Case Law post CJEU ruling Huawei v ZTE

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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) [88] . 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 [89] .

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [90] and also market, inter alia in Germany, LTE-compliant products [91] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [91] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [92] . An offer for a licensing agreement was, however, not finalized [92] .

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 [93] .

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 [94] : 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 [95] . 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 [96] .

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[97] .

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 [98] . 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 [99] 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[100] .

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 [101] .

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 [102] .

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 [103] . 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 [104] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[105] .

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[106] . 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 [106] . 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 [107] .

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 [108] . 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[109] , 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 [110] . 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 [111] .

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’ [98] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[98] .

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 [99] . 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[100] . 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 [100] .

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[112] .

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 [113] .


  • [88] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
  • [89] Ibid, para. 22.
  • [90] Ibid, para. 40.
  • [91] Ibid, para. 24.
  • [92] Ibid, para. 25.
  • [93] Ibid, para. 27.
  • [94] Ibid, paras. 29 et seqq.
  • [95] Ibid, paras. 30 et seqq
  • [96] Ibid, paras. 34 et seqq
  • [97] Ibid, para. 77.
  • [98] Ibid, para. 65.
  • [99] Ibid, para. 66.
  • [100] Ibid, para. 67.
  • [101] Ibid, paras. 72 et seqq
  • [102] Ibid, para. 42.
  • [103] Ibid, para. 43.
  • [104] Ibid, para. 46.
  • [105] Ibid, para. 47.
  • [106] Ibid, para. 53.
  • [107] Ibid, paras. 53 et seqq
  • [108] Ibid, paras. 58 et seqq
  • [109] Ibid, para. 61.
  • [110] Ibid, para. 63.
  • [111] Ibid, para. 64.
  • [112] Ibid, para. 68.
  • [113] Ibid, para. 69.

Updated 24 July 2020

Sisvel v Haier, Federal Court of Justice (Bundesgerichtshof)

Federal Court of Justice - BGH
5 May 2020 - Case No. KZR 36/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (Standard Essential Patents, or SEPs).

The defendants are a German and a French subsidiary of the Haier group (Haier) which has its headquarters in China. The Haier group produces and markets -among other things- electronic devices complying with the GPRS standard.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) about the infringing use of Sisvel's SEPs. Sisvel provided a list of approx. 450 patents included in its portfolio and informed Haier that Sisvel offers licences for its SEPs.

On 10 April 2013, Sisvel made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

In August and November 2013, Sisvel sent further letters with information about its licensing program to Haier China. Haier China replied to Sisvel only in December 2013. It expressed the hope to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned by Sisvel in previous communications.

In August 2014, Sisvel made a licensing offer to Haier, which was rejected in September 2014. Shortly after that, Sisvel filed an infringement action against Haier before the District Court of Duesseldorf (District Court) based on a SEP covering data transmission technology under the GPRS standard (patent in suit). As a reaction to this step, Haier filed a nullity action against the patent in suit before the German Federal Patent Court in March 2015.

On 3 November 2015, the District Court granted an injunction against Haier [1] . The District Court also ordered the recall and destruction of infringing products. It further recognised Haier's liability for damages on the merits and ordered Haier to render full and detailed account of the sales of infringing products to Sisvel.

Haier appealed this decision and also requested the Higher District Court of Duesseldorf (Appeal Court) to order a stay in the enforcement of the injunction granted by the District Court. In January 2016, the Appeal Court rendered a respective order [2] .

In the appeal proceedings, Haier argued –among other things– that the District Court had not adequately taken into account the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE in a decision rendered in July 2015 (Huawei judgment), that is after Sisvel had filed the infringement action [3] . During the course of the proceedings before the Appeal Court, on 16 January 2016, Haier further declared that is was willing to take a FRAND licence from Sisvel, however, only in case that the German courts would finally confirm the validity and infringement of the patent in suit. On 23 March 2016, Haier sent another letter to Sisvel, stating that their position remained unchanged. Moreover, Haier requested claim charts with respect to all of Sisvel's patents as well as further information about the royalty calculation. In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

By judgment dated 30 March 2017, the Appeal Court partially granted Haier's appeal [4] . It confirmed Haier's liability for damages on the merits as well as its obligation to render accounts. However, the Appeal Court held that Haier was under no obligation to recall and destroy infringing products, because Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier. The Appeal Court did not have to decide about the claim for injunctive relief, because the parties had agreed to settle the matter in this regard. Reason for that was that the patent in suit had expired in September 2016. Sisvel appealed the decision of the Appeal Court.

In October 2017, the Federal Patent Court narrowed certain claims of the patent in suit and, otherwise, confirmed its validity [5] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [6] .

With the present judgment dated 5 May 2020 [7] (cited by https://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=3abd1ba29fc1a5b129c0360985553448&nr=107755&pos=0&anz=1), the FCJ reversed the judgment of the Appeal Court. The ruling of the District Court in first instance was confirmed with respect to Sisvel's damage claims and claims for information and rendering of accounts. Sisvel's claims for the recall and destruction of infringing products were limited to products that were in the possession of Haier or had been produced or delivered until the expiration of the patent in suit in September 2016. Sisvel's claim for injunctive relief was not subject to the Court's ruling, since this claim was withdrawn in the course of the preceding proceedings before the Appeal Court after the patent in suit had lapsed.

B. Court's reasoning

The Court found that the patent in suit was essential to the GPRS standard and infringed [8] .

Furthermore, the Court held that by initiating infringement proceedings against Haier, Sisvel had not abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [9] .

In the Court's eyes, Sisvel met its obligation under the Huawei judgment to notify Haier about the infringing use of its SEPs prior to filing the infringement action. On the other hand, Haier had failed to comply with its Huawei obligation to adequately express its willingness to enter into a licensing agreement with Sisvel. Although this fact was no longer decisive for the present case, the Court also expressed the view that Sisvel had made a FRAND licensing offer to Haier in line with the respective Huawei requirement.

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [10] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [11] . For this, several factors need to be considered [12] . One key factor is the relevant market. When a patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives to the standard are not available for products brought on a downstream market, relevant for the assessment of dominance is the (distinct) market, in which licences for the patent in question are offered [13] .

On this basis, the Court found that Sisvel was in a dominant market position: The patent in suit was essential to the practice of the GPRS standard and non GPRS compliant mobile phones could not compete in the (downstream) market, since neither the previous not subsequent standards generations allowed the same features [14] .

In this context, the FCJ was not convinced by Sisvel's argument that SEP holders' market dominance is restricted by the fact that standards implementers – compared to buyers in markets for goods and services – often have a stronger standing in negotiations [15] . The Court saw that –unlike buyers of goods and services– standards implementers are in the favourable position to be able to access protected technology needed for producing standard compliant products, even without an agreement with the patent holder [16] . According to the Court, however, this fact does not suffice to rule out market dominance. The extent of SEP holders' bargaining power towards individual implementers in licensing negotiations is not relevant [17] . A dominant market position is conferred by the patent holder's structural superior market power arising from the legal ability to exclude any implementer from the market by enforcing exclusivity rights [18] .

Similarly, the Court pointed out that the limitations imposed by the Huawei judgment with respect to the enforcement of SEPs likewise do not impair market dominance [19] . The Court noted that these limitations significantly weaken the bargaining position of the SEP holder, since the lever needed for negotiations on an equal footing is not available to the latter to the full extent [19] . Nevertheless, this does not suffice to question the dominant position of the patent holder, even in cases in which the implementer might engage in 'hold-out' by delaying negotiations until the patent expires [19] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [20] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [20] .

Abuse of market dominance

Looking at the parties' conduct, the Court found – in contrast to the Appeal Court – that Sisvel did not abuse its dominant market position [21] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [22] . The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position [22] . According to the FCJ, an obligation to allow the use of SEPs does, however, not exist, when the implementer is not willing to obtain a licence on FRAND terms. A patent holder –even with a dominant market position– is not obliged to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [23] .

Against this background, the Court identified two cases, in which the assertion of exclusivity rights (claims for injunctive relief and/or the recall and destruction of infringing products) by an SEP holder can amount to an abuse of market dominance:

1. The implementer has made an unconditional licensing offer on terms which the patent holder cannot reject, without abusing its dominance or violating its non-discrimination obligation (insofar the Court repeated its previous ruling in 'Orange-Book-Standard'; judgment dated 6 May 2009 – Case No KZR 39/06) [24] ;

2. the implementer is, basically, willing to take a licence, but the SEP holder has not made 'sufficient efforts' to facilitate the signing of an agreement in line with the 'particular responsibility' attached to its dominant position [25] .

Notification of infringement

Consequently, the Court took the view that the SEP holder has an obligation to notify the implementer about the infringing use of the patent in suit prior to filing an infringement action [26] . The FCJ seems to suggest that this obligation arises, only when the implementer is not already aware of the infringement [27] .

The Court explained that technology implementers are, in principle, obliged to make sure that no third party rights are infringed, before assuming the manufacturing or sales of products [28] . However, this task is often significantly challenging, especially in the Information and Communication Technology (ICT) sector, in which a product might be affected by numerous patent rights [29] . The patent holder, who will regularly have already examined infringement, should, therefore, inform the implementer about the use of the patent before initiating court proceedings, allowing the latter to assess the need to obtain a licence on FRAND terms and, consequently, avoid an injunction [30] .

In the eyes of the Court, it will usually be sufficient to address a respective notification of infringement to the parent company within a group of companies [31] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [32] . A detailed technical and legal analysis of the infringement is not required: the implementer should only be placed in a position to evaluate the infringement allegation, eventually by taking recourse to expert and/or legal advice [32] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [32] .

Furthermore, the FCJ added that a patent holder which has provided information about the patent infringed and the standard affected can expect that the implementer will indicate within a short period of time that the information received is not sufficient for the assessment of infringement [33] . This applies also to cases, in which a number of patents and standards are involved [33] .

Taking the above into consideration, the Court found that Sisvel had given proper notification of infringement to Haier. The letter dated 20 December 2012 and the following correspondence met the relevant requirements [34] .

Willingness

Considering Haier's conduct, on the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [35] . In this respect, the FCJ disagreed with the respective assessment of the Appeal Court which had reached the opposite conclusion.

The Court observed that the first response of Haier China to Sisvel's notification was belated, since Haier had waited for almost one year (December 2012 – December 2013) to react [36] . An implementer taking several months to respond to a notification of infringement typically sends a signal that there is no interest in taking a licence [36] . The fact that Sisvel made a FRAND commitment towards ETSI covering the patent in suit only after the first notification to Haier in December 2012 did not change anything in the assessment of timeliness: in its letter dated 20 December 2012, Sisvel had already declared that it is prepared to offer a FRAND licence to Haier [36] . The question, whether a late response made prior to the start of infringement proceedings (as it was the case with Haier's response from December 2013) shall, nevertheless, be taken into account, when assessing parties' compliance with the Huawei judgment (as the Appeal Court had assumed) was left undecided by the FCJ [37] . In the present case, this question was not relevant, since –in terms of content – none of Haier's responses could be seen as a sufficient declaration of willingness to obtain a licence [38] .

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' (citing High Court of Justice of England and Wales, judgment dated 5 April 2017, [2017] EWHC 711(Pat) - Unwired Planet v Huawei) [39] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [39] . On the contrary, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [39] .

On this basis, the Court found that Haier's response in December 2013, in which only the hope to have a 'formal negotiation' was expressed, was not a sufficient declaration of willingness: This declaration was neither clear not unambiguous in the above sense [40] .

Similarly, Haier's letter dated 16 January 2016 did not contain a sufficient declaration of willingness, since Haier had made the signing of a licence subject to the prior confirmation of the validity and infringement of the patent in suit by German courts [41] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of a licensing agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [41] .

Furthermore, the FCJ found that Haier did not sufficiently express its willingness by the letter dated 23 March 2016 either. Apart from the fact that Haier had not withdrawn the above unacceptable condition, the Court took the view that requesting the production of claim charts for all of Sisvel's patents almost three years after the receipt of the notification of infringement was an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [42] .

Since no adequate declaration of willingness by Haier was in place, the Court did not answer the question, whether it is possible for the implementer to fulfil this obligation after infringement proceedings have been initiated [43] .

  • [1] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [2] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [3] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [4] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [5] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [6] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [7] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [8] Ibid, paras. 9 et seqq. and 59.
  • [9] Ibid, para. 52.
  • [10] Ibid, para. 54.
  • [11] Ibid, para. 56.
  • [12] Ibid, paras. 57 et seqq.
  • [13] Ibid, para. 58.
  • [14] Ibid, paras. 59 et seq.
  • [15] Ibid, para. 61.
  • [16] Ibid, para. 63.
  • [17] Ibid, para. 62.
  • [18] Ibid, paras. 61 et seqq. According to the FCJ, market entry barriers are created already by the fact that the respective legal obstacles make it unreasonable for any company to enter a market, without having taken a licence before, see para. 63.
  • [19] Ibid, para. 64.
  • [20] Ibid, para. 65.
  • [21] Ibid, paras. 67 et seqq.
  • [22] Ibid, para. 69.
  • [23] Ibid, para. 70.
  • [24] Ibid, para. 71.
  • [25] Ibid, para. 72.
  • [26] Ibid, paras. 73 et seqq.
  • [27] Ibid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission.
  • [28]  Ibid, para. 74.
  • [29] Ibid, para. 74.
  • [30] Ibid, para. 74 and 85.
  • [31] Ibid, para. 89.
  • [32] Ibid, para. 85.
  • [33] Ibid, para. 87.
  • [34] Ibid, paras. 86 et seqq.
  • [35] Ibid, paras. 91 et seqq.
  • [36] Ibid, para. 92.
  • [37] Ibid, paras. 93 et seq.
  • [38] Ibid, para. 94.
  • [39] Ibid, para. 83.
  • [40] Ibid, para. 95.
  • [41] Ibid, para. 96.
  • [42] Ibid, para. 98.
  • [43] Ibid, para. 97.

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.

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