Case Law post CJEU ruling Huawei v ZTE

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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.

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. [22] 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. [23] 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. [24]
    2. Market power and notice of infringement
      The court does not elaborate on the market power issue. As part of the notice of infringement [25] 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. [26] 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: [27] 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, [28] 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. [29] . 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.
  • [22] Case No. 7 O 66/15, para. 53 et seq.
  • [23] Case No. 7 O 66/15, para. 56
  • [24] Case No. 7 O 66/15, para. 53
  • [25] Case No. 7 O 66/15, para. 57
  • [26] Case No. 7 O 66/15, para. 65-69
  • [27] Case No. 7 O 66/15, para. 58
  • [28] Case No. 7 O 66/15, para. 70-72
  • [29] Case No. 7 O 66/15, para. 59 et seq

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) [62] . 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 [63] .

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 [64] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [64] .

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 [64] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [64] . 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 [65] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [66] . 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 [67] .

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 [68] . 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) [68] . This deadline was extended for almost three weeks until 7 May 2018 [68] .

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) [68] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [69] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [69] . 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 [70] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [71] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [69] . 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) [69] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [72] . 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 [73] . 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” [73] . The Court held that the Defendant failed to establish such fact [72] . 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?) [72] .

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 [74] .

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 [75] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [75] . 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 [65] . 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 [65] . 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 [76] .

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 [74] . 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 [74] .

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 [74] . 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 [78] .

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 [79] .

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) [80] .

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 [65] . 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) [65] .

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) [81] .

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) [66] .

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 [66] .

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) [82] . 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 [66] .

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 [83] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [83] . 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 [83] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [83] .

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 [84] . 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 [84] . 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”) [84] . 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 [85] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [85] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [85] .


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 [86] . On the other hand, it does not define the ownership of the patent in material legal terms [87] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [88] .

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 [89] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [89] . The Defendant failed convince the Court that this was the case with the SEP in suit [89] .

  • [62] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [63] Ibid, page 23 et seq.
  • [64] Ibid, page 5.
  • [65] Ibid, page 25.
  • [66] Ibid, page 26.
  • [67] Ibid, pages 5 et seq.
  • [68] Ibid, page 6.
  • [69] Ibid, page 19.
  • [70] Ibid,page 23.
  • [71] Ibid, pages 16 et seqq.
  • [72] Ibid, page 20.
  • [73] Ibid, page 21.
  • [74] Ibid, page 22.
  • [75] Ibid, page 24.
  • [76] Ibid, pages 24 et seq.
  • [77] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [78] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [79] Ibid,pages 23 and 25.
  • [80] Ibid, page 23.
  • [81] Ibid, pages 23 and 25 et seq.
  • [82] Ibid, pages 26 et seqq.
  • [83] Ibid, page 27.
  • [84] Ibid, page 28.
  • [85] Ibid, page 29.
  • [86] Ibid, page 10.
  • [87] Ibid, pages 10 et seq.
  • [88] Ibid, page 11.
  • [89] Ibid, page 30.

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) [1] . 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 [2] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [3] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [3] .

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) [4] . 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 [5] . 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 [6] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [6] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [7] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [5] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [8] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [9] , it found that the Claimant cannot enforce its patent rights for the time being [10] , 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) [8] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [12] .

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 [13] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [14] . 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 [15] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [16] .

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 [17] . 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 [17] . 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 [17] .

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 [17] . 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) [17] . 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 [17] .

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 [18] .

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 [19] . 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 [20] .

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 [21] .

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 [22] . 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 [22] .

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 [23] . 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 [23] . 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 [23] .

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) [24] . 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) [24] . 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 [24] .

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 [25] .

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 [26] .

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 [27] . Given the circumstances of the specific case, even an implicit behaviour can suffice [27] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [28] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [28] . 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 [28] . 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 [28] .

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 [29] . 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 [30] .

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 [31] .

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 [32] . 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 [5] .

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 [33] . 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 [34] .

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 [35] . 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 [35] . 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 [35] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [36] . 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 [37] .

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 [7] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [38] .

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 [39] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [40] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [41] .

First, the terms did not adequately consider the effects of patent exhaustion [42] . As a rule, FRAND requires licensing offers to contain respective provisions [43] . 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 [44] .

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 [45] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [46] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [47] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [48] . 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 [48] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [49] .

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 [39] . 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) [50] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [51] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [51] . 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 [52] .

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 [53] . 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 [54] .

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 [55] . 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 [56] . 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 [57] .

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 [58] . 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 [58] . 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) [58] . 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 [58] . 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 [59] .

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 [60] . 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 [61] . 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 [62] .

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 [63] .


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 [64] .

  • [1] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [2] Ibid, para. 13.
  • [3] Ibid, para. 12.
  • [4] Ibid, paras. 14 and 211.
  • [5] Ibid, para. 15.
  • [6] Ibid, para. 16.
  • [7] Ibid, para. 236.
  • [8] Ibid, paras. 140 and 313 et seqq.
  • [9] Ibid, paras. 114 et seqq.
  • [10] Ibid, paras. 60 and 140.
  • [11] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [12] Ibid, para. 142.
  • [13] Ibid, para. 148.
  • [14] Ibid, paras. 153 and 146.
  • [15] Ibid, paras. 159 - 181.
  • [16] Ibid, para. 158.
  • [17] Ibid, para. 147.
  • [18] Ibid, paras. 183 et seqq.
  • [19] Ibid, para. 191.
  • [20] Ibid, para. 188.
  • [21] Ibid, paras. 195 et seqq.
  • [22] Ibid, para. 199.
  • [23] Ibid, para. 198.
  • [24] Ibid, para. 200.
  • [25] Ibid, para. 203.
  • [26] Ibid, para. 205.
  • [27] Ibid, para. 208.
  • [28] Ibid, para. 207.
  • [29] Ibid, para. 210.
  • [30] Ibid, para. 212.
  • [31] Ibid, paras. 215 et seq.
  • [32] Ibid, para. 220.
  • [33] Ibid, paras. 222 et seqq.
  • [34] Ibid, para. 225.
  • [35] Ibid, para. 233.
  • [36] Ibid, para. 228.
  • [37] Ibid, para. 230.
  • [38] Ibid, para. 237.
  • [39] Ibid. para. 241.
  • [40] Ibid, para. 242.
  • [41] Ibid, paras. 283 et seqq.
  • [42] Ibid, para. 285.
  • [43] Ibid, para. 288.
  • [44] Ibid, paras. 292 et seq.
  • [45] Ibid, paras. 298 et seqq.
  • [46] Ibid, para. 301.
  • [47] Ibid, para. 306.
  • [48] Ibid, para. 311.
  • [49] Ibid, para. 271.
  • [50] Ibid, para. 250.
  • [51] Ibid, para. 248.
  • [52] Ibid, para. 267.
  • [53] Ibid, paras. 256 and 259 et seq.
  • [54] Ibid, para. 262.
  • [55] bid, paras. 258 and 264.
  • [56] Ibid, paras. 263 and 265.
  • [57] Ibid, para. 265.
  • [58] Ibid, para. 273.
  • [59] Ibid, para. 274.
  • [60] Ibid, para. 276.
  • [61] Ibid, para. 277.
  • [62] Ibid, para. 281.
  • [63] Ibid, para. 315.
  • [64] Ibid, paras. 75 et seq.