by intervenor 2 from the portfolio would be a significant blow to the defendant’s core business. Moreover, a removal would also be detrimental for intervenor 2 because a major distribution channel for its smartphones would become inaccessible. [33] As a result, the defendant’s interest in staying the execution outweigh the interests of the claimant.

• [19] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 2.
• [20] Landgericht Mannheim, 10 March 2015, 2 O 103/14, para 27.
• [21] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 3.
• [22] Bundesgerichtshof, 6 May 2015, KZR 39/06.
• [23] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 6.
• [24] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 17.
• [25] OLG Karlsruhe, 8 September 2016, 6 U 58/16, para 38. After lodging the application, the claimant and intervenor 1 had reached a settlement agreement. As a result, intervenor 1 had withdrawn its appeal to the Higher Regional Court of Karlsruhe. Thus, in the eyes of the court, no stay of execution was required.
• [26] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 19.
• [27] GA Wathelet, 20 November 2014, C-170/13.
• [28] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 20.
• [29] Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06.
• [30] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 21.
• [31] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 25.
• [32] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 26.
• [33] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 27.

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Updated 23 January 2018

LG Mannheim

LG Mannheim
4 March 2016 - Case No. 7 O 24/14

A. Facts

Case No. 7 O 24/14 [1] related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard (‘subtitle data encoding/decoding and recording medium for the same’). [2] The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used such DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. In early 2013, the patent pool approached the defendant’s parent company about the use of their patents in general.

On 30 May 2014, the defendant offered to enter into a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license (but for Germany only). It was also willing to have the claimant determine the royalties owed under section 315 of the German Civil Code. On 25 July 2014, the claimant suggested to change the license offer to a worldwide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 as to the number of respective computers they put into circulation between July 2013 and June 2014 in Germany.

On 13 March 2015, the claimant made an offer for a worldwide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details as to 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. 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 parent company on 3 September 2015, the parties were unable to reach an agreement. On 30 September 2015, the claimant sent a PowerPoint presentation containing explanations regarding the patent and the calculation of the license fees.

The District Court of Mannheim granted an injunction order on 4 March 2016. [3] It also held that the defendant was liable for compensation and ordered it to render full and detailed accounts of its sales to determine the amount of compensation owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

B. Court’s Reasoning

1. Notice of Infringement

According to the Huawei/ZTE ruling, the claimant is required to notify the defendant of the alleged patent infringement. According to the District Court, this notice is supposed to provide the defendant an opportunity to assess the patent situation. [4] Thus, it is insufficient to notify the defendant that its products contain the respective standard and it is therefore infringing the SEP. Instead, the claimant is required to specify the infringed patent, the standard in question, and that the patent has been declared essential. The level of detail required depends on the respective situation. [5] However, the description does not need to be as thorough as a statement of claim in patent litigation. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. By sending the charts to the defendant, the claimant had met its obligations under the Huawei/ZTE ruling. [6]

The Huawei/ZTE principles require the SEP holder to give notice of infringement before commencing patent infringement proceedings. Otherwise, the SEP holder would abuse its market power, which would mean that the patent infringement court would not be able to grant an injunction order. However, according to the District Court, in such a situation the SEP holder would not lose its patent rights, but would be prevented from exercising those rights in court. [7] Proceedings that had been commenced prior to the Huawei/ZTE ruling present a special case. In that situation, the SEP holder could not have been aware of the obligations that the CJEU subsequently imposed on claimants. Thus, it must be possible for an SEP holder to go through the Huawei/ZTE process subsequently without losing the pending lawsuit. [8] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [9]

2. The SEP Owner’s Licensing Offer

The District Court expressed its view that the CJEU had wanted to establish a procedure that keeps the infringement proceedings free of complicated deliberations about the conditions of the offer, similarly to the German Federal Court of Justice decision Orange Book Standard. [10] If the alleged infringer argues that the conditions of the offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. [5] Thus, the District Court took the view that an infringement court only assesses in a summary review whether the conditions were not evidently non-FRAND. An offer is only non-FRAND if it is under the relevant circumstances abusive. For example, this would be the case if the conditions offered to the alleged infringer were significantly worse than those offered to third parties. [11] The District Court held that in the case in issue the royalties were not evidently non-FRAND because the royalty rates were generally accepted in the market. [12]

The offer needs to include the calculation method in respect of the royalties. [11] However, the CJEU did not elaborate on the level of detail required. [13] The District Court took the view that the SEP holder needs to enable the alleged infringer to understand why the offer is FRAND. In the case in issue, the claimant had included the calculation method. It had also provided further explanations regarding the calculation, which met the Huawei/ZTE requirements. [14]

3. The standard implementer’s reaction

The alleged infringer is required to respond to the SEP proprietor’s license offer, even if the infringer is of the opinion that the offer does not meet the FRAND criteria. [13] The only possible exception is an offer that, by means of summary examination, is clearly not FRAND, which would constitute an abuse of market power. A counter-offer would need to be made as soon as possible, taking into account recognized commercial practices in the field and good faith. The District Court held that the defendant had not made an adequate counter-offer. It is common business practice to enter into license agreements in respect of worldwide portfolio licenses. [15] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [15] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [16]

C. Other Important Issues

The court held that the procedures prescribed by the Huawei/ZTE ruling apply to applications for injunctions and recall orders, but not to rendering accounts and compensation. Regarding rendering accounts and compensation, SEP holders could pursue their rights in court without additional requirements. [13]

Further, the District Court was of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. Even if the claimant’s conduct was anti-competitive pursuant to Art. 101 TFEU, the standardisation agreement would be void. [17] This has no implications for patent infringement proceedings.

The court also held that there was no general rule that the SEP holder could only bring proceedings against the manufacturer of the infringing product. [18] In the eyes of the District Court, the Higher Regional Court of Karlsruhe decision 6 U 44/15 (23 April 2015) did not establish such a principle. In that case, the defendant was a company that acted merely as a distributor of infringing products (which means it was reselling the products without making any alterations). In contrast, the defendant in the present case had installed the infringing software onto laptops and then sold them under its own brand name. Thus, the two cases were not comparable. [18]

• [1] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
• [2]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
• [3] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
• [4] LG Mannheim, 4 March 2016, 7 O 24/14, p. 22.
• [5] LG Mannheim, 4 March 2016, 7 O 24/14, p. 23.
• [6] LG Mannheim, 4 March 2016, 7 O 24/14, p. 34/35.
• [7] LG Mannheim, 4 March 2016, 7 O 24/14, p. 26.
• [8] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 27-30.
• [9] LG Mannheim, 4 March 2016, 7 O 24/14, p. 33.
• [10] LG Mannheim, 4 March 2016, 7 O 24/14, p. 21.
• [11] LG Mannheim, 4 March 2016, 7 O 24/14, p. 24.
• [12] LG Mannheim, 4 March 2016, 7 O 24/14, p. 37.
• [13] LG Mannheim, 4 March 2016, 7 O 24/14, p. 25.
• [14] LG Mannheim, 4 March 2016, 7 O 24/14, p. 35/36.
• [15] LG Mannheim, 4 March 2016, 7 O 24/14, p. 38.
• [16] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 38-40.
• [17] LG Mannheim, 4 March 2016, 7 O 24/14, p. 43.
• [18] LG Mannheim, 4 March 2016, 7 O 24/14, p. 44.

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Updated 6 March 2018

OLG Düsseldorf

OLG Düsseldorf
18 July 2017 - Case No. I-2 U 23/17

A. Facts

The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a provider of telecommuni­cation services. Under the policy governing the relevant standard, the Claimant is obliged to license its SEP on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Against Claimant’s SEP a nullity action is pending. The Claimant, nevertheless, concluded portfolio licensing agreements also covering the SEP in question with two companies.

Since November 2012, the Claimant made efforts to license his SEP also to the Defendant. The parties could, however, not reach an agreement. In January 2016, the Claimant brought an action against the Defendant before the Regional Court of Düsseldorf requesting for a declaration of the Defendant’s liability for damages as well as rendering of accounts (main proceedings). After the main proceedings were ini­tiated, the Claimant made two offers for a license agreement to the Defendant. In order to protect busi­ness secrets connected with these offers, the Claimant requested the Defendant to sign a Non-Disclosure Agreement (NDA). The Defendant refused to sign a NDA. Moreover, the Defendant brought an action against the Claimant before an Irish Court requesting for a declaration that Claimant’s offers did not comply with FRAND.

Subsequently, the Claimant filed a motion for a preliminary injunction against the Defendant before the Regional Court of Düsseldorf. The Regional Court of Düsseldorf dismissed Claimant’s motion. The Claimant appealed this judgement. With the present ruling the competent Higher Regional Court of Düsseldorf in­dicated that the Claimant’s appeal has no prospects of success.

B. Court’s reasoning

The court made clear that preliminary injunctions involving SEPs are subject to the same strict prerequi­sites as injunctions referring to non-SEPs. The SEP-holder has, therefore, to adequately establish the va­lidity of the SEP, its use by the alleged infringer as well as the urgency of its request for a preliminary injunction.

Besides this, prior to seeking for a preliminary injunction, the SEP holder also has to fulfill the require­ments set forth by the Court of Justice of the European Union in its decision in the matter Huawei ./. ZTE (Huawei judgement). This follows from the fact that SEP-holders’ claims for injunctive relief are, in prin­ciple, only enforceable, after the prerequisites established by the Huawei judgement have been fully met.

Since preliminary injunctions may severely affect alleged infringer’s ongoing business, such injunctions can only be granted, when both the validity and the use of the SEP by the alleged infringer appear to be given with a high degree of certainty.

The validity of a SEP is deemed to be given, when the SEP has been confirmed in patent opposition or nullity proceedings. Without a prior confirming decision, the validity of a SEP can, exceptionally, also be regarded as being given, when

• the alleged infringer has unsuccessfully intervened in the proceedings, in which the SEP was granted,
• no opposition or nullity proceedings were initiated against the SEP, because it is universally consid­ered to be able to receive patent protection (one indication for this being, for instance, the fact that the SEP was licensed to renowned licensees),
• the objections raised against SEP’s validity can be proven to be unfounded even by the limited means of the summary examination foreseen in proceedings for interim relief, as well as
• in “extraordinary circumstances”, in which the SEP-holder will face substantial disadvantages, if he is forced to wait with the initiation of proceedings against the infringer, until after the end of opposition or nullity proceedings pending against the SEP.

Against this background, the court argued that the Claimant is most likely not entitled to the requested preliminary injunction.

First, the Claimant failed to establish the validity of the SEP in dispute with the required high degree of certainty. A decision confirming the SEP in dispute is missing, since the nullity proceedings are still pending. Furthermore, the exceptions allowing this conclusion to be drawn, even without a prior con­firming decision, do most likely not apply. In particular, the fact that the Claimant concluded portfolio licensing agreements with two other companies covering also the SEP in question, does not suffice to adequately establish its validity. This fact only proves that the licensees held the SEP-holder’s portfolio as being able to receive patent protection as a whole, not, however, that they considered the SEP itself as being worthy of such protection. Furthermore, due to the high level of technical complexity, the court does not expect that the objections raised against the validity of the SEP can be proven as being unfounded solely on basis of the limited examination means available to the court in the present pro­ceedings for interim relief.

Second, the court has also substantial doubts that urgency is given. The Claimant was aware of the alleged infringement since 2012. Nevertheless, the Claimant refrained from making his claim for injunctive relief enforceable by fulfilling the Huawei judgement requirements. Furthermore, in the main proceedings ini­tiated prior to the present proceedings for preliminary injunction, the Claimant did not request for injunc­tive relief, but limited his action against the Defendant to damages and rendering of accounts. In terms of urgency, it could be expected from the Claimant to request for injunctive relief already in the main proceedings. Furthermore, the fact that the Defendant brought an action before an Irish Court requesting a declaration that Claimant’s offers did not comply with FRAND, also fails to establish urgency. It is the Defendant’s right to seek legal redress.

C. Other issues

In addition, the court expressed its view regarding the consequences of the refusal of a potential licensee to sign a NDA covering information connected with the SEP-holder’s offer for a licensing agreement on FRAND terms, without, however, ruling on this question on the merits of the present case.

The court suggested that the unjustified refusal of a licensee to enter into a NDA does not release the SEP-holder from the obligations established by the Huawei judgement, namely the obligation to make a FRAND offer to the licensee and specify the underlying conditions (particularly the price calculation). An unjusti­fied refusal of the licensee to sign a NDA shall, however, lead to easing the SEP-holder’s burden to provide the licensee with detailed explanations regarding the justification of its licensing conditions, to the extent that this is required for protecting its justified confidentiality interests. Instead of detailed information, “merely indicative observations” would, basically, suffice. The licensee cannot object the FRAND con­formity of the SEP-holder’s offer based on the insufficient specification of the licensing terms.

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Updated 22 August 2018

TQ Delta LLC v Zyxel Communications and Ors., EWHC

English court decisions
13 June 2018 - Case No. HP-2017-000045, [2018] EWHC 1515 (Ch)

A. Facts

The Claimant acquired patents which were declared as essential to the DSL standard under the so-called "ITU Recommen¬dations" (Standard Essential Patents, or SEPs) from a company called Aware Inc [1] . The ITU Recommendations require from the SEP holder to make its patents accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] . The Defendants manufacture and sell various types of equipment complying with the DSL standard [2] .

The Claimant asserted claims against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds [3] . The proceedings involve, on the one hand, technical issues concerning the validity, essentiality and infringement of the SEPs in question and, on the other hand, the licensing of these SEPs on FRAND terms [4] .

Prior to service of the statements of case, the Court ordered the Claimant to disclose licence agreements concluded with third parties covering the SEPs in suit (comparable agreements) [5] . The Claimant entered into licences with two companies (in the following referred to as "counterparty A" and "counterparty B") [6] and also possesses copies of licences previously granted by Aware Inc. to other SEP users [7] . Counterparty A and Aware Inc. argued that their licence agreements can only be disclosed on an "external eyes only" basis (that is only towards i.e. external counsels and independent experts), since they contain confidential information, such as party names, pricing terms and other commercial information [8] . Counterparty B did not object to the disclosure of its licence agreement to the Defendant (provided that this would take place on a confidential basis), but argued that any other confidential information provided to the Claimant in the course of negotiations for the licence can only be disclosed to "external eyes only" [9] .

The Claimant suggested that the parties to the proceedings enter into a co-called "Confidentiality Club Agreement". The agreement proposed by the Claimant differentiated between "Confidential Infor-mation" and "Highly Confidential Information" [10] . Whether information is designated as "Confidential" or "Highly Confidential" would be determined by the disclosing party [10] . Information designated as "Highly Confidential" would be subject to an "external eyes only" limitation [10] . This limitation would apply to both comparable licences granted by the Claimant and licences granted by Aware Inc. [11] . The Defendants did not agree with the Claimant’s proposal. Instead, they requested that two named individuals from the Defendant’s group should be given access to the comparable licences [10] .

The Court did not approve the establishment of an "external eyes only" mechanism as suggested by the Claimant [12] and ordered disclosure of the comparable licences. Nevertheless, the Court temporarily stayed that order to give the third parties affected (counterparties A and B and Aware Inc.) the opportunity to set it aside or vary it, before disclosure of the comparable licences is made [13] .

B. Court’s reasoning

In the Court’s eyes, it is "common practice" in patent cases for parties to reach Confidentiality Club Agreements [10] ; such agreements are "often essential", when disclosure of confidential information is required in court proceedings [14] . In cases involving intellectual property rights, a mechanism for disclosure limiting access to confidential documents to specific representatives of one of the parties is considered "commonplace" [14] . Furthermore, documents can be redacted to exclude confidential material which is irrelevant to the dispute [14] .

Looking particularly at "external eyes only" mechanisms, the Court takes the view that such mechanisms can be included in Confidentiality Club Agreements upon agreement of the parties (as it was the case in the matter Unwired Planet v Huawei [15] ) [16] . If no agreement can be reached on such a provision, parties can request the Court to restrict access to specified documents to "external eyes only" [7] .

The Court finds, however, that such a confidentiality regime can be applied only to exceptional cases [17] . An "external eyes only" mechanism enables one party to exclude access to any document that it chooses, placing the burden of seeking access to documents to the opposing party, despite the fact that the latter is prima facie entitled to such access [18] . In the Court’s view, the opposite should rather be the case: The party wishing to limit access to documents to "external eyes only" should be obliged to justify that limitation [19] .

According to the Court, when determining whether "external eyes only" restrictions should be ordered, the role which the affected documents are expected to play in the case must be considered [20] . Where the documents are of limited, if any, relevance to the proceedings and their disclosure could be unnecessarily damaging for the party asserting confidentiality, ordering an "external eyes only" limitation may be justified in specific cases [14] (insofar the Court adopts the notion expressed in the matter IPCom v HTC [21] ). Furthermore, the Court did not rule out that in certain exceptional cases an "external eyes only" mechanism might also be justified with respect to specific documents of "greater relevance", at least at an interim stage of the proceedings [22] .

When it comes to documents key to the case, the Court finds, however, that the "blanket exclusion" of access to such documents enabled through "external eyes only" mechanisms is not in line with the right to a fair hearing stipulated by Article 6 of the European Convention on Human Rights and the principles of natural justice . Such a regime is further incompatible with the obligation of lawyers to share all relevant information of which they are aware with their clients . If key documents were to be subject to an "external eyes only" restriction, the opposing party would be unable to discuss the respective documents with its legal representative, to attend parts of the trial and to see all of the reasons for the judgment .

Against this background, the Court held that in the present case, approving the establishment of an "ex-ternal eyes only" mechanism as suggested by the Claimant would "merely postpone the resolution of the dispute" . The Court had ordered the disclosure of the comparable licences, because they are, or are likely to be, key documents in the above sense . Since the Court may be asked to decide on a FRAND licence which must be reasonable and non-discriminatory, existing licence agreements entered into by the Claimant (and its pre¬decessor, Aware Inc.) may be highly relevant documents as comparators .

• [1] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 2.
• [2] Ibid, para. 3.
• [3] Ibid, para. 1.
• [4] Ibid, para. 1. With respect to the relationship between the 'technical trials' (that means the proceedings concerning the validity, essentiality and infringement of the SEPs in suit) and the 'non-technical trial' regarding to FRAND licensing see, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 21 November 2017, Case-No. HP-2017-000045, [2017] EWHC 3305 (Pat)
• [5] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), paras. 25 and 30.
• [6] Ibid, para. 25.
• [7] Ibid, para. 25.
• [8] Ibid, paras. 26 and 28.
• [9] Ibid, para. 27.
• [10] Ibid, para. 4.
• [11] Ibid, para. 22.
• [12] Ibid, paras. 34 et seqq.
• [13] Ibid, para. 35.
• [14] Ibid, para. 23.
• [15] Unwired Planet v Huawei, UK High Court of Justice, 5 April 2017, Case-No. HP-2014-000005, [2017] EWHC 711 (Pat).
• [16] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.
• [17] Ibid, para. 21.
• [18] Ibid, paras. 21 and 34.
• [19] Ibid, para. 34.
• [20] Ibid, para. 15.
• [21] IPCom GmbH and Co KG v HTC Europe Co. Limited and ors, judgement dated 23 January 2013, Case No. HC11 C02064, [2013] EWHC 52 (Pat).
• [22] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.

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Updated 17 January 2018

Sisvel v Haier

OLG Düsseldorf
30 March 2017 - Case No. I-15 U 66/15

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [23] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [24] and that the claimant had not made a license offer on FRAND conditions. [25] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [26] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [27] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [28]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [29] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [30] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [30] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [31] because the patent in question was related to data transfer, an essential function of the GPRS standard. [32]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [33] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [34] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [34] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [35]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [36] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [36]

3. The Defendant’s Willingness to Enter into a License Agreement

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [37] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [38] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [38] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [38]

4. The SEP Owner’s Licensing Offer and the Standard Implementer’s Reaction

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [39] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [40] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [40] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [40] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [41] because it discriminated against the defendants. [42] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [43]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [44] SEP owners have discretion regarding the license fees that they charge. [45] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [46] Further, license conditions can be abusive only if they are significantly different between licensees. [46] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [47] The burden of proof for such substantially unequal treatment lies with the defendant, [48] whilst the onus is on the claimant to prove that this unequal treatment is justified. [48] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [48] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [49] without having a proper justification. [50] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [51] or that these discounts were a result of the particularities of the case. [52]

• [23] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
• [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
• [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
• [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
• [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
• [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
• [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
• [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
• [31] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
• [32] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
• [33] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
• [34] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
• [35] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
• [36] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
• [37] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
• [38] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
• [39] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
• [40] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
• [41] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
• [42] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
• [43] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
• [44] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
• [45] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
• [46] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
• [47] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
• [48] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
• [49] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
• [50] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
• [51] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
• [52] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

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Updated 26 January 2017

Pioneer v Acer

OLG Karlsruhe
31 May 2016 - Case No. 6 U 55/16

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 7 O 96/14 seeking to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. The facts underlying the two decisions are therefore the same: Claimant owns the patent EP 1 267348, allegedly essential to the DVD standard and administered with regard to its licensing by the patent pool “A”. Early in 2013 “A” and the Defendant’s group parent were in contact regarding “A” ’s DVD licensing activity, but no concrete notice of infringement was made and no licensing negotiations ensued. After having been sued for patent infringement Defendant submitted, on 6 October 2014, an offer to license the patent-in-suit for Germany at FRAND conditions, with the exact royalty rate to be determined by Claimant pursuant to § 315 German Civil Code. Furthermore, Defendant declared to be willing to negotiate a portfolio license for all German patents of Claimant and, in case the negotiations were to fail, to have the licensing conditions determined by a state court or arbitration tribunal. In order to indicate what Defendant considered to be a FRAND royalty rate Defendant submitted an expert opinion. As of 28 November 2014, Claimant proposed to modify the conditions to the effect that Defendant’s group parent was supposed to take a worldwide portfolio license comprising all Claimant’s portfolio patents administered by “A”. Claimant made a (perhaps: additional) FRAND declaration with regard to the patent and informed Defendant thereof in December 2014. After Defendant had rejected this offer, Claimant offered, on 13 March and 13 April 2015, a worldwide portfolio license to Defendant’s group parent company. To the offer were added claim charts for two pool patents, as well as information on how Claimant deduced the royalty from the overall royalty rates of the “A”-patent pool. On 5 May 2015, Defendant’s group parent requested claim charts regarding all patents to be licensed as well as further information on royalty calculation. Claimant sent, on 7 August 2015, claim charts for five additional patents declaring its willingness to provide further information as soon as constructive technical discussions would be taken up. In a filing to the court as of 20 November 2015, Claimant explained its royalty calculation in greater detail and submitted an expert opinion on the issue.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous.
2. Court’s reasoning
   1. Applicability of Huawei to transitory cases
      The court tentatively confirms that, in transitory cases, it is sufficient if the SEP proprietor fulfills its Huawei duties by way of the statement of claims or even after the lawsuit was initiated. [74] As to the reasons for this finding, the court is not convinced by the considerations of the lower court (cf. above LG Mannheim, 8 January 2016 - 7 O 96/14), in particular because the ECJ has not stated that actions for infringement brought prior to the Huawei decision had to comply only with the Orange Book rules of conduct and not the Huawei rules. [75] However, according to the Court, the Huawei decision deals only with the abusive bringing of an action for SEP infringement, not with the question whether such action remains abusive even after the SEP proprietor has fulfilled its conduct obligations under Huawei. [76] It appears possible that, at least in transitory cases, the continuation of an infringement action is no longer abusive where the statement of claims provided sufficient notice of the infringement, where the SEP proprietor made a Huawei-compliant licensing offer during the ongoing litigation, and where the standard implementer failed to appropriately react to this offer. Hence, the lower court’s finding on that issue was not considered manifestly erroneous.
   2. Standard of review for licensing offers
      The court did, however, find the lower court’s ruling to be manifestly erroneous with regard to the standard of review it had postulated for the SEP proprietor’s licensing offer: [77] As stated clearly by the ECJ, the SEP proprietor has to make a licensing offer that qualifies as FRAND—not, for instance, slightly above FRAND—and it is for the respective court to assess the FRAND quality of the offer. A reduced standard of review, consisting merely in a summary assessment of whether the offer is evidently non-FRAND, has no basis in Huawei. Even if the SEP proprietor were to be granted much leeway in determining the licensing conditions—a question which the court reserves for its decision on the merits of the appeal—the conditions would still have to remain within the FRAND range. Since the lower court’s conclusion that Claimant had complied with the Huawei rules of conduct while Defendant had violated them was reached by applying the reduced standard of review the court decided to partly [78] suspend the enforcement of the first instance-ruling.

• [74] Case No. 6 U 55/16, para. 24-28
• [75] Case No. 6 U 55/16, para. 26
• [76] Case No. 6 U 55/16, para. 27
• [77] Case No. 6 U 55/16, para. 29-36
• [78] The reasons why the Court limited the suspension to the recall and destruction of infringing products are of no interest here, cf. OLG Karlsruhe, 31 May 2016 – Case No. 6 U 55/16, para. 37 et seq.

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Updated 17 August 2018

Apple v Qualcomm, [2018] EWHC 1188 (Pat)

English court decisions
22 May 2018 - Case No. HP-2017-000015

A. Facts

The Claimants are the US-based parent company of the Apple group, Apple Inc., and five European subsidiaries. The Apple group manufactures and sells, among other products, mobile telecommunication and media devices [41] .

The two Defendants are the US-based parent company of the Qualcomm group, Qualcomm Incorporated (Qualcomm USA), and its subsidiary, Qualcomm (UK) Limited (Qualcomm UK) [42] . Qualcomm USA supplies manufacturers of Claimants’ devices with chipsets for mobile phones [43] . The company holds a great number of patents declared essential (Standard Essential Patents, or SEPs) to mobile telecommuni¬cation standards developed by the European Telecommunications Standards Institute (ETSI) [42] . Qualcomm USA made undertakings towards ETSI pursuant to Article 6.1 of the ETSI Intellectual Property Rights Policy (IPR Policy) that it “and its Affiliates” would make its SEPs accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (FRAND undertakings). Qualcomm UK, on the other hand, neither holds SEPs relating to ETSI standards, nor made a FRAND undertaking vis-à-vis ETSI pursuant to Article 6.1. ETSI [44] . The company is, nevertheless, a member of ETSI.

The Claimants brought an action against both Defendants before the High Court of Justice (Court). Against Qualcomm USA the Claimants asserted claims for declaration of invalidity, for revocation and for declaration of non-essentiality with respect to certain SEPs [45] , a claim for declaration that rights derived from SEPs held by Qualcomm USA are exhausted [46] , a claim for damages allegedly suffered by an abuse of dominant position by Qualcomm USA in the relevant markets [47] , as well as claims arising from an alleged breach of the ETSI IPR Policy and the FRAND undertakings [48] .

Against Qualcomm UK the Claimants raised one single claim: They argued that Qualcomm UK as a member of ETSI was in breach of an obligation to license or procure licences on FRAND terms for SEPs held by the Qualcomm group [49] .

In its present decision, the Court did not rule on the merits of the claims asserted against Qualcomm USA. The Court focused on procedural questions regarding to the service of these claims, expressing doubts that some of the claims raised (particularly the claim for damages resulting from an alleged abuse of market power) could be validly served on Qualcomm USA outside the UK jurisdiction [50] .

Regarding to the claim asserted against Qualcomm UK, the Court found that no real prospect of success on the merits exist [51] . Accordingly, the Court signaled that it will grant Qualcomm UK a summary judg-ment against that claim, as the latter requested [52] .

B. Court’s reasoning

The Claimants based the claim against Qualcomm UK on the notion that the ETSI IPR policy obliges all ETSI members to license or procure a licence for SEPs on FRAND terms [49] . In addition, the Claimants argued that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to see to it that Qualcomm USA, or other companies belonging to the Qualcomm group, performed their FRAND undertakings [53] . Further, the Claimants pleaded that the FRAND undertakings made by Qualcomm USA towards ETSI on behalf of itself and its “Affiliates” also covered Qualcomm UK; thus, a breach of these undertakings was enforceable and actionable against the latter as well [54] .

Ruling on the obligations of ETSI members, the Court made clear that the ETSI IPR Policy does not require ETSI members which do not own SEPs to make a FRAND undertaking, not least because such an undertaking could not be fulfilled [55] . Moreover, in the eyes of the Court, the ETSI IPR Policy does not establish such an obligation even for entities which hold SEPs [55] . This can be derived from the provisions contained in the ETSI IPR Policy regulating the steps to be taken, in case that the patent holder chooses to refrain from making a FRAND undertaking (Article 8 ETSI IPR Policy) [55] .

Furthermore, the Court rejected the notion that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to make sure that Qualcomm USA performed its FRAND undertakings [53] . According to the Court, there is nothing in the wording of the ETSI IPR Policy or in the nature of the ETSI scheme which could establish such an obligation of ETSI members [53] . The Court did not see any need to impose an unexpressed obligation of that kind on ETSI members, either [53] .

Finally, the Court ruled that the FRAND undertakings of Qualcomm USA did not affect Qualcomm UK [56] . In the Court’s view, the reference to “Affiliates” in connection with undertakings pursuant to Article 6.1 ETSI IPR Policy covers only subsidiaries which themselves own SEPs subject to the respective undertaking [57] . Again, a company which does not own SEPs cannot be required to grant licences for patents that it does not hold [58] .

• [41] Applev Qualcomm, UK High Court of Justice, judgement dated 22ndMay 2018, Case-No. HP-2017-000015, [2018] EWHC 1188 (Pat), para. 1 et seq.
• [42] Ibid, para. 3.
• [43] Ibid, para. 63.
• [44] Ibid, para. 35 et seq.
• [45] Ibid, para. 13 et seq.
• [46] Ibid, para. 15.
• [47] Ibid, para. 16.
• [48] Ibid, paras. 13 et seq.
• [49] Ibid, paras. 11 and 38.
• [50] Ibid, paras. 92 and 115 et. seq.
• [51] Ibid, para. 57.
• [52] Ibid, paras. 8 and 57.
• [53] Ibid, para. 53.
• [54] Ibid, para. 38.
• [55] Ibid, para. 47.
• [56] Ibid, para. 49 et seq.
• [57] Ibid, para. 50 et seq.
• [58] Ibid, para. 50.

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Updated 26 January 2017

Sisvel v ZTE, Tribunale Ordinario di Torino

Italian court decisions
18 January 2016 - Case No. 30308/20215 R.G.

1. Facts
   Claimant (Sisvel Int. S.A.) is the proprietor of European patent EP 1 264 504, originally granted to Nokia Corporation, allegedly covering part of the UMTS standard, and being part of Claimant’s patent portfolio “Sisvel Wireless patents” which purportedly encompasses patents essential to various ICT standards. Defendant I (ZTE Italy S.R.L.) and Defendant II (Europhoto Trading S.R.L.) produce and market UMTS-based devices.
   On 10 April 2013, Claimant made a commitment towards ETSI declaring to grant a license on FRAND terms with regard to patent EP 1 64 504. By letter as of December 2012 Claimant informed ZTE Corporation, parent company of Defendant I, about its ownership in various SEPs, indicated that the teachings of these patents were implemented in Defendant I’s devices and expressed its willingness to grant licenses on FRAND terms. On 19 December 2012, ZTE Corporation requested from Claimant further information in order to be able to assess that offer. On 29 January 2013, Claimant sent a non-disclosure agreement (NDA) which ZTE Corporation signed only about seven months later on 3 September 2013. In the course of meetings in September and October 2013, Claimant and ZTE Corporation entered into licensing negotiations without concluding a licensing agreement. On 25 July 2014, after a break of several months, the licensing negotiations have been reinitiated and ZTE Corporation for the first time addressed a claim chart provided by Claimant about ten months before.
   Claimant, by letter as of 13 October 2014, gave notice of its decision to unilaterally terminate the NDA within thirty days because ZTE Corporation adhered to delaying tactics. At the same time, though, Claimant continued the licensing negotiations. Although ZTE Corporation declared at first, on 5 February 2015, to agree to the terms proposed by Claimant it submitted a counter-offer a few months later. The counter-offer was rejected by Claimant. After the presentation of a draft licensing agreement by Claimant on 11 March 2015 and several meetings of the parties Claimant submitted a final licensing offer on 4 November 2015 being rejected by ZTE Corporation due to its alleged non-conformity with FRAND terms. Since a further licensing offer being presented in December 2015 was equally refused by ZTE Corporation, Claimant commenced litigation against Defendants.
   After Defendant II, a retail company, was informed about the seizure of twenty mobile phones implementing the UMTS-standard, it immediately returned the remaining six devices to its supplier and provided the necessary sales documents to the court.
2. Court’s reasoning
   Since Claimant only entered into licensing negotiations with and addressed all licensing offers to ZTE Corporation, being the parent company of Defendant I, it did not comply with its Huawei obligations vis-à-vis Defendant I. Claimant neither noticed Defendant I of the alleged infringement prior to initiating litigation nor did it provide the necessary documents indicating the essential character of the patent in question. [72]
   While rejecting all other actions , particularly as to the seizure of devices using the patent-in-suit, raised against Defendant II, who neither became involved into the licensing negotiations between Claimant and ZTE Corporation nor possesses mobile devices implementing the UMTS standard anymore, the court upheld the action for prohibitory injunction because the confirmation of cessation of sales does not completely exclude periculum in mora. [73] Furthermore, the court rejected the preliminary measures raised by Claimant against Defendant I.
   Furthermore, the court stated that the NDA was not validly terminated by Claimant’s unilateral declaration as of 19 December 2014 and that therefore Claimant was not allowed to initiate proceedings against ZTE Corporation or its subsidiaries, such as Defendant I, until 3 September 2016.

• [72] Case No. 30308/20215 R.G., para. 3
• [73] Case No. 30308/20215 R.G., para. 5, a-c

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Updated 20 April 2017

Wiko v Sisvel, Tribunal de Commerce de Marseille

French court decisions
20 September 2016 - Case No. RG: 2016F01637

1. Facts
   Claimant WIKO S.A.S. markets mobile phones as well as telecommunication products and services, produced by its parent company TINNO, in France and Europe. Defendant SISVEL UK LTD is a division of SISVEL INTERNATIONAL and performs the function of an intermediary between manufacturers seeking access to high-level technology and intellectual property rights holders willing to grant licenses to their portfolio. Claimant considers itself a victim of acts of unfair competition committed by Defendant. The latter sent letters to several French distributors and customers of Claimant, such as Carrefour, Casino or LDLC, alerting them that they (purportedly) infringed Claimant’s patents allegedly essential to the LTE standard. In consequence, Claimant sued Defendant before the Tribunal de Commerce de Marseille, seeking, inter alia, a decision declaring Defendant’s letters to be acts of unfair competition, forcing Defendant to issue a notice of revocation, and awarding damages to Claimant.
2. Court’s reasoning
   The Tribunal de Commerce de Marseille rejected Claimant’s submission regarding the alleged violation of the French rules on unfair competition. Against the background of paras. 61, 63 of the Huawei judgment, requiring the SEP proprietor to alert the alleged infringer about the infringement prior to the initiation of proceedings and to present a specific, written offer for a license on FRAND terms, the Court considered the letters as prior notice in the sense of the Huawei rules of conduct and denied a violation of the French rules on unfair competition. In particular, the court stressed that the documents communicated by Defendant provided an overview including each SEP, its filing date as well as the parts of the LTE standard implementing the respective patented technology. They indicated not only the consequences of acts of unauthorized use and the devices allegedly embodying such use but informed the distributors also about their option to contest both the communicated information and the validity of the patents at issue. Furthermore, Defendant had offered to grant a FRAND license in the sense of the Huawei decision, defined a response period for this offer and attached a terms sheet substantiating the general framework, the basic clauses and, in particular, the royalties of a potential FRAND licensing agreement. The letters did not, however, ask for a cessation of sales of the allegedly infringing products.

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Updated 10 April 2019

Huawei v ZTE

CJEU Huawei v ZTE
16 July 2015 - Case No. C-170/13

A. Facts

The Claimant, Huawei Technologies Co. Ltd., holds a patent declared as essential to the practice of the LTE wireless telecommunication standard (Standard Essential Patent, or SEP) developed by the European Telecommunications Standards Institute (ETSI) [1] . In March 2009, the Claimant committed towards ETSI to make the patent in question accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] .

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [3] and also market, inter alia in Germany, LTE-compliant products [4] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [4] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [5] . An offer for a licensing agreement was, however, not finalized [5] .

In April 2011, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court), seeking for injunctive relief, the rendering of accounts for past uses, the recall of products and an award for damages for patent infringement [6] .

The District Court stayed its proceedings and submitted a reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) to the Court of Justice of the European Union (CJEU). In brief, the District Court noted that the German Federal Court of Justice (Bundesgerichtshof) and the European Commission appeared to have adopted conflicting positions on the question under which conditions an action for a prohibitory injunction brought by a SEP holder against a SEP user constitutes an abuse of dominant position in violation of Article 102 TFEU [7] : In its Orange Book ruling, the German Federal Court of Justice held that, in infringement proceedings concerning SEPs, the defendant is entitled to raise a defence under Article 102 TFEU (and thus avoid an injunction), only and insofar as it submits an unconditional, fair offer to conclude a licence to the patent holder, accounts for past acts of use and also makes a deposit on the royalty payments resulting thereof [8] . The European Commission, on the other hand, in proceedings relating to enforcement actions taken by Samsung against Apple in a number of EU member states, took the view that an action for injunctive relief concerning a SEP may, in principle, infringe Article 102 TFEU to the extent to which the defendant has demonstrated his willingness to negotiate a licence on FRAND terms in accordance with the patent holder’s FRAND commitments [9] .

With the present judgment, the CJEU established the conditions under which a SEP holder can file an action for a prohibitory injunction against a patent user, without violating Article 102 TFEU. In particular, the CJEU ruled that a SEP holder which has given an irrevocable undertaking to make its patents accessible on FRAND terms, does not abuse its dominant position by seeking an injunction and/or the recall of infringing products, as long as – prior to bringing a respective court action – it has

• firstly, notified the user about the infringement of its patent ‘by designating that patent and specifying the way in which it has been infringed’, and
• secondly, if the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, ‘presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated’ [10] .

By contrast, the SEP user may invoke the abusive nature of a patent holder’s action for a prohibitory injunction and/or for the recall of products, only if it responds to SEP holder’s offer without delay [11] . In case that the patent user rejects that offer, it has to

• submit ‘promptly and in writing, a specific counter-offer that corresponds to FRAND terms’ to the patent holder [12] and
• if its counter-offer is rejected, provide appropriate security for the use of the patent(s), ‘for example by providing a bank guarantee or by placing the amounts necessary on deposit’ [13] .

The CJEU made clear that the above framework does not apply to SEP holders’ claims for damages and/or the rendering of accounts in relation to past acts of use; actions concerning these claims cannot infringe Article 102 TFEU, since they have no impact on whether standard compliant products can appear or remain on the market [14] .

B. Court’s Reasoning

The CJEU stressed the need to balance, on the one hand, the effective judicial protection of SEP holders’ fundamental intellectual property rights (IPRs) and, on the other hand, the public interest in free undistorted competition [15] .

Since the parties had not contested that the Claimant held a dominant market position, the Court’s analysis focused on the existence of an ‘abuse’ in terms of Article 102 TFEU [16] . According to the CJEU, the exercise of an IPR cannot ‘in itself’ be abusive, even if it is the act of an undertaking holding a dominant position [17] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances” [18] .

Cases, in which SEPs are involved, distinguish themselves from other IPR-related cases: First, the fact that the patent has obtained SEP status means that the patent holder can ‘prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question’ [19] . Besides that, by making a FRAND commitment, the patent holder has created ‘legitimate expectations’ to third parties implementing the standard that the SEP will be accessible on FRAND terms [19] . Having regard to the ‘legitimate expectations’ created, the patent user sued in infringement proceedings can, in principle, defend himself by invoking Article 102 TFEU, in case that the SEP holder refused to grant him a FRAND licence [20] .

Although the SEP holder cannot be deprived of its rights to have recourse to legal proceedings for the protection of its IPRs, the CJEU found that the FRAND undertaking justifies the imposition of an obligation on the SEP holder to comply with specific requirements, when seeking for injunctive relief [21] . In particular, in order to avoid a violation of Article 102 TFEU, the SEP holder should meet the following conditions: (a) prior to the filing of an action for a prohibitory injunction, it must notify the user about the infringement ‘by designating that SEP and specifying the way in which it has been infringed’ [22] , and (b) submit a specific written offer for a licence on FRAND terms to the user, particularly specifying ‘the royalty and the way in which it is to be calculated’, if the latter has expressed its willingness to enter into such a licence [23] . In this context, the CJEU observed that the SEP holder can be expected to make such an offer, since it is ‘better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer’, because, as a rule, no public standard licensing agreement exists and the terms of existing agreements entered by the SEP holder with third parties are not made public [24] .

On the other hand, the (alleged) infringer must diligently respond to the SEP holder’s offer, ‘in accordance with recognised commercial practices in the field and in good faith’ [11] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics’ [11] .

In case that the infringer finds the proposed terms as falling short of the patent holder’s FRAND commitment and chooses to reject the SEP holder’s licensing offer, it must submit a specific written counter-offer on FRAND terms to the SEP holder [12] . If the counter-offer is rejected and the (alleged) infringer already used the SEP in question without a licence, it is obliged to provide ‘appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit’ [13] . The calculation of that security must include, inter alia, ‘the number of the past acts of use of the SEP’, and the alleged infringer must be able to render accounts in respect of those acts of use [13] .

When no agreement is reached following the counter-offer by the (alleged) infringer, the CJEU pointed out that the parties have the option, to request ‘by common agreement’ that the amount of the royalty be determined ‘by an independent third party, by decision without delay’ [25] .

Finally, the CJEU made clear that the (alleged) infringer is allowed to challenge the validity and/or the essentiality and/or the actual use of SEP holder’s patents in parallel to the licensing negotiations, or to reserve the right to do so in the future [26] .

• [1] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
• [2] Ibid, para. 22.
• [3] Ibid, para. 40.
• [4] Ibid, para. 24.
• [5] Ibid, para. 25.
• [6] Ibid, para. 27.
• [7] Ibid, paras. 29 et seqq.
• [8] Ibid, paras. 30 et seqq
• [9] Ibid, paras. 34 et seqq
• [10] Ibid, para. 77.
• [11] Ibid, para. 65.
• [12] Ibid, para. 66.
• [13] Ibid, para. 67.
• [14] Ibid, paras. 72 et seqq
• [15] Ibid, para. 42.
• [16] Ibid, para. 43.
• [17] Ibid, para. 46.
• [18] Ibid, para. 47.
• [19] Ibid, para. 53.
• [20] Ibid, paras. 53 et seqq
• [21] Ibid, paras. 58 et seqq
• [22] Ibid, para. 61.
• [23] Ibid, para. 63.
• [24] Ibid, para. 64.
• [25] Ibid, para. 68.
• [26] Ibid, para. 69.

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Updated 26 January 2017

Saint Lawrence v Deutsche Telekom

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

1. Facts
   Since 28 August 2014, 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 Claimant is disputed between the parties. 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—Defendant having been served with the claim on 7 August 2014—Claimant informed 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 Defendant. Inviting Defendant to discuss such a licensing agreement Claimant offered, in addition, to communicate a draft licensing agreement by letter as of 9 December 2014. Defendant did not show any interest in acquiring a license regarding the patent-in-suit.
   Prior to the infringement action, Claimant neither tried to contact nor to make a licensing offer to Defendant’s supplier “H”(HTE) which, knowing about the lawsuit since August 2014, acted as an intervener in the present proceedings. Subsequent to Defendant’s third-party notice, “H” started licensing negotiations with Claimant on 9 December 2014. After “H” had signed a non-disclosure agreement provided by Claimant on 22 December 2014, 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 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 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 Claimant criticized the letter as incomprehensible by e-mail of 13 September 2015, 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 Claimant, (2) of whether—even absent actual market dominance—the FRAND declaration subjected Claimant to the conduct requirements for a market dominant SEP proprietor, (3) of whether 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 Defendant’s device suppliers entitled Defendant to a FRAND defense regardless of its own readiness to take a license. [59] 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, Defendant refrained from expressing its willingness to conclude a licensing agreement on FRAND terms it was left undecided whether 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 Defendant, a letter from which Defendant could recognize that an action had already been brought.
      The Mannheim court did also not determine whether 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 Defendant in August 2014. [60] 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. [61]
   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 Claimant satisfied FRAND. [62]
   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 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 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. [63]
      The court then analyzed whether 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. [64] 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”. [65]
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. [66]
   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 Defendants. [67]
   No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [68] 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, 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 Claimant had declared its willingness to grant a license on FRAND terms. [69] 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. [70] 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. [71]

• [59] Case No. 2 O 106/14, para. 133
• [60] Case No. 2 O 106/14, para. 139-144
• [61] Case No. 2 O 106/14, para. 146-149
• [62] Case No. 2 O 106/14, para. 152-153
• [63] Case No. 2 O 106/14, para. 153-160
• [64] Case No. 2 O 106/14, para. 158-164
• [65] Case No. 2 O 106/14, para. 167-169
• [66] Case No. 2 O 106/14, para. 146
• [67] Case No. 2 O 106/14, para. 78-80
• [68] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
• [69] Case No. 2 O 106/14, para. 118-131
• [70] Cf. LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 131, i.a. on the mechanism of “blind selection” among technological alternatives, (initially) irrespective of existing patents and their ownership situation.
• [71] Case No. 2 O 106/14, para. 198

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Updated 26 January 2017

Sisvel v Haier

LG Düsseldorf
3 November 2015 - Case No. 4a O 144/14

1. Facts
   The facts of the case are very similar to those of LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14: Claimant, a non-practicing entity, is the proprietor of the European patent EP D, originally applied for by “A” and formerly owned (after various transfers) by “B”, allegedly covering part of the UMTS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market UMTS-based devices. On 10 April 2013 Claimant made a FRAND commitment towards ETSI, inter alia regarding patent EP D. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014, Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Program” but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by “J” without a counter-offer. By letter as of 13 October 2014 one of the Defendants submitted a first counter-offer regarding patent EP D which Claimant refused on 20 October 2014 referring to the ongoing negotiations with the parent company of that Defendant. On 12 August 2015 Defendants “I” and “J” made a second counter-offer which was rejected by Claimant on 24 August 2015. After Claimant had brought a lawsuit Defendants made a last counter-offer in their court filing as of 22 September 2015 that was also refused by Claimant. In the course of the oral hearings of 29 September 2015, Defendants submitted a security (€ 5000) and rendered account in respect of acts of use in the past.
2. Court’s reasoning
   Except for references to the slightly differing facts of both cases the court’s considerations are identical to those in the decision LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14.
   1. Market power and notice of infringement
      The court left open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power (cf. below). As to the infringement notification, [34] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules.
      
      In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.
   2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [35]
   3. The standard implementer’s reaction
      According to the court, even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [36] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [37] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [38]
3. Other important issues
   In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes 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 Defendants. [39] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [40]

• [34] Case No. 4a O 93/14, para. 90-94
• [35] Case No. 4a O 93/14, para. 96-98, 125
• [36] Case No. 4a O 93/14, para. 98-101
• [37] Case No. 4a O 93/14, para. 14, 103-109
• [38] Case No. 4a O 93/14, para. 103-111
• [39] Case No. 4a O 93/14, para. 37-40
• [40] Case No. 4a O 93/14, para. 118-123

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Updated 20 February 2018

TQ Delta LLC v Zyxel Communications, [2017] EWHC 3305 (Pat)

English court decisions
21 November 2017 - Case No. HP-2017-000045

A. Facts

The Claimant is holder of two patents declared as essential to the implementation of the DSL standard under the relevant policy (ITU Recommen­dations). According to this policy he is required to license these patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. The Defendants manufacture and sell various types of equipment complying with the DSL standard.

The parties were unable to reach an agreement on a worldwide portfolio license. The Claimant argued that the Defendants followed a “hold-out” strategy by trying to delay negotiations and litigation as long as possible, in order to avoid royalty payments.

The actions brought before the High Court of Justice of England and Wales (EWHC) involve, on the one hand, the technical issues of validity, essentiality and infringement (technical trials) and, on the other hand, non-technical issues regarding licensing on FRAND terms (non-technical trial).

The parties agreed that the technical trials should be tried separately from, and before, the non-technical trial. After holding a case management conference, the court complied with the parties’ agreement to hold the technical trials first. The court, however, refrained from ordering the stay of the non-technical trial until the completion of the technical trials. Instead, the court allowed it to go ahead.

B. Court’s reasoning

In light of both the decision of the European Union Court of Justice in the matter Huawei v ZTE and the recent decision of the EWHC in the matter Unwired Planet v Huawei the court questioned the practice it followed so far, to hold FRAND related trials after technical trials.

In the court’s opinion, particularly if a global license for a global portfolio is in dispute between the parties, it is worth considering whether the prioritization of the trials should be altered, so that the non-technical trial comes first. If the defendant (potential infringer) wishes to argue that it does not need to take any license under any of the patents in suit, it is not compelled to do so. In this case, however, the defendant risks that it will, subsequently, be injuncted in infringement proceedings.

To justify its decision not to stay the non-technical trial, the Court referred to EWHC’s decision in the matter Unwired Planet v Huawei and pointed out, that the longer these proceedings are postponed, the longer their objective from the Claimant's perspective is frustrated, that is to obtain appropriate relief by way of injunction and/or financial compensation.

C. Other issues

Although the court did not rule on Claimant’s allegation that the Defendants pursued a “hold out” strategy, it made clear – again under reference to the matter Unwired Planet v Huawei – that if that is the case, then the Defendants face the risk of being injuncted, if they should be unsuccessful in either of the technical trials.

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Updated 6 June 2017

Sisvel v Haier

OLG Düsseldorf
13 January 2016 - Case No. 15 U 65/15

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 4a O 144/14 to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. As to the facts of the case, it can be referred to the deliberations under point “1b” of the previous summaries.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous. If the decision, as in the present case, has been declared provisionally enforceable subject to the provision of security by Claimant suspension of execution will only be granted in exceptional circumstances. [79]
2. Court’s reasoning
   
   
   1. The SEP owner’s licensing offer
      The question of whether granting a portfolio license would be FRAND was referred to the subsequent appeal proceedings. [80]
   2. The standard implementer’s reaction
      More importantly, the Court found that the standard user is not required to respond to a license offer of the SEP proprietor if the terms of that offer are not FRAND. In other words, the subsequent obligations of the alleged infringer derived from Huawei only arise when and provided that the SEP proprietor submitted an offer on FRAND terms. As the lower court had not determined whether the conditions of the proprietor’s license offers were FRAND, the Court considered this part of the lower court’s decision to be manifestly erroneous. Given this flaw in the lower court’s reasoning, it was left undecided by the Court whether a license offer submitted in the course of the oral hearings can fulfill the Huawei requirements. [81]
3. Other important issues
   For the purposes of the present proceedings, the Court explicitly stated that there is—in principle—no reason to treat patent assertion entities, such as Claimant, in a different manner than other market participants. [82]

• [79] Case No. 15 U 65/15, para. 2
• [80] Case No. 15 U 65/15, para. 28
• [81] Case No. 15 U 65/15, para. 23-30
• [82] Case No. 15 U 65/15, para. 12

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Updated 26 January 2017

Sisvel v ZTE, Tribunale Civile e Penale di Torino, Sezione I Civile

Italian court decisions
4 March 2016 - Case No. 2695/2016 R.G.

Additional information: Sezione I Civile, specializzata in materia di impresa (specialized in enterprise issues).

1. Facts
   The proceedings before the Tribunale Civile e Penale di Torino concerned the appeal of Claimant in Case No. 30308/20215 R.G. seeking to set aside the decision of the court of first instance. As to the facts of the case, it can be referred to the summary of that case above.
2. Court’s reasoning
   Due to non-compliance with the minimum duration of the NDA, including apactum de non petendo in connection to ZTE Corporation and its affiliates (such as Defendant I), of three years until 3 September 2016, Claimant’s unilateral termination of the agreement by letter as of 13 October 2014 and the subsequent initiation of proceedings were declared inadmissible. Claimant validly waived its right to bring actions under Italian law and it cannot circumvent this obligation by paying damages. According to the wording of the agreement, a lack of reaction on the part of ZTE Corporation was not to be interpreted as a waiver of rights.
3. Other important issues
   Claimant argued that the patents in question never were essential to the UMTS standard and, hence, there existed no FRAND licensing obligation. The court rejected the appeal because Claimant’s action before the court of first instance was based on exactly the opposite argumentation (i.e. the patents in question being essential to the UMTS standard).

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Updated 26 January 2017

Saint Lawrence v Vodafone

LG Düsseldorf
31 March 2016 - Case No. 4a O 73/14

1. Facts
   Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [59] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
2. Court’s reasoning
   1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [60] The court declared the Huawei rules applicable to claims for the recall of products. [61] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [62] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [63] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [64] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [65] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [66] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
   2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [67] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [68] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [69] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [70] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [71] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [72]
   3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [73] Whether the Intervener satisfied the ECJ criteria was left undecided. [74] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [75] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [76] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [77] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [78] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [79] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [80] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [81]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [82] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [83] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [84]

• [59] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
• [60] Case No. 4a O 73/14, para. 184
• [61] Case No. 4a O 73/14, para. 187
• [62] Case No. 4a O 73/14, para. 195 et seq.
• [63] Case No. 4a O 73/14, para. 208-210
• [64] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [65] Case No. 4a O 73/14, para. 193
• [66] Case No. 4a O 73/14, para. 270 et seq.
• [67] Case No. 4a O 73/14, para. 222 et seq.
• [68] Case No. 4a O 73/14, para. 225 et seq.
• [69] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
• [70] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
• [71] Case No. 4a O 73/14, para. 256 et seq.
• [72] Case No. 4a O 73/14, para. 279 et seq.
• [73] Case No. 4a O 73/14, para. 214-220
• [74] Case No. 4a O 73/14, para. 214-220; 278
• [75] Case No. 4a O 73/14, para. 266
• [76] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
• [77] Case No. 4a O 73/14, para. 264
• [78] Case No. 4a O 73/14, para. 291 et seq.
• [79] Case No. 4a O 73/14, para. 278
• [80] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
• [81] Case No. 4a O 73/14, para. 304
• [82] Case No. 4a O 73/14, para. 189
• [83] Case No. 4a O 73/14, para. 309-313
• [84] Case No. 4a O 73/14, para. 317 et seq.

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Updated 6 June 2017

Philips v Acer

OLG Karlsruhe
29 August 2016 - Case No. 6 U 57/16

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). This case first instance concerned the infringement of the patent EP 0.745.307.B3, which covered a technology for subtitles in the DVD standard. The defendant marketed computers that use a DVD-software. The claimant, which commercialised the patent in question through a patent pool, [91] had made a FRAND-declaration to the “DVD-Forum” which administers the DVD standard. [92]
      On 30 May 2014, the defendant offered to enter into a license agreement for patent in question and respective products marketed in Germany. The license fees were based on an expert opinion which the defendant had commissioned. Alternatively, the defendant suggested that the license fees could be determined by the claimant in good faith pursuant to sec 315 of the German Civil Code. [93] The defendant made a deposit with the Düsseldorf Magistrates Court which covered use of the patent in Germany and rendered account to the claimant. On 25 July 2014, the claimant sent an amended counter-offer, which was rejected by the defendant. [94] On 13 March 2015, the claimant made another license offer for a world-wide portfolio license, giving details about the calculation of the license fee. [95] The defendant requested claim charts and rejected the calculation details as insufficient. [96]
      The District Court of Mannheim ordered the defendant to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [97] to calculate the amount of compensation it owed. [98]
   2. The Ensuing Application for Stay of Execution
      Under the German rules of civil procedure, the Higher Regional Court can only grant a stay of execution if an appeal is pending and it is probable that the challenged decision will be overturned because it appears manifestly erroneous. [99] 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. [99]
      The applicant sought to stay the execution of the order of the District Court of Mannheim, [100] which required it to render full account. Instead, the applicant 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). [101] The Higher Regional Court of Karlsruhe dismissed the application. [99] It held that the decision of the District Court of Mannheim was not manifestly erroneous. Further, the applicant had not provided sufficient evidence that particularly severe harm would be caused if the decision of the District Court of Mannheim were executed. [102]
2. Court’s reasoning
   
   Most aspects of the decision do not directly relate to the Huawei ruling. However, the court held that the decision of the District Court of Mannheim was not manifestly erroneous in ordering the applicant to render accounts in full detail. It held that the District Court of Mannheim had correctly decided that the Huawei ruling did not contain any restrictions of the SEP holder’s information claims. [103] In the eyes of the District Court of Mannheim, the CJEU had not referred to means of calculating the amount of compensation owed - it had only clarified that Art. 102 TFEU does not prevent the SEP owner from demanding the alleged infringer to render accounts for use of the patent in the past. [103] Accordingly, the District Court of Mannheim considered that competition law, and in particular, the existence of a FRAND declaration, are not relevant considerations for compensation and information claims. [104] In the eyes of the court, this view is not manifestly erroneous.
3. Other important issues
   The claimant commercialised the patent in question through a patent pool. This fact itself, according to the court, does not mean that the applicant’s interests outweigh the interests of the claimant. [105] In the past, the court had given special consideration to whether the claimant’s interests were primarily focused on receiving royalties (Higher Regional Court of Karlsruhe, 23 April 2015, Case No. 6 U 44/15; Higher Regional Court of Karlsruhe, 31 May 2016, Case No. 6 U 55/16). However, the court reasoned, in contrast to the case at issue, that the aforementioned decisions had concerned cases in which it was likely that the decision at first instance would not be upheld on appeal. [105]
   The court held that the decision at first instance was not manifestly erroneous in its interpretation of Art. 101 TFEU (anticompetitive conduct). 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. [106] If a standardisation agreement breached Art. 101 TFEU, the standard would be void. The Higher Regional Court of Karlsruhe confirmed that it had not yet been decided by the higher courts if the commencement of patent infringement proceedings by an SEP holder constituted a breach of Art. 101 TFEU. However, even if that were the case, this defence would only be relevant against injunctions, but not in respect of compensation and rendering accounts claims. [107]

• [91] Case No. 6 U 57/16, para 5
• [92] Case No. 6 U 57/16, para 8
• [93] Case No. 6 U 57/16, para 10
• [94] Case No. 6 U 57/16, para 11
• [95] Case No. 6 U 57/16, para 12
• [96] Case No. 6 U 57/16, para 13
• [97] Case No. 6 U 57/16, paras 15-19
• [98] The decision omits further details on the decision first instance because they are not relevant for the application, see OLG Karlsruhe, 29 August 2016, Case No. 6 U 57/16, para 14
• [99] Case No. 6 U 57/16, para 25
• [100] Case No. 6 U 57/16, para 23
• [101] Case No. 6 U 57/16, para 23, 31
• [102] Case No. 6 U 57/16, para 26
• [103] Case No. 6 U 57/16, para 31
• [104] Case No. 6 U 57/16, para 32, 33
• [105] Case No. 6 U 57/16, para 43
• [106] Case No. 6 U 57/16, para 28
• [107] Case No. 6 U 57/16, para 30

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Updated 26 January 2017

NTT DoCoMo v HTC

LG Mannheim
29 January 2016 - Case No. 7 O 66/15

1. Facts
   Claimant owns the patent EP 1 914 945, declared to be essential with regard to ETSI’s UMTS standard. Defendant markets devices implementing the UMTS standard (in particular the HSUPA/EUL technology). On 19 March 2014 Claimant sent to Defendant’s group parent a detailed licensing offer and explained its conditions at several instances before filing suit in April 2015. As of 7 April 2014 and 15 July 2014, Claimant communicated to Defendant’s group parent company claim charts in order to demonstrate standard-essentiality of its patent and further explained the issue in a presentation on 8 July 2014. Defendant submitted its first counter-offer on 30 October 2015. The counter-offer envisaged a 3 year-license limited to some of the countries in which Defendant markets its products. Claimant rejected the counter-offer on 12 November 2015. Defendant did not provide security but merely promised to do so, based on a calculation including sales of relevant devices in Germany only. Claimant rejected this and demanded security based on worldwide sales.
2. Court’s reasoning
   1. General meaning of the Huawei framework
      Prior to discussing specific conduct requirements established by the Huawei ruling, the court sketches its approach in a general manner. [83] According to the court the Huawei decision establishes a set of rules of due conduct in SEP licensing negotiations. Based on whether the parties comply with these rules the respective court can determine whether an SEP owner’s seeking of an injunction and a recall of products constitutes an abuse of a position of market dominance or a justified reaction to a standard implementer’s delaying tactics. In consequence, the respective court does not—unless it has to decide a claim for the payment of licensing fees and not claims for injunction and recall of products—have to rule on the substance of the offered licensing conditions or their being FRAND. [84] This is in line with recognized commercial practice according to which reasonable parties will not usually want courts to determine their licensing conditions. Furthermore, the ECJ has—from the perspective of the Mannheim District court—stressed that the exercise of the exclusive rights conveyed by a patent will be barred only in very exceptional circumstances. As a result, it is up to the standard implementer to show that such exceptional circumstances are present. [85]
   2. Market power and notice of infringement
      The court does not elaborate on the market power issue. As part of the notice of infringement [86] the court deems it necessary for the proprietor to identify the (allegedly) violated patent, including the patent number, and to inform that the patent has been declared standard-essential. Furthermore, the proprietor has not only to name the standard but to specify the pertinent part of the standard and the infringing element of the implementer’s products in a way that enables the standard implementer to assess whether its use of the standard infringes on the patent-in-suit. The level of detail required must be determined on a case-by-case basis, depending mainly on the expertise of – or available to – the implementer. Presenting claim charts corresponding to recognized commercial practice for licensing negotiations is, in principle, an acceptable way to give notice of the alleged infringement. In casu the court considered the proprietor’s notice as sufficient. [87] In particular, notice was given before the bringing of an action for infringement and the proprietor had submitted claim charts not only with regard to the patent-in-suit but also with regard to six other patents from the portfolio offered for license, a sample which the court deemed in accordance with recognized commercial practice. Sufficient notice having taken place, the court left open the question whether, (1) the Huawei rules applied at all in spite of the action being brought before the ECJ’s decision, and whether (2) the proprietor was obliged to submit claim charts for other patents than the patent-in-suit.
   3. The SEP proprietor’s licensing offer
      The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [88] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept. In casu the court accepted the Huawei compliance of the licensing offer, [89] in particular because the proprietor had explained its calculation of the licensing fee based on the percentage of patents in the WCMA/SIPRO and the VIA patent pools held by the proprietor. The proprietor was not required to prove its share in the patent pools. The parties disagreed over whether the smallest saleable unit forms an appropriate basis for royalty calculation and whether it is acceptable to look only at the size, not the quality of a proprietor’s share in a relevant patent pool. The court, however, considered these issues as not decisive for the Huawei-conformity of the licensing offer.
   4. The standard implementer’s reaction
      As a further consequence of the court’s general approach, the standard implementer’s duty to diligently react to the proprietor’s licensing offer is not removed only because the offer does not fully comply with FRAND. [90] . An exception applies only where it can be established by a mere summary assessment that the offer evidently violates FRAND. If a reaction of the alleged infringer is due, the “diligence”, i.e. timeliness, of this offer has to be determined cases-by-case, based on the principles of good faith and recognized commercial practice. In casu the standard implementer’s reaction was insufficient (1) because a counter-offer was made only 1.5 years after receiving the licensing offer and 0.5 years after the bringing of the proprietor’s action, (2) because security was merely promised, not provided, and (3) because the amount of security offered fell short of the court’s suggestions.
3. Other important issues
   The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products. It is, however, free from their grip when bringing an action seeking the rendering of accounts in relation to past acts of use or an award of damages in respect of those acts of use.

• [83] Case No. 7 O 66/15, para. 53 et seq.
• [84] Case No. 7 O 66/15, para. 56
• [85] Case No. 7 O 66/15, para. 53
• [86] Case No. 7 O 66/15, para. 57
• [87] Case No. 7 O 66/15, para. 65-69
• [88] Case No. 7 O 66/15, para. 58
• [89] Case No. 7 O 66/15, para. 70-72
• [90] Case No. 7 O 66/15, para. 59 et seq

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Updated 21 November 2018

Core Wireless v LG, Court of Appeal (Cour d’ Appel) of Paris

French court decisions
9 October 2018 - Case No. RG 15/17037

A. Facts

The Claimant, Core Wireless Licensing S.à.r.l., holds a portfolio of patents declared essential to the GSM, UMTS and LTE wireless telecommunication standards (Standard Essential Patents or SEPs). The Defendants, LG Electronics France S.A.S. and LG Electronics Inc., manufacture and sell – among others – mobile devices complying with the above standards.

The Claimant acquired its portfolio of SEPs from Nokia by a ‘Purchase and Sale Agreement’ concluded in 2011 [53] . The Claimant, Nokia and Microsoft also concluded a so-called ‘Royalty Participating Agreement’, referring to encumbrances [54] .

The parties failed to reach an agreement on a licence for Claimant’s SEP portfolio. Consequently, the Claimant brought an infringement action against the Defendants before the District Court (Tribunal de Grande Instance) of Paris, based on five French patents of its portfolio. The District Court of Paris dis-missed Claimant’s action [55] .

In the ongoing appeal proceedings before the Court of Appeal (Cour d’ Appel) of Paris (Court), the Defendants requested the Court to order the Claimant to produce the ‘Purchase and Sale Agreement’, the ‘Royalty Participating Agreement’, as well as all licensing agreements concluded by the Claimant with third parties, covering the patents in suit [53] . A few days prior to the oral hearing, the Claimant requested, in turn, that the Defendants produce four license agreements which they had entered with third parties [56] .

With the present decision, the Court dismissed Claimant’s request; it held that it was delayed and that the Claimant failed to explain the relevance of the requested licensing agreements to the present pro-ceedings [54] .

On the other hand, the Court granted the Defendants’ request [54] under the following conditions: First, the relevant documents will be made available (unredacted) only to the parties’ counsels, within a deadline of one month after the Court’s order [57] . The parties’ counsels will then be given the opportunity to argue by written submissions which parts or elements of these documents may affect business secrets [57] . On this basis, the Court will decide whether further measures (as set-forth in paragraphs 2, 3 or 4 of Article L. 153-1 of the French Commercial Code) are required for the protection of potential confidential information, or not [57] .

B. Court’s reasoning

The Court made use of the procedural possibilities for the protection of business secrets in court pro-ceedings recently introduced to the French Commercial Code by Law No. 2018-670 dated 30 July 2018 [58] .

In particular, the Court referred to paragraph 1 of Article L. 153-1 of the French Commercial Code, which reads as follows:

‘Where, in the course of civil or commercial proceedings aimed at obtaining a pre-trial order for investiga¬tive measures before any proceedings on the merits, or in the course of proceedings on the merits, the communication or production of a document is requested, which has been deemed to infringe or alleged by a party to the proceedings or a third party to be capable of infringing a trade secret, the court may take any of the following steps on its own motion or at the request of a party to the proceedings or a third party, if the trade secret cannot be otherwise protected, without prejudice to the rights of defence:

(1°) The court alone will review the document and, if deemed necessary, order an expert valuation and request the opinion, for each of the parties, of a person authorized to assist or represent the party, in order to decide whether to apply the protective measures set out in this Article.’

According to the paragraphs 2-4 of Article L. 153-1 of the French Commercial Code, the Court can order the following protective measures:

• (2°) Decide to limit the disclosure or production of the document to certain parts thereof, order disclo¬sure or production of a summary of the document only, or restrict access to the document, for each of the parties, to a single individual person and a person authorized to assist or represent that party;
• (3°) Decide that hearings will be held and the decision will be issued in chambers;
• (4°) Adapt the grounds of the decision and the mode of publication thereof to the needs of protecting the trade secret.’

• [53] Court of Appeal (Cour d’ Appel) of Paris, judgment dated 9 October 2018, page 5.
• [54] Ibid, page 5.
• [55] District Court (Tribunal de Grande Instance) of Paris, judgment dated 17 April 2015, Case No. 14/14124.
• [56] Ibid, page 2.
• [57] Ibid. page 6.
• [58] Ibid, page 5 et seq.

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Updated 26 January 2017

Unwired Planet v Samsung

LG Düsseldorf
19 January 2016 - Case No. 4b O 120/14

1. Facts
   Since 7 March 2014 Claimant, a non-practicing entity, is the proprietor of European patent EP D, allegedly covering a feature of the GSM standard, originally granted to the Intervener, and subsequently transferred to company “I”. Defendants, belonging to the K-group, produce and market GSM- and UMTS-based devices.
   In an agreement as of 26 October 2011, the Intervener granted a worldwide non-exclusive license to Qualcomm Inc., being, in turn, allowed to grant sub-licenses to its customers. Furthermore, by agreement as of 1 February 2014 one of the Defendants was granted a worldwide, non-exclusive license to patents owned by the Intervener.
   On 10 January 2013, the Intervener concluded a so-called “Master Sales Agreement” (MSA), concerning the exploitation of a portfolio of more than two thousand patents, with “E”, “F” and its subsidiaries. Claimant became a party to the MSA later on. After its accession to the MSA, “I”, by assuming the existing FRAND obligation of the Intervener in accordance with the MSA, made a separate FRAND commitment towards ETSI on 14 June 2013 and declared, in an agreement as of 13 February 2013, to ensure that subsequent acquirers equally assume this obligation. Accordingly, after the transfer of patent EP D to Claimant the latter made, on 6 March 2014, a separate commitment towards ETSI declaring to be willing to grant licenses on FRAND terms with regard to, inter alia, patent EP D.
   In order to implement the MSA the parties concluded three transfer agreements. Claimant argues that the Intervener validly transferred a part of its patent portfolio, including patent EP D, by agreement as of 11 February 2013 to undertaking “B”. On 13 February 2013, “B”, in turn, transferred the patent portfolio, including patent EP D, to “I”. After successfully requesting, on 3 September 2013, an amendment of the patent register, being performed on 24 October 2013, “I” transferred, on 27 February 2014, the patent portfolio, including patent EP D, to Claimant. Claimant successfully requested, on 7 March 2014, an amendment of the patent register which was performed on 3 July 2014.
   As a reaction to Claimant’s public license proposal including a royalty of USD 0.75 per mobile device Defendants allegedly submitted a counter-offer but no licensing agreement was concluded.
2. Court’s reasoning
   1. Market power
      The court stressed that an application of Article 102 TFEU does not automatically result from SEP ownership but that it requires proof of a dominant position on the relevant market being conveyed by the SEP in question. Due to the fact that products not implementing the patent-in-suit could not effectively compete on the relevant market because of GSM being a key feature for such products market power of Claimant was affirmed. [108]
   2. Applicability of the Huawei rules to damages and the rendering of accounts
      While the Huawei rules of conduct apply to actions for injunction, recall and destruction of products they are, in principle, not directly applicable to claims for damages and the rendering of accounts. [109] Nor is it necessarily abusive for a SEP proprietor to bring an action for damages and the rendering of accounts without having notified the standard implementer of an infringement and without having offered a FRAND license beforehand. The Huawei obligations do, however, have an indirect impact on the extent to which damages and the rendering of accounts are due: Where the SEP proprietor fails to grant a FRAND license although he has made a FRAND commitment and the standard implementer has expressed its readiness to take a license, damages are limited to the FRAND royalty level but only for the period after the SEP proprietor’s abusive refusal to license. [110] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [111]
   3. Cap on damages/rendering of accounts in casu
      In casu Defendant could not show that he had complied with its Huawei obligation to sufficiently express its willingness to take a FRAND license. In consequence, no cap on Claimant’s claim for damages was deemed appropriate. [111]
3. Other important issues
   Whether a SEP proprietor is free to enforce its patent in court or whether the proprietor is obliged to grant a FRAND license has to be determined under Art. 102 TFEU, not Art. 101 TFEU. [112] A FRAND declaration is not an unconditional offer made by the patent proprietor to enter into a licensing agreement with anyone willing to take a license, it merely expresses that the proprietor is, in principle, ready to grant a FRAND license if the patent in question conveys market dominance. As such, the FRAND commitment merely specifies a duty to license which competition law would impose anyway but it has an impact on the patent owner’s obligations under Art. 102 TFEU. [113]
   As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes—also with regard to claims for damages and the rendering of accounts—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 Defendants. The non-registration of “B” as an interim owner was considered irrelevant under the circumstances of the present case (but not generally). Case No. 4b O 120/14, para. I, 1-2
   The MSA and the subsequent transfer agreements neither violate the German provisions on merger control (§§ 35-43 GWB) since, in any case, merger control thresholds are not reached.
   Nor was a violation of the European provisions on anticompetitive agreements (Article 101 TFEU) or on the abuse of a dominant position (Article 102 TFEU) found. Case No. 4b O 120/14, para. I, 4, a-c In particular, the transactions did not aim at enforcing non-FRAND royalties or at discriminating between licensees and the agreements framing the transactions ensured that the acquirers of the relevant patents were bound by (the initial) FRAND commitments. [114] The acquirer of a SEP is neither obliged to continue the transferor’s licensing practice in an unmodified manner nor to implement exactly the same conditions in all licensing agreements, provided the conditions are FRAND and no unjustified discrimination takes place. It is not abusive in itself for a (former) SEP proprietor to split its portfolio and to transfer the parts to several acquirers, thereby trying to arrive at higher overall royalties being paid for the portfolio. Nor is a resulting increase in the number of licenses a standard implementer has to take per se inacceptable. However, licensing conditions are FRAND only if the cumulative royalty level resulting from the licensing of all pertinent SEPs is not excessive. Putting it differently, where the royalty level for the entire portfolio was below or at the lower end of the FRAND range, it is not abusive to arrive, by way of splitting the portfolio and licensing its parts separately, at a higher overall royalty level within the FRAND range. Furthermore, the transaction agreements did not amount to price fixing. [115]

• [108] Case No. 4b O 120/14, para. VII, 6, a
• [109] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
• [110] Case No. 4b O 120/14, para. VII, 6, b, dd
• [111] Case No. 4b O 120/14, para. VII, 6, b, ee
• [112] Case No. 4b O 120/14, para. VII, 4
• [113] Case No. 4b O 120/14, para. VII, 5
• [114] Case No. 4b O 120/14, para. I, 4, b, aa
• [115] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

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Updated 6 June 2019

Conversant v LG, Court of Appeal of Paris

French court decisions
16 April 2019 - Case No. 061/2019

A. Facts

On 1 September 2011, the Claimant, Conversant Wireless Licensing SARL (Conversant; previously named Core Wireless Licensing SARL), acquired from Nokia more than 2,000 patents declared essential to the GSM, UMTS or LTE standards (Standard Essential Patents, or SEPs) towards ETSI [1] .

Conversant contacted the Defendants, LG Electronics France SAS and LG Electronics Inc. (LG) for a licence under the patents in March 2012. The parties held a few meetings to find an agreement on a Fair, Reasonable and Non-Discriminatory (FRAND) rate for a global license under Conversant’s essential patents [2] .

On 30 September 2014, Conversant brought an infringement action against LG based on five patents before the Paris Court (Court), asking inter alia for a FRAND rate determination [3] .

In first instance, the Court rejected Conversant’s claims, as it held that Conversant had not demonstrated the essentiality of the patents in suit [4] .

On appeal, Conversant solely asserted two out of the five patents asserted in first instance [5] . With the present judgment, the Court of Appeal of Paris (Court of Appeal) confirmed the first instance decision, finding the patents in suit valid but not essential [6] .

B. Court’s reasoning

Validity, Essentiality and Infringement

In first instance, Conversant alleged five patents to be essential and infringed by LG [1] . On appeal, both parties acknowledged that, for three of them, the essentiality was not sufficiently supported [7] .

Therefore, the Court of Appeal limited the analysis of validity, essentiality and infringement to the two other patents, EP 978 210 (EP 210) and EP 950 330 (EP 330) [3] . LG raised prior art documents to challenge the validity, novelty and inventive steps of the patents. The Court of Appeal analysed those documents to determine that none was destroying the validity of the patents [8] .

Regarding the essentiality, Conversant had alleged that EP 210 was essential to both UMTS and LTE standards [9] and EP 330 was essential to the LTE standard [10] . The Court of Appeal rejected those claims by comparing the patent specifications to the technical specifications of the relevant standards [11] and found hold that standard compliant devices do not necessarily have to use the patents in suit. The Court considered that it is possible to comply with the UMTS and LTE standards without implementing said patents. The Court, therefore, found that the patents are not essential [3] .

FRAND determination

Conversant and LG both had requested the Court to make a FRAND determination. However, as Conversant’s infringement claim was based on the essentiality of the patents, the Court of Appeal declared any request concerning a FRAND rate determination, past damages and the nomination of an expert without object [12] .

FRAND duties and abuse of a dominant position

In its decision, the Court of Appeal also briefly summarized two points addressed by the first instance Court regarding parties’ duties in negotiation and a potential abuse of dominant position without any further analysis.

One of them is the determination of bad faith of the parties in the negotiations. In first instance, the Court stated that it was difficult to assess bad faith in view of the history of the negotiations. The Court had underlined that the fact that the parties negotiated for more than two years tended to demonstrate that none of them was of particularly bad faith to push the other not to further pursue the negotiations [5] . The Court had further stressed that as each company passed the buck to the other, it was difficult to declare that bad faith lied more on one side than the other [3] .

Regarding a potential abuse of dominant position through the filing of an action based on SEPs by Conversant, the Court had stated that filing a judicial complaint to have a FRAND rate determined that could not be amicably fixed, without any other circumstance demonstrating among others the express willingness to deprive LG of its rights to exploit the patents against a fair and proportionate compensation, could not constitute an abuse of a dominant position [3] .

Confidentiality and Trade Secret Protection

The Court of Appeals also briefly referred to the rules for the protection of trade secrets that had been agreed upon by the parties and accepted by the Court of Appeal.

In application of Article L153-1 of French Commercial Code, the parties had set up a protection mechanism for confidential documents, which included the following steps [13] : (1) access to some licensing agreements from Nokia and Conversant would be restricted to the parties’ legal representatives, the court and persons (translators or experts) obliged to confidentiality by a Non-Disclosure Agreement, (2) the parties would submit two versions of each party’s written conclusions to the Court of Appeal, one with a reference to all disclosed agreements in full with confidential information highlighted and one without any reference to any confidential information [14] .

• [1] Court of Appeal of Paris, judgement dated 16 April 2019, page 3.
• [2] Ibidem.
• [3] Ibid.
• [4] Court of Appeal of Paris, judgement dated 16 April 2019, pages 5-6.
• [5] Court of Appeal of Paris, judgement dated 16 April 2019, page 6.
• [6] Court of Appeal of Paris, judgement dated 16 April 2019, pages 15-24.
• [7] Court of Appeal of Paris, judgement dated 16 April 2019, page 15.
• [8] Court of Appeal of Paris, judgement dated 16 April 2019, pages 15 and subsequent.
• [9] Court of Appeal of Paris, judgement dated 16 April 2019, pages 19-21.
• [10] Court of Appeal of Paris, judgement dated 16 April 2019, pages 23-24.
• [11] Court of Appeal of Paris, judgement dated 16 April 2019, pages 19-21 and 23-24.
• [12] Court of Appeal of Paris, judgement dated 16 April 2019, pages 24-25.
• [13] Court of Appeal of Paris, judgement dated 16 April 2019, page 13
• [14] Court of Appeal of Paris, judgement dated 16 April 2019, page 14

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Updated 23 January 2018

Unwired Planet v Huawei, [2017] EWHC 711 (Pat)

English court decisions
5 April 2017 - Case No. HP-2014-000005

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [1] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [2] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [3]

In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [4] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [5] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [6]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [7] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [8]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [9] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [10] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [11]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [12] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [13] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [14] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [14]

The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [15] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [16] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [17]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [18] This eliminates the so-called Vringo-problem, [19] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [20]

The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [21] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [23] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [23]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [24] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [25] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [26]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [25] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [27] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [26]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [28] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [28] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [29] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [30] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [31]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [32] Other freely-negotiated license agreements might be used as comparables. [33] This may be compared with a top down approach [34] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [35] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [32] License agreements must meet certain criteria to be comparable. [36] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [36] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [37]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [38] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive.

Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.

• [1] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
• [2] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
• [3] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
• [4] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
• [5] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
• [6] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
• [7] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
• [8] Unwired Planet v Huawei, EWHC 1304 (Pat).
• [9] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
• [10] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
• [11] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
• [12] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
• [13] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
• [14] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
• [15] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
• [16] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
• [17] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
• [18] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
• [19] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
• [20] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
• [21] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
• [22] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
• [23] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
• [24] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
• [25] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
• [26] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
• [27] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
• [28] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
• [29] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
• [30] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
• [31] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
• [32] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
• [33] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
• [34] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
• [35] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
• [36] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
• [37] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
• [38] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

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Updated 6 June 2017

OLG Karlsruhe

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

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. [116] In early 2013, the patent pool approached the defendant’s mother company about the use of the patent, but without making a license offer. [117]
      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. [117] 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. [118] It held that the defendant was liable for compensation [119] and ordered it to render full and detailed account of its sales (including all parties involved, the respective advertisements, all costs and profits) [120] 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. [121]
   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. [122] 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. [122]
      The applicant sought to stay the execution of two elements of the resulting court order. [123] 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). [124] 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. [125]
      The Higher Regional Court of Karlsruhe granted the application to stay the execution in respect of the order to the recall of products. [126] 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. [126]
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. [127] 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. [128]
   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. [129] Further, the Huawei ruling did not contain any restrictions in respect of the SEP holder’s information claims. [130] 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). [131] 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. [132] 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. [133]
   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. [134] 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. [134]

• [116] 6 U 58/16, para 6
• [117] 6 U 58/16, para 7
• [118] 6 U 58/16, para 12-17
• [119] 6 U 58/16, para 25
• [120] 6 U 58/16, para 18-24
• [121] 6 U 58/16, para 26-28
• [122] 6 U 58/16, para 39
• [123] 6 U 58/16, para 33
• [124] 6 U 58/16, para 45
• [125] 6 U 58/16, para 35
• [126] 6 U 58/16, para 38
• [127] 6 U 58/16, para 51
• [128] 6 U 58/16, para 52
• [129] 6 U 58/16, para 62
• [130] 6 U 58/16, para 63
• [131] 6 U 58/16, para 63-64
• [132] 6 U 58/16, para 59-60
• [133] 6 U 58/16, para 61
• [134] 6 U 58/16, para 67

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Updated 26 January 2017

Canon v Carsten Weser

OLG Düsseldorf
29 April 2016 - Case No. I-15 U 49/15

The proceedings before the Court concerned the subsequent appeal of Defendants in Case LG Düsseldorf, 11 June 2015 – Case No. 4a O 45/14 (decision rendered before Huawei) seeking to set aside the decision of the lower court. As Cases No. I-15 U 49/15 and No. I-15 U 47/15 are interconnected, the Court came to the same conclusions and framed them in essentially the same wording as in its decision OLG Düsseldorf, 29 April 2016 - Case No. I-15 U 47/15 (cf. above). Therefore, no separate and detailed summary is provided here.

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Updated 26 January 2017

Pioneer v Acer

LG Mannheim
8 January 2016 - Case No. 7 O 96/14

1. Facts
   Claimant owns the patent EP 1 267348, allegedly essential to the DVD standard and administered with regard to its licensing by the patent pool “A”. Early in 2013 “A” and the Defendant’s group parent were in contact regarding “A” ’s DVD licensing activity, but no concrete notice of infringement was made and no licensing negotiations ensued. After having been sued for patent infringement Defendant submitted, on 6 October 2014, an offer to license the patent-in-suit for Germany at FRAND conditions, with the exact royalty rate to be determined by Claimant pursuant to § 315 German Civil Code. Furthermore, Defendant declared to be willing to negotiate a portfolio license for all German patents of Claimant and, in case the negotiations were to fail, to have the licensing conditions determined by a state court or arbitration tribunal. In order to indicate what Defendant considered to be a FRAND royalty rate Defendant submitted an expert opinion. As of 28 November 2014, Claimant proposed to modify the conditions to the effect that Defendant’s group parent was supposed to take a worldwide portfolio license comprising all Claimant’s portfolio patents administered by “A”. Claimant made a (perhaps: additional) FRAND declaration with regard to the patent and informed Defendant thereof in December 2014. After Defendant had rejected this offer, Claimant offered, on 13 March and 13 April 2015, a worldwide portfolio license to Defendant’s group parent company. To the offer were added claim charts for two pool patents, as well as information on how Claimant deduced the royalty from the overall royalty rates of the “A”-patent pool. On 5 May 2015, Defendant’s group parent requested claim charts regarding all patents to be licensed as well as further information on royalty calculation. Claimant sent, on 7 August 2015, claim charts for five additional patents declaring its willingness to provide further information as soon as constructive technical discussions would be taken up. In a filing to the court as of 20 November 2015, Claimant explained its royalty calculation in greater detail and submitted an expert opinion on the issue.
2. Court’s reasoning
   1. General meaning of the Huawei framework and applicability to transitory cases
      As to the court’s general take on the Huawei rules cf. LG Mannheim, 29 January 2016 - 7 O 66/15 (above). Where an action for prohibitory injunction and recall of products has been brought before the ECJ handed down its ruling it has, in the opinion of the court, no negative effect on the action if Claimant fulfills its Huawei conduct obligations only after filing the lawsuit. [1] According to the extensive analysis undertaken by the court this is because, inter alia, the SEP proprietor could not be expected to comply with the – then future and unknown – conduct requirements established by Huawei but rather with the legal framework set by the German Federal Court (BGH) in Orange Book. Hence, a proprietor’s conduct that respected Orange Book but deviated from Huawei cannot be taken to signal inappropriate economic goals or lack of willingness to grant FRAND licenses. Furthermore, it seems more in line with the ECJ’s core intention of furthering successful licensing negotiations if the parties get the chance to perform their Huawei conduct obligations even though litigation is already underway.
      Where, however, the action is brought after the Huawei ruling a violation of the conduct requirements established therein bars—as a matter of substantive law, not of procedural law—Claimant from enforcing its patent-based rights to prohibitory injunction or recall of products. [2] Although Claimant’s action will then be dismissed, Claimant is free to catch up on its Huawei obligations and re-file the action if the standard user fails to comply with Huawei.
   2. Market power and notice of infringement
      Leaving open whether Claimant was market dominant, the court formulates general considerations identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). The court doubts whether the initial contact between the patent pool “A” and Defendant’s group parent qualifies as an appropriate notice of infringement. In any case, such notice has been given by and after bringing the infringement lawsuit. Claimant’s statement of claims, in particular, contained all information necessary. Producing the original document in which Claimant made its FRAND declaration or proving that a FRAND declaration has been properly made during the standard-setting procedure is not required as long as the SEP proprietor considers itself bound by a FRAND licensing obligation. Not least because the lawsuit had been suspended for several months and some more months elapsed between the ECJ’s Huawei ruling and the oral hearings in the case at issue, there was ample time for the standard user to fulfill its Huawei duties and negotiate a license unburdened by the pressure created by an impending prohibitory injunction. [3] Even if it were justified to request—the court seems to doubt this—claim charts for a sample of patents where a worldwide portfolio license is offered, Claimant would have met this obligation, in particular because Defendant did not communicate that or why it considered the sample insufficient. It was not necessary for Claimant to impart to Defendant a documentation of the standard at issue. [4]
   3. The SEP proprietor’s licensing offer
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above): The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [5] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept.
      In casu the court considered Claimant’s offer as sufficient, [6] in particular because a worldwide license, granted to the parent of a group, corresponded to recognized commercial practice in the field. It was no evident FRAND violation to calculate the royalties based on the licensing conditions of the patent pool “A” and Claimant’s share in the patents of this pool. It was further appropriate to demand a lump sum for past use of the patents to be licensed without specifying (in the licensing offer) the exact amount for lack of accessible information on the extent of the use. The information provided by Claimant on how the royalties were calculated was deemed sufficient. It was not necessary to impart to Defendant licensing contracts concluded with other market participants since “A” ’s model contracts were accessible on the Internet and no circumstances indicated unequal treatment of licensees absent objective justification such as differing turnovers.
   4. The standard implementer’s reaction
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). In casu the court considered Defendant’s counter-offer to be evidently non-FRAND, mainly because the license would have—inappropriately, given the facts of the case and recognized commercial practice—been limited to Germany. [7] Furthermore, Defendant neither rendered account nor provided security for its use of the patent in the past. The fact that Defendant has—allegedly—terminated its use of the patent does not remove these obligations for past periods of use. [8] As the court explains in some detail, [9] an overall assessment of the conduct of the parties indicates that Defendant engaged in delaying tactics while Claimant was not trying to use the infringement action for extorting excessive royalties.
3. Other important issues
   The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products (cf. LG Mannheim, 29 January 2016 - 7 O 66/15, above). Regarding claims for rendering of accounts it mentions, but does not decide the question whether the existence of a FRAND declaration has an impact on the content of such claims. [10]
   Even if the standard-setting at issue had—due to the lack of a timely FRAND commitment by Claimant—violated Art. 101 TFEU, this would not bar Claimant from enforcing its patents within the limits set by Art. 102 TFEU and the Huawei ruling. [11]
   Neither competition law nor the general principle of good faith required Claimant to primarily address entities that produce standard-implementing components of Defendant’s products. [12] On the contrary, Claimant was free to immediately demand the taking of a license from Defendant, all the more so because Defendant was not only engaged in marketing and selling third-party devices but also devices produced by Defendant’s group of companies using the standard-implementing components.

• [1] Case No. 7 O 96/14, para. 84-107
• [2] Case No. 7 O 96/14, para. 81-83
• [3] Case No. 7 O 96/14, para. 109 et seq.
• [4] Case No. 7 O 96/14, para. 114-117
• [5] LG Mannheim, 29 January 2016 – Case No. 7 O 66/15, para. 58
• [6] Case No. 7 O 96/14, para. 118-129
• [7] Case No. 7 O 96/14, para. 131-133
• [8] Case No. 7 O 96/14, para. 134 et seq.
• [9] Case No. 7 O 96/14, para. 136-141
• [10] Case No. 7 O 96/14, para. 142
• [11] Case No. 7 O 96/14, para. 144 et seq.
• [12] Case No. 7 O 96/14, para. 146

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Updated 26 January 2017

Sisvel v Haier

OLG Düsseldorf
13 January 2016 - Case No. I-15 U 66/15

1. Facts
   The proceedings concerned the subsequent application of Defendants in Case No. 4a O 93/14 seeking to suspend the execution of the District Court’s decision until the appellate court has decided on the merits of an appeal brought by Defendants. As to the facts of the case, it can be referred to the summary above.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous. [135]
2. Court’s reasoning
   
   
   1. The SEP owner’s licensing offer
      The question of whether granting a portfolio license would be FRAND was referred to the subsequent appeal proceedings. [136]
   2. The standard implementer’s reaction
      More importantly, the court found that the standard user is not required to respond to a license offer of the SEP proprietor if the terms of that offer are not FRAND. In other words, the subsequent obligations of the alleged infringer derived from Huawei only arise when and provided that the SEP proprietor submitted an offer on FRAND terms. As the lower court had not determined whether the conditions of the proprietor’s license offers were FRAND, the court considered this part of the lower court’s decision to be manifestly erroneous. Given this flaw in the lower court’s reasoning, it was left undecided by the court whether a license offer submitted in the course of the oral hearings can fulfill the Huawei requirements. [137]
3. Other important issues
   For the purposes of the present proceedings, the court explicitly stated that there is—in principle—no reason to treat non-practicing entities, such as Claimant, in a different manner than other market participants. [138]

• [135] Case No. I-15 U 66/15, para. 4-5
• [136] Case No. I-15 U 66/15, para. 20
• [137] Case No. I-15 U 66/15, para. 17-20
• [138] Case No. I-15 U 66/15, para. 11

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Updated 17 January 2018

Unwired Planet v Huawei, [2017] EWHC 1304 (Pat)

English court decisions
7 June 2017 - Case No. HP-2014-000005

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [112] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [113]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [114] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [115] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [115]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [116] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [117] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [116] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [118] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [118]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [119] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [120] One reason is that it involves a public vindication of the claimant’s rights. [120] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [120] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [121] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [122] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [122]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [123] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [124] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [125] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [126] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [127] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [128] The ensuing question was whether any deductions were appropriate. [129] The court held that neither party had offered terms that were essentially FRAND. [130] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [130] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [131] second, the hard-edged non-discrimination point; [132] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [133] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [134]

• [111] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
• [112] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
• [113] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
• [114] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
• [115] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
• [116] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
• [117] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
• [118] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
• [119] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
• [120] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
• [121] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
• [122] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
• [123] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
• [124] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
• [125] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
• [126] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
• [127] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
• [128] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
• [129] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
• [130] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
• [131] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
• [132] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
• [133] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
• [134] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

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Updated 26 January 2017

Saint Lawrence v Vodafone

LG Düsseldorf
31 March 2016 - Case No. 4a O 126/14

1. Facts
   Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
   Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
   On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [85] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
2. Court’s reasoning
   The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
   1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [86] The court declared the Huawei rules applicable to claims for the recall of products. [87]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [88] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [89] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [90]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [91]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [92] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
   2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [93]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [94] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [95] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [96]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [97]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [98]
   3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [99] Whether the Intervener satisfied the ECJ criteria was left undecided. [100]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [101] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [102] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [103]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [104] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [105]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [106] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [107]
3. Other important issues
   According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [108]
   Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [109]
   Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [110]

• [85] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
• [86] Case No. 4a O 73/14, para. 184
• [87] Case No. 4a O 73/14, para. 187
• [88] Case No. 4a O 73/14, para. 195 et seq.
• [89] Case No. 4a O 73/14, para. 208-210
• [90] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
• [91] Case No. 4a O 73/14, para. 193
• [92] Case No. 4a O 73/14, para. 270 et seq.
• [93] Case No. 4a O 73/14, para. 222 et seq.
• [94] Case No. 4a O 73/14, para. 225 et seq.
• [95] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
• [96] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
• [97] Case No. 4a O 73/14, para. 256 et seq.
• [98] Case No. 4a O 73/14, para. 279 et seq.
• [99] Case No. 4a O 73/14, para. 214-220
• [100] Case No. 4a O 73/14, para. 214-220; 278
• [101] Case No. 4a O 73/14, para. 266
• [102] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
• [103] Case No. 4a O 73/14, para. 264.
• [104] Case No. 4a O 73/14, para. 291 et seq.
• [105] Case No. 4a O 73/14, para. 278
• [106] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
• [107] Case No. 4a O 73/14, para. 304
• [108] Case No. 4a O 73/14, para. 189
• [109] Case No. 4a O 73/14, para. 309-313
• [110] Case No. 4a O 73/14, para. 317 et seq.

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Updated 6 March 2017

Philips v Archos

LG Mannheim
1 July 2016 - Case No. 7 O 209/15

1. Facts
   Claimant, a globally operating electronics manufacturer, is the proprietor of European patents EP 1 062 743 B1 and EP 1 062 745 B1, allegedly covering part of the UMTS- and LTE-standard respectively. Defendant, being the German subsidiary of the French parent company Archos S.A., produces and markets UMTS- and LTE-based devices under the brand name “ARCHOS” in Germany.
   By letter of 5 July 2014, Claimant sent an infringement notification, including a list of the patents affected, to Defendant. Furthermore, on 15/16 September 2014, Claimant explained its licensing program to Defendant and provided for corresponding documents. After Defendant offered Claimant in a meeting on 25 November 2014 the transfer of patents which it considered essential to the UMTS- and LTE-standard respectively, Claimant sent a written licensing offer, containing a list of SEPs and patent-infringing products, to Defendant on 28 July 2015 and provided for additional technical information concerning the SEPs in-suit on 25 September 2015 via e-mail. On 12 January 2016, Defendant, in turn, submitted a written counter-offer to Claimant for a licence covering Claimant’s worldwide LTE/UMTS-patent portfolio including royalties of 0.071% of the net sales price per unit. Since the parties did not conclude a binding licensing agreement subsequently, Claimant brought an action against Defendant on 16 October 2015, received by the court on 19 October 2015. In April 2016, Defendant deposited an amount of EUR 161’343.00 at the Landesjustizkasse (federal justice treasury) Bamberg, which should cover the worldwide sales of LTE/UMTS-based devices between 2012 and 30 June 2016 and was calculated on the basis of the royalties previously offered in Defendant’s counter-offer.
2. Court’s reasoning
   1. Market power and infringement notification
      The court left open the question of whether the SEP conveyed market power to Claimant since it did, in any case, find no abuse of such potential market power.
      Having regard to the content of the infringement notification, the Mannheim court held that, in any case, the SEP proprietor, on the one hand, has to denote the patent in-suit, which it deems essential, by reference to its patent number and to indicate, that the patent has be declared essential by the respective standardization organization. In order to specify the way in which the SEP has been infringed, the SEP proprietor’s notification must, on the other hand, clarify to which standard the patent in-suit is essential and based on which circumstances it assumes that the alleged infringer makes use of the patent’s teachings. For this purpose, the SEP proprietor must indicate which (category of the) technical functionality of the challenged embodiment makes use of the standard. The alleged infringer must be able to assess the intellectual property rights situation autonomously or by recourse to a third party.
      The level of detail to be adhered to in the infringement notification depends on the specific circumstances of the case, taking into account in particular the technology knowledge of the alleged infringer or by what means it can acquire the corresponding professional expertise in a reasonable manner. In order to substantiate the facts of the infringement in accordance with Huawei, it is deemed sufficient to refer to so-called claim charts, being customarily used in the course of licensing negotiations, comparing the asserted claim of the patent in-suit according to features with the relevant passages of the standard without fulfilling the requirements of the conclusiveness test of an infringement action. In contrast, the mere reference that the standard implementer would produce or market products implementing the standard and therefore infringe the patent in-suit is not adequate.
   2. The SEP owner’s licensing offer
      As regards the Huawei condition to submit a written offer on FRAND terms prior to the initiation of proceedings, the court requires a contractual offer that is ready to be adopted and comprises the essentialia negotii. However, in the opinion of the judges, Huawei does not oblige the infringement court to determine pursuant to objective criteria whether the licensing offer complies with FRAND terms, if the latter fact is disputed by the alleged infringer. [139] The SEP proprietor’s offer is only considered not FRAND and in violation of antitrust law, if it constitutes an expression of exploitative abuse, taking into account the specific negotiation situation and, in particular, the market conditions.
      In order to comply with the obligation to specify the way in which the royalty is to be calculated, the SEP proprietor must put the alleged infringer in a position to understand on the basis of objective criteria why the former considers its licensing offer as FRAND. For this purpose, it is, in the case of quota licence agreement, not sufficient to indicate the royalties per unit without substantiating their FRAND character. The respective amount must be made sufficiently transparent, e.g. by reference to an established standard licensing program or by indicating other reference values allowing to deduce the royalty demanded, such as a pool licence fee.
      Taking into account the summary examination of the Higher Regional court in Karlsruhe granting the SEP proprietor much leeway in determining FRAND terms [140] , the Mannheim court left in the present case undecided whether it has to reassess its own standards of review, because Claimant did not sufficiently explain why royalties of USD 1.00 per unit should be FRAND in accordance with Huawei. The mere indication of the multipliers underlying the calculation of the royalties were deemed inadequate, since on the basis of this incomplete (market) information the alleged infringer is neither able to assess whether Claimant’s offer is FRAND nor to submit a FRAND counter-offer.
      The subsequent explanations as well as the expert opinion, seeking to prove the non-discriminatory character of the royalties, forming part of Claimant’s reply, did not fulfill the Huawei requirements, because prior to the initiation of proceedings Claimant has to substantiate both the manner of patent infringement and the way of calculating the royalties. Without completely dissenting from the decision previously rendered by the OLG Düsseldorf [141] , the Mannheim court, by reference to the subsequent rectification order issued by the ECJ on 15 December 2015, denied the SEP proprietor’s unlimited possibility to perform its Huawei obligations within the ongoing trial without incurring sanctions, because otherwise the central idea underlying the ECJ decision of being able to negotiate without the burden of pending proceedings while having all necessary information to evaluate the FRAND conformity of the licensing offer would be diminished.
      Moreover, Claimant was not exempted from its respective Huawei obligation due to Defendant’s alleged lack of willingness to conclude a licensing agreement. In contrast, a fundamental unwillingness to enter into licensing negotiations was rejected, because Defendant, firstly, complained in letters of 20 November 2015 and 4 December 2015 about Claimant’s deficient explanation why the licensing fee should be FRAND according to Huawei; secondly, it made a counter-offer including royalties of 0.071% of the net sales price per unit and provided for an expert opinion elaborating on the FRAND character of this royalty; thirdly, it submitted an offer to transfer own patents prior to the proceedings; and lastly, even though conducted after the initiation of proceedings, Defendant deposited a considerable amount with the court, which should cover worldwide sales with its LTE/UMTS-based products.
   3. The standard implementer’s reaction
      The standard implementer is obliged to react to a licensing offer, even if it deems the later not as FRAND in accordance with Huawei [142] , unless it is established by means of summary examination that the licensing offer is evidently not FRAND and therefore constitutes an abuse of dominance.
3. Other important issues
   Although the Mannheim court rejected the action for prohibitory injunction and for the recall of products for reasons of antitrust law, it confirmed, on the basis of § 140b PatG and § 242 BGB, Claimant’s application for information as well as for rendering account and granted damages in accordance with § 139 (2) PatG, because it found Defendant to infringe the patents in-suit.
   Besides, the Court denied the exhaustion of the patents in-suit. [143]

• [139] The judges stated in an even more general manner that the infringement court shall not be required under Huawei to determine the FRAND terms, if the proceedings do not involve the payment of royalties, but only relate to actions for a prohibitory injunction or for the recall of products.
• [140] See above OLG Karlsruhe, 31 May 2015 – Case No. 6 U 55/16
• [141] See above OLG Düsseldorf, 9 May 2016 – Case No. 15 U 36/16
• [142] See also LG Mannheim, 27 November 2015 – Case No. 2 O 106/14 and LG Düsseldorf, 3 November 2015 – Case No. 4a O 144/14
• [143] Para. V, p. 34 et seq.

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Updated 6 June 2017

Philips v Archos

LG Mannheim
17 November 2016 - Case No. 7 O 19/16

Prof. Dr. Philipp Maume, S.J.D. (La Trobe)

1. Facts
   The claimant is an international electronics company, which owns a range of patents relating to mobile phone technology. In particular, the claimant owns the patent EP 1.440.525, which is allegedly essential for the UMTS and LTE standards. The defendant is a German subsidiary of a French multinational electronics company that offers Android tablets and smartphones which are compliant UMTS and LTE standards. On 5 July 2014, the claimant informed the defendant in writing that by marketing and selling mobile phones, the defendant is infringing standard essential patents owned by the claimant. On 15/16 September 2014, the claimant handed over written documents about its licensing program to the defendant. In a discussion on 25 November 2014, the defendant offered to transfer patents that it deemed essential to the standards in question. In a letter dated 28 July 2015, the claimant offered to grant a license for the relevant patent. This letter included a list of all allegedly infringing products and patents in question, and relevant technical details. The claimant sent additional technical information via email on 25 September 2015. On 12 January 2016, the defendant sent a written offer to enter into a license agreement for the claimant’s worldwide patent portfolio. The parties did not reach an agreement. The claimant commenced infringement proceedings in the District Court of Mannheim on 16 October 2015 (received by the court on 19 October 2015). The defendant subsequently made a deposit at the Bavarian Justice Exchequer at Bamberg in April 2016. The deposit was supposed to cover all royalties owed for the worldwide sale of LTE/UMTS devices by the defendant between 2012 and 30 June 2016. The court dismissed the actions for injunction, recall and destruction of products because the claimant had not complied with its obligations under EU competition law. However, the court ordered the defendant to render accounts and declared that the defendant was liable for compensation.
2. Court’s reasoning
   1. Market Power and Notice of Infringement
      TThe court did not comment on the existence of a dominant market position. It focused on the notice of infringement and the license offer. The court held that the notice of infringement should enable the alleged infringer to examine and assess the patent situation. [150] It is insufficient to indicate that the alleged infringer is marketing products covered by a standard and is therefore infringing a patent. Rather, the SEP proprietor needs to specify the patent number and the standard for which it has been declared essential. The SEP proprietor also needs to describe the technical functionality of the standard which is at issue. The level of detail of these descriptions depends on the particular situation. [150] The SEP proprietor needs to take into consideration the level of the alleged infringer’s technological knowledge, or its ability to gain the required knowledge through professional advice. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. However, the description does not need to be as thorough as a statement of claim in patent litigation.
   2. The SEP owner’s licensing offer
      The court stated that the SEP proprietor’s written license offer needs to contain all relevant aspects of the contract, to enable the alleged infringer to accept the offer. [151] If the alleged infringer argues that the conditions of this offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. The Court acknowledged that the Higher Regional Court of Karlsruhe had rejected this view in the decision 6 U 55/16 of 31 May 2016. [152] The Mannheim District Court, however, reiterated its view that a reduced standard of review of the offered conditions is sufficient, referring to the final opinion given by the Advocate General in the ZTE/Huawei ruling. [151] It was, the court argued, the CJEU’s intention to keep the infringement proceedings free of the determination as to what precise conditions would exactly be FRAND in each particular situation. [151] Only an offer that is clearly abusive, i.e. evidently non-FRAND, would not meet the CJEU criteria at this point. [151]
      Of course, the SEP proprietor’s mere assertion that the offer is FRAND would be insufficient. [151] Instead, the Court requires the SEP proprietor to be transparent about the calculation. That means that it needs to specify how the terms of the license offer are calculated. [153] It needs to make clear the basis of the SEP proprietor’s conclusion that the offer is FRAND. Merely stating the royalties owed per unit (in this case: USD 1,- per unit without further explanation) [154] is also insufficient. Rather, the SEP proprietor needs to find a proper way of substantiating its view as to what royalties are owed. This could be a standard license agreement entered into with third parties, or other references such as fees for a pool license that contains SEPs of the respective standard.
      The SEP proprietor needs to make these explanations before it commences infringement proceedings. [155] Only then, the alleged infringer is able to assess the situation unburdened by the treat of an ongoing court case. The Court was aware that the Higher Regional Court of Düsseldorf had recently (Case No. I – 15 U 36/16, 9 May 2016) expressed its view that this understanding might be overly formal. However, the Mannheim District Court upheld its opinion that only a thorough explanation by the SEP proprietor enabled the alleged infringer an informed decision as to whether the license offer is FRAND. [155]
      The Court held that, in theory, the claimant could be exempt from this transparency obligation if the defendant had been unwilling to enter into a license agreement. [156] However, in the case at issue the defendant had demonstrated its willingness to enter into a license agreement. The Court took into account four factors:
      1. the defendant’s had repeatedly requested the claimant to explain the basis of the license offer calculation, [156]
      2. the defendant had offered to transfer some of its own patents in exchange, [156]
      3. the defendant had made an offer and had commissioned an expert opinion that elaborated why the respective conditions were FRAND, [156]
      4. the defendant had deposited a substantial amount. [157]
   3. Standard Implementer’s Reaction
      The Court repeated its view expressed in the decision 2 O 106/14 of 27 November 2015. [158] Accordingly, the alleged infringer needs to respond to the SEP proprietor’s offer, even if the infringer considers that the offer does not meet the FRAND criteria. The only possible exception is an offer that, by means of summary examination, is clearly not FRAND and therefore constitutes an abuse of market power. A potential counter offer needs to be made in due course, which means as soon as possible, taking into account the recognized commercial practices in the field and good faith.

• [150] Case No. 7 O 19/16, para 77
• [151] Case No. 7 O 19/16, para 78
• [152] Case No. 7 O 19/16, para 76
• [153] Case No. 7 O 19/16, para 79
• [154] Case No. 7 O 19/16, para 84
• [155] Case No. 7 O 19/16, para 86
• [156] Case No. 7 O 19/16, para 87
• [157] Case No. 7 O 19/16, para 88
• [158] Case No. 7 O 19/16, para 80

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Updated 26 January 2017

Unwired Planet v Huawei, EWHC

English court decisions
2 October 2015 - Case No. HP-2014-000005

Dates: 2 October 2015, 19 November 2015, 23 November 2015, 7 December 2015, 16 December 2015, 28 January 2016, 29 January 2016, 12 February 2016, 22 March 2016, 29 April 2016, 27 May 2016

1. Facts
   The overall dispute can be separated into five technical trials (A-E), three of which have been completed, each dealing with one patent and relating to technical issues such as validity, infringement and essentiality. Still uncompleted is the fifth trial, concerning the only non-SEP in the portfolio, and one trial relating to competition law and FRAND issues, scheduled to start on 20 October 2016 and to last for approximately thirteen weeks.
   Claimant (Unwired Planet Int. and Unwired Planet LLC) is the proprietor of European patents EP 2 229 744 whose standard-essential character has been confirmed in Trial A; EP 2 119 287 and EP 2 485 514 who have been revoked in Trial B; and EP 1 230 818 whose standard-essential character has been confirmed in Trial C. All patents were originally granted to Ericsson and are part of a patent portfolio Claimant obtained from Ericsson, purportedly encompassing patents essential to various ICT standards. Defendants (in particular Huawei and Samsung) produce and market GSM- and LTE 4G-based devices.
   In the decision of interest here, the court had to decide on the application of Defendant Samsung to transfer competition law as well as FRAND issues to the Competition Appeal Tribunal (CAT). The application was rejected because it appeared not to be feasible to decide these issues separately from the rest of the case. [148]
   With regard to competition law the court has, so far, examined three competition law defences pursuant to Article 101 TFEU raised by Defendant Samsung against the claim for patent infringement. This claim is based on, inter alia, the Master Sale Agreements (MSA) concluded as of 10 January 2013 between Claimant and Ericsson. The MSA entitles Ericsson to a share in the patent royalties and contains the option to transfer a substantial number of additional patents to Claimant in the future. On 14 June 2013 and 6 March 2014 respectively, Claimant and one of its subsidiaries made FRAND commitments towards ETSI. Defendant’s first defence contends that the MSA generally failed to transfer the FRAND commitments made by Ericsson towards ETSI to Claimant, because (a) it does not require Claimant to give any FRAND undertaking, (b) even if there were such an obligation, it cannot be enforced by third parties and (c) the MSA does not prohibit Claimant from obtaining licensing terms more favorable than those Ericsson could obtain. The second defence alleges that Claimant and Ericsson could, as an effect of the patent portfolio’s division by the MSA, demand excessive royalties. Moreover, by means of its third defence, Defendant argues that particular clauses of the MSA have the object or potential effect of restricting competition under Article 101 TFEU because they define minimum royalties and exclude alternative royalty schemes.
2. Decision of the court of first instance
   The court of first instance let the second defense go to trial because it held that the MSA is not a straightforward agreement for the sale of patents since Ericsson retains a share in the royalties to be earned and can transfer a substantial further body of patents if it chooses to do so. Moreover, the acquirer, as a non-practicing entity, does not compete in the downstream market in the way that Ericsson does. In these circumstances the court of first instance considered it was arguable that the MSA has as its object or would have as its effect the distortion or restriction of competition.
   The court of first instance reached the same conclusion in relation to the third defence. It considered it arguable that the pertinent clauses would contribute to the creation of an anti-competitive incentive to charge higher royalties.
   However, the court of first instance rejected all elements of the first defense. As for the first aspect, it recognised that the acquirers acknowledged (1) that the SEPs were subject to existing encumbrances, including FRAND commitments to ETSI; (2) that all encumbrances would continue after assignment; and (3) that within a reasonable time after closing they would provide declarations to ETSI including FRAND undertakings in accordance with the ETSI IPR Policy. Such FRAND undertakings were indeed provided. Turning to the second element, the court of first instance considered that it was unarguable because once a FRAND undertaking had been given any third party could require to license the patents on FRAND terms. As for the third element, the judge rejected as unarguable the contention that Ericsson’s own FRAND obligations should have been assigned to and become binding on Unwired Planet.
   Defendant appealed against the findings regarding the second and third elements of the first defence.
3. Court’s reasoning
   Having regard to the second element of the first defence the court, considering the fact that Claimant made commitments towards ETSI shortly after the conclusion of the MSA, found that the undertaking to grant licences on FRAND terms is equally binding for Claimant irrespective of the fact whether it is a member of ETSI and rejected Defendant’s submission that the obligations under the MSA cannot be enforced by third parties. [149]
   Contrary to the findings of the court of first instance regarding the third element of the first defence, the court states that Article 101 TFEU may require an effective transfer of Ericsson’s FRAND obligation to Claimant to the effect that the latter cannot obtain more favorable terms from its licensees than Ericsson could itself have obtained. It therefore let this aspect go to full trial as well.

• [148] HP-2014-000005, 29 April 2016, para. 30 et seq., 46
• [149] HP-2014-000005, 27 May 2016, para. 38-40

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Updated 30 July 2018

France Brevets v HTC, LG Düsseldorf

LG Düsseldorf
26 March 2015 - Case No. 4b O 140/13

A. Facts

The Claimant is a patent assertion entity established by the French State [1] . The Claimant was granted an exclusive licence by a company previously called Inside Technologies S.A. (SEP holder) for a European patent essential (Standard Essential Patent or SEP) for the implementation of the Standard LL V11.0.0, 2011-09 (LL standard) which was developed by the European Telecommunications Standards Institute (ETSI) [2] . The SEP holder had made an undertaking towards ETSI to make its SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [3] . The LL standard enables applications of the so-called “Near field Communication” (NFC) technology to run on smartphones over the phone’s SIM-card [4] . NFC-applications can alternatively be implemented on smartphones also by a so-called “Smartcard”, or so-called “embedded secure elements” [5] .

The Defendant is the German subsidiary of an international manufacturer of smartphones that incorporate a so-called “NFC-controller” implementing the LL standard [6] The Defendant promotes the offering and sale of smartphones manufactured by its parent company in Germany [7] .

The Claimant brought an action for infringement of the German part of the SEP in question against the Defendant before the District Court (Landgericht) of Düsseldorf (Court), requesting for injunctive relief, information and rendering of accounts [8] . The Claimant also sought for a declaratory judgment on the Defendant’s liability for damages on the merits [8] .

Against these claims, the Defendant raised inter alia a defence based on antitrust considerations; basically, it argued that the Claimant’s request for injunctive relief constitutes an abuse of market power conferred to the Claimant by the SEP in suit in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU) (antitrust defence) [9] . The Defendant also requested the Court to stay its proceedings, until the Court of Justice of the European Union (CJEU) rendered its final decision in the matter Huawei v ZTE which concerned the availability of injunctive relief to SEP holders [10] .

The Court dismissed the Defendant’s request to order a stay of the proceedings [11] and granted the Claimant’s motions to the full extent. In its analysis regarding to the antitrust defence, the Court took into account the opinion delivered by Advocate General Wathelet in the matter Huawei v ZTE (Wathelet opinion) [12] , before the final decision of the CJEU was delivered on 16th July 2015 [13] .

B. Court’s reasoning

As a starting point, the Court made clear that an entity granted an exclusive licence for a SEP is entitled to all rights arising from the patent, including claims for injunctive relief as well as claims for damages, information and rendering of accounts [14] .

Having said that, the Court pointed out that the protection of intellectual property rights (IPRs) is a high priority; IPRs are expressly protected under the Charter of Fundamental Rights of the European Union (Article 17 Sec. 2), which also guarantees right holders access to justice (Article 47). Limitations of these rights can be justified only by antirust rules for the protection of general public interest, particularly Article 102 TFEU [15] .

Following the Wathelet opinion, the Court found that a dominant position of the Claimant, which is re-quired for the implementation of Article 102 TFEU, cannot be established solely on grounds of its legal position with respect to the SEP in suit [16] . In the Court’s view, not every SEP confers market power relevant from an antitrust perspective to its holder [16] . Moreover, it has to be examined on a case-by-case basis whether the technical teachings protected by the SEP actually establish such market power [16] .

Further, the Court held that ownership of a SEP does not give rise to the presumption that market power exists [17] . Standards, particularly in the telecommunications sector, refer also to technical functionalities which are of secondary importance to the relevant market; with respect to such functionalities, there are no grounds for a presumption that the SEP holder has market power [17] . Insofar, the party asserting the existence of market power must plead and establish the relevant facts in trial [17] .

With respect to IPRs, the relevant market from an antitrust perspective is not the licensing market, but the downstream product market [18] . Looking at SEPs, relevant is the market in which products implement-ing the respective standard are offered [19] . Accordingly, the Court found that the relevant market in the present case is the smartphone market, because the NFC technology is almost solely used in smartphones [20] .

Since the NFC technology does not apply to basic functionalities of smartphones and is, therefore, no prerequisite for market entry, market power could only be established, if smartphones that do not use the teachings of a SEP could not compete in the market with products implementing this patent [21] .

In the eyes of the Court, this was not the case. The SEP in suit (and the LL Standard) enable NFC-applications to run over smartphones’ SIM-card. However, NFC-applications can alternatively also run over so-called “Smartcards” or “embedded secure elements”. The Defendant could not establish that NFC-applications running over the SEP in suit have reached market penetration to the extent that market power could be achieved [22] . On the contrary, smartphone byers do not appear to base their purchase decision on which of the three available technical solutions for enabling NFC-applications the smartphone uses [22] .

• [1] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 18
• [2] Ibid, paras. 19, 20, 24 and 26
• [3] Ibid, para. 22
• [4] Ibid, para. 212
• [5] Ibid, para. 213
• [6] Ibid, para. 22.
• [7] Ibid, paras. 151 et seq
• [8] Ibid, para. 3
• [9] Ibid, para. 46
• [10] Ibid, para. 38
• [11] Ibid, para. 219
• [12] Opinion of Advocate General Wathelet delivered on 20 November 2014, ECLI:EU:C:2014:2391
• [13] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 197 et seqq
• [14] Ibid, para. 61
• [15] Ibid, para. 197
• [16] Ibid, para. 199
• [17] Ibid, para. 201
• [18] Ibid, para. 204
• [19] Ibid, para. 205
• [20] Ibid, para. 206
• [21] Ibid, para. 208
• [22] Ibid, para. 217

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Updated 26 January 2017

Canon v Sieg/Kmp Printtechnik/Part Depot

OLG Düsseldorf
29 April 2016 - Case No. I-15 U 47/15

1. Facts
   The proceedings before the court concerned the subsequent appeal of Defendants in Case LG Düsseldorf, 11 June 2015 – Case No. 4a O 44/14 (decision rendered before Huawei) seeking to set aside the decision of the lower court.
   Claimant, a Japanese company that produces and markets photocopiers, printers and cartridges in cooperation with undertaking “C”, is the proprietor of European patent 2 087 AAA B1 which has not been declared essential to a particular standard. Defendants “1”, “2” and “3” are involved in the supply and distribution, inter alia to Germany, of cartridges of brand “E”, being based on recycled models of and serving as substitutes for particular OEM-cartridges of Claimant. In 2011, Claimant and “C” made a commitment towards the EU Commission that their products would comply with EU-Directive 2009/125/EC. Part of this commitment is the obligation to secure interoperability of the products with non-OEM cartridges.
   The admissible appeal of Defendants has been rejected by the court of second instance.
2. Court’s reasoning
   Even though the commitment made toward the EU Commission does, contrary to the opinion of Claimant, not constitute merely a non-binding memorandum but rather a binding declaration it executes Article 15 (2) Directive 2009/125/EC and has the sole purpose of enhancing the environmental performance of the products at issue. Hence, it can be considered neither as a direct nor as an indirect FRAND declaration and the Huawei obligations do not apply in the present case. [144] In consequence, Claimant is not obliged to present a licensing offer corresponding to FRAND terms. [145]
   Nor can Claimant’s seeking of a prohibitory injunction be considered as abusive pursuant to § 242 BGB since Claimant’s declaration could not establish a reliance worthy of protection to the effect that Defendant was entitled to make use of Claimant’s patent protected inventions. [146]
   Moreover, the cumulative conditions established by the ECJ (inter alia in IMS Health) for granting a compulsory license on the basis of Article 102 TFEU absent a standard-setting context are not fulfilled. [147]

• [144] Case No. I-15 U 47/15, para. 72 et seq.
• [145] Case No. I-15 U 47/15, para. 74
• [146] Case No. I-15 U 47/15, para. 48, 78 et seq.
• [147] Case No. I-15 U 47/15, para. 88 et seq.

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Updated 3 December 2018

IP Bridge v HTC

LG Mannheim
28 September 2018 - Case No. 7 O 165/16

A. Facts

The Claimant, IP Bridge, is a non-practising entity holding a European patent (German part) which was declared essential to the wireless telecommunications standard LTE (Standard Essential Patent or SEP) developed by the European Telecommunications Standards Institute (ETSI) [135] . The previous holder of the SEP in question had made an undertaking towards ETSI according to Article 6.1 of ETSI IPR Policy to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [136] .

The Defendant is a German subsidiary of HTC, a company which manufactures and sells electronic devices worldwide, including mobile phones complying with the LTE standard [137] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [137] .

In December 2014, the Claimant contacted the Defendant’s parent company (parent company) suggesting that the parties entered into negotiations regarding a licence for Claimant’s patent portfolio which also included the aforementioned SEP [137] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [137] . On 29 February 2016, the Claimant sent a letter to the parent company explaining how the LTE standard made use of the technology covered by its SEP inter alia under reference to an attached claims chart [138] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [139] . However, no licensing agreement was concluded.

On 27 September 2016, the Claimant brought an infringement action against the Defendant before the District Court of Mannheim (Court) requesting for a declaratory judgment confirming Defendant’s liability for damages arising from the use of its SEP as well as for information and rendering of accounts [140] .

On 16 February 2018, during the course of the pending proceedings against the Defendant, the Claimant made a further licensing offer to the parent company [141] . On 11 April 2018, after the parent company had signed a Non-Disclosure Agreement, the Claimant presented existing licensing agreements with third parties concerning its relevant patent portfolio (comparable agreements) to the parent company and requested the latter to respond to its last licensing offer of 16 February 2018 within one week (that is until 18 April 2018) [141] . This deadline was extended for almost three weeks until 7 May 2018 [141] .

On 15 May 2018, the Claimant extended its claims in the ongoing proceedings; in addition to its already pending claims, it sought for injunctive relief and also requested the recall and the destruction of products infringing its SEP (claims for injunction) [141] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [142] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [142] . On the other hand, the Court dismissed the claim for injunctive relief and the recall and destruction of infringing products as being unenforceable for the time being [143] .

B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [144] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [142] . Since the Claimant has no knowledge of the details required for the quantification of the damages suffered, the Defendant is obliged to provide information on relevant uses (starting from the publication of the patent grant) and render accounts for such uses (starting from one month after the publication of the patent grant) [142] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [145] . A “patent ambush” requires that the patent holder deliberately – in terms of a willful fraudulent misconduct – misled the participants in the standardisation process and intentionally prevented the adoption of an alternative technology into the standard [146] . Insofar, it needs to be established (by the defendant) that the disclosure of the patent during the standardisation process would have led to an alternative structure of the standard, which would have avoided making use of the teaching of the patent in suit; the mere theoretical possibility of an alternative technical solution does not suffice for supporting the allegation of a “patent ambush” [146] . The Court held that the Defendant failed to establish such fact [145] . Accordingly, the Court left the question regarding the legal consequences of a “patent ambush” open (obligation to licence royalty-free or just an obligation to offer FRAND licences?) [145] .

Furthermore, the Court stressed out that the FRAND undertaking given by the previous holder of the SEP in suit has no impact on both the scope and the enforceability of the above claims [147] .

In the Court’s eyes, the Claimant is bound to the FRAND undertaking made by the previous holder of the SEP in suit towards ETSI [148] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [148] . In any case, the assignee of a SEP abuses its market power, if it is aware of the FRAND-undertaking of its predecessor, but, nevertheless, refuses to fulfil the obligations arising from it [138] . The assignee of an SEP cannot draw benefits from the inclusion of its patent into a standard, without being bound to the FRAND commitment of its predecessor, since the latter enabled the inclusion of the SEP in the standard in the first place [138] . Indeed, antitrust law and particularly Article 101 of the Treaty for the Functioning of the EU (TFEU) obliges standard development organisations to make the inclusion of patented technology into a standard subject to a FRAND commitment of the patent holder, in order to secure that essential technology will be accessible to users [149] .

Having said that, the Court made clear that SEP holder’s claims for information and rendering of accounts are not limited by the FRAND undertaking [147] . Even if one would assume that such undertaking limits the SEP holder’s claims for damages to the amount of the FRAND royalty (which the Court left undecided), the patent holder would, nevertheless, be entitled, in principle, to information regarding the use of its SEP [147] .

In addition, the Court explained that a FRAND undertaking has also no influence on the enforceability of the claims for damages (on the merits), information and rendering of accounts asserted by the Claimant [147] . In particular, these claims are not subject to the conduct requirements set forth by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTEHuawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13. (Huawei requirements or framework) with respect to dominant undertakings in terms of Article 102 TFEU [151] .

The opposite is, on the other hand, the case with respect to the claims for injunction asserted by the Claimant. These claims are not enforceable for the time being, since the Claimant failed to fully comply with the Huawei requirements [152] .

Regarding to the SEP in suit, the Court ruled that the Claimant has a dominant market position in terms of Article 102 TFEU: The patent is essential to the LTE standard, which, in turn, cannot be substituted by an alternative standard (from the users’ point of view) [153] .

Looking at the negotiations between the parties involved, the Court did not see any flaws in the parties’ conduct with respect to the first two steps of the framework; the Claimant had effectively notified the Defendant about the infringing use of its SEP and the Defendant (in fact, its parent company) had effectively declared its willingness to obtain a licence covering also the SEP in suit [138] . In this context, the Court pointed out that the SEP holder’s obligation to notify the user of the infringing use of its SEP is also met, when the respective notification is addressed to the parent company of the (alleged) infringer (as is was the case here, especially with the Claimant’s letter to the parent company dated 29 February 2016) [138] .

However, the Court held that the Claimant failed to fulfil its consequent obligation under the Huawei framework, namely to make a FRAND licensing offer to the Defendant (respectively its parent company) [154] .

The Court considered only two offers made by the Claimant to the Defendant’s parent company prior to the extension of its claims in the pending proceedings on 15 May 2018 (since the other offers made were either indisputably not FRAND or were not produced by the Claimant in trial) [139] .

An offer made in February 2016 was found not to be FRAND in terms of content, since it contained a clause, according to which the licensee was obliged to pay the full amount of the royalties agreed, even if only one patent of the licensed portfolio was valid and used by the Defendant [139] .

The Court reached the same conclusion also with respect to the further offer made by the Claimant on 11 April 2018 (that is short before the Claimant extended its claims in the proceedings, adding the claims for injunction) [155] . The Court held that this offer did not comply with the Huawei requirements, since the Defendant was not given sufficient time to assess the offer and eventually make a counter-offer to the Claimant, before the latter asserted the claims for injunction against him in the proceedings [139] .

In the Court’s eyes, a licensing offer complying with the Huawei requirements is only given, when the SEP holder provides the SEP user with all information required from assessing the FRAND conformity of the offer [156] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [156] . In particular, the SEP holder must make the requested royalty amount transparent with reference to a standard licensing programme implemented in the market or to rates actually paid by third parties to a patent pool, covering also patents relevant to the standard [156] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [156] .

Based on the above considerations, the Court held that the period of 22 workdays between the presentation of the comparable agreements to the parent company (11 April 2018) and the assertion of the injunction claims in the proceedings by the Defendant (15 May 2018) was too short for a competent assessment of the Claimant’s licensing offer [157] . The fact that the Defendant (and/or its parent company) would have had sufficient time to react to the Claimant’s offer until the end of the oral hearings in mid-July 2018 was considered irrelevant by the Court in this respect [157] . The Huawei framework aims at preventing the situation, in which the SEP user agrees to unfavourable licensing conditions under the pressure of pending infringement proceedings (defined by the Court as “patent hold-up”) [157] . In case that the SEP holder has not fulfilled the Huawei requirements prior to the initiation of proceedings (as it was the case here), it has to make sure that the parties can again negotiated without the pressure of an ongoing trial, for instance by asking the court to stay its proceedings pursuant to Article 251 of the German Court of Civil Procedure [158] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [158] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [158] .

C. Other issues

The Court explained that the registration in the patent register allows the registered patent holder to assert the patent rights in court [159] . On the other hand, it does not define the ownership of the patent in material legal terms [160] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [161] .

Besides that, the Court pointed out that a stay in the infringement proceedings (pursuant to Article 148 of the German Code of Civil Procedure) until the end of parallel invalidation proceedings concerning the patent(s) in suit can be considered only under special circumstances [162] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [162] . The Defendant failed convince the Court that this was the case with the SEP in suit [162] .

• [135] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
• [136] Ibid, page 23 et seq.
• [137] Ibid, page 5.
• [138] Ibid, page 25.
• [139] Ibid, page 26.
• [140] Ibid, pages 5 et seq.
• [141] Ibid, page 6.
• [142] Ibid, page 19.
• [143] Ibid,page 23.
• [144] Ibid, pages 16 et seqq.
• [145] Ibid, page 20.
• [146] Ibid, page 21.
• [147] Ibid, page 22.
• [148] Ibid, page 24.
• [149] Ibid, pages 24 et seq.
• [150] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
• [151] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
• [152] Ibid,pages 23 and 25.
• [153] Ibid, page 23.
• [154] Ibid, pages 23 and 25 et seq.
• [155] Ibid, pages 26 et seqq.
• [156] Ibid, page 27.
• [157] Ibid, page 28.
• [158] Ibid, page 29.
• [159] Ibid, page 10.
• [160] Ibid, pages 10 et seq.
• [161] Ibid, page 11.
• [162] Ibid, page 30.

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Updated 26 January 2017

Saint Lawrence v Vodafone

OLG Düsseldorf
9 May 2016 - Case No. I-15 U 36/16

1. Facts
   The proceedings concerned the subsequent application of Defendant in Case No. 4a O 73/14 seeking to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. As to the facts of the case, it can be referred to the summary above.
   Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous.
2. Court’s reasoning
   1. Notice of infringement and declaration of willingness to license
      Firstly, the court of appeal focused on the Huawei requirement to submit an infringement notification prior to the initiation of proceedings. Although the court voiced some doubts over whether a distinction between transitional and non-transitional cases is permitted and whether, in transitional cases, reliance of a SEP proprietor on the Orange Book standard of conduct is worthy of protection, it did not consider the result reached by the lower court as manifestly erroneous. Since the SEP proprietor has the option to withdraw its action, to perform its Huawei obligations and to re-file the claim afterwards, it seems overly formalistic to deny the option to perform the Huawei obligations within the ongoing trial. Among a number of further reasons [159] for its position the court stressed that the ECJ intended the Huawei framework to be fact-sensitive. [160]
      Secondly, the court confirmed the lower court’s view that Defendant did not comply with its Huawei obligation to express its willingness to conclude a licensing agreement because it reacted belatedly (more than five months after the infringement notification) and in an evasive manner. The fact that proceedings have been initiated by Claimant does not alter the Huawei requirements and Defendant will particularly not be granted more time to comply with its respective obligations. [161]
   2. The SEP owner’s licensing offer / The standard implementer’s reaction
      The court left it undecided whether the lower court erred in focusing on a licensing offer which Claimant presented solely to the Intervener but not to Defendant. According to the court the conduct of the parties required by Huawei constitutes a mechanism of alternating, consecutive steps in which no subsequent conduct requirement is triggered unless the other party performed the previous “step”. In consequence, Claimant was, in the present case, not obliged to submit a FRAND licensing offer at all since Defendant had failed to signal willingness to license. [162]
      The lower court’s finding that Claimant’s licensing offer was FRAND while the Intervener’s counter-offer failed to meet this threshold was accepted. Hence, the court considered it as irrelevant under the present circumstances—and as a completely open question in general—whether a SEP proprietor is obliged, before bringing an action for prohibitory injunction against the supplier of a standard-implementing device, to (cumulatively) submit a FRAND licensing offer not only to the supplier but also to the producer of said device. [163]
3. Other important issues
   The remarks of the lower court rejecting, in the present case, a patent ambush-argument were not deemed manifestly erroneous, mainly because the lower court had reasonably argued that such an abusive practice would only result in the SEP proprietor’s obligation to grant licenses on FRAND terms. [164]
   Licensing negotiations (allegedly) undertaken by Defendant after the decision of the lower court provided no reason to suspense execution since it was not evident to the court that Defendant had thereby fulfilled its Huawei obligations. [165]

• [159] For details, cf. OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16, para. 2, b, aa
• [160] Case No. I-15 U 36/16, para. 2, b, aa
• [161] Case No. I-15 U 36/16, para. 2, b, bb
• [162] Case No. I-15 U 36/16, para. 2, b, cc
• [163] Case No. I-15 U 36/16, para. 2, b, ff
• [164] Case No. I-15 U 36/16, para. 2, b, ee
• [165] Case No. I-15 U 36/16, para. 2, b, dd

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Updated 26 January 2017

VRINGO Infrastructure v ZTE, [2015] EWHC 214 (Pat)

English court decisions
30 January 2015 - Case No. HC 2012 000076, HC 2012 000022

So far, this litigation is still in its technical phase and has not produced substantial results with regard to the issues of interest here. This may, however, change in the future.

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Updated 26 January 2017

Vringo v ZTE, Bucharest Court of Appeal 4th Civil Divison

Romanian court decisions
28 October 2015 - Case No. 29437/3/2015

1. Facts
   The litigation before the Bucharest court of appeal concerns an appeal against decision no. 947/31, August 2015, of the Bucharest Tribunal, 5^th civil division, dismissing Defendant’s motion to revoke the interim measures ordered by the Bucharest Tribunal, 4^th civil division, in its previous decision no. 801/30, June 2014, and to replace them by Defendant’s obligation to deposit a bond of EUR 350.000 to secure damages incurred by Claimant.
   Claimant (Vringo Infrastructure Inc.) is the proprietor of patent EP 1808029, originally granted to Nokia Corporation and allegedly covering parts of the LTE 4G standard. Defendants (inter alia ZTE) produce and market LTE 4G-based devices.
   As a member of ETSI, Claimant is considered to be subject to an obligation to grant FRAND licences for its SEPs. After informing Defendant, on 25 September 2012, about its SEP portfolio and inviting it to indicate its interest in obtaining a global license, Claimant submitted, on 28 March 2013, a licensing offer (inter alia) for the patent-in-suit. Defendant did not respond to Claimant’s communications.
2. Court’s reasoning
   Notwithstanding the retroactive effect of ECJ decisions, the court refused to reexamine the challenged decision with regard to whether Claimant complied with the requirements defined in Huawei. According to the court, the Huawei decision places the Member States under no obligation to review final court decisions that qualify as res judicata.
   However, as a secondary consideration, the court confirmed that the challenged decision of the court of first instance is in compliance with Huawei. Furthermore, Claimant’s argument that it would contravene recognized commercial practice in the field to grant licences limited to Romania, instead of global licences, was considered plausible.

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Updated 6 June 2017

Archos v. Philips, Rechtbank Den Haag

Dutch court decisions
8 February 2017 - Case No. C/09/505587 / HA ZA 16-206 (ECLI:NL:RBDHA:2017:1025)

1. Facts
   Defendant (Koninklijke Philips N.V.) is the proprietor of a number of patents declared essential to ETSI’s UMTS (3G) and LTE (4G) standards. Defendant made FRAND commitments towards ETSI on 15 January 1998 and 26 November 2009. Claimant (Archos S.A.) markets mobile devices which are alleged to infringe upon Defendant’s patents.
   By letter of 5 June 2014, Defendant brought her UMTS and LTE patent portfolio and her licensing program to the attention of Claimant. In this letter, Defendant made clear that Claimant was infringing her patents by marketing products incorporating the UMTS and LTE standards and explained the possibility of obtaining a FRAND license. On 15 September 2014, a meeting took place to inform Claimant of Defendant’s patent portfolio and to discuss the licensing offer. In another meeting on 25 November 2014, Claimant suggested Defendant to grant her a royalty-free license to all of Defendant’s patents (i.e. not only to the UMTS/LTE patents but also to other patents related to so-called ‘Portable Features’) in exchange for the transfer of certain patents of Claimant to Defendant. Defendant informed Claimant by email of 23 December 2014 that it was not interested in Claimant’s patents because it considered them to represent ‘relatively low value’.
   By letter of 28 July 2015 Defendant sent Claimant an updated list of UMTS/LTE patents as well as a draft licensing agreement in which she confirmed her earlier licensing offer. The proposed royalty amounted to $ 0.75 per product containing UMTS and/or LTE functionality. For products already sold, a royalty of $ 1 would need to be paid. At a next meeting on 3 September 2015, it became clear that Claimant did not wish to obtain the license offered. On behalf of Claimant, it was made clear during the meeting that Defendant would have to take legal action if she wished to obtain a license fee. In October 2015, Defendant started proceedings before the Rechtbank Den Haag for infringement of her European Patents EP 1 440 525, EP 1 685 659 and EP 1 623 511.
   By letter of 12 January 2016, Claimant made a written counter offer of 0.071% of her net revenue from products incorporating the UMTS and/or LTE standards. For a net sale price per product of € 100, the offered royalty would amount to 7 eurocent per product.
2. Court’s reasoning
   Claimant asked the court to declare that Defendant’s licensing offer of 28 July 2015 is not FRAND and to declare that a royalty fee of € 0.007 for every product sold by Claimant incorporating the UMTS standard and a royalty fee of € 0.020 for every product sold by Claimant incorporating the UMTS and LTE standards is FRAND. In addition, Claimant asked the court to rule that its own licensing offer of 12 January 2016 is higher than what a fair, reasonable and non-discriminatory royalty fee would require.
   
   1. Market power and notice of infringement
      The court left open whether the SEPs conferred market power to Defendant since it did, in any case, find no abuse of such potential market power. The court argued that it is generally accepted and to be inferred from the system laid down in the Huawei/ZTE judgment that a FRAND license has a certain bandwidth. After all, the Huawei/ZTE judgment contemplates that the SEP holder makes a FRAND offer first and afterwards, if the SEP user does not agree with the offer, makes a counter offer which also has to be FRAND. During this negotiation process, the characteristics of the SEP user as well as its specific objections can be taken account in the license at the discretion of the parties. As such, the court noted that the fact that Defendant’s initial offer would turn out to be unreasonable for Claimant because she finds itself in the low budget segment of the market and her margins are small does not imply that the offer made by Defendant on 28 July 2015 is not FRAND.
      The court also made clear that until the Huawei/ZTE judgment the initiative to obtain a license was incumbent on the SEP user and not on the SEP holder in line with the common interpretation of the judgment of the Rechtbank Den Haag in Philips/SK Kassetten and the Orange Book ruling of the Bundesgerichtshof. In the view of the court the, on this crucial point, contrary Huawei/ZTE judgment that was delivered on 15 July 2015 constituted a new moment for negotiation between the parties. The court noted that, in line with the Huawei/ZTE judgment, Defendant took initiative with its licensing offer of 28 July 2015. Since Claimant made clear in the meeting on 3 September 2015 that Defendant would have to take legal action if she wished to obtain more than a few thousand euros in licensing fees, it seems unfitting that Archos reproaches Philips to have not been open to negotiation, or at least that position is insufficiently substantiated (par. 4.3).
   2. The SEP owner’s licensing offer
      Claimant put forward a number of arguments for its claim that Defendant’s offer of 28 July 2015 is not FRAND. All of these arguments were rejected by the court on the ground that Claimant had not sufficiently substantiated them. The main arguments raised are as follows.
      Claimant argued that Defendant’s rights regarding devices incorporating Qualcomm baseband chips had been exhausted due to the cross-license that Defendant had already concluded with Qualcomm for these chips. Since a number of Claimant’s products rely on Qualcomm baseband chips, the compensation that Defendant had already received from Qualcomm should, in the view of Claimant, at least have been taken into account in the license offer. The court noted that Claimant had not sufficiently contested that the Qualcomm license did not cover production and sales of mobile phones – as Defendant had made clear before the court – and that Claimant could have raised this point during the negotiations (par. 4.4).
      The court continued by stating that the fact that Defendant’s licensing offer covered both UMTS and LTE SEPS could not affect the FRAND-ness of the offer in the case at hand considering that Claimant’s products do not merely require a license under the LTE SEPs but also under the UMTS SEPs (par. 4.5).
      While the parties agreed that the Defendant’s share of the absolute number of SEPs in the UMTS-SEP portfolio is an important factor for assessing the FRAND-character of Defendant’s offer, they each reached different absolute numbers. The court concluded that the calculations in the consultancy reports on which Claimant relied do not lead to accurate results and are rather speculative in nature. As such, the Claimant downplayed the value of Defendant’s SEPs (par. 4.6-4.7).
      With regard to Claimant’s argument that Defendant’s proposed royalty rate would amount to impermissible royalty stacking, the court argued that this was insufficiently substantiated by Claimant (par. 4.8).
      Claimant also argued that the royalty rate should not be based on the total price of a phone but merely on the part in which the technology at issue is incorporated (the Smallest Saleable Patent-Practising Unit, SSPPU). In this context, the court noted that Defendant rightly pointed out that the requested royalty was set at a fixed amount as a result of which there is no relationship with the market value of the phone. Furthermore, since the SSPPU concept is at the very least subject to debate, the court noted that this issue could have been considered in the negotiations. That the royalty rate suggested by Defendant, which was not based on the SSPPU price, would not be FRAND for that mere reason could not be established by the court (par. 4.10).
      The court also dismissed Claimant’s reference to patent hold-up on the ground that a situation of hold-up can only occur in the case of a non-FRAND license which had not been established in the case at issue (par. 4.13).
      In the end, the court dismissed Claimant’s request to make a declaratory statement that Defendant’s offer of 28 July 2015 was not FRAND.
   3. The standard implementer’s reaction
      Considering that Claimant’s counter offer of 12 January 2016 is more than a factor 10 lower than the Defendant’s offer and is based on an inaccurate (at least insufficiently substantiated) share of Defendant’s SEPs in the relevant UMTS standard, the court refused to declare the counter offer to be FRAND, let alone to declare that this counter offer is higher than a FRAND royalty rate as requested by Claimant (par. 4.17-4.18).
3. Other important issues
   AA defence that Defendant invoked was that Claimant had no interest (anymore) in the requested declaratory statements because its respective FRAND commitments were exhausted due to the unwilling attitude of Claimant. However, as Claimant’s requests for the declaratory statements were found not to be sufficiently substantiated, there was no need for the court to discuss this issue anymore (par. 4.18).

---

Updated 3 December 2018

District Court, LG Düsseldorf

LG Düsseldorf
11 July 2018 - Case No. 4c O 81/17

A. Facts

The Claimant holds a patent essential to the data communication standards ADSL2+ and VDSL2 (Standard Essential Patent or SEP) [163] . The previous holder of the patent in question had declared towards the standardization organisation International Telecommunication Union (ITU) its willingness to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [164] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [165] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [165] .

In January 2016, the Claimant brought an action against the Defendant before the District Court (Landgericht) of Düsseldorf (Court) requesting for a declaratory judgement recognizing Defendant’s liability for damages arising from the infringement of its SEP as well as the provision of information and the rendering of accounts (liability proceedings) [166] . During the course of these proceedings, the Claimant made two offers for a licensing agreement to the Defendant. The Defendant made a counter-offer to the Claimant and provided security for the use of the SEP [167] . The parties failed to reach an agreement.

In June 2016, the Defendant filed an action for a declaratory judgement against the Claimant before the Dublin High Court in Ireland, requesting the High Court to declare that both Claimant’s offers were not FRAND and that Defendant’s counter-offer was FRAND [168] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [168] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [169] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [167] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [170] .

B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [171] , it found that the Claimant cannot enforce its patent rights for the time being [172] , since it failed to fully comply with the obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTEHuaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13. (Huawei obligations or framework) with respect to dominant undertakings in terms of Article 102 of the Treaty for the Functioning of the EU (TFEU) [170] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [174] .

In the Court’s eyes, the relevant market for assessing dominance with regards to SEPs is, as a rule, the (downstream) market for products or services implementing the standard, to which the SEP refers [175] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [176] . Since the Court held that, in the present case, none of the existing technological alternatives to the standards ADSL2+ and VDSL2 (e.g. HFC networks, LTE, HDSL, SHDSL, ADSL, SDSL, VDSL, fibre optic networks, radio relay technology or internet services via satellite) offers an equivalent solution to users [177] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [178] .

Regarding to the subsequent question of whether the Claimant has a dominant position in the above market, the Court first made clear that ownership of a SEP does not per se establish such condition [179] . The fact that a patent is essential to a standard does neither give rise to the (rebuttable) presumption that the SEP holder can distort competition in downstream markets, because products complying with the standard need to use the SEP [179] . Since a high number of patents is usually declared as standard essential, not every SEP can actually (significantly) affect the competitiveness of products or services in downstream markets; the effect of each SEP on a downstream market has, therefore, to be established on a case-by-case basis by taking into account the circumstances of each individual case [179] .

The Court explained that a dominant market position is given, when the use of the SEP is required for entering the market, particularly for securing the general technical interoperability and compatibility of products or services under a standard [179] . The same is true, if the patent user could not market competitive products or services without a licence (for instance, because only a niche market exists for non-compliant products) [179] . No market dominance exists, however, when the SEP covers a technology which is only of little importance to the majority of the buyers in the relevant market [179] .

According to the Court, the latter was not the case here; on the contrary, the Defendant cannot offer competitive products or services in the market for DSL internet connections, without using the SEP in suit [180] .

2. Huawei framework

In the Court’s view, the parties to SEP licensing negotiations need to fulfill the mutual conduct obligations under the Huawei framework step by step and one after another [181] . The Court did not see any flaws in the parties’ conduct with respect to the first two steps of the Huawei framework (SEP holder’s notification of infringement and SEP user’s declaration of willingness to obtain a licence), held, however, that the Claimant did not meet its consequent obligation to make a FRAND licensing offer to the Defendant [182] .

Notification of infringement

The Court found that the Claimant had fulfilled its obligation to notify the Defendant about the infringing use of the SEP in suit prior to the commencement of the injunction proceedings [183] .

First, the Court pointed out that a respective notification (as well as a later licensing offer) can be made by the SEP holder itself, or by any other affiliated company within the same group of companies, especially by the patent holder’s parent company [184] . On the other hand, it is not required that the infringement notification is addressed to the company that will later be party to the infringement proceedings; in general, it is sufficient to address the notification to the parent company within a group of companies [184] .

In terms of content, the notification of infringement must name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [185] . A detailed (technical and/or legal) explanation of the infringement (particularly an analysis of how the individual features of the patent claims are infringed) is not required; the addressee needs just to be put in the position to assess the infringement allegations, if necessary by seeking expert advice [185] . In this context, the Court disagreed with the District Court of Mannheim which had requested the SEP holder to inform the user about the essentiality of the patent to the standard and/or attach claim charts to the notification of infringement [185] .

In terms of timeliness, the Court took the view that the notification of infringement can be made alongside with SEP holder’s offer for a FRAND licence to the user (prior to the initiation of court proceedings) [186] . In this case, the second step under the Huawei framework will be skipped (that is the SEP user’s declaration of its willingness to obtain a licence). According to the Court, this fact does not, however, have an impact on the SEP holder’s position: If the SEP user is willing to enter into a licence, this approach would safe time (although the SEP user should be granted more time than usual to assess and react to both the notification of infringement and the FRAND offer) [186] . If, on the other hand, the SEP user is unwilling to obtain a FRAND licence, then the SEP holder will just have made a licensing offer absent a respective obligation under the Huawei framework [186] .

In the present case, the fact that the Claimant did not make a separate notification of infringement prior to the initiation of the injunction proceedings, was not considered problematic. The Court pointed out that the Defendant was fully informed about the infringement allegation by the action for damages raised by the Claimant long before the injunction proceedings, so that a separate notification was not required [187] .

Willingness to obtain a FRAND licence

The Court further found that the Defendant had fulfilled its Huawei obligation to express its willingness to obtain a FRAND licence [188] .

In terms of content, no high demands should be placed on the SEP user’s respective declaration; it is not subject to formal requirements and can be of a general nature, as long as the willingness to obtain a licence is clearly stated [189] . Given the circumstances of the specific case, even an implicit behaviour can suffice [189] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [190] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [190] . If the SEP holder’s notification of infringement contains only the minimum required information, a reaction within a period of five or even three months at the most could be expected [190] . In case that the infringement notification contains information going beyond the required minimum, an even quicker reaction could be required from the SEP user under certain circumstances [190] .

In the present case, the Court held that the Defendant has implicitly declared its willingness to enter into a FRAND licence with the Claimant at the latest at the point in time, in which the injunction proceedings were initiated [191] . At that time, the Defendant had already made a counter-offer for a FRAND licence to the Claimant and had also provided security for the use of Claimant’s patents [192] .

In this context, the Court noted that neither the fact that the Defendant contested Claimant’s claims in the parallel liability proceedings not the fact that it raised an action for declaratory judgement against the Claimant before the Dublin High Court can support the argument that the Defendant has deviated from its previous declaration of willingness [193] .

SEP holder’s licensing offer

The Court held that the offer which the Claimant made to the Defendant in course of the injunction proceedings was not FRAND [194] . Since the Claimant expressly relied only on this offer to establish its compliance with the Huawei framework, the Court did not assess the FRAND conformity of the two previous offers of the Claimant to the Defendant [167] .

In terms of timeliness, the Court stressed out that the SEP holder must make a FRAND licensing offer to the user before the initiation of infringement proceedings [195] . Under German procedural law, proceedings are initiated after the claimant has made the required advance payment on costs, even if the statement of claims has not been served to the defendant, yet [196] .

The Court did not rule out that SEP holder’s failure to fulfil its Huawei obligations prior to the commencement of infringement proceedings can be remedied during the course of the proceedings [197] . Depending on the circumstances of each case, the SEP holder should be given the opportunity – within the limits of procedural deadlines – to react to (justified) objections of the SEP user and eventually modify its offer [197] . Denying the SEP holder this opportunity without exceptions would be contrary to the principle of procedural economy; the patent holder would be forced to withdraw its pending action, make a modified licensing offer to the patent user and, subsequently, sue the latter again [197] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [198] . Notwithstanding the above, the Court made, however, clear that the possibility of remedying a flawed licensing offer is subject to narrow limits; the CJEU intended to relieve licensing negotiations between SEP holder and SEP user from the burden imposed on parties by ongoing infringement proceedings, and particularly the potential undue pressure to enter into a licensing agreement which such proceedings can put on the SEP user [199] .

Against this background, the Court expressed doubts that the Claimant’s licensing offer, which was made in the course of the pending injunction proceedings could be considered as timely [169] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [200] .

The Court did not deem necessary to decide whether the FRAND conformity of the SEP holder’s offer must be fully assessed in infringement proceedings, or whether only a summary assessment of its compatibility with FRAND suffices [201] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [202] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [203] .

First, the terms did not adequately consider the effects of patent exhaustion [204] . As a rule, FRAND requires licensing offers to contain respective provisions [205] . The clause contained in Claimant’s offer, establishing the possibility of a reduction of the royalties owed by the Defendant in case of the exhaustion of licensed patents, is not fair, because it puts the burden of proof regarding to the amount of the reasonable reduction of the royalties on the Defendant’s shoulders [206] .

Second, the clause, according to which Defendant’s payment obligations regarding to past uses of the SEP in suit should be finally settled without exceptions and/or the possibility to claim reimbursement, was also considered not fair [207] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [208] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [209] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [210] . In the present case, however, excluding a significant part of the Defendant’s overall business, namely the wholesale business, from the licensing offer, hinders a fair market access [210] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [211] .

To begin with, the Court stressed out that FRAND refers to a range of acceptable royalty rates: As a rule, there is not only a single FRAND-compliant royalty rate [201] . Furthermore, as far as a corresponding commercial/industry practice exists, offers for worldwide portfolio licences are, in general, in line with the Huawei framework, unless the circumstances of the individual case require a different approach (for instance a limitation of the geographical scope of the licence, in case that the user is active only in a single market) [212] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [213] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [213] . In any case, SEP holders are obliged to specify the royalty calculation in a manner that allows the user to assess whether the offered conditions are non-discriminatory or not. The respective information needs to be shared along with the licensing offer; only when the SEP user has obtained this information a licensing offer triggering an obligation of the latter to react is given [214] .

In the Court’s view, presenting all existing essential licensing agreements concluded with third parties, covering the SEPs in suit or a patent portfolio including said SEPs (comparable agreements), has priority over other means for fulfilling this obligation [215] . In addition, SEP holders have to produce also court decisions rendered on the FRAND-conformity of the rates agreed upon in the comparable agreements, if such decisions exist [216] .

Whether presenting comparable agreements (and relevant case law) suffices for establishing the non-discriminatory character of the offered royalty rates depends on the number and the scope of the available agreementsI [217] . In case that no or not enough comparable agreements exist, SEP holders must (additionally) present decisions referring to the validity and/or the infringement of the patents in question and agreements concluded between other parties in the same or a comparable technical field, which they are aware of [218] . If the SEP in suit is part of a patent portfolio, SEP holders must also substantiate the content of the portfolio and its impact on the offered royalty rates [219] .

Having said that, the Court pointed out that an unequal treatment resulting in a discrimination in antitrust terms is not only at hand, when a dominant patent holder grants preferential terms to specific licensees, but also when it chooses to enforce its exclusion rights under a SEP in a selective manner [220] . The latter is the case, when the SEP holder brings infringement actions only against certain competitors and, at the same time, allows other competitors to use its patent(s) without a licence [220] . However, such a conduct is discriminatory only if, depending on the overall circumstances of each case (for instance, the extend of the infringing use and the legal remedies available in the country, in which claims need to be asserted), it would have been possible for the SEP holder with reasonable efforts to enforce its patent rights against other infringers (which it was or should have been aware of) [220] . In favour of an equal treatment of competitors, the level of action which must be taken by the SEP holder in this respect should not be defined narrowly [220] . However, it has to be taken into account, that – especially in the early stages of the implementation of a standard – the SEP holder will usually not have the means required to enforce its rights against a large number of infringers; in this case, the choice to enforce its rights only against infringers with market strength first appears reasonable [221] .

Based on the above considerations, the Court ruled that the Claimant’s choice to sue only the Defendant and its two main competitors, without asserting the SEP in suit against the rest of their competitors, respectively against their suppliers, was discriminatory [222] . The Claimant should have already, at least, requested the companies, against which no action was filed, to obtain a licence, particularly since the remaining period of validity of the SEP in suit is limited [223] . Furthermore, the Court found that the Claimant’s refusal to make a licensing offer to the Intervener, although the latter had requested for a licence, was also discriminatory; in the Court’s view, the Claimant failed to provide an explanation justifying this choice [224] .

Since the Claimant’s offer was found to be non-compliant with FRAND, the Court refrained from ruling on the conformity of Defendant’s counter-offer and the security provided with the Huawei framework [225] .

C. Other issues

The Court ruled that in accordance with Article 30 para. 3 of the German Patent Law (PatG) the registration in the patent register establishes the presumption of ownership, allowing the entity which is registered as patent holder to assert the rights arising from the patent before court [226] .

• [163] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
• [164] Ibid, para. 13.
• [165] Ibid, para. 12.
• [166] Ibid, paras. 14 and 211.
• [167] Ibid, para. 15.
• [168] Ibid, para. 16.
• [169] Ibid, para. 236.
• [170] Ibid, paras. 140 and 313 et seqq.
• [171] Ibid, paras. 114 et seqq.
• [172] Ibid, paras. 60 and 140.
• [173] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [174] Ibid, para. 142.
• [175] Ibid, para. 148.
• [176] Ibid, paras. 153 and 146.
• [177] Ibid, paras. 159 - 181.
• [178] Ibid, para. 158.
• [179] Ibid, para. 147.
• [180] Ibid, paras. 183 et seqq.
• [181] Ibid, para. 191.
• [182] Ibid, para. 188.
• [183] Ibid, paras. 195 et seqq.
• [184] Ibid, para. 199.
• [185] Ibid, para. 198.
• [186] Ibid, para. 200.
• [187] Ibid, para. 203.
• [188] Ibid, para. 205.
• [189] Ibid, para. 208.
• [190] Ibid, para. 207.
• [191] Ibid, para. 210.
• [192] Ibid, para. 212.
• [193] Ibid, paras. 215 et seq.
• [194] Ibid, para. 220.
• [195] Ibid, paras. 222 et seqq.
• [196] Ibid, para. 225.
• [197] Ibid, para. 233.
• [198] Ibid, para. 228.
• [199] Ibid, para. 230.
• [200] Ibid, para. 237.
• [201] Ibid. para. 241.
• [202] Ibid, para. 242.
• [203] Ibid, paras. 283 et seqq.
• [204] Ibid, para. 285.
• [205] Ibid, para. 288.
• [206] Ibid, paras. 292 et seq.
• [207] Ibid, paras. 298 et seqq.
• [208] Ibid, para. 301.
• [209] Ibid, para. 306.
• [210] Ibid, para. 311.
• [211] Ibid, para. 271.
• [212] Ibid, para. 250.
• [213] Ibid, para. 248.
• [214] Ibid, para. 267.
• [215] Ibid, paras. 256 and 259 et seq.
• [216] Ibid, para. 262.
• [217] bid, paras. 258 and 264.
• [218] Ibid, paras. 263 and 265.
• [219] Ibid, para. 265.
• [220] Ibid, para. 273.
• [221] Ibid, para. 274.
• [222] Ibid, para. 276.
• [223] Ibid, para. 277.
• [224] Ibid, para. 281.
• [225] Ibid, para. 315.
• [226] Ibid, paras. 75 et seq.

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Updated 6 June 2019

Koninklijke Philips N.V. v Asustek Computers INC., Court of Appeal of The Hague

Dutch court decisions
7 May 2019 - Case No. 200.221.250/01

A. Facts

The present case concerns a dispute between Philips—a consumer electronics manufacturer and holder of a portfolio of patents declared potentially essential to the practice of various standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI)—and Asus—a manufacturer of wireless devices, such as laptops, tablets and smartphones.

Philips had committed towards ETSI to make its SEPs accessible to users on Fair, Reasonable, and Non-Discriminatory (FRAND) terms. In particular, in 1998 Philips had provided ETSI with a general (blanket) commitment to offer access to its SEPs on FRAND terms.

In 2013, Philips notified Asus of its portfolio reading on the 3G-UMTS and 4G-LTE wireless telecommunications standards and proposed a licensing agreement. In subsequent meetings between the parties, Philips provided further details on its patents, as well as claim charts mapping its patents on the standards on which they were reading. Philips also submitted to Asus its standard licensing agreement, which included the standard royalty rate in Philips’s licensing program and the way it is calculated.

In 2015, negotiations fell apart and Philips initiated infringement proceedings based, among others, on its European Patent 1 623 511 (EP 511) in various European jurisdictions, namely England, France, Germany. The EP 511 patent was declared by Philips to be potentially essential to the 3G-UMTS and 4G-LTE standards. The High Court of Justice of England and Wales delivered a preliminary verdict, upholding the validity of the EP 511 patent.

In the Netherlands, Philips had brought an action against Asus before the District Court of The Hague (District Court), requesting inter alia for an injunction. The District Court dismissed Philips’s request for an injunction based on the EP 511 patent. [1] Philips appealed before the Court of Appeal of The Hague (Court of Appeal).

With the present judgment, the Court of Appeal upheld the validity and essentiality of the EP 511, rejected Asus’s FRAND defence based on Article 102 TFEU, and entered an injunction against Asus for its products infringing the patent in suit. [2]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [3] Moreover, the Court of Appeal found the patent essential and infringed. [4]

The Court of Appeal went on to examine the claims put forward by Asus, namely that Philips, in initiating infringement proceedings requesting injunctive relief, had violated its contractual FRAND obligations towards ETSI and infringed Article 102 TFEU, by failing to meet the requirements set forth in the decision of the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE (Huawei requirements) [5] . In particular, Asus argued that Philips (a) failed to properly and timely disclose the EP 511 in accordance with ETSI IPR Policy, and (b) that Philips failed to comply with the Huawei requirements, because it did not clarify why its proposed terms were FRAND.

With regard to the former, the Court of Appeal found that, in declaring EP 511 as potentially essential two years after it was granted, Philips had not breached its contractual obligations under Article 4.1 ETSI IPR Policy which requires ‘timely disclosure’ of SEPs.

Starting with the general purpose underlying the ETSI disclosure obligation, the Court of Appeal found that it was not—as Asus maintained—to allow ETSI participants to choose the technical solutions with the lowest cost, since ETSI standards seek to incorporate the best available technologies. [6] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [7]

Having said that, the Court of Appeal found that the general blanket declaration by Philips was sufficient to fulfil its obligations under the ETSI IPR Policy. In this regard, the Court of Appeal dismissed the argument raised by Asus that Philips’s late declaration of specific SEPs would result in over-declaration: on the contrary, the Court of Appeal held, early disclosure is more likely to include patents that are not in fact essential to ETSI standards. [8] Moreover, the Court of Appeal pointed out that Philips’s blanket declaration did not infringe Article 101 TFEU, as per the Horizontal Guidelines by the EU Commission, blanket declarations are also an acceptable form of declaration of SEPs for the purposes of EU competition law. [9]

Having dismissed Asus’s first ground for a FRAND defence, the Court of Appeal assessed the compliance of both parties with the Huawei requirements in their negotiations. The Court of Appeal noted, as a preliminary point, that the decision of the CJEU in Huawei did not develop a strict set of requirements such that patent holders that failed to abide by they would automatically infringe Article 102 TFEU. [10] For such a finding an overall assessment of the particular circumstances of the case and the parties’ conduct is necessary.

The Court of Appeal then examined Philips’s compliance with the first Huawei requirement, the proper notification to the infringer. According to the Court of Appeal, the case record showed that Philips had clearly discharged its burden to notify Asus, by submitting a list of patents that were allegedly infringed, the standards to which they were essential, and by declaring its willingness to offer a licence on FRAND terms. [11] Moreover, in further technical discussions, Philips provided more technical details on its portfolio and licensing program, including claim charts and its standard licensing royalty rate. [12] However, Asus failed to demonstrate its willingness to obtain a licence on FRAND terms. The Court of Appeal found that talks commenced always at Philips’s initiative, and that Asus was not represented in these talks by technical experts able to evaluate Philips’s portfolio. [13] The technical issues raised by Asus in negotiations were merely pretextual with a view to stall the process, or as the Court of Appeal put it a ‘behaviour also referred to as “hold-out.”’ [14]

Although the Court of Appeal held that at this point Asus was already in breach of its obligations under Huawei and thus Philips was entitled to seek an injunction, the Court went on to discuss compliance with the further steps in the Huawei framework. The Court of Appeal found that Philips’s proposal of its standard licensing agreement fully satisfied the CJEU requirements in that it was specific and explained how the how the proposed rate was calculated. [15] Moreover, the Court of Appeal held that the counteroffer submitted by Asus after the initiation of proceedings in Germany did not in itself alter the conclusion that Philips was compliant with Huawei, and thus entitled to seek an injunction. [16] Finally, the Court rejected the request on behalf of Asus to access comparable licences signed by Philips to assess the latter’s FRAND compliance. According the Court, neither the ETSI IPR Policy nor Article 102 TFEU and the Huawei framework provide a basis for such a request. [17]

• [1] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
• [2] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01.
• [3] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
• [4] ibid, paras 4.118 et seq.
• [5] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
• [6] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01, paras 4.153 et seq.
• [7] ibid, paras 4.155 and 4.157.
• [8] ibid, para 4.159.
• [9] ibid, para 4.164.
• [10] ibid, para 4.171.
• [11] ibid, para 4.172.
• [12] ibid.
• [13] ibid, paras 4.172-4.179.
• [14] ibid, para 4.179.
• [15] ibid, para 4.183.
• [16] ibid, para 4.185.
• [17] ibid, paras 4.202 et seq.

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Updated 1 November 2017

Unwired Planet v Huawei, [2017] EWHC 711 (Pat)

English court decisions
4 May 2017 - Case No. HP-2014-000005

1. Facts
   The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [227] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [228] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [229]
   In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [230] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [231] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [232]
   The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [233] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [234]
2. Court’s reasoning
   1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [235] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [236] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [237]
      
   2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
         The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [238] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [239] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [240] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [240]
         The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [241] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [242] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [243]
         
      2. ‘True FRAND Rate’
         The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [244] This eliminates the so-called Vringo-problem, [245] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [246]
         The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [247] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [248] Since Art. 102 TFEU condemns excessive pricing, [249] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [249]
         
      3. Discrimination
         The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [250] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [251] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [252]
         Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [251] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [253] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [252]
         
      4. Territorial Scope of License
         The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [254] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [254] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [255] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [256] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [257]
         
3. Court’s reasoning
   1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [258] Other freely-negotiated license agreements might be used as comparables. [259] This may be compared with a top down approach [260] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [261] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [258] License agreements must meet certain criteria to be comparable. [262] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [262] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [263]
   2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [264] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
      

• [227] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
• [228] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
• [229] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
• [230] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
• [231] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
• [232] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
• [233] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
• [234] Unwired Planet v Huawei, EWHC 1304 (Pat)
• [235] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
• [236] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
• [237] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
• [238] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
• [239] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
• [240] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
• [241] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
• [242] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
• [243] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
• [244] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
• [245] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
• [246] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
• [247] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
• [248] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
• [249] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
• [250] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
• [251] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
• [252] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
• [253] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
• [254] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
• [255] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
• [256] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
• [257] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
• [258] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
• [259] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
• [260] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
• [261] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
• [262] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
• [263] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
• [264] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

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Updated 26 January 2017

Saint Lawrence v Vodafone

OLG Düsseldorf
9 May 2016 - Case No. I-15 U 35/16

The proceedings concerned the subsequent application of Defendant in Case No. 4a O 126/14 seeking to suspend execution of the lower court’s decision. As Cases No. 4a O 126/14 and No. 4a O 73/14 are interconnected, the Court came to the same conclusions and framed them in exactly the same wording as in its decision OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16 (cf. above). Therefore, no separate and detailed summary is provided here.

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Updated 12 March 2019

Fraunhofer-Gesellschaft (MPEG-LA) v ZTE.

LG Düsseldorf
9 November 2018 - Case No. Case-No. 4a O 15/15

A. Facts

The Claimant, Fraunhofer-Gesellschaft zur Förderung der Angewandten Forschung, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent of SEP) [1] . The patent holder committed towards the relevant standardization body to make this patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant contributed the SEP in question to a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [2] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones manufactured by its parent company (parent company) which practise the AVC/H.264 standard in Germany [3] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [4] . It has signed licensing agreements with approx. 1,400 implementers [4] .

By e-mail dated 8 September 2011, MPEG LA sent a copy of its standard licensing agreement to the Defendant’s parent company and informed the latter that its “mobile handset and tablet products” infringe patents included in its “AVC patent portfolio” (without indicating, however, either the concrete patent numbers or the specific infringing products) [5] .

On 15 September 2011, the parent company asked MPEG LA to send any relevant documents by mail to its IPR Manager [6] . A copy of MPEG LA’s standard licensing agreement reached the parent company in late September 2011 [7] .

In 2012, the parent company acquired patents included in the MPEG LA pool [2] .

Since MPEG-LA and the parent company could not reach an agreement on a licence covering the MPEG LA pool [8] , the Claimant brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [9] .

During the proceedings, the Defendant declared its willingness to obtain a licence for the patent in suit and other SEPs of the Claimant referring to the AVC/H.264 standard [10] . Moreover, the Defendant sent to MPEG LA two signed copies of MPEG LA’s standard licensing agreement, along with a statement of accounts of its past sales and a bank guarantee [11] . MPEG LA did not countersign this agreement. It insisted, instead, on a licence that would cover all companies belonging to the same group as the Defendant [12] .

With the present judgment, the Court granted Claimant’s requests.

B. Court’s reasoning

The Court held that the mobile phones sold by the Defendant in Germany infringe Claimant’s SEP in suit [13] . It also found that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [14] (Huawei obligations or framework) with respect to dominant undertakings [15] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [16] .

The Court defined the relevant market for the assessment of dominance as the market for licences for any given patent [17] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [17] .

The Court made, however, clear that ownership of a SEP does not per se establish market dominance [18] . A dominant market position is given, when the use of the SEP is required for entering the market [18] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [18] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no “realistic” alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [19] .

2. Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [20] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [21] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [22] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [23] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [24] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement [25] . The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [26] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the nevertheless existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [27] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [28] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [29] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counter-offer to the Claimant. Since an adequate counter-offer was missing, the Court did not take up the question whether the bank guarantee provided by the Claimant to MPEG LA constitutes an adequate security in terms of the Huawei framework [30] .

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the e-mail sent by MPEG LA to the parent company on 8 September 2011 [31] .

The fact that this e-mail was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries con­cerned [32] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [32] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [33] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant [34] . The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [35] . In addition, the Defendant’s parent company was also aware of MPEG LA’s capacity to act on behalf of the Claimant, since it joined the MPEG LA pool as a patent holder in 2012 [36] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [37] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [38] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [38] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [38] . The respective test is, however, subject to strict conditions [38] .

Based on the above considerations, the Court found that MPEG LA’s e-mail to the parent company dated 8 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [39] . The overall circumstances of the case (especially the fact that the parent company acquired patents included in the MPEG LA pool in 2012 and had also previously been in contact with MPEG LA regarding a standard licensing agreement) [40] , give rise to the assumption that the parent company had already been aware of the MPEG LA pool and the fact that AVC/H.264-compliant products need to be licensed [41] .

Willingness to obtain a FRAND-licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the e-mail sent to MPEG LA on 15 September 2011 [42] .

In the eyes of the Court, this e-mail indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard. This is sufficient under the Huawei framework [43] . The implementer is not required to refer to a specific licensing agreement [43] .

SEP holder’s licensing offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [44] .

The fact that the offer was addressed to the parent company and not to the Defendant was not relevant, since the parties were discussing about a licensing agreement on group level and the parent company had itself requested to receive the draft agreement [45] .

Furthermore, the fact that the draft agreement sent to the parent company did not directly provide for the licensing of all subsidiaries (including the Defendant) was also not considered as harmful [46] . Insofar, the Court held that under the Huawei framework it is, as a rule, acceptable that the patent holder enters into licensing negotiations only with the parent company within a group of companies [47] . Whether subsidiaries can (or should) also be licensed, will be the object of these negotiations [48] . An exception would apply only then, when it is made clear already at the beginning of the licensing negotiations that the offer made to the parent company cannot include its subsidiaries [49] . This was, however, not the case here, since the standard licensing agreement sent to the parent company indicates MPEG LA’s willingness to grant licences also to the subsidiaries of the former [50] .

Besides that, the Court did not consider the fact that the standard licensing agreement sent to the parent company did not cover the sale of licensed products to wholesalers and retailers (but regarded only sales to end users) to be in conflict with the Huawei framework, although the Defendant was engaged also in this business [51] . According to the Court, sales to wholesalers and retailers would be covered by the effects of patent exhaustion, even without an express provision in a potential licensing agreement [52] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company does not contain detailed explanation of the way the royalties were calculated [53] . In the Court’s view, the respective explanation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [54] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [54] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [54] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [55] .

Against this background, the Court did not consider it to be harmful that the standard licensing agreement sent to the parent company by MPEG LA did not include a detailed explanation of the royalty calculation in the above sense [56] . On the one hand, the parent company was aware that this (standard) agreement had been accepted in the market by a great number of licensees [56] . On the other hand, the parent company was also adequately aware of the way the offered royalties were calculated, since it held patents included in the MPEG LA pool itself [57] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content.

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [58] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [58] . The Court made clear that in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [58] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [58] .

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases; an unequal treatment is allowed, as long as it is objectively justified [59] . Limitations in this context may especially occur, when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive only when it uses the patent’s teachings [59] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [60] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [60] .

Looking at the standard licensing agreement sent to the parent company, the Court observed that the fact the MPEG LA sought for a licence covering all companies within the group, to which the Defendant belonged, was not violating FRAND principles [61] . In the electronics and mobile communications industries, licences covering a group of companies are in line with the industry practice [62] . Patent holder have a special interest in concluding such licences particularly in cases, in which – as in the present case – the parent company manufactures products which are sold worldwide by its subsidiaries. This is because licences at group level makes sure that patent holders can enforce their rights effectively, without having to distinguish between licenced and unlicenced products within a group of companies [63] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are appropriate under the Huawei framework [64] . An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [65] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [65] .

Implementer’s counter-offer

The Court found that the Defendant failed to make a FRAND counter-offer [66] .

Sending signed copies of MPEG LA’s standard licensing agreement back to MPEG LA can be regarded as a counter-offer [67] . The fact, however, that this offer concerned a licence limited to the Defendant and, thus, not covering the parent company (and all further companies belonging to the same group) was not FRAND conform [68] . The Court accepted that licences at group level mirror the industry practice in the field in question; accordingly, no objections can be raised when a patent holder contributing its patents to a pool is willing to grant only licences covering all group companies [69] .

Since the counter-offer was not FRAND in terms of content, the Court did not have to decide, whether it was made in due time, or not [70] .

• [1] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, para. 56.
• [2] Ibid, para. 58
• [3] Ibid, para. 57
• [4] Ibid, para. 59
• [5] Ibid, paras. 61 et seqq. and 340
• [6] Ibid, para. 65
• [7] Ibid, para. 66
• [8] Ibid, para. 73
• [9] Ibid, para. 42
• [10] bid, para. 74
• [11] Ibid, paras. 75 et seq
• [12] Ibid, para. 75
• [13] Ibid, paras. 127 – 254
• [14] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13
• [15] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, Ibid, para. 280
• [16] Ibid, para. 283 and paras. 291 et seqq
• [17] Ibid, para. 286
• [18] Ibid, para. 287
• [19] Ibid, paras. 291 et seqq
• [20] Ibid, para. 296
• [21] Ibid, para. 300
• [22] Ibid, para. 302
• [23] Ibid, para. 308
• [24] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06
• [25] Ibid, para. 305
• [26] Ibid, paras. 306 et seqq
• [27] Ibid, para. 310
• [28] Ibid, para. 311
• [29] Ibid, para. 312
• [30] Ibid, para. 421
• [31] Ibid, para. 314
• [32] Ibid, para. 320
• [33] Ibid, para. 318
• [34] Ibid, para. 329
• [35] Ibid, paras. 336 et seq
• [36] Ibid, para. 338
• [37] Ibid, para. 198
• [38] Ibid, para. 315
• [39] Ibid, paras. 340 et seq
• [40] Ibid, paras. 342 et seqq
• [41] Ibid, para. 344
• [42] Ibid, para. 346
• [43] Ibid, para. 348
• [44] Ibid, para. 352
• [45] Ibid, para. 367
• [46] Ibid, para. 369
• [47] Ibid, para. 370
• [48] Ibid, para. 378
• [49] Ibid, para. 371
• [50] Ibid, para. 374
• [51] Ibid, para. 376
• [52] Ibid, para. 377
• [53] Ibid, para. 380
• [54] Ibid, para. 381
• [55] Ibid, para. 386
• [56] Ibid, para. 382
• [57] Ibid, para. 387
• [58] Ibid, para. 391
• [59] Ibid, para. 392
• [60] Ibid, para. 393
• [61] Ibid, para. 397
• [62] Ibid, para. 398
• [63] Ibid, para. 399
• [64] Ibid, para. 402
• [65] Ibid, para. 404
• [66] Ibid, para. 410
• [67] Ibid, para. 413
• [68] Ibid, para. 416
• [69] Ibid, para. 417
• [70] Ibid, para. 411

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Updated 2 August 2019

Philips v Wiko, Court of Appeal of The Hague

Dutch court decisions
2 July 2019 - Case No. C/09/511922/HA ZA 16-623

A. Facts

By letter dated 13 October 2013, the Claimant, Koninklijke Philips N.V. (“Philips”), informed the Defendant, Wiko SAS (“Wiko”), that it holds patents declared essential to the UMTS and LTE mobile telecommunication standards (Standard Essential Patents or “SEPs”) towards the European Telecommunications Standards Institute (“ETSI”). The letter included a list of some of Wiko’s products and invited Wiko to discuss a FRAND licensing agreement [1] . Wiko did not react to the letter [2] .

On 28 July 2015, Philips sent Wiko claim charts and a licensing agreement [3] . The communication remained unanswered by Wiko [2] .

On 19 October 2015, Philips started the present proceedings against Wiko [4] . On 25 August 2016, Wiko made a counteroffer [5] . Since 2016, it has also provided information about worldwide units sold and blocked an amount of EUR 895.000 into an escrow account [2] .

After the present proceedings were filed, Philips brought a further action against Wiko before the District Court of Mannheim (Mannheim Court), Germany (German proceedings). On 2 March 2018, the Mannheim Court honoured Wiko’s FRAND defence and dismissed Philips’ action.

In an interlocutory decision dated 16 April 2019, the Court of Appeal of The Hague (Court) held that the patent in suit EP1 623 511 (EP 511) is valid and that Wiko is infringing this patent [6] . Wiko claimed that, as this patent is a SEP and Philips has not complied with its contractual duties, Philips is abusing its dominant position by initiating infringement proceedings against Wiko [2] .

With the present judgment, the Court granted Philips’ request for injunctive relief [7] , destruction [8] and the recall of products [9] , but partly invalidated EP 511, insofar it goes beyond the claims of the second auxiliary request [10] .

B. Court’s reasoning

German Proceedings and Lis Pendens

Since the Court of Manheim in Germany had honoured its FRAND defence, Wiko argued that Articles 29 and 30 of Brussels Regulation 1215/2012 on jurisdiction and enforcement of judgements (Brussels Regulation) are applicable and that the Court is not competent for the present case [11] .

The Court rejected this argument, underlying that each national proceedings are based on a national counterpart of a European patent. For each national counterpart, the concerned national jurisdiction is exclusively competent [12] .

The fact the same FRAND defence has been raised in the German proceedings does not prevent the Court from moving on with its proceedings. The application of Articles 29 and 30 of the Brussels Regulation on cases with same object requires that the filed claims, not the raised defences, are identical [11] .

The Court concluded that recognition of the Mannheim decision would not affect the pending proceedings, as the patents at stake were not the same [13] .

Patent essentiality and infringement

Philips had declared EP 511 as essential to HSUPA (part of UMTS standard) towards ETSI on 26 November 2009 [14] . The fact that EP 511 is essential to HSUPA was not challenged by Wiko [15] .

Moreover, the interlocutory decision of the Court dated 16 April 2019 confirmed that claims 1, 9 and 12 of EP 511 are implemented in the UMTS standard [2] .

FRAND negotiations and application of the Huawei steps

The Court considers that the Huawei decision [16] does not set up strict rules, but rather guidelines for FRAND negotiations in good faith between the parties [17] .

Regarding the first step of the Huawei decision, that is the SEP-holder’s obligation to notify the implementer of the patents at stake and the infringement [18] , the Court underlines that this approach is different than what had been previously decided in a Dutch case prior to the Huawei decision, Philips v. SK Kassetten [19] .

Moving on to the next step, the Court found that Wiko had not fulfilled its duty as it did not react to Philips’ notification [20] . The Court, therefore, held that Philips was not obliged to make a licensing offer to Wiko, before starting proceedings against Wiko [2] .

FRAND offer

Nevertheless, Philips had made an offer to Wiko on 28 July 2015 [21] . This offer was for a worldwide licence under Philips’ UMTS and LTE SEPs [22] .

Philips’ expert explained that the offered rate amounting to USD 1,0 per product (non-compliant rate) and USD 0,75 per product (compliant rate) was justified in view of all UMTS and LTE SEPs [2] .

However, Wiko argued that Philips’ offer is not FRAND for the following reasons: Philips did not specify that its offer was FRAND compliant and did not explain how the offer was FRAND [23] .

Contrary to German courts, the Court held that the Huawei steps do not imply a substantiation duty [24] , but solely the duty to specify the amount of the rate and the way it is calculated [25] . It bases this reasoning on the fact that the Huawei decision has to be read in light of a previous German decision, the Orange Book Standard decision, where the German Supreme Court decided it was up to the implementer to make a first FRAND offer [2] . The Court interprets the Huawei decision as requiring the SEP-holder, as it is in a better position to do so, to make a first FRAND offer after the implementer has demonstrated itself to be a “willing licensee” [2] . But it does not require the SEP-holder to substantiate its FRAND offer and give insights on why he believes the offer is FRAND. The Court also considers there is no duty for the SEP-holder to justify its rate in view of what other licensees are paying [26] .

Wiko also challenged specific terms of the license, i.e. the suggested duration (until expiry of the last patent), the coupling of UMTS and LTE SEPs, as well as the requested fixed licence fees [27] . The Court held, however, that Wiko did not provide any evidence to support its position that Philips’ offer is not FRAND [2] . Additionally, the Court attached importance to the fact that Philips had expressed its willingness to discuss the offer and specific circumstances with Wiko [28] . Philips had even asked Wiko to make a counteroffer, which the latter did not [29] .

The Court further pointed out that the fact that there are different terms and conditions with other parties does not necessarily imply that the offer made to Wiko is discriminatory [30] . It stressed that “non-discriminatory” does not mean that every licensee must be offered the same structure and rate; the “non-discriminatory” nature of an offer depends on the facts and circumstances of the specific case [2] .

Wiko’s counteroffer

Wiko GmbH, an entity legally independent from other Wiko entities, had made a counteroffer to Philips [31] . However, the Court did not consider this counteroffer as a counteroffer made by the Defendant of the present proceedings to Philips [2] .

Besides that, the Defendant had also made a counteroffer to Philips after the start of the present proceedings [32] . This offer was based on the following estimates: the total number of UMTS and LTE SEPs was 12.000, out of which Wiko estimated that Philips holds 97 families, and the aggregated royalty rate for all SEPs amounted to 12% [33] . Wiko derived a rate of 0.001% per SEP family and made the following counteroffer to Philips [2] :

- 0.042% for the compliant rate (EUR 0.027)

- 0.066% for the non-compliant rate (EUR 0.043)

- 0.0315% for past sales (EUR 0.020).

Subsequently, Wiko made a further offer to Philips of 0.084 (which, in Philips‘ eyes, referred to a percentage) [2] .

The Court held that Wiko’s counteroffers were not FRAND. It found that the counteroffer included too many patents into the total SEPs pool, because it included base station and infrastructure patents, while Philips portfolio was focused on cellphone patents [34] . Consequently, the Court concluded that Philips held a higher percent of SEPs than estimated by Wiko [2] . It also highlighted that Wiko did not provide any explanation with respect to a proposed discount of the initially estimated rate of 0.097% and the aggregated royalty rate [34] . The Court also noticed that, while Wiko stated Philips’ rate should account for the technical and economic value of Philips’ SEPs, this analysis was missing from Wiko’s counteroffer [35] . It added that Wiko’s counteroffer did not account for the value of Philips’ SEPs in view of other SEPs for the same standard [36] .

Abuse of a dominant position

The Court held that the Huawei case requires that the facts and circumstances of a case have to be assessed to determine if there is an abuse of a dominant position [17] . Furthermore, the Court also referred to the decision of the UK High Court of Justice in Unwired Planet v. Huawei to note that the fact that the circumstances of a case diverge from the Huawei scheme does not automatically lead to the conclusion of an abuse of a dominant position, if the SEP-holder, nonetheless, files an action against an implementer [2] .

The Court expressly pointed out that if starting proceedings is considered as an abuse of a dominant position, then implementers have no incentives to comply with the Huawei steps and can just delay the negotiations [37] .

With respect to the asserted claims for injunction and recall of products, the Court found that the facts and circumstances of this case were different from the German proceedings, where the Mannheim Court viewed Wiko as a “willing licensee” [38] .

Wiko did not demonstrate itself to be a “willing licensee”, as it did not react to Philips’ notification, and did not comply with the required Huawei steps. Therefore, the Court rejected Wiko’s FRAND defence and granted Philips’ request for an injunction and recall of products.

• [1] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.1
• [2] Ibidem
• [3] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.2
• [4] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.3
• [5] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
• [6] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 3.1
• [7] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.1
• [8] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.4
• [9] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.3
• [10] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.8
• [11] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.1
• [12] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.2
• [13] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.3
• [14] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.5 and 4.6
• [15] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.5
• [16] Huawei v ZTE, Court of Justice of the EU, judgement dated 16 July 2015, Case No. C-170/13.
• [17] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.14
• [18] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10
• [19] Case reference: Court of The Hague, Philips v. SK Kassetten, 17 March 2019, referred to in Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10.
• [20] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.15
• [21] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.16
• [22] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.27
• [23] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.17
• [24] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18 and 4.19
• [25] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18
• [26] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.19
• [27] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.31
• [28] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.26, 4.31, 4.32, 4.36
• [29] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.36
• [30] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.34
• [31] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.20
• [32] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
• [33] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.38
• [34] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.40
• [35] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.39
• [36] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.41
• [37] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.21
• [38] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.22

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Updated 15 May 2018

Conversant v Huawei and ZTE, [2018] EWHC 808 (Pat)

English court decisions
16 April 2018 - Case No. HP-2017-000048

A. Facts

The claimant, Conversant, is a licensing firm incorporated in Luxembourg. The defendants are two major Chinese telecoms equipment and handset manufacturers, Huawei and ZTE, and their English affiliates. After years of negotiations that failed to result in licenses for claimant’s portfolio of Standard Essential Patents (SEPs) reading on ETSI wireless telecoms standards (and comprising inter alia Chinese and UK patents),Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5. the claimant filed an action for infringement of four of its UK SEPs before the High Court of Justice (Court), and requested the Court to define Fair, Reasonable and Non-Discriminatory (FRAND) terms for its global SEP portfolio. [167] The defendants in separate proceedings initiated in China disputed the validity, essentiality and infringement of claimant’s Chinese patents. Since the defendants failed to unequivocally commit to conclude licenses on FRAND terms decided by the Court, the plaintiff amended its pleading to include injunctive relief, unless and until the defendants comply with the Court’s FRAND determination. [168]

The judgment at hand involves the defendants’ challenge to the Court’s jurisdiction to decide upon the terms of a global portfolio license. According to the defendants, a UK court has no jurisdiction to decide on the validity and infringement of foreign (in the present case: Chinese) patents. [169] Furthermore, the defendants claim that the jurisdiction most closely connected to the case is China which is the centre of the defendants’ manufacturing activities as well as the jurisdiction where the bulk of their sales takes place. [170]

B. Court’s Reasoning

The court dismissed the defendants’ challenge of jurisdiction. Following the reasoning of Birss J in Unwired Planet,Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67 Carr J held that, although issues of validity of patents granted in foreign jurisdictions are not justiciable in the UK, nevertheless the issue of validity should be distinguished from the issue of the determination of a global portfolio license on FRAND terms. According to Carr J, the defendants are free to challenge the validity, essentiality, and infringement of claimant’s Chinese patents in separate proceedings before Chinese courts; the pending issues of validity, essentiality and infringement do not preclude, however, the Court from determining FRAND terms for a global license and providing a mechanism of adjusting the royalty rate according to the validity and infringement decisions of courts in other jurisdictions.Conversant v. Huawei and ZTE(n. 1) paras 17 et seq. Furthermore, the defendants’ justiciability defense, were it to be accepted, would make it impossible for patent holders with a global portfolio of SEPs to obtain relief in the form of court-determined FRAND terms for a global license, since they would need to commence litigation on a country-by-country basis. [173] Forcing the patent holder to seek separate licenses for every individual country where it held SEPs could be characterized as a ‘hold-out chater’, in the eyes of the Court. [173]

Moreover, the Court seized jurisdiction over the case on the ground that the plaintiff’s claim concerns four patents granted in the UK; the issue of relief for patent infringement, and in particular whether such relief will take the form of setting FRAND terms for a global license, is to be decided in the context of a ‘FRAND trial’, after a decision on infringement is reached. [174] Were the defendants’ argument to be accepted, the Court would, in effect, be barred from deciding on the infringement and the proper relief for patents granted in the UK. [170] Besides that, the Court also held that the defendants’ failed to establish that the Chinese courts would be the appropriate forum for the dispute. [175] In this respect, given that royalty rates for telecommunication SEPs are usually lower in China than in other countries, the Court particularly pointed out that no holder of a global SEP portfolio would voluntarily prefer to submit to determination of a FRAND license for the entirety of portfolio in a country, where the rates applied would be lower than the rest of the world. [176]

• [166] Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5.
• [167] ibid, para 7.
• [168] ibid, para 8.
• [169] ibid, paras 9, 12 and 13.
• [170] ibid.
• [171] Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67
• [172] Conversant v. Huawei and ZTE(n. 1) paras 17 et seq.
• [173] ibid, para 28.
• [174] ibid, para 69.
• [175] ibid, paras 72 et seq.
• [176] ibid, para 63.

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Updated 6 June 2017

OLG Düsseldorf

OLG Düsseldorf
14 December 2016 - Case No. I-2 U 31/16

1. Facts
   The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a telecommunications company, which inter alia sells mobile phones allegedly using Claimant’s SEPs. Upon Claimant’s action, the Regional Court of Düsseldorf (1) ordered the Defendant to render accounts regarding the sales of mobile phones embedding Claimant’s SEPs and (2) recognized Defendant’s obligation to pay damages to the Claimant resulting from the infringement of its SEPs (cf. Regional Court of Düsseldorf, decision dated 19th January 2016, Case No. 4b O 49/14). The Defendant appealed this judgement. In the appeal proceedings before the Higher Regional Court of Düsseldorf (Case No. 2 U 31/16), one issue in dispute was whether the license fees, which the Claimant had calculated, were Fair, Reasonable and Non-Discriminatory (FRAND). The Claimant explained its calculation in a statement to the court that was produced in two versions. In the first version, which was filed only with the court, the information regarding the FRAND calculation (including comparable license agreements pre¬sented as evidence), were fully disclosed. In the second version, which was presented to the Defendant and a third party that had joined the proceedings (Intervener), the respective sections (and evidence) were redacted.
   With the present interlocutory application, the Claimant requested the court to order that disclosure of full information (and evidence) regarding its FRAND calculation shall be required only towards Defendant’s and Intervenor’s counsels, provided that the court would oblige the counsels to full confi-dentiality towards everyone, including their clients themselves (that is the Defendant and the Intervener). The Defendant objected this request. The Intervener, on the other hand, stated that it agreed with the proceeding defined in Claimant’s request.
   In its first decision dated 14th December 2016, the court rejected the application with respect to both the Defendant and the Intervener. Instead, the court encouraged the parties to enter into a Non-Disclosure Agreement (NDA) reinforced by a contractual penalty, in case confidentiality was breached.
   This decision was consequently modified by a further decision rendered by the court on 17th January 2017. The court granted Claimant’s application in respect to the Intervener, but again rejected the application in respect to the Defendant. The court, however, requested from the Defendant to present an offer for an NDA to the Claimant incorporating particularly the following conditions within a deadline of three weeks:
   • The confidential information should be used only in the context of the present litigation.
   • The information would be made available only to four company representatives of the Defendant (as well as any experts engaged by the Defendant in the ongoing litigation).
   • These persons shall be themselves obliged to confidentiality by the Defendant.
   • In case confidentiality was breached, the Defendant shall be liable for payment of a contractual pen-alty amounting to EUR 1 million.
   
   
   
   
   
2. Court’s Reasoning
   In its first decision, the court found that the German rules of Civil Procedure do not provide a legal basis for granting an order in the form requested by the Claimant. [265] Such an order would exclude Defendant’s right to be heard with respect to Claimant’s FRAND calculation, in breach of Art. 103 Sec. 1 of the German Constitutional Law (Grundgesetz). [265] The fact that Defendant’s counsels would have access to the relevant information, does not suffice to meet the requirements set forth by the aforementioned provision. Party’s right to be heard contains also the right to personally participate in the proceedings. Consequently, a limitation of a party’s right to be heard reaching so far as Claimant requested, is not possible, unless the party affected expressly waives its right to personally participate in the proceedings. [265] Since the Defendant decided to not do so, a respective order cannot be rendered against it.
   The fact that the Intervener waived its respective right, can also not justify rendering such an order against the Defendant. [266] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [267] Accordingly, it cannot make decisions that would affect the party’s standing, such as a declaration to waive the right to be heard. In the present case, the Intervener’s decision to waive its respective right may, therefore, impact its own standing in the proceedings, but cannot affect Defendant’s position.
   
   As a result, the Claimant can either make the confidential information available to the Defendant or keep this information redacted, accepting that the court cannot take redacted information into consideration for its decision. [268]
   
   Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [269] the court held, that, as a rule, it can be expected from the implementer of SEPs to enter into a NDA reinforced by a contractual penalty with the SEP holder. [270] SEP implementer is obliged to facilitate FRAND licensing negotiations to the best of its ability. This includes also taking justified confidentiality interests of the SEP holder into account. [270]
   
   In its second decision dated 17th January 2017 the court applied the above considerations. Since the Intervener waived its right to be heard, the court found that there is no reason to deny Claimant’s request in relation to the Intervener. On the other hand, due to Defendant’s denial to waive its respective right, the court still refrained for granting Claimant’s request against the Defendant. Taking Claimant’s confi¬dentiality interests into account, the court ordered, however, the Defendant to submit an offer for a NDA to the Claimant based particularly on the conditions mentioned above.

• [265] Judgement dated 14th December 2016, para. 1
• [266] Judgement dated 14th December 2016, para. 2
• [267] Judgement dated 14th December 2016, para. 2
• [268] Judgement dated 14th December 2016, para. 3
• [269] Bundesgerichtshof, Decision dated 19th February 2014, Case No. I ZR 230/12
• [270] Judgement dated 14th December 2016, para. 5

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Updated 27 June 2018

OLG Düsseldorf

OLG Düsseldorf
25 April 2018 - Case No. I-2 W 8/18

A. Facts

The Claimant holds a patent essential to a technical standard (Standard Essential Patent or SEP) which is subject to a so-called “FRAND-undertaking”, that is a commitment to make the SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant entered into nego¬tiations for a FRAND licensing agreement with the Defendant. In June 2017, the parties signed a Non-Disclosure Agreement (NDA). [271] A few days later, the Claimant entered into an NDA also with a third party, the Intervener . Shortly after signing the NDA, the Intervener [272] argued that several clauses of the agreement were void. [273]

In September 2017, the Claimant initiated infringement proceedings against the Defendant before the District Court of Düsseldorf (District Court). The Intervener joined these proceedings in support of the Defendant. After joining the proceedings, the Intervener claimed that the NDA with the Claimant does not cover information which the latter has to produce in the trial. This is particularly the case with infor-mation regarding to comparable licensing agreements concluded by the Claimant with third parties (comparable licences), which the Claimant regarded as strictly confidential. [274]

In December 2017, the Intervener requested full access to the court files. [275] The District Court dismissed the Intervener’s motion in part, namely by excluding access to confidential information, including information on comparable licences. The District Court held that the protection of such information was not adequately ensured, since the Intervener’s behaviour raised significant doubts that he considered himself bound to confidentiality by the NDA signed with the Claimant. [276] The Intervener appealed this decision.

The Higher District Court of Düsseldorf (Court) set the above ruling aside and requested the District Court to further clarify the facts of the case and decide again on the Intervener’s motion for full access to the court files on basis of the principles set forth in its present judgement. [277] In particular, the Court requested from the District Court to (re-)examine whether the Claimant actually possessed confidential business information which needed protection. [277] If this fact could be positively established, then a limited access to the court files would, basically, be justified, if the party seeking access to the files refused to commit itself to confidentiality. [278]

B. Court’s reasoning

The Court pointed out that parties to court proceedings seeking to protect confidential information must undertake efforts to sign an NDA with the opposing party and any intervener that has joined or is expected to join the proceedings with a high degree of certainty, before disclosing such information in the trial. [279] A party doing so without an NDA has to accept that the opposing party and/or the intervener could gain access to confidential information through an inspection of the court files. [280]

In the eyes of the Court, requesting from the party seeking to protect confidential information to actively pursue the conclusion of NDAs with other parties involved in the proceedings does not put that party at a disadvantage. The unjustified refusal of the opposing party (or an intervener) to enter into an NDA allows the party seeking protection to use only non-confidential information in the proceedings for specifying the FRAND conformity of its licensing offer to the potential licensee. [281] Although still obliged to specify the conditions of its FRAND licensing offer, the party has a lower burden to bear; to the extent (and not be¬yond) that is required for protecting its justified confidentiality interests, the party can meet its respective obligation by making “merely indicative observations” in the trial. [282]

In case that an intervener joins the proceedings at a point in time, in which a party has already produced confidential information on grounds of an NDA previously signed with the opposing party, the intervener’s right to inspect the court files can only be limited, if it was (or can) be established that the party seeking protection actually possesses confidential business information. [283] The fact that the other parties involved in the proceedings have already signed an NDA does not of itself limit the intervener’s right to full access to the court files. [284]

To establish that it possesses confidential business information worthy of protection, a party must identify such information and concretely explain why this information constitutes a business secret. [285] The party also needs to present in detail which measures were taken so far for securing confidentiality with respect to the information in question. [285] In addition, the party has to demonstrate in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed. [285] It also needs to be explained, with which degree of certainty the said disadvantages are expected to occur. [285]

When protection of confidential information contained in comparable licences is sought, the existence of confidentiality interests requires, in general, special justification. [286] In the Court’s view, the SEP holder’s FRAND-undertaking entails transparency vis-à-vis interested stakeholders with respect to licensing conditions. [286] Moreover, knowledge of licensing conditions already accepted in the market can help potential licensees exercise their rights in infringement proceedings effectively. [286] Considering the non-discriminating element of SEP holder’s FRAND undertaking, it is not immediately apparent to the Court which interest worthy of legal protection the SEP holder could have in keeping conditions agreed in existing licensing agreements confidential. [286] In fact, several licensing pools (e.g. MPEG) publish their licensing agreements online. [286]

Should the party seeking protection fail to establish that it possesses confidential business information needing protection, full access to the court files must be granted to the intervener upon request, irrespective of whether the latter signs an NDA or not. [287] Conversely, if the existence of confidential business information is established, the intervener’s right to inspect the court files can be limited only to non-confidential information, as long as the intervener refuses to enter into an NDA with the party seeking protection of its confidentiality interests. [278]

In case that a party which has signed an NDA breaches its obligations under this agreement or “backs out” of the NDA, the party relying on the protection of its confidentiality interests can again limit its (future) submissions of facts in the proceedings to non-confidential information. [288] In other words, in terms of detail, the party must again not present information going beyond “merely indicative observations”. [288] Whether a party has “backed out“ of an NDA is a question of fact which has to be decided on a case-by-case basis. [289] For this, it is required that the party’s behaviour has caused a high risk of a breach of confidentiality. [289] For instance, this could be the case, when legal arguments brought by the party against the validity of the NDA are not reasonable, but rather serve as a pretext. [289]

• [271] Higher District Court of Düsseldorf, judgement dated 25 April 2018, Case No. I-2 W 8/18, para. 26
• [272] Ibid, para. 26
• [273] Ibid, para. 32
• [274] Ibid, para. 35
• [275] Ibid, para. 2
• [276] Ibid, para. 27
• [277] Ibid, para. 36 et seq
• [278] Ibid, para. 17
• [279] Ibid, paras 11 and 14
• [280] Ibid, para. 11
• [281] Ibid, para. 13
• [282] Ibid, para. 13
• [283] Ibid, para. 15
• [284] Ibid, para. 15 et seq
• [285] Ibid, para. 23
• [286] Ibid, para. 24
• [287] Ibid, para. 16
• [288] Ibid, para. 20
• [289] Ibid, para. 21

---

Updated 30 October 2018

Unwired Planet v Huawei, UK Court of Appeal

English court decisions
23 October 2018 - Case No. A3/2017/1784, [2018] EWCA Civ 2344

A. Facts

The Claimant, Unwired Planet International Limited, holds a significant portfolio of patents which are essential for the implementation of the 2G/GSM, 3G/UMTS and 4G/LTE wireless telecommunications standards (Standard Essential Patents, or SEPs). The Defendants, Huawei Technologies Co. Ltd. and Huawei Technologies (UK) Co. Ltd., manufacture and sell mobile devices complying with the above standards worldwide.

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [290] In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court). [291] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [292]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [293] By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid. [293] The parties agreed to postpone further technical trials indefinitely. [293]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [294] The Claimant also settled the infringement proceedings with Google. [295]

In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. [296]

In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND) [297] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [298] Pending appeal, the High Court stayed the injunction. [299]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [300]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [301]

B. Court’s reasoning

The Defendants appealed the decision of the High Court on the following three grounds:

1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. [302]

2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. [303]

3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE [304] (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). [305]

Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. [306]

1. Worldwide licences

The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). [307]

The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence) [308] . [309]

Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI. [310] Such an undertaking has international effect. [311] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [312] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [312] Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. [313]

Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND. [314] German Courts (in Pioneer Acer [315] and St. Lawrence v Vodafone [316] ) as well as the European Commission in its Communication dated 29 November 2017 [317] had also adopted a similar approach. [318]

Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist. [313] In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe. [319] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [319]

In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. [320]

In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. [321] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [321] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [322] If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. [322]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [323] In particular, the Defendants argued that this approach encourages over-declaration of patents [324] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [325] which requires relief for patent infringement to be proportionate. [326]

Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties. [327] The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. [328]

2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [329] that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. [330]

The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung. [331] In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position [332] or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. [333]

Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers). [334] It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology. [335] It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. [336]

Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. [337]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [338] 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. [338] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [339]

The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth. [340] However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. [340]

In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare. [341] The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth. [341] Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. [342]

3. Abuse of dominant Position / Huawei v ZTE

The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. [343]

To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter. [344] It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP [345] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [346] and the risk of hold-out that is immanent to the structure of the respective market, [347] can either alone or together rebut the assumption that it most likely holds market power. [348]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [349]

The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU. [350] The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse. [351] If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. [352]

In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents. [353] This follows from the clear language used by the CJEU with respect to this obligation. [354] The precise content of such notice will depend upon all the circumstances of the particular case. [354] In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. [355]

On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. [356]

Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior. [357] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [358] St. Lawrence v Vodafone [358] and Sisvel v Haier [359] ) [360] .

• [290] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
• [291] Ibid, para. 6 et seqq.
• [292] Ibid, para. 233.
• [293] Ibid, para. 7.
• [294] Ibid, paras. 8 and 137 et seqq.
• [295] Ibid, para. 8.
• [296] Ibid, para. 9 et seqq.; para. 31 et seqq.
• [297] Ibid, para 17.
• [298] Ibid, para 130.
• [299] Ibid, para 18.
• [300] Ibid, para 112.
• [301] Ibid, para 291.
• [302] Ibid, paras. 19 and 45 et seqq.
• [303] Ibid, paras. 20 and 132 et seqq.
• [304] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
• [305] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
• [306] Ibid, para. 17.
• [307] Ibid, paras. 74 and 77 et seq.
• [308] Ibid, para. 82.
• [309] Ibid, para. 80.
• [310] Ibid, para. 79 et seq.
• [311] Ibid, para. 26.
• [312] Ibid, para. 53.
• [313] Ibid, para. 54 et seq., para. 59.
• [314] Ibid, para. 56.
• [315] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
• [316] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
• [317] Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
• [318] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
• [319] Ibid, para. 111.
• [320] Ibid, para. 128.
• [321] Ibid, para. 121.
• [322] Ibid, para. 125.
• [323] Ibid, para. 75.
• [324] Ibid, para. 92
• [325] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
• [326] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
• [327] Ibid, para. 96.
• [328] Ibid, para. 98.
• [329] Ibid, para. 20 and 132 et seqq.
• [330] Ibid, paras. 207 and 210.
• [331] Ibid, para. 176.
• [332] Ibid, para. 173.
• [333] Ibid, para. 169 et seq.
• [334] Ibid, paras. 194 et seqq.
• [335] Ibid, para. 198.
• [336] Ibid, para. 198.
• [337] Ibid, para. 199.
• [338] Ibid, para. 195.
• [339] Ibid, para. 202.
• [340] Ibid, para. 196.
• [341] Ibid, para. 197.
• [342] Ibid, para. 200.
• [343] Ibid, para. 21, paras. 211 et seqq and para. 251.
• [344] Ibid, para. 212.
• [345] Ibid, para. 216.
• [346] Ibid, para. 219.
• [347] Ibid, para. 220.
• [348] Ibid, para. 229.
• [349] Ibid, para. 284.
• [350] Ibid, para. 269.
• [351] Ibid, para. 270.
• [352] Ibid, para. 269 and 282.
• [353] Ibid, para. 253 and 281.
• [354] Ibid, para. 271.
• [355] Ibid, para. 273.
• [356] Ibid, para. 284
• [357] Ibid, para. 275
• [358] See above
• [359] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
• [360] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

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Updated 21 June 2019

Unwired Planet v Huawei, Higher District Court (Oberlandesgericht) of Düsseldorf

OLG Düsseldorf
22 March 2019 - Case No. I-2 U 31/16

A. Facts

The Claimant, Unwired Planet International Limited, acquired patents relevant to the 2G (GSM) and 3G (UMTS) wireless telecommunications standards developed by the European Telecommunications Standards Institute (ETSI).

The previous holder of the patents in question, Telefonaktiebolaget LM Ericsson (Ericsson), had made an undertaking towards ETSI to grant users access to its patents should they become essential to a standard (Standard Essential Patents or SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendants, China-based Huawei Technologies Co. Ltd (Huawei China) and its German affiliate Huawei Technologies Deutschland GmbH, offer for sale and sell devices in Germany complying with the 2G and 3G standards.

In March 2014, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court) based on one of its SEPs, asking for a declaratory judgement recognising the Defendants’ liability for damages on the merits, as well as information and the rendering of accounts [1] . At the same time, the Claimant also initiated infringement proceedings against the Defendants in the UK (UK proceedings). During the course of the UK proceedings, the parties made certain licensing offers. However, an agreement was not reached.

By judgment dated 19th January 2016, the District Court found that the Defendants infringed the patent in suit, recognised the Defendant’s liability for damages on the merits and ordered the Defendants to render accounts to the Claimant [2] . The Defendants appealed the District Court’s ruling.

With the present judgment, the Higher District Court (Oberlandesgericht) of Düsseldorf (Court), basically, upheld the decision of the District Court. However, following a partial withdrawal of claims by the Claimant, the Court limited the Defendants’ obligation to render accounts by excluding information about production costs (broken down by single cost factors) and realised profits [3] .

The Court allowed for an appeal on points of law before the Federal Court of Justice (Bundesgerichtshof). The parties appealed the present decision.

B. Court’s reasoning

The Court confirmed the District Court’s finding that the Defendants had infringed the patent in suit by offering for sale and selling standard-compliant products in Germany [4] .

The Court also agreed with the District Court’s finding that the Claimant was entitled to assert claims against the Defendants: in its view, the patent in suit had been validly transferred to the Claimant [5] .

Transfer of SEPs

The Defendants had argued that the agreements underlying the transfer of said SEP to the Claimant had several flaws, which the District Court had not evaluated properly. In a lengthy reasoning, the Court dismissed this argument and confirmed the validity of the agreements in question [6] .

Besides that, the Defendants had claimed that the relevant agreements were void from an antitrust perspective, because they violated Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). The Court rejected these claims as well.

In the Court’s eyes, the – repeated – transfer of a SEP does not constitute an abuse of market power in violation of Article 102 TFEU [7] , since the FRAND undertaking, which – according to the Court – irrevocably limits the exclusion rights arising from a patent ‘in rem’ (‘dinglich’) [8] , is directly and indispensably binding for the new patent holder (irrespective of any contractual obligation assumed by the latter) [9] . Due to the ‘automatic’ transfer of the FRAND undertaking, there is no reason for prohibiting the transfer of SEPs or imposing limitations regarding to whom the SEP is assigned to; insofar, the patent holder has a free choice [10] .

Furthermore, the Court found that the transfer of the SEP in suit to the Claimant did not violate Article 101 TFEU [11] . Reciprocal agreements, as the agreements underlying the transfer of said patent, per se do not violate Article 101 TFEU, unless they contain side agreements which could impede competition [12] . According to the Court, this was not the case here. In this context, the Court explained that the fact that Ericsson had transferred only a part of its portfolio to the Claimant could not have any anti-competitive effect in terms of Article 101 TFEU [13] . Reason for this is that the FRAND-undertaking, to which both Ericsson and the Claimant are bound, sets the upper limit for the financial or other kind of burden from the licence that can be imposed on any licensee with respect to the entire patent portfolio [13] .

FRAND-undertaking

Having taken the view that the FRAND-undertaking is ‘automatically’ transferred to the new SEP holder, the Court suggested that it is binding for the latter not only ‘on the merits’ (‘dem Grunde nach’), but also in terms of ‘amount and content’ (‘der Höhe und dem Inhalt nach’) [14] . In other words: the new patent holder is not only – generally – obliged to offer access to the SEP on FRAND terms, it is, moreover, bound to the actual licensing practice of the previous patent holder [14] . The Court found that this is needed for ensuring that the SEP holder will not exempt itself of its FRAND commitment – especially the non-discrimination obligation – by transferring the SEP to a third party [15] .

Existing licensing agreements / Confidentiality

Accordingly, the Court held that existing licensing agreements of the previous patent holder (which have not expired yet) need to be considered for the assessment of the non-discriminatory character of licensing offers made by the new SEP holder [16] . Consequently, in the Court’s view, the SEP holder’s FRAND undertaking obliges the latter to provide its successor with information regarding to the content of licensing agreements which it had concluded with third parties [16] .

To be able to establish the non-discriminatory character of its licensing offer, the new SEP holder needs to make sure that it will be able to refer to and present licensing agreements of the prior SEP holder, particularly in court proceedings [17] . An exception could be made only when presenting such agreements would violate contractual confidentiality obligations. For this, the content of relevant confidentiality clauses must be presented in detail in trial, in order to allow an assessment of the extent of the patent holder’s obligations [18] . In addition, the party bound to respective clauses must demonstrate that it cannot release itself from its confidentiality obligations, by showing that all existing licensees have refused – upon request – to waive their rights arising from each clause in question [18] . Notwithstanding this, the Court expressed the view that agreeing to comprehensive confidentiality clauses will, as a rule, bar the SEP holder (and/or its successor) from invoking confidentiality with respect to existing licences in pending court proceedings: in this case, the refusal to present licences cannot be justified, since the patent holder acted culpably by agreeing to confidentiality with other licensees, regardless of its FRAND-obligation to provide information to its successor with respect to the licensing agreements it has signed [18] . Its unjustified refusal to present existing licences will, moreover, also affect the position of the new patent holder in trial (leading potentially to a dismissal of its claims for lack of evidence of the FRAND-conformity of its licensing offer) [18] .

In this context, the Court noted that presenting existing licensing agreements with third parties in trial does not raise antitrust concerns (especially under Article 101 TFEU) [19] . According to the Court, the fact that business secrets will be disclosed to potential competitors of the existing licensees is not harmful from an antitrust perspective, since measures to protect confidentiality in trial are available [19] . In particular, the addressee of confidential information is obliged to sign a Non-Disclosure Agreement (NDA), if the holder of such information (a) concretely explains why this information constitutes a business secret, (b) presents in detail which measures were taken so far for securing confidentiality with respect to the information in question, (c) demonstrates in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed and (d) also explains, with which degree of certainty the said disadvantages are expected to occur [19] . If these requirements are met, the opposing party’s refusal to sign an NDA would allow the party holding confidential information to limit its pleadings in trial to ‘general, indicative statements’ [19] . According to the Court, this was, however, not the case here.

Application of the Huawei framework

On the merits of the case, the Court made clear that the conditions established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE [20] (Huawei framework or obligations) apply only to claims for injunctive relief and the recall of infringing products, not to the patent holders’ claims for information, rendering of accounts and damages [21] . In particular, when deciding about the implementer’s liability for damages on the merits, courts do not have to consider whether the patent holder has met its Huawei obligations or not [22] .

This question is, however, relevant for deciding on the amount of damages owed to the patent holder. The non-compliance of the SEP holder with the Huawei framework can limit the amount of damages that it can claim to the amount of a FRAND royalty (for certain periods of time) [23] . Since the right to request the rendering of accounts serves the calculation of the amount of damages, the Court took the view that the SEP holder is barred from claiming information about production costs and/or realised profits for periods of time, in which it is not entitled to damages going beyond the FRAND royalty, because this information is not required for calculating the latter [24] .

SEP holder’s offer to the implementer

Looking at the present case, the Court held that the Claimant had not fulfilled its Huawei obligation to make a written and specific FRAND licensing offer to the Defendants [25] . In particular, in the offers made the Claimant failed to adequately specify both the calculation and the non-discriminatory nature of the royalties proposed [26] .

For allowing the implementer to assess the non-discriminatory character of the SEP holder’s licensing offer, the Court repeated that the latter is obliged to disclose whether other licensees exist and, if so, to which conditions they have been licensed [27] . This obligation extends also to licensing agreements concluded by the previous patent holder(s) [27] . Only agreements that have expired or have been terminated do not need to be considered in this respect [28] . As a result, the Claimant should have referred to both the licences covering the SEP in suit that it had concluded with third parties after the transfer of the patent, and to all licences, which Ericsson had concluded with licensees prior to the transfer of said patent and were still in force, when the Claimant made the respective licensing offer to the Defendants [29] .

The Court took the view that, prior to granting the very first FRAND licence, the SEP holder ought to select a specific ‘licensing concept’. This ‘concept’ is ‘legally binding’ for the future licensing conduct of the SEP holder and potential successors. In other words: the licensing conditions established by the first FRAND licence granted outline the leeway available to the SEP holder for future licensing negotiations [30] . This is also the case, when the royalties agreed for the first licence lie at the lower end of the FRAND scale available to the patent holder [31] . Accordingly, any deviation from the ‘licensing concept’ is allowed only and to the extent that (existing and new) licensees are not discriminated through less favourable conditions [30] .

The Court allowed SEP holders to select a new ‘licensing concept’ (within the available FRAND range), provided that all licensing agreements subject to the existing ‘concept’ will expire at the same point in time [32] . In the Court’s view, this could be achieved, for instance, by agreeing with all later licensees that their licence will expire at the same time as the first FRAND licence ever granted [28] . The Court recognised that this would require substantial efforts, particularly when considerable patent portfolios are involved; this fact did not, however, speak against binding the successor to the licensing practice of the previous SEP holder [33] .

C. Other important issues

According to the Court, the fact that the UK proceedings were directed towards setting the terms of a worldwide licence between the parties, covering all SEPs held by the Claimant did not require the Court to stay its own proceedings [34] . According to Article 27 of the Brussels I Regulation, the court later seized of the matter has to stay its proceedings until the jurisdiction of the court first seized of the case has been settled. The Court saw, however, no indication that the UK proceedings (had ever) concerned the claims asserted in the proceedings brought before it (claims limited to Germany) [34] .

Besides that, the Court confirmed that German courts have international jurisdiction for the claims brought against Huawei China [35] . If infringing products are offered over the internet, the international jurisdiction of German courts is established, when German patent rights are being affected and the website can be accessed in Germany [35] .

• [1] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 32 (cited by www.nrwe.de).
• [2] Ibid, para. 41. See District Court of Duesseldorf, judgement dated 19 January 2016, Case No. 4b O 49/14.
• [3] Ibid, paras. 139 et seqq.
• [4] Ibid, paras. 252-387.
• [5] Ibid, paras. 161 et seqq.
• [6] Ibid, paras. 169-199.
• [7] Ibid, para. 203 et seqq.
• [8] Ibid, para. 205.
• [9] Ibid, paras 205 et seqq.
• [10] Ibid, para 209.
• [11] Ibid, paras. 235 et seqq.
• [12] Ibid, para. 236.
• [13] Ibid, para. 242.
• [14] Ibid, paras. 212 et seqq.
• [15] Ibid, para. 214.
• [16] Ibid, paras. 216 et seq.
• [17] Ibid, para. 216.
• [18] Ibid, para. 218.
• [19] Ibid, para. 220.
• [20] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [21] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 159 (cited by www.nrwe.de).
• [22] Ibid, para. 396.
• [23] Ibid, para. 402.
• [24] Ibid, para. 402 et seq. Insofar the Court expressly disagreed with the District Court of Mannheim, which in a previous decision had denied any limitations of the patent holder’s right to demand the rendering of accounts, in case of non-compliance with the Huawei framework; cf. District Court of Mannheim, judgment dated 10 November 2017, Case No. 7 O 28/16, GRUR-RR 2018, 273.
• [25] Ibid, paras. 406 et seqq.
• [26] Ibid, para. 411.
• [27] Ibid, para. 419.
• [28] Ibid, para. 420.
• [29] Ibid, para. 423.
• [30] Ibid, paras. 413 et seq.
• [31] Ibid, para. 413.
• [32] Ibid, paras. 414 and 420.
• [33] Ibid, para. 421.
• [34] Ibid, para. 144.
• [35] Ibid, paras. 153 et seqq.

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Updated 30 October 2018

TQ Delta LLC v Zyxel Communications UK Ltd. and Ors., UK High Court of Justice

English court decisions
28 September 2018 - Case No. HP-2017-000045, [2018] EWHC 2577 (Pat)

A. Facts

The Claimant, TQ Delta LLC, acquired patents that had been declared as essential to the DSL standard under the so-called “ITU Recommen­dations” from a company called Aware Inc. (Standard Essential Patents, or SEPs) [361] . The ITU Recommendations require from the SEP holder to make its patents accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [362] . The Defendants, Zyxel Communications UK Ltd. and Zyxel Communications A/S, manufacture and sell various types of equipment complying with the DSL standard [362] .

The Claimant brought an infringement action against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds [362] . The proceedings involve, on the one hand, technical issues concerning the validity, essentiality and infringement of the SEPs in question and, on the other hand, the licensing of these SEPs on FRAND terms [363] .

Prior to service of the statements of case, the Court ordered the Claimant to disclose licence agreements concluded with third parties, covering also the SEPs in suit (comparable agreements) [364] . The Claimant requested the Court to establish an “external eyes only” regime with respect to comparable agreements, especially a licence entered with a company called Zhone (Zhone licence) as well as a licence concluded with another company referred to as company “X” (X licence). In June 2018, the Court dismissed Claimant’s motion [365] . After that, the Court ordered standard disclosure, requesting both parties to search for documents relevant to the case and produce so-called “disclosure statements”, containing the documents identified [366] .

In its disclosure statement, the Claimant included only the licences concluded by Aware Inc. with third parties covering also the patents in suit (of which he possessed only redacted copies; “Aware licences”), the assignment agreement signed with Aware Inc., the inter partes correspondence with the latter as well as a few public validity findings made by the US Patent and Trademark Office on certain patents of its portfolio [367] .

The Defendants, who had obtained unredacted copies of the Aware licences directly from Aware Inc. [367] , complained that the Claimant’s disclosure was not appropriate and set out various categories of documents which, in their view, should have been in disclosure [367] . Accordingly, the Defendants requested an order for standard disclosure to be repeated, backed this time by a so-called “unless order” (meaning that non-compliance with the order will be sanctioned by the dismissal of Claimant’s claims) [368] .

On 28 September 2018, the Court made an order requesting disclosure of the following specific categories of documents by the Claimant [369] :

• Documents concerning the assignment of patents from Aware Inc. to the Claimant (besides the assignment agreement itself);
• documents regarding to the assessment of the (technical) essentiality of the patents in suitIbid, pages 5 et seq., and
• documents concerning the Claimant’s royalty calculationIbid, pages 6 et seq..

On the other hand, the Court refused to order disclosure of documents relating to the negotiations leading to the Zhone licence, the X licence and the Aware licences, documents concerning licensing negotiations between the Claimant and third parties which have not resulted in a licence yet [372] , as well as documents regarding to assessments of the validity [373] or the technical significance of Claimant’s patents within the standard [370] .

With judgment dated 11 October 2018, the Court set forth the specific terms of the order [374] . Since the Court held that the Claimant did not carry out a proper search for existing documents under the previous standard disclosure order, it required the Claimant to conduct such a search and deliver a new statement of disclosure [375] . In addition, the Court ordered the Claimant to disclose the aforementioned specific categories of documents, ruling that failure to comply with this order, will lead to the dismissal of Claimant’s claim [375] .

B. Court’s reasoning

The Court explained that disclosure can be refused only with respect to documents not relevant to the case and/or documents which are relevant but might have been privileged or disproportionate to search for [376] . In the Court’s eyes, proportionality comes in play in this context under two aspects: On the one hand, the cost and complexity of searching for and extracting the relevant material should be considered [377] . On the other hand, the impact of the documents on the trial as well as the cost and complexity of deploying any material which is produced in the proceedings needs also to be taken into account [377] .

Further, the Court made clear that disclosure cannot be refused on the grounds that documents referring to a specific transaction (e.g. a licensing agreement) are subjective in nature (whereas FRAND is objective); in the Court’s eyes, even then, the acts of individuals working in a field is capable of being evidence on what “reasonable business people” might do in similar circumstances [372] .

On this basis, the Court held that documents concerning the assignment of the SEPs in suit from Aware Inc. to the Claimant should be disclosed [372] . The fact that the Claimant had disclosed the assignment agreement itself does not mean that further disclosure is not necessary [372] . Documents referring to the assignment might be “potentially highly relevant information” in FRAND-related trials, since they could provide insights into how different parts of the patent portfolio assigned were valued, offering (presumably “at arm's length”) a “concrete data point” for the respective valuation [372] .

The Court further found that documents concerning the assessment of whether the patents in suit are (from a technical perspective) essential to the DSL standard should also be disclosed [373] , because it is particularly relevant to know what proportion of the patents which were assigned to the Claimant by Aware Inc. are essential to the DSL standard [373] .

Furthermore, the Court requested disclosure of documents referring to the Claimant’s royalty calculation, since they were regarded as “directly relevant” to the case [373] . The fact that respective documents were prepared in connection with previous litigation between the parties in the United States does per se hinder disclosure, unless litigation was the “dominant purpose” for which the documents were made [369] . In other words, the litigation privilege applies only to documents created in litigation to put forward arguments about what is and is not FRAND in court; on the contrary, documents which – in Claimant’s practice as a licensing company – led to the creation of the royalty rates and other terms in FRAND offers are subject to disclosure [369] .

On the other hand, the Court held that disclosure of documents relating to the negotiations which had led to the Zhone licence, the X licence and the Aware licences was not required [377] . Although such documents might, in principle, be relevant to the case (particularly for demonstrating what the parties may have said in the licensing negotiations about the value of the patents and their relevance to the standard) [378] , the Court found that disclosure of documents related to the Zhone licence and the X licence would be disproportionate in the present case, since it would have limited probative value [377] . This is because the Defendants had argued that the Zhone licence was not a relevant comparable agreement [368] . In addition, none of the parties advanced the X licence as a comparable agreement in connection with the royalty rates; in the Court’s eyes, the fact that it might be comparable in relation to other licence terms, did not have “significant utility” for the case [377] . With respect to documents related to the negotiations of the Aware licences, the Court refrained from ordering disclosure, because it was convinced that the Claimant was not in possession of such documents [378] .

Regarding to documents concerning licensing negotiations between the Claimant and third parties the Court held that, although these documents might be relevant to the case, their disclosure would also be disproportionate in light of the rather limited probative value that they are likely to have [372] .

Furthermore, the Court explained that documents referring to the individual technical significance of a patent within a standard (in a sense that some patents might be of higher value to the standard than others), were not relevant in the present case, since no party pleaded that respective considerations need to be taken into account for the royalty determination [370] . In this context, the Court expressed doubts about whether a method of determining royalties based on such considerations is workable in practice at all [372] .

The Court finally refused disclosure of documents relating to the validity of Claimant’s patents [373] . Insofar, the Court followed the usual practice of UK Courts in patent cases, according to which, as a rule, unspecific disclosure relating to patent validity is refused [373] .

• [361] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 1.
• [362] Ibid, page 1.
• [363] Ibid, page 1 et seq. With respect to the relationship between the “technical trials” (that means the proceedings concerning the validity, essentiality and infringement of the SEPs in suit) and the “non-technical trial” regarding to FRAND licensing see, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 21st November 2017, Case-No. HP-2017-000045, [2017] EWHC 3305 (Pat); summary available at caselaw.4ipcouncil.com/english-court-decisions/tq-delta-llc-v-zyxel-communications-ewhc
• [364] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), paras. 25 and 30; summary available at caselaw.4ipcouncil.com/english-court-decisions/tq-delta-llc-v-zyxel-communications-and-ors-ewhc
• [365] Ibid, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018.
• [366] Q Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 2.
• [367] Ibid, page 2.
• [368] Ibid, page 3.
• [369] Ibid, page 7.
• [370] Ibid, pages 5 et seq.
• [371] Ibid, pages 6 et seq.
• [372] Ibid, page 5.
• [373] Ibid, page 6.
• [374] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 11th October 2018, Case-No. HP-2017-000045, [2018] EWHC 2677 (Pat).
• [375] Ibid, pages 2 et seq.
• [376] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 2.
• [377] Ibid, page 4.
• [378] Ibid, pages 3.

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Updated 7 May 2019

TQ Delta v Zyxel Communications, UK High Court of Justice

English court decisions
18 March 2019 - Case No. HP-2017-000045 - [2019] EWHC 745 (Pat)

A. Facts

The Claimant, TQ Delta LLC, holds patents which have been declared as essential to the practice of certain xDSL standards under the ITU Recommendations (Standard Essential Patents, or SEPs). The ITU Recommendations require from the SEP holder to make its patents accessible to users on Reasonable and Non-Discriminatory (RAND) terms and conditions.

The Defendants, Zyxel Communications Ltd. and Zyxel Communications A/S, manufacture and sell various types of equipment complying with the DSL standard.

In 2013, the Claimant approached the Defendants, seeking to license its SEPs. Since it failed to reach agreement, the Claimant issued infringement proceedings against the Defendants in the United States. Subsequently, the Claimant brought an infringement action against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds, asking inter alia for injunctive relief. These proceedings involved, on the one hand, technical issues concerning the validity, essentiality and infringement of the patents in suit (technical trial) and, on the other hand, the licensing of these patents on RAND terms (RAND trial).

The Defendants did not make any payments to the Claimant [200] . During the course of the proceedings, the Defendants also refused to confirm that they would take a (global or UK) licence on whatever terms the Court determined to be RAND [201] .

The Court proceeded in both the technical and RAND trial in parallel [202] . On 11 March 2019, the Court delivered its judgement in the technical trial: it found that one of the patents in suit was valid, essential and infringed, whereas the other patent in suit was invalid but would have been essential and infringed had it been valid [203] . The patent that was found valid, essential and infringed expires on 25 June 2019 [204] . The RAND trial is listed for September 2019.

On 18 March 2019, the Court considered the form of order arising from the technical trial [205] . The Court granted an immediate injunction against the Defendants. It refused to stay the injunction or order a carve-out of the injunction allowing the Defendants to process certain existing clients’ orders referring to infringing products. Finally, the Court also refused to grant the Defendants permission to appeal in this case [206] .

B. Court’s reasoning

When considering whether an injunction should be granted in the present case, the Court placed particular emphasis on the Defendants’ conduct. The Court held that there were no grounds to deny an injunction, since the Defendants engaged in ‘hold-out’: they have been infringing one of the two patents in suit for many years without paying any royalties to the Claimant and have also refused to submit to the outcome of an appropriate RAND determination by the Court [207] .

In the Court’s eyes, denying an injunction in these circumstances would be ‘unjust’ [208] , because it ‘would enable ZyXEL [the Defendants] to benefit from their strategy of hold-out’, since they ‘would avoid an injunction, and if the terms of a [F]RAND licence are not as they wish, could refuse to enter into a licence on the terms deemed appropriate by the Court’ [208] . Moreover, depriving the Claimant of injunctive relief would, ‘in effect, amount to a compulsory licence by the court’ which according to the Court would be ‘wrong in principle’ [209] . Against this background, the Court rejected the Defendants’ submission that the grant of an injunction would be disproportionate due to the fact that the patent in suit would expire a few months after the Court’s decision.

Besides that, the Court found that there were no grounds either for staying the injunction for one month, as the Defendants requested, or for granting a carve-out of the injunction to allow the Defendants to fulfil certain existing clients’ orders [210] . The Defendants had not produced sufficient evidence allowing an assessment of any disadvantages potentially arising from the immediate enforcement of the injunction [211] .

Furthermore, the Court refused to grant the Defendants permission to appeal from the grant of an injunction. The Court considered that it would be ‘wrong’ to grant permission, since the Court of Appeal had already set forth the correct general principles in its recent decision in the matter Unwired Planet v Huawei [212] . What is more, in the Court’s view, an appeal would not have any prospects of success; the decision to grant an injunction is an exercise of discretion, from which it is, in general, difficult to appeal. In addition, the Court’s decision was well founded, since refusing an injunction ‘would amount to a compulsory licence of the patentee's exclusive rights and deprive it of meaningful protection in circumstances where the Defendants have elected not to enforce the [F]RAND undertaking’ [213] .

• [200] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 6.
• [201] Ibid, para. 10.
• [202] See TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 21 November 2017, [2017] EWHC 3305 (Pat). Summary available at www.4ipcouncil.com.
• [203] See TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 11 March 2019, [2019] EWHC 562 (ChD).
• [204] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 2.
• [205] During the course of the RAND trial, the Court had rendered interim rulings concerning particularly the treatment of potentially confidential information in the proceedings; see TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 13 June 2018, [2018] EWHC 1515 (Ch); judgement dated 28 September 2018, [2018] EWHC 2577 (Pat) and judgment dated 11 October 2018, [2018] EWHC 2677 (Pat). Summaries of the above judgments are available at www.4ipcouncil.com.
• [206] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 19.
• [207] Ibid, para. 12.
• [208] Ibid, para. 13.
• [209] Ibid, para. 14.
• [210] Ibid, para. 15.
• [211] Ibid, paras. 16 et seqq.
• [212] Unwired Planet v Huawei, UK Court of Appeal, judgement dated 23 October 2018, Case No. A3/2017/1784, [2018] EWCA Civ 2244, paras. 53 and 54. Summary available at www.4ipcouncil.com.
• [213] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 22.

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Updated 30 October 2018

­Vodafone v Intellectual Ventures, High Court of Ireland

English/Irish court decisions
10 March 2017 - Case No. 2016 5102P, [2017] IEHC 160

A. Facts

The Claimant, Vodafone GmbH, is a German company offering communication services in Germany, including DSL internet connections based on the standards ADSL2+ and VDSL2 [177] .

The first Defendant, Intellectual Ventures II LLC (IV LLC), is a US company that holds patents declared as essential to the above standards (Standard Essential Patents or SEPs), including German designations of several European patents [178] . The second Defendant, Intellectual Ventures International Licensing (IV Licensing), is an Irish company engaged in patent licensing [178] . IV LLC granted IV Licensing a sub-licence which allows the latter to grant non-exclusive licences in respect to IV LLC’s portfolio [179] .

In January 2016, IV LLC brought infringement actions against the Claimant before the District Court (Landgericht) of Düsseldorf in Germany (Düsseldorf Court) based on the German designation of two of its SEP relating to the ADSL2+ and VDSL2 standards (German proceedings) [180] . In the German proceedings, IV LLC sought for a declaration that the Claimant is liable for damages arising from the infringement of the SEPs in suit as well as the provision of information and the rendering of accounts [180] .

During the course of the German proceedings, IV Licensing made an offer for a licensing agreement to the Claimant comprising the German designations of sixteen European Patents, including the two patents already asserted before the Düsseldorf Court [181] . The Claimant made a counter-offer which was, however, rejected [182] .

Subsequently, the Claimant filed an action for a declaratory judgement against the Defendants before the Dublin High Court (High Court) in Ireland (Irish proceedings). The Claimant requested the High Court inter alia to declare (1) that IV Licensing’s offer was not Fair, Reasonable and Non-Discriminatory (FRAND) and, therefore, amounted to an abuse of dominant position contrary to Article 102 of the Treaty on the Functioning of the EU (TFEU) and (2) that Claimant’s counter-offer was FRAND [183] . In case that the High Court held that neither IV Licensing’s offer nor Claimant’s counter-offer were FRAND, the Claimant also sought for a declaration as to which terms and conditions would be FRAND [183] .

The Defendants challenged the jurisdiction of the High Court. They requested the High Court – among other motions – to decline jurisdiction in favour of the Düsseldorf Court, or, in the alternative to stay its proceedings [184] .

With the present judgment the High Court refused to decline jurisdiction over the dispute brought before it [185] . The Court ordered, however, a stay in the proceedings, until the Düsseldorf Court delivered its final judgment in the German proceedings [185] .

B. Court’s reasoning

The High Court held that neither Article 24 nor Article 29 of the Recast Brussels Regulation [186] require the court to decline jurisdiction in favour of the Düsseldorf Court, even though the German proceedings were initiated prior to the Irish proceedings.

Pursuant to Article 24 of the Regulation, the Courts of each EU Member State have exclusive jurisdiction in proceedings concerned with the validity of any European Patent granted for that Member State. Both pending proceedings concern German designations of IV LLC’s European patens. However, this fact did not hinder the High Court to assume jurisdiction over the present case: In the High Court’s eyes, no issue as to the validity the patents which ought to be licensed has been placed in issue in the Irish proceedings; moreover, no part of Claimant’s cause of action concerning the (alleged) abuse of dominance depends in any way on the validity of the SEPs in suit [187] .

Furthermore, the High Court found that Article 29 of the Regulation does not apply to the present case, either. The High Court took the view that the Irish proceedings and the German proceedings do not involve the “same cause of action”, as Article 29 of the Regulation requires [188] . Although there are overlapping issues in both proceedings (for instance, Article 102 TFEU is mentioned in parties’ pleadings in both trials), this fact does not suffice to establish a “same cause of action” in terms of Article 29 of the Regulation [188] . In particular, Article 102 TFEU, to the extent that it features in the German proceedings is not concerned with an (alleged) abuse of dominant position by way of the offer made to the Claimant by IV Licensing [188] . Besides that, the High Court also pointed out, that – at least regarding to IV Licensing – it is not presented with proceedings “between the same parties” (since IV Licensing in not party to the German proceedings) which is, however, a further prerequisite for the application of Article 29 of the Regulation [189] .

Notwithstanding the above, the High Court held that some form of relief under Article 30 of the Regulation ought to be granted to the Defendants [190] . Under this provision, a court is allowed (meaning that the power given to the court is discretionary) to either stay its proceedings (Article 30 para. 1) or decline jurisdiction (Article 30 para. 2), in case that a “related action” is already pending before another court [191] . The objective of Article 30 of the Regulation is “to improve co-ordination of the exercise of judicial functions” within the EU and to avoid “irreconcilable judgments” [192] . In the matter at hand, the High Court found that these ob­jectives are served by an order to stay the proceedings according to Article 30 para. 1 of the Regulation [185] .

Looking at the present case, the High Court explained that a risk of “irreconcilable judgments” exists, since at the heart of both the Irish and the German proceedings lies the question whether the parties have complied with their conduct obligations under the judgment of the Court of Justice of the EU in the matter Huawei v ZTE [193] (Huawei requirements), especially with the obligation to exchange licensing offers on FRAND terms [194] .

In the Irish Proceedings, the claims made by the Claimant expressly address this question. In the German Proceedings, the same question will be of “direct relevance” for the nature and scope of the claim for damages and the accessory claim for the rendering of accounts asserted by IV LLC [195] . Although compliance with the Huawei requirements is – in contrast to claims for injunctive relief – no direct prerequisite for the enforcement of SEP holder’s damage claims (including the auxiliary claims for information and the rendering of accounts) [196] , it has an impact on the scope of such claims: according to the case law of the Düsseldorf Courts, if the patent holder does not meet the Huawei requirements or both the patent holder and the potential licensee comply with the Huawei requirements, the patent holder’s damage claim is limited to the FRAND licence fees and the claim for the rendering of accounts is limited to the information needed in order to calculate the respective damages (using the so-called “licence analogy” method) [197] . Accordingly, the Düsseldorf Court would not be able to decide on the merits of the claims raised by IV LLC before it, without first determining whether the parties fulfilled the Huawei requirements [198] .

In addition, the High Court pointed out that setting the FRAND terms and conditions for the patent portfolio offered to the Claimant, as the latter requested in the Irish proceedings, could also lead to “irreconcilable judgments”, particularly if the Düsseldorf Court would be asked by IV LLC at a later point in time to fix the damages for the two SEPs asserted in the German proceedings (since these SEPs were also part of the portfolio offered) [199] . Insofar, the High Court was not convinced by the Claimant’s argument, that fixing of rates for a patent portfolio usually involves different considerations to the fixing of a rate for individual patents [199] . On the contrary, the High Court recognized that within the “longstanding industry practice” of portfolio licensing, the fixing of rates for a portfolio of patents does, in general, involve the same methodology as the fixing of rates for individual patents. Consequently, rates set by the High Court in the Irish proceedings might conflict with any rates determined by the Düsseldorf Court with respect to the damage claims made in the German proceedings [199] .

• [177] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 1.
• [178] Ibid, para. 2.
• [179] Ibid, para. 3.
• [180] Ibid, para. 37.
• [181] Ibid, paras. 10-12 and 93.
• [182] Ibid, paras. 13-16.
• [183] Ibid, para. 5.
• [184] Ibid, para. 7.
• [185] Ibid, para. 180.
• [186] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12th December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), OJ L 351/1 of 20th December 2012.
• [187] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 122.
• [188] Ibid, para. 146.
• [189] Ibid, para. 148.
• [190] Ibid, para. 166.
• [191] Ibid, para. 119.
• [192] Ibid, para. 165.
• [193] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [194] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 52.
• [195] Ibid, paras. 52 and 60.
• [196] Ibid, paras. 55 et seqq.
• [197] Ibid, para. 61 et seq.
• [198] Ibid, para. 62.
• [199] Ibid, para. 93.

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Updated 2 August 2019

Tagivan (MPEG-LA) v Huawei, District Court (Landgericht) of Düsseldorf

OLG Düsseldorf
15 November 2018 - Case No. 4a O 17/15

A. Facts

The Claimant, Tagivan II LLC, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent, or SEP). The patent in question is subject to a FRAND commitment (FRAND stands for Fair, Reasonable and Non-Discriminatory terms and conditions) made towards the relevant standardisation body. It was included into a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [1] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones in Germany that practise the AVC/H.264 standard [2] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [3] . Since 2004, MPEG-LA has signed approx. 2,000 agreements with implementers [4] , 1,400 of which are still in force [3] .

In 2009, MPEG LA and the Defendant’s parent company (parent company) started discussions about a potential licence covering other standards, especially the MPEG-2 standard. On 6 September 2011, MPEG LA informed the parent company about the possibility to obtain a licence also regarding the AVC/H.264 standard, by sending PDF-copies of its standard licensing agreement to the parent company via email [5] . On 15 September 2011, the parent company suggested to arrange a call on this issue [6] . In February 2012, MPEG LA sent the pool’s standard licensing agreement for the AVC/H.264 standard to the parent company also by mail [7] .

In November 2013, the discussions between MPEG LA and the parent company ended without success [8] . The parties resumed negotiations in July 2016; again, no agreement was reached [8] .

The Claimant then brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [9] .

In November 2017, during the course of the present proceedings, the Defendant made a counteroffer to the Claimant for a licence, which – in contrast to MPEG LA’s standard licensing agreement – was limited to the Claimant’s patent portfolio and established different royalty rates for different regions, in which the Defendant sold products [10] .

In March and September 2018 (again during the proceedings), the Defendant provided bank guarantees to the Claimant covering past and future sales of (allegedly) infringing products. The security amounts were calculated based on the Defendant’s counteroffer dated November 2017 [11] . Furthermore, the Defendant made a second counteroffer to the Claimant shortly after the last oral hearing before the Court [12] .

With the present judgment, the Court granted Claimant’s requests.

B. Court’s reasoning

The Court found that the patent in suit was valid [13] , standard essential [14] and infringed by the products sold by the Defendant in Germany [15] . Furthermore, the Court held that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [16] (Huawei obligations or framework) with respect to dominant undertakings [17] .

Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [18] .

The Court defined the relevant market for the assessment of dominance as the market, in which licences for any given patent are offered [19] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [19] .

The Court made clear that ownership of a SEP does not per se establish market dominance [20] . A dominant market position is given, when the use of the SEP is required for entering the market [21] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [22] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no ‘realistic’ alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [23] .

Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [24] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [25] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [26] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [27] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [28] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement. The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [29] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the, nevertheless, existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [30] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [30] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [31] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written FRAND licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counteroffer to the Claimant. Since an adequate counteroffer was missing, the Court did not take up the question whether the bank guarantees provided by the Defendant constitute an adequate security in terms of the Huawei framework.

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the email sent by MPEG LA to the parent company on 6 September 2011 [32] .

The fact that this email was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries concerned [33] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [34] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [35] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant. The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [36] . In addition, the Defendant’s parent company was most likely aware of MPEG LA’s capacity to act on behalf of the Claimant, since it had entered into direct negotiation with MPEG LA already in 2009, that is almost two years prior to the notification of infringement [37] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the infringed patent (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [38] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [38] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [38] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [38] . The respective test is, however, subject to strict conditions [38] .

Based on the above considerations, the Court found that MPEG LA’s email to the parent company dated 6 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [39] . The overall circumstances of the case (especially the fact that the parent company had been in negotiations with MPEG LA already since 2009 and, therefore, should have been aware that MPEG LA has granted licences for the AVC/H.264 standard to the implementers mentioned at its website), give rise to the assumption that the parent company had been conscious of the fact that AVC/H.264-compliant products need to be licensed [40] .

Willingness to obtain a licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the email sent to MPEG LA on 15 September 2011 [41] .

In the eyes of the Court, this email indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard, especially if it is seen in the context of the negotiations between MPEG LA and the parent company that had commenced in 2009 [41] . This is sufficient under the Huawei framework: A general, informal statement suffices [42] . The implementer is not required to refer to a specific licensing agreement (on the contrary, this could be considered harmful under certain circumstances) [42] .

SEP holder’s offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company in February 2012 presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [43] .

The fact that the standard licensing agreement was not tailored to the parent company but was designed for use towards a large number of (potential) licensees (the name of the licensee ought to be added in each case separately), was not criticized by the Court. MPEG-LA had made clear that the documents sent by mail in February 2012 would serve as the basis for negotiations and a future agreement with the parent company [44] .

In addition, the Court did not take an issue with the fact that the offer was addressed to the parent company and not to the Defendant, since the parties were discussing about a licensing agreement on group level and the parent company had been involved in the communications from the beginning [45] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company did not contain a detailed explanation of the way the royalties were calculated [46] . The Court found that, in the present case, it was sufficient that the parent company was aware that the (standard) agreement presented to her had been accepted in the market by a great number of licensees [47] . In the Court’s view, the explanation of the royalty calculation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [48] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [48] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [48] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [49] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content [50] .

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [51] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [51] . The Court made clear that, in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [51] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [51] .

Non-discrimination

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases [52] . Even then, an unequal treatment is allowed, as long as it is objectively justified [52] . Limitations may, nevertheless, occur, especially when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive, only when it uses the patent’s teachings [52] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may, however, seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [53] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [53] .

Against this background, the Court found that the offer made by MPEG LA to the parent company was not discriminatory. The Defendant had argued that seeking a licence also covering sales in China violated FRAND, since not every other competitor in the Chinese market was licensed by MPEG LA [54] . The Court observed that the selective assertion of patents against only a part of the competitors in a downstream market might, in principle, be discriminatory [55] . This was, however, not the case here, because the Claimant had already sued another company active in China and was attempting to persuade other companies to obtain a licence [56] . Due to the high cost risk associated with court proceedings, the patent holder is not obliged to sue all potential infringers at once; choosing to assert its patents against larger implementers first was considered by the Court as reasonable, since a win over a large market player could motivate smaller competitors to also obtain a licence (without litigation) [57] .

Furthermore, the Court did not consider the fact that the offered standard licensing agreement contained a cap for the annual licensing fees payable to the MPEG LA pool to be discriminatory [58] . The Defendant had argued that the respective cap disproportionally favoured licensees with high volume sales which offered not only mobile phones, but also other standard compliant products in the market. The Court made, however, clear that Art. 102 TFEU does not establish a ‘most-favoured-licensee’ principle (meaning that the patent holder must offer the same conditions to all licensees) [59] . It is not per se discriminatory to use sale volumes as a criterion for discounts, especially if a company has managed to open up a larger market than its competitors [60] . Discounts can further hardly be discriminatory, if they are offered to every (potential) licensee under the same conditions [60] .

Besides that, the Court dismissed the Defendant’s argument that MPEG LA’s standard licensing agreement is discriminatory, because it is offered to both MPEG LA pool members and third licensees. The Court found that the share of the licensing income paid to pool members, who have also signed a MPEG LA licence, reflects their contribution to the pool and, therefore, does not discriminate the latter against third licensees (who have not contributed any patents to the pool) [61] . In this context, the Court also pointed out that the clauses contained in MPEG LA’s standard licensing agreement, providing for deductions or instalment payments are not discriminatory, particularly because they are offered to all licensees [62] .

The Court was further not convinced that the parent company was discriminated by MPEG LA’s offer, because the MPEG LA pool had refrained from requesting a licence at group level from a competitor, but had only granted a licence to a subsidiary within the respective group, instead. In the Court’s eyes, the Claimant had managed to establish that this exception was objectively justified, since only the subsidiary granted a licence had activities concerning the patents included in the pool [63] .

Fair and reasonable terms

With respect to the assessment of whether MPEG LA’s offer to the parent company was also fair and reasonable, the Court placed particular emphasis on the existing licensing agreements between the MPEG-LA pool and third licensees. The Court took the view, that existing licences can establish the actual presumption that the terms offered (as well as the scope of the licence) are fair and reasonable [64] . Moreover, the fact that licences regarding the same patent portfolio have already been granted for similar products prima facie suggests that the selection of the patents included in the pool was adequate [64] .

Based on these premises, the Court found that the approx. 2,000 standard licensing agreements concluded by the MPEG LA pool provide a ‘strong indication’ (‘erhebliche Indizwirkung’) that the underlying licensing terms are fair and reasonable [65] . In the Court’s view, the Defendant had failed to show sufficient facts that could rebut this indication.

In particular, the Court did not accept Defendant’s claim that, as a rule, licences for products sold in the Chinese market are subject to special conditions. On the contrary, the Court found that the existing MPEG LA pool licences allow the assumption that setting worldwide uniform licence fees corresponds to industry practice [66] . Accordingly, the Court rejected Defendant’s argument, that the royalties offered by MPEG LA to the parent company would hinder the Defendant from making profits with its sales in China, since the overall licensing burden (including licences needed from third parties) would be too high. The Court noted that the price level for Defendant’s sales in China does not significantly differ from the price level in other regions [67] . What is more, the Defendant did not show that further licences are needed with respect to the AVC/H.264 standard [68] . The Court further did not recognise a need to apply special conditions for the Chinese market, because – compared to patents from other regions – a lower number of Chinese patents is contained in the MPEG LA pool. According to the Court, the number of patents in a specific market should not be ‘overestimated’ as a factor for assessing the FRAND conformity of an offer, since even a single patent can block an implementer from a market, generating, therefore, the need for obtaining a licence [69] .

Apart from the above, the Court did not criticise that MPEG LA’s standard licensing agreement did not contain an adjustment clause. Such clauses can secure that the agreed licensing fees remain reasonable, in case that the number of patents contained in the pool changes during the term of the licensing agreement. They are, however, in the Court’s view, not the only mean to reach this goal: Moreover, the clause contained in MPEG LA’s standard licensing agreement, according to which the agreed royalties will not be adjusted either when more patents are added to the pool or when patents are withdrawn from the pool, offers an adequate balance of risk and is, therefore, FRAND compliant [70] . This assumption is also confirmed by the fact that all existing licensees have accepted this clause [71] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are, in general, appropriate under the Huawei framework. An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [72] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [72] .

An offer for a pool licence can, nevertheless, violate FRAND in ‘special circumstances’ [73] , for instance, if not all patents included in the pool are used by the licensee [74] . According to the Court, the fact that the Defendant – as well as mobile phone manufacturers in general – usually use only one of four available profiles of the AVC-Standard does not, however, render the standard licensing agreement offered by MPEG LA unreasonable [75] . This is particularly the case, since Defendant’s products – and especially its latest smartphones – have the technical capability to implement more than one available profile [76] . Besides that, it is reasonable to offer one single licence covering all profiles, since modern products incorporate functionalities of several types of devices (e.g. smartphones offer also digital television functionalities) [76] .

In this context, the Court dismissed Defendant’s arguments that the licence offered by MPEG LA was not FRAND, because it allegedly covered both standard-essential and non-essential patents. The Court recognised that the ‘bundling’ of essential and non-essential patents in a patent pool could, in principle, be incompatible with FRAND, if it is done with the intention to extract higher royalties from licensees by increasing the number of patents contained in the pool [77] . The Defendant failed, however, to present any reliable evidence that this was the case with the MPEG-LA pool [78] .

In the Court’s eyes, the Defendant also failed to establish that the rates offered by MPEG LA would lead to an unreasonably high total burden of licensing costs (‘royalty stacking’) [79] . The theoretical possibility that the Defendant might need to obtain licences also for patents not included in a pool does not per se lead to royalty stacking; the Defendant would have been obliged to establish that the total amount of royalties actually paid does not allow to extract any margin from the sale of its products [80] .

The Court further pointed out that MPEG-LA’s offer did not violate FRAND principles, because it referred to a licence covering all companies within the group, to which the Defendant belonged [81] . In the electronics and mobile communications industries, licences on a group level are in line with the industry practice and, therefore, FRAND-compliant [82] .

Implementer’s counteroffer

Having said that, the Court found that the Defendant failed to make a FRAND counteroffer [83] .

In particular, the counteroffer made in November 2017 after the commencement of the present proceedings violated the FRAND principles in terms of content, because it was limited to a licence covering solely the Claimant’s patent portfolio and not all patents included in the MPEG LA pool [84] . Furthermore, the counteroffer established different licensing rates for different regions (especially for China) without factual justification [85] .

Furthermore, the second counteroffer made by the Defendant after the end of the last oral hearing was belated and, therefore, not FRAND. The Court held that the Claimant was not given sufficient time to respond to that counteroffer, so that there was no need for any further assessment of its content [12] . On the contrary, the Court expressed the view that the purpose of this counteroffer was most likely to delay the infringement proceedings [12] .

Provision of security

Since Defendant’s counter-offers were not FRAND in terms of content, the Court did not have to decide, whether the security provided in form of bank guarantees was FRAND or not. The Court noted, however, that the amounts provided were insufficient, since they were calculated on basis of Defendant’s counteroffer from November 2017, which itself failed to meet the FRAND requirements [86] .

• [1] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, para. 36.
• [2] Ibid, para. 35.
• [3] Ibid, para. 37.
• [4] Ibid, para. 453.
• [5] Ibid, para. 39.
• [6] Ibid, para. 43.
• [7] Ibid, para. 44.
• [8] Ibid, para. 53.
• [9] Ibid, para. 2.
• [10] Ibid, para. 54.
• [11] Ibid, para. 65.
• [12] Ibid, para. 716.
• [13] Ibid, paras. 143-208.
• [14] Ibid, paras. 209-293.
• [15] Ibid, paras. 295-302.
• [16] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [17] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, paras. 304 et seqq.
• [18] Ibid, para. 307.
• [19] Ibid, para. 310.
• [20] Ibid, para. 310. In this respect, the Court pointed out that – vice versa – also a non-essential patent might confer a dominant position, if the patented invention is superior in terms of technological merit and/or economical value, para. 312.
• [21] Ibid, paras. 310 et seq.
• [22] Ibid, para. 311.
• [23] Ibid, paras. 315 et seqq.
• [24] Ibid, para. 321.
• [25] Ibid, para. 326.
• [26] Ibid, para. 327.
• [27] Ibid, para. 330.
• [28] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06.
• [29] Ibid, paras. 331 et seqq.
• [30] Ibid, para. 335.
• [31] Ibid, para. 337.
• [32] Ibid, para. 339.
• [33] Ibid, para. 343.
• [34] Ibid, para. 345.
• [35] Ibid, para. 356.
• [36] Ibid, paras. 357 et seqq.
• [37] Ibid, paras. 366 et seqq.
• [38] Ibid, para. 340.
• [39] Ibid, para. 341.
• [40] Ibid, paras. 395 et seqq.
• [41] Ibid, paras. 400 et seqq.
• [42] Ibid, para. 399.
• [43] Ibid, para. 405.
• [44] Ibid, paras. 411-417.
• [45] Ibid, para. 419.
• [46] Ibid, para. 421.
• [47] Ibid, para. 425.
• [48] Ibid, para. 422.
• [49] Ibid, paras. 426 et seqq.
• [50] Ibid, para. 429.
• [51] Ibid, para. 431.
• [52] Ibid, para. 432.
• [53] Ibid, para. 433.
• [54] Ibid, para. 438.
• [55] Ibid, para. 443.
• [56] Ibid, para. 444.
• [57] Ibid, para. 445.
• [58] Ibid, para. 579.
• [59] Ibid, para. 582.
• [60] Ibid, paras. 583 et seqq.
• [61] Ibid, para. 564.
• [62] Ibid, paras. 568 et seqq.
• [63] Ibid, paras. 573 et seqq.
• [64] Ibid, para. 451.
• [65] Ibid, para. 449.
• [66] Ibid, para. 454.
• [67] Ibid, paras. 487 et seqq.
• [68] Ibid, para. 491.
• [69] Ibid, para. 495.
• [70] Ibid, paras. 591 et seqq., particularly para. 596.
• [71] Ibid. para. 597.
• [72] Ibid. para. 504.
• [73] Ibid. para. 508.
• [74] Ibid. para. 514.
• [75] Ibid. paras. 511 et seqq.
• [76] Ibid. para. 524.
• [77] Ibid, para. 528.
• [78] Ibid, paras. 531-543.
• [79] Ibid, paras. 545 et seqq.
• [80] Ibid, para. 546.
• [81] Ibid, para. 599.
• [82] Ibid, para. 600.
• [83] Ibid, para. 603.
• [84] Ibid, paras. 605 et seqq.
• [85] Ibid, paras. 617 et seqq.
• [86] Ibid, para. 625.

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