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 9 November 2020

Sharp v Daimler

LG Munich
10 September 2020 - Case No. 7 O 8818/19

A. Facts

The claimant is part of the Sharp group with headquarters in Japan (Sharp). Sharp holds a portfolio of patents declared as (potentially) essential to the practice of various wireless telecommunication standards (Standard Essential Patents, or SEPs) developed by the European Telecommunications Standards Institute (ETSI).

The defendant, Daimler, is a major German car manufacturer. Daimler produces and sells cars in Germany with connectivity features which implement standards developed by ETSI.

Sharp declared the patent involved in the present case as (potentially) essential for the 4G/LTE standard towards ETSI. ETSI requires right holders to commit to make patents that are or might become essential to the practice of a standard accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

In 2017, Sharp joined the Avanci licensing platform. Avanci offers licences to SEPs reading on connectivity standards to car manufacturers based on a standard licensing agreement and fixed rates. Avanci had been in contact with Daimler about a potential licence already since September 2016 without, however, signing an agreement.

On 20 May 2019, after an initial contact, Sharp sent claim charts to Daimler mapping its SEPs – including the patent in suit – to the relevant parts of the affected standards.

On 7 June 2019, Daimler responded that it is, in principle, willing to take a licence for patents used, but asked whether Sharp offered a bilateral licence or a licence from the Avanci platform. If a bilateral licence was offered, Daimler pointed out that it assumed that its suppliers could also be licensed.

On 23 July 2019, Daimler sent a further letter to Sharp arguing that not Daimler, but its (not individually identified) suppliers should be licensed. Daimler claimed that Sharp would breach its FRAND commitment towards ETSI, in case no licences were offered to Daimler's suppliers and requested information about agreements already signed by Sharp, especially with companies supplying connectivity units to Daimler.

On 8 August 2019, Sharp responded and informed that it intended to make an individual licensing offer to Daimler. For this, Sharp requested certain information from Daimler, particularly regarding Daimler's suppliers.

On 18 September 2019, Daimler refused to provide the information requested by Sharp and referred again to its suppliers as the correct addressees for Sharp's licensing demands.

On 22 October 2019, Sharp made an offer for a bilateral FRAND licence to Daimler. This offer was not accepted.

Subsequently, Sharp filed the present infringement action against Daimler before the District Court of Munich (Court). Several of Daimler's suppliers joined the proceeding in support of Daimler.

On 17 December 2019, after the action was filed, Daimler made a counteroffer which was followed by a request towards Sharp to consent to a stay of the pending infringement proceedings. On 31 December 2019, Sharp rejected Daimler's counteroffer.

During the course of the trial, Sharp agreed with one of Daimler's suppliers that joined the proceedings on a licensing agreement. Consequently, Sharp adapted the claims asserted in trial.

With the present judgment [19] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2020-N-22577?hl=true), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to recall and destroy infringing products, render accounts and provide information necessary for the calculation of damages to Sharp.


B. Court's reasoning

The Court found that the patent-in-suit is essential to the practice of the 4G/LTE standard [20] and infringed [21] . For this reason, Sharp was entitled -among other claims- to injunctive relief [22] .

Daimler asserted a so-called 'FRAND-defence', basically, arguing that by filing an infringement action, Sharp abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. Among other points, it was argued that Sharp had failed to comply with the conduct requirements established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [23] (Huawei decision, or framework).

The Court dismissed the FRAND-defence raised by Daimler and also found that Daimler could not rely on a FRAND-defence derived from its suppliers [24] .

Abuse of market dominance

According to the Court, an abuse of market dominance by the enforcement of SEPs can occur, if the patent holder did not make 'sufficient efforts' to satisfy the 'particular responsibility' attached to its dominant position and facilitate the signing of an agreement with a licensee, which is 'in principle willing to take a licence' [25] . This requires, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [26] . The Court explained that it cannot be requested by the SEP holder to 'impose' a licence to any standards user [26] .

Based on the above, the Court found that the initiation of the present proceedings by Sharp was not abusive in terms of Article 102 TFEU [27] . The Court did not establish whether Sharp had a dominant market position, but just assumed that this was the case [27] Nevertheless, an abuse of (assumed) dominance was not given, since Daimler had failed to adequately express willingness to obtain a licence for Sharp's SEP portfolio [28] .

Willingness

The Court explained that 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' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [26] .

This means that the implementer should not delay licensing negotiations [29] . In the eyes of the Court, this is particularly important since implementers, which already use the patented standardized technology prior to negotiations, could have the -sole or predominant- interest to delay the signing of a licence until the expiration of the patent [29] .

Having said that, the Court found that Daimler did not behave as a 'willing' licensee [28] .

Looking at Daimler's behaviour before the counteroffer to Sharp was made, the Court held that a 'clear' declaration of willingness is missing [30] . In its first response to Sharp dated 7 June 2019, Daimler did not express a commitment of any kind going beyond the general willingness to discuss a licence, if Sharp's patents were used [31] . Furthermore, Daimler's letter dated 23 July 2019 did neither contain an adequate declaration of willingness, particularly since Daimler referred Sharp -without specification- to its suppliers and insisted that Sharp is obliged to license the latter [32] . The same is true with respect to the statement dated 18 September 2019, in which Daimler again referred to its suppliers and refused to provide Sharp with information necessary for drawing up a licensing offer [33] . The Court noted that although no legal obligation to share the information requested by Sharp existed, Daimler's respective refusal made clear that it did not engage in the discussions in a 'target-oriented manner', but rather aimed at delaying the negotiations [34] . This is also confirmed by the fact that Daimler's response came almost six weeks after Sharp's respective request; the Court did not see any reason why Daimler's reaction took so long [34] .

In addition, the Court noted that the finding that Daimler acted as an 'unwilling' licensee was reinforced by Daimler's overall behaviour in the discussions with the Avanci platform [35] . The Court held that for the assessment of the 'willingness' of an implementer who raises a FRAND defence the entire conduct must be taken into account, not only facts occurring, in terms of time, directly after receipt of an infringement notification [36] . The standard for the assessment of willingness should not depend on the -rather random- fact of whether the implementer was first approached by the patent holder or took the initiative to seek a licence itself, instead [37] . Although the duties established in the Huawei judgment (one of which is to react to an infringement notification by expressing 'willingness' to obtain a licence) shall, as a rule, be followed as 'steps' in the order described by the CJEU, exceptions must be allowed on a case-by-case basis, if the parties' behaviour allows for that and a purely 'formalistic' view of the Huawei framework does not appear appropriate [38] . According to the Court this was the case here, since Daimler that had been in contact with Avanci since September 2016 and had not expressed the willingness to take a licence at any point in time [39] .

The Court further found that Daimler's counteroffer dated 17 December 2019, which was made only after the infringement action was filed, could not remedy the missing willingness [40] . In the view of the Court, the fact that the counteroffer was followed by a request towards Sharp to consent to a stay of the ongoing proceedings showed, in the present case, that Daimler only aimed at causing delay; the counteroffer could, therefore, not compensate the 'massive unwillingness' which Daimler had demonstrated up to that point in time [41] . In this respect, the Court noted that the possibility to remedy flaws during pending court proceedings (e.g. by making a counteroffer), is, in principle, given, however, under increasingly stricter conditions as the trial progresses [42] .

The Court also highlighted that, in terms of content, Daimler's counteroffer did not express a willingness to obtain a licence on 'whatever terms are in fact FRAND' [43] . By using a different 'reference point' for the royalty calculation, Daimler had counteroffered only a fraction of the fees offered by Sharp or collected by Avanci from its competitors, so that the rejection of the counteroffer was 'logically necessary' [44] .

In this context, the Court made clear that for the assessment of willingness only the behaviour of Daimler was relevant [45] . What is more, Daimler could not rely on the -alleged- willingness of the suppliers that joined the proceedings to obtain a licence from Sharp, in order to avoid an injunction [46] . Accordingly, the Court did not examine whether Daimler's suppliers had indeed acted as 'willing licensees' [46] .

Non-discrimination / licensing level

Apart from the above, the Court explained that Sharp did not act in an abusive or discriminatory manner by seeking to license only Daimler as the end device manufacturer [47] .

The Court took the view that Sharp was not obliged to license Daimler's suppliers [48] . The fact that in the (German) automotive sector it is common that suppliers take licences concerning components sold to car manufacturers, does not oblige Sharp to respect and accept this practice [49] . On the contrary, as far as its products increasingly use wireless telecommunications technologies, Daimler must accept the practices prevailing in this field which include licensing also to end device manufacturers [49] .

Irrespective of this, Sharp is under no legal duty to grant licences to component manufacturers; it is only obliged to grant 'access' to the standard, on which its SEPs read [50] . The patent holders' commitment towards ETSI creates an obligation to license SEPs to third parties [51] . The Court highlighted that this does not entail, however, an obligation to grant licences at all levels of the value chain [52] . Such an obligation does not arise either from competition nor from patent or contract law in conjunction with the FRAND undertaking towards ETSI [52] .

In particular, EU competition law does not establish an obligation to license SEPs at all levels of the value chain [53] . According to the Court, patent holders are, in principle, free to choose the level of the value chain for licensing [54] . In the Huawei judgment, the CJEU pointed out that the FRAND undertaking creates 'legitimate expectations' on the part of third parties to be licensed by the patent holder. The Court held, however, that by that no obligation to license all suppliers of an end-device manufacturer is created; access to the market does not necessarily require a licence, but just a 'possibility of legal use', which can be, for instance, given through a licence granted at the last level of the value chain, from which suppliers can draw 'have-made-rights' [54] .

The Court also explained that neither patent law dictates the level of the value chain, at which SEP licences must be granted [55] . Especially the fact that not all patents contained in a SEP portfolio are necessarily exhausted at all times at the level of component manufacturers speaks for licensing at the end-device level (in addition to the more efficient 'management' of the licensing fees which is possible in this scenario) [56] .

Finally, the Court pointed out that contract law in conjunction with the FRAND undertaking towards ETSI do not impose an obligation on the patent holder to license every interested third party [57] . Under the applicable French law, Section 6.1. ETSI IPR Policy is to be understood as establishing only an obligation to negotiate a FRAND agreement in good faith with a party seeking a licence [58] . However, by referring to 'equipment', this provision addresses only end-device manufacturers, since not all components necessarily implement the standard as a whole [59] . In the eyes of the Court, the views expressed by the European Commission in different occasions in the past do not lead to a different conclusion [60]

FRAND defence raised by suppliers

The Court further found that Daimler cannot profit from a FRAND defence raised by suppliers [61] . The defendant can rely on such defence only if the patent holder is under an obligation to license the suppliers; this does not apply, however, when the defendant is in a position to sign a licence with the SEP holder itself which sufficiently considers patent exhaustion within the relevant value chain [61] .

The Court considered that this was the case here. Daimler's suppliers did not have an own claim to be granted a licence against Sharp, but a claim for a 'legally secured access' to standardised technology which cannot be considered in favour of Daimler [62] .


C. Other issues

Furthermore, the Court ruled that there are no grounds for a limitation of Sharp's claim for injunctive relief based on proportionality considerations [63] . Daimler had argued that no injunction should be granted based on the patent in suit, since the vehicles it manufactures are 'complex' products integrating a large number of components and the telematic control unit, on which Sharp's SEPs read, is of minor importance for the car.

The Court made clear that, under German law, proportionality is a general principle of constitutional rank that is to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant [64] . According to the jurisprudence of the Federal Court of Justice, an injunction might not be immediately enforceable in exceptional cases, in which the implementer would suffer hardships not justified by the patent holder's exclusionary right in violation of the principle of good faith [65] .

In the eyes of the Court, any limitation of the right to injunctive relief shall come into question 'in very few exceptional cases' and must, thus, be subject to strict conditions, not least for preserving the 'legal order' as well as 'legal certainty and predictability' [66] . A case-by-case assessment of all relevant facts must take place, whereas the overall substantive and procedural framework (including e.g. the need to provide security for the enforcement of first-instance injunctions) should be considered [66] . The Court explained that only hardships going beyond the usual consequences of an injunction can be taken into account [66] . It should be expected from the infringer to make efforts towards the signing of a licence as soon as possible and take precautions against a potential injunction after receipt of an infringement notification, at the latest [66] .

Against this background, the Court noted that even if only a single component of Daimler's vehicles might be affected in the present case, the dispute revolves around the licensing of a complex patent portfolio (either Sharp's or Avanci's portfolio) [67] . The Court was further not convinced that the features enabled by Sharp's patents were of minor importance to Daimler's vehicles, since a significant part of innovation referring to 'connected cars' relates from both technical and economic angle closely to mobile telecommunications technologies [68] . Finally, the Court also criticized the fact that Daimler did not make serious efforts for signing a licence with Sharp or Avanci [69] .

  • [19] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19
  • [20] Ibid, paras. 68 et seqq
  • [21] Ibid, paras. 25 et seqq
  • [22] Ibid, para. 90
  • [23]  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [24] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19, para. 121
  • [25] Ibid, para. 124
  • [26] Ibid, para. 125
  • [27] Ibid, para. 128
  • [28] Ibid, paras. 130 et seqq
  • [29] Ibid, para. 126
  • [30] Ibid, paras. 132 et seqq
  • [31] Ibid, paras. 134 et seq
  • [32] Ibid, paras. 136 et seq
  • [33] Ibid, paras. 138 et seqq
  • [34] Ibid, para. 140
  • [35] Ibid, para. 141
  • [36] Ibid, paras. 142 et seq
  • [37] Ibid, paras. 143 et seq
  • [38] Ibid, para. 144
  • [39] Ibid, paras. 146-149
  • [40] Ibid, para. 150
  • [41] Ibid, paras. 151 and 153
  • [42] Ibid, para. 152
  • [43] Ibid, para. 154
  • [44] Ibid, paras. 154 et seqq
  • [45] Ibid, paras. 158 and 159
  • [46] Ibid, para. 158
  • [47] Ibid, paras. 161 et seqq
  • [48] Ibid, para. 162
  • [49] Ibid, para. 164
  • [50] Ibid, para. 165
  • [51] Ibid, para. 168
  • [52] Ibid, para. 169
  • [53] Ibid, paras. 170 et seqq
  • [54] Ibid, para. 171
  • [55] Ibid, paras. 173 et seq
  • [56] Ibid, para. 174
  • [57] Ibid, paras. 175 et seqq
  • [58] Ibid, paras. 177 et seqq
  • [59] Ibid, para. 178
  • [60] Ibid, paras. 180-183. The Court referred particularly to the decision of the European Commission, Case No. AT.39985 – Motorola; the Communication on the Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (2011/C 11/01); and the Communication on ICT Standardisation Priorities for the Digital Single Market, COM(2016) 176 final.
  • [61] Ibid, para. 167
  • [62] Ibid, para. 185
  • [63] Ibid, paras. 92-102
  • [64] Ibid, para. 93
  • [65] Ibid, para. 94
  • [66] Ibid, para. 95
  • [67] Ibid, paras. 97 et seq
  • [68] Ibid, paras. 100 et seq
  • [69] Ibid, para. 99

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. [70] 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. [71] 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. [72]
    2. Market power and notice of infringement
      The court does not elaborate on the market power issue. As part of the notice of infringement [73] 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. [74] 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: [75] 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, [76] 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. [77] . 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.
  • [70] Case No. 7 O 66/15, para. 53 et seq.
  • [71] Case No. 7 O 66/15, para. 56
  • [72] Case No. 7 O 66/15, para. 53
  • [73] Case No. 7 O 66/15, para. 57
  • [74] Case No. 7 O 66/15, para. 65-69
  • [75] Case No. 7 O 66/15, para. 58
  • [76] Case No. 7 O 66/15, para. 70-72
  • [77] Case No. 7 O 66/15, para. 59 et seq

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 [78] . 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 [79] .

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 [80] . 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 [81] . 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 [82] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [83] .

With the present judgment dated 5 May 2020 [84] (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 [85] .

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) [86] .

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 [87] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [88] . For this, several factors need to be considered [89] . 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 [90] .

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 [91] .

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 [92] . 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 [93] . 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 [94] . 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 [95] .

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 [96] . 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 [96] . 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 [96] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [97] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [97] .

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 [98] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [99] . 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 [99] . 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 [100] .

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) [101] ;

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 [102] .

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 [103] . The FCJ seems to suggest that this obligation arises, only when the implementer is not already aware of the infringement [104] .

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 [105] . 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 [106] . 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 [107] .

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 [108] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [109] . 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 [109] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [109] .

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 [110] . This applies also to cases, in which a number of patents and standards are involved [110] .

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 [111] .

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 [112] . 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 [113] . 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 [113] . 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 [113] . 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 [114] . 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 [115] .

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) [116] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [116] . 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 [116] .

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 [117] .

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 [118] . 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 [118] .

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 [119] .

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 [120] .

  • [78] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [79] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [80] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [81] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [82] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [83] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [84] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [85] Ibid, paras. 9 et seqq. and 59.
  • [86] Ibid, para. 52.
  • [87] Ibid, para. 54.
  • [88] Ibid, para. 56.
  • [89] Ibid, paras. 57 et seqq.
  • [90] Ibid, para. 58.
  • [91] Ibid, paras. 59 et seq.
  • [92] Ibid, para. 61.
  • [93] Ibid, para. 63.
  • [94] Ibid, para. 62.
  • [95] 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.
  • [96] Ibid, para. 64.
  • [97] Ibid, para. 65.
  • [98] Ibid, paras. 67 et seqq.
  • [99] Ibid, para. 69.
  • [100] Ibid, para. 70.
  • [101] Ibid, para. 71.
  • [102] Ibid, para. 72.
  • [103] Ibid, paras. 73 et seqq.
  • [104] 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.
  • [105]  Ibid, para. 74.
  • [106] Ibid, para. 74.
  • [107] Ibid, para. 74 and 85.
  • [108] Ibid, para. 89.
  • [109] Ibid, para. 85.
  • [110] Ibid, para. 87.
  • [111] Ibid, paras. 86 et seqq.
  • [112] Ibid, paras. 91 et seqq.
  • [113] Ibid, para. 92.
  • [114] Ibid, paras. 93 et seq.
  • [115] Ibid, para. 94.
  • [116] Ibid, para. 83.
  • [117] Ibid, para. 95.
  • [118] Ibid, para. 96.
  • [119] Ibid, para. 98.
  • [120] Ibid, para. 97.

Updated 3 February 2020

Philips v Wiko

OLG Karlsruhe
30 October 2019 - Case No. 6 U 183/16

A. Facts

The Claimant, Philips, holds patents declared as (potentially) essential to the practice of wireless telecommunications standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI), including SEPs reading on the UMTS and LTE standards. Philips committed towards ETSI to make its SEPs accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendant is the German subsidiary of the Wiko group of companies, which has its headquarters in France (Wiko). Wiko sells mobile phones implementing the LTE standard in Germany.

In October 2014, Philips informed the parent company of the Wiko group about its SEP portfolio, but did not receive a response. In July 2015, Philips shared a draft licensing agreement for its SEP portfolio as well as claim charts referring to several of its SEPs with the parent company of the Wiko group, which again did not react at all. In September 2015, Philips shared further technical details regarding its SEPs.

On 19 October 2015, Philips brought an infringement action against Wiko before the District Court of Mannheim based on one of its SEPs, requesting for injunctive relief, information and rendering of accounts, destruction and recall of infringing products from the market as well as a declaratory judgment confirming Wiko’s liability for damages on the merits.

On the next day, 20 October 2015, Wiko sent a letter to Philips, in which it declared its willingness to enter into negotiations with the latter for a licence covering ‘valuable’ patents. In August 2016, during the course of the pending infringement proceedings, Wiko made a counteroffer to Philips. Philips did not accept this offer. Subsequently, Wiko provided security to Philips for the use of its patents, calculated on basis of its counteroffer.

By judgment dated 25 November 2016 [121] , the District Court of Mannheim granted Philips’ claims almost to the full extent. Wiko appealed the District Court’s judgement. In addition, by way of a counterclaim, Wiko requested disclosure of existing licensing agreements signed by Philips with similarly situated licensees (comparable agreements).

With the present judgment [122] , the Higher District Court of Karlsruhe (Court) overturned the ruling of the District Court in part. In detail, the Court confirmed Philips’ claims for information and the rendering of accounts as well as Wiko’s liability for damages on the merits. The Court, however, rejected Philips’ claims for injunctive relief, destruction and recall of infringing products from the market.

Apart from that, the Court also rejected Wiko’s counterclaim regarding the production of comparable agreements in the proceedings.


B. Court’s reasoning

The Court confirmed that Wiko’s products infringe the patent in suit [123] .

Contrary to the view taken previously by the District Court, the Court found, however, that Article 102 of the Treaty for the Functioning of the EU (TFEU) prevents Philips from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings for the time being [124] . In the Court’s eyes, Philips had failed to meet the conduct obligations established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [125] (Huawei framework or obligations) [126] .

Huawei framework

The Court explained that SEP holder’s failure to meet its Huawei obligations will – as a rule – render an infringement action resulting in an exclusion of the implementer from a downstream market (action for injunctive relief and/or recall and destruction of products) abusive in terms of Article 102 TFEU [127] . This will, however, not be the case, when the implementer himself fails to fulfil its duties under the Huawei framework; if the implementer acts in bad faith as an ‘unwilling’ licensee, then SEP holder’s Huawei obligations are ‘suspended’ [127] . As a result, asserting the rights to injunctive relief and/or the destruction and recall of infringing products in court could then be considered as a justified reaction of the SEP holder to the implementer’s unwillingness to enter into a FRAND licence [127] .

Having said that, the Court expressed the view that the parties can remedy potential flaws in their conduct under the Huawei judgment and/or even fulfil their Huawei obligations for the first time during the course of pending infringement proceedings [128] . The Court noted that in Huawei v ZTE, the CJEU did not require that the parties fulfil all conduct obligations established prior to the initiation of court proceedings [129] . In the Court’s eyes, denying the parties such possibility is not compatible either with the general principle of proportionality known to European law, nor with the German civil procedural law, according to which courts need to consider all facts relevant for their decision-making raised in the proceedings until the end of the oral arguments [130] .

Accordingly, an infringement action that did not give rise to any antitrust concerns at the time it was filed, can be considered as abusive at a later point in time, if the situation significantly changed, e.g. the implementer fulfilled its Huawei obligations in the meantime [131] . Vice versa, an action of an abusive nature can later on be ‘corrected’, if the patent holder performs its duties under the Huawei framework during the course of the pending proceedings [131] .

In the Court’s view, a SEP holder seeking to remedy (or fulfil for the first time) obligations under the Huawei framework after the initiation of infringement proceedings must make sure that pressure-free licensing negotiations between the parties are enabled, as required by the CJEU in Huawei v ZTE [132] . For this, the patent holder must use procedural tools available under German law, particularly a motion for suspension of the trial [132] . The SEP holder can also propose a consensual stay of the proceedings, especially when a parallel nullity action against the patent in suit is pending before the Federal Patent Court [132] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [132] .

On the other hand, the Court pointed out that fulfilment of Huawei obligations by the implementer after the beginning of infringement proceedings does not necessarily lead to a dismissal of the claims asserted by the SEP holder [133] . Indeed, if the implementer meets its Huawei duties at a very late point in time in the proceedings (e.g. shortly before the closing of the oral arguments), the Court could eventually neglect this fact in its decision [134] . This way, delays can be avoided. In this context, the Court also made clear that the implementer is not in a position to cause a unilateral suspension of the proceedings; in contrast to the opposite case (that is cases, in which a stay of the proceedings is suggested by the claimant), the SEP holder will usually not be required to agree to a suspension of the proceedings proposed by the implementer, in order to allow pressure-free negotiations to take place [134] . Insofar, the implementer bears the risk that the fulfilment of its obligations under the Huawei framework in the course of a pending infringement trial will have no impact [134] .

Notification of infringement

Looking at the specific conduct of the parties in the present case, the Court found that Philips had fulfilled its obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

The Court confirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [135] . In terms of content, the Court was satisfied by the fact that Philips’ letter from July 2015 named the patent in suit as well as the relevant part of standard document implementing the technical teachings of this patent [136] . The Court explained that the notification does not have to contain (further) information required for a final assessment of the validity and essentiality of the patent in suit [136] . Accordingly, the SEP holder is not obliged to share claims charts customarily used in SEP licensing negotiations with the implementer along with the notification of infringement [136] .

Willingness to enter into a licence

The Court further found that Wiko had sufficiently met its obligation to express its willingness to negotiate a licence with Philips [137] .

The Court agreed with the assessment of the District Court that Wiko’s initial reaction to Philips’ notification in July 2015 by letter dated 20 October 2015 was belated. According to the Court, the time available to the implementer for expressing its willingness to enter into negotiations for a licence will – as a rule – not exceed two months [138] . This period of time will usually be sufficient: since by declaring its willingness to enter into negotiations the implementer does not waive any rights (especially the right to contest the validity and/or infringement of the patents in question), it shall not be given more time than the time needed for an ‘initial overview’ of the SEP holder’s claims [138] . Delaying tactics potentially applied by the implementer must be prevented [138] . Against this background, Wiko’s letter dated 20 October 2015 was sent to Philips too late.

Nevertheless, the Court found that Wiko had remedied the belated response after the beginning of the infringement proceedings. On the one hand, Wiko’s letter dated 20 October 2015 had reached Philips at a very early stage of the proceedings, namely just some days after the action was filed [139] . In addition, Wiko had confirmed its willingness to enter into negotiations with Philips expressed in said letter during the course of the proceedings, by making a counteroffer, rendering accounts and providing security to Philips [139] .

SEP holder’s offer

On the other hand, the Court held that Philips had failed to comply with its obligation to make a FRAND licensing offer to Wiko. In particular, the Court took the view that Philips did not provide sufficient information to Wiko with respect to its licensing offer dated July 2015 [140] .

The Court argued that the ‘fairness’ element of the FRAND commitment establishes an ‘information duty’ (‘Informationspflicht’) of the SEP holder with respect to the content of its licensing offer to the implementer [141] . This duty exists besides the patent holder’s duty to make a FRAND licensing offer to the implementer [142] .

In terms of scope, the Court found that the information duty is, basically, not limited to the calculation of the offered royalty but also covers (objective) facts showing that the ‘contractual compensation factors’ (‘vertragliche Vergütungsfaktoren’) are not discriminatory [143] . The extent of the information to be shared depends on the circumstances of the specific ‘licensing situation’ [143] .

In case that the patent holder has already granted licences to third parties, the information duty will extend also towards its ‘licensing practice’, including comparable agreements [144] .

If the SEP holder uses exclusively a standard licensing programme, then it will be sufficient to show that said programme has been accepted in the market and that the offer made to the implementer corresponds with the standard licensing agreement used [144] .

On the other hand, if the SEP holder has concluded individual licensing agreements with third licensees, then it would be obliged to disclose – at least – the content of the key contractual terms in a way that would allow the implementer to identify whether (respectively why) the offer it received is subject to dissimilar conditions [144] . The Court made, however, clear that – contrary to the approach adopted by the Duesseldorf courts – the SEP holder is not obliged in any case to disclose the full content of all existing comparable agreements [144] . In the eyes of the Court, the information duty serves only the purpose of facilitating good will licensing negotiations. A full disclosure of comparable agreement is, however, uncommon in practice [144] .

In this context, the Court pointed out that the patent holder will have to adequately substantiate the content of ‘justified confidentiality interests’ that might hinder the disclosure of comparable agreements [144] . Furthermore, the SEP holder would need to facilitate the conclusion of a Non-Disclosure Agreement which would allow sharing further information with the implementer [144] .

Based on the above considerations, the Court found that Philips had not fulfilled its information duty at any time [145] . In particular, the Court criticized that Philips did not adequately explain the reasons for choosing to agree on a lump sum payment (instead of a running royalty) in an existing agreement with a third licensee [146] . The fact that companies of different size were affected did not relieve Philips from its information duty; according to the Court, the mere fact that two competitors in a downstream market are of different size does not per se offer sufficient ground for different treatment [147] .

Since the Court assumed that Philips had failed to meet its information duties, it did not examine whether Philips’ licensing offer to Wiko was FRAND in terms of content [148] . In this respect, the Court seemed to agree, however, with the notion that FRAND is a range providing parties with a degree of flexibility [149] .

Implementer’s claim for disclosure of comparable agreements

Referring to the counterclaim for full disclosure of Philips’ comparable agreements raised by Wiko in the appeal proceedings, the Court clarified that a respective right of Wiko does not exist [150] .

Such a right does not arise either from German civil law (Articles 809 and 810 German Civil Code) [150] or Article 102 TFEU [151] . Furthermore, a right for disclosure of comparable agreement can neither be extracted by the SEP holder’s FRAND commitment to ETSI [152] . The Court saw no indication that French law (which is applicable to the ETSI FRAND undertaking) establishes such a right in favour of standards implementers [153] .

C. Other important issues

The Court pointed out that the claims for damages as well as information and rendering of accounts also asserted by Philips in the present proceedings are not subject to the Huawei framework [154] . Moreover, the Court explained that the non-fulfilment of the Huawei obligations by the patent holder poses no limitations on these rights in terms of content [155] . This is particularly true with respect to SEP holder’s claim to request information about expenses and profits from the implementer5 [156] .

  • [121] Philips v Wiko, District Court (Landgericht) of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16.
  • [122] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16, cited by http://lrbw.juris.de.
  • [123] Ibid, paras. 37-87.
  • [124] Ibid, para. 88.
  • [125] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C 170/13.
  • [126] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, para. 108.
  • [127] Ibid, para. 107.
  • [128] Ibid, paras. 117 et seqq.
  • [129] Ibid, para. 119.
  • [130] Ibid, paras. 120 et seq.
  • [131] Ibid, para. 120.
  • [132] Ibid, para. 125.
  • [133] Ibid, para. 126.
  • [134] Ibid, para. 127.
  • [135] Ibid, para. 111.
  • [136] Ibid, para. 112.
  • [137] Ibid, paras. 115 and 117.
  • [138] Ibid, para. 115.
  • [139] Ibid, para. 129.
  • [140] Ibid, paras. 131 et seqq.
  • [141] Ibid, paras. 132 et seq.
  • [142] Ibid, para. 135.
  • [143] Ibid, para. 133.
  • [144] Ibid, para. 134.
  • [145] Ibid, paras. 136 et seqq.
  • [146] Ibid, para. 136.
  • [147] Ibid, para. 138.
  • [148] Ibid, para. 131.
  • [149] Ibid, para. 106.
  • [150] Ibid, paras. 157 et seqq.
  • [151] Ibid, paras. 162 et seqq.
  • [152] Ibid, paras. 160 et seq.
  • [153] Ibid, para. 161.
  • [154] Ibid, para. 143.
  • [155] Ibid, para. 144.
  • [156] Ibid, paras. 145 et seqq.

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) [157] . 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 [158] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [159] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [159] .

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) [160] . 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 [161] . 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 [162] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [162] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [163] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [161] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [164] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [165] , it found that the Claimant cannot enforce its patent rights for the time being [166] , 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) [164] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [168] .

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 [169] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [170] . 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 [171] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [172] .

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 [173] . 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 [173] . 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 [173] .

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 [173] . 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) [173] . 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 [173] .

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 [174] .

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 [175] . 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 [176] .

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 [177] .

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 [178] . 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 [178] .

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 [179] . 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 [179] . 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 [179] .

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) [180] . 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) [180] . 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 [180] .

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 [181] .

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 [182] .

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 [183] . Given the circumstances of the specific case, even an implicit behaviour can suffice [183] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [184] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [184] . 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 [184] . 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 [184] .

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 [185] . 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 [186] .

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 [187] .

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 [188] . 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 [161] .

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 [189] . 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 [190] .

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 [191] . 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 [191] . 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 [191] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [192] . 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 [193] .

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 [163] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [194] .

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 [195] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [196] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [197] .

First, the terms did not adequately consider the effects of patent exhaustion [198] . As a rule, FRAND requires licensing offers to contain respective provisions [199] . 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 [200] .

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 [201] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [202] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [203] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [204] . 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 [204] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [205] .

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 [195] . 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) [206] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [207] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [207] . 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 [208] .

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 [209] . 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 [210] .

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 [211] . 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 [212] . 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 [213] .

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 [214] . 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 [214] . 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) [214] . 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 [214] . 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 [215] .

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 [216] . 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 [217] . 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 [218] .

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 [219] .


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 [220] .

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

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 [223] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [223] .

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 [223] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [223] . 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 [224] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [225] . 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 [226] .

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 [227] . 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) [227] . This deadline was extended for almost three weeks until 7 May 2018 [227] .

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) [227] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [228] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [228] . 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 [229] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [230] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [228] . 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) [228] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [231] . 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 [232] . 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” [232] . The Court held that the Defendant failed to establish such fact [231] . 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?) [231] .

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 [233] .

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 [234] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [234] . 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 [224] . 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 [224] . 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 [235] .

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 [233] . 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 [233] .

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 [233] . 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 [237] .

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 [238] .

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) [239] .

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 [224] . 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) [224] .

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) [240] .

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) [225] .

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 [225] .

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) [241] . 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 [225] .

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 [242] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [242] . 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 [242] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [242] .

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 [243] . 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 [243] . 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”) [243] . 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 [244] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [244] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [244] .


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 [245] . On the other hand, it does not define the ownership of the patent in material legal terms [246] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [247] .

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 [248] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [248] . The Defendant failed convince the Court that this was the case with the SEP in suit [248] .

  • [221] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [222] Ibid, page 23 et seq.
  • [223] Ibid, page 5.
  • [224] Ibid, page 25.
  • [225] Ibid, page 26.
  • [226] Ibid, pages 5 et seq.
  • [227] Ibid, page 6.
  • [228] Ibid, page 19.
  • [229] Ibid,page 23.
  • [230] Ibid, pages 16 et seqq.
  • [231] Ibid, page 20.
  • [232] Ibid, page 21.
  • [233] Ibid, page 22.
  • [234] Ibid, page 24.
  • [235] Ibid, pages 24 et seq.
  • [236] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [237] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [238] Ibid,pages 23 and 25.
  • [239] Ibid, page 23.
  • [240] Ibid, pages 23 and 25 et seq.
  • [241] Ibid, pages 26 et seqq.
  • [242] Ibid, page 27.
  • [243] Ibid, page 28.
  • [244] Ibid, page 29.
  • [245] Ibid, page 10.
  • [246] Ibid, pages 10 et seq.
  • [247] Ibid, page 11.
  • [248] Ibid, page 30.

Updated 20 October 2020

Sisvel v Wiko

LG Mannheim
4 September 2019 - Case No. 7 O 115/16

A. Facts

The Claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards under a commitment to be made accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (Standard Essential Patents or SEPs). Sisvel administrates a patent pool comprising patents of several SEP holders, including Sisvel’s own SEPs (patent pool).

The Defendants are the French parent company and the German subsidiary of the Wiko group (Wiko). Wiko sells mobile phones implementing the LTE standard –among other markets– also in Germany.

In June 2015, Sisvel informed Wiko about the patent pool and the need to obtain a licence. The parties entered into licensing discussions. Sisvel provided Wiko with information about the SEPs included in the patent pool, including claim charts illustrating the standard-essentiality of a number of these patents. On 1 June 2016, Sisvel made an offer for a licence covering the patent pool to Wiko. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko’s liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence covering only its own SEPs to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

On 4 October 2016, Sisvel amended its claims in the infringement proceedings. It raised, additionally, claims for injunctive relief as well as the removal and subsequent destruction of infringing products from the market.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Subsequently, Wiko provided security as well as information to Sisvel in accordance with its counteroffer.

During the course of the proceedings, Sisvel made a new offer for a pool licence to Wiko which contained reduced royalty rates. Wiko rejected this offer as well. On 22 December 2017, Sisvel asked the Court to order a stay of the infringement proceedings, until the German Federal Patent Court rendered its decision on the validity of the SEP in suit in the parallel nullity proceedings. Wiko agreed with Sisvel’s motion. On 30 January 2018, the infringement proceedings were stayed by order of the Court.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing programme designed by Sisvel in the meantime (2018 offer).

Along with the 2018 offer, Sisvel provided Wiko –among other information– with claim charts regarding twenty selected patents as well as a list of existing licensees of both its new licensing programme and two pre-existing programmes. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, Wiko replied to Sisvel, without, however, providing any feedback on the content of the 2018 offer; it just referred back to its counteroffer dated 11 November 2016, instead. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees in the list that it had shared along with the 2018 offer.

In response to that claim, Sisvel sent a draft Non-Disclosure Agreement (NDA) to Wiko on 22 October 2018. Sisvel was willing to disclose the names of the existing licensees upon signing of the NDA by Wiko. Wiko refused, however, to sign the NDA proposed by Sisvel.

In October 2018, the German Federal Patent Court upheld the SEP in suit in part. Subsequently, the Court moved on with the infringement proceedings, discussing in particular the FRAND-related issues.

After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

With the present judgment [249] , the Court granted an injunction against Wiko and ordered the removal and subsequent destruction of infringing products from the market. The Court also confirmed Wiko’s liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages.


B. Court’s reasoning

The Court found that Wiko’s products infringe the patent in suit [250] . The essentiality of the patent in suit was not in dispute between the parties [251] .

The Court further held that Article 102 of the Treaty for the Functioning of the EU (TFEU) does not prevent Sisvel from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings. Wiko had argued that by filing the present lawsuit, Sisvel had abused its dominant market position in violation of Article 102 TFEU.

In the Court’s eyes, this was not the case, since Sisvel had fulfilled the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [252] (Huawei framework or obligations). Wiko, on the other hand, had, according to the Court, failed to comply with the Huawei framework.

Huawei framework

In deviation from its earlier case-law, the Court expressed the view that the Huawei obligations can be remedied by the parties during the course of infringement proceedings [253] . This requires, however, that pressure-free negotiations between the parties are enabled, as requested by the CJEU. For this, the parties have to use available procedural instruments for a temporary suspension of the proceedings, such as a motion for suspension of the trial [254] or a consensual stay of the proceedings until the decision of the Federal Patent Court on a parallel nullity action [255] .

Against this background, the Court requested from a SEP holder, who seeks to remedy information obligations under the Huawei framework after the initiation of infringement proceedings, to file a motion for suspension of the trial [255] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [255] .

The Court observed that granting the parties the opportunity to remedy shortcomings concerning the Huawei obligations in the course of pending infringement proceedings is in line with the ‘safe harbour’ approach adopted by both the Court of Appeal of England and Wales in Unwired Planet v Huawei [256] and the Court of Appeal of The Hague in Philips v Asus [257] . These courts do not consider the Huawei framework as a mandatory formalistic procedure that needs to be executed strictly; accordingly, deviations from the negotiation framework established by the CJEU do not necessarily amount to abusive behaviour, barring the patent holder from asserting claims for injunctive relief [258] . Moreover, whether this is the case, needs to be assessed on a case by case basis [259] .


Notification of infringement

Having said that, the Court found that Sisvel had fulfilled its Huawei obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

Regarding the content of SEP holder’s respective notification, the Court, basically, applied the same requirements set forth in previous decisions. The Court found that such notification must (1) name the patent in suit, including the patent number, (2) inform that the patent has been declared standard- essential towards the relevant standardisation body, (3) indicate for which standard the patent is essential and (4) explain which technical functionality of the user’s products or services implements the standard [260] . The appropriate level of detail should be determined on a case by case basis [260] . The Court confirmed that the patent holder will, as a rule, meet its notification duty by making claims charts customarily used in SEP licensing negotiations available to the implementer [260] . The Court further affirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [260] .


SEP holder’s offer

The Court found that Sisvel had also complied with its Huawei obligation to make a written and specific FRAND licensing offer to Wiko. For the respective assessment, the Court considered only the 2018 offer, the last offer made by Sisvel to Wiko during the stay of the infringement proceedings [261] .

To begin with, the Court reiterated its position that infringement courts are not obliged to determine which concrete licensing fees and further contractual terms and conditions are ‘under objective aspects’ FRAND [262] . Contrary to the view previously taken by the superior Higher District Court of Karlsruhe, the Court maintained that the CJEU did not intend to ‘burden’ the proceedings concerning injunctive relief and the recall of products with the ‘precise mathematical determination’ of FRAND conditions [263] . Moreover, since there is a ‘range’ of potential FRAND conform terms and conditions, a request for injunctive relief could conflict with Article 102 TFEU only in case, in which – under consideration of the specific bargaining situation and market conditions – the SEP holder’s offer would amount to an ‘exploitative abuse’ [262] . Insofar, the Court shared a similar understanding with the Court of Appeal of England and Wales in Unwired Planet v Huawei [256] .

Notwithstanding the above, the Court made clear that infringement courts should go beyond a just ‘superficial’ assessment of the FRAND conformity of SEP holder’s licensing offer. Infringement courts should examine, whether the overall structure of the concrete offer would require from an implementer acting in good faith to respond to that offer, irrespective of the – typical – initial divergence of the bargaining position of the parties [264] . As a rule, such a duty will emerge, when the SEP holder explains the royalty calculation in a way that demonstrates the reasons for which it considers that its offer is FRAND [265] . In case that a pool licensing programme or a standard licensing programme exists, it will usually be enough to demonstrate the acceptance of the respective programme in the market. If a sufficient number of licences has been granted by the pool, the patent holder will just have to outline the composition of the pool by presenting an adequate number of claim charts referring to patents included in the pool [266] .

In this context, the Court pointed out that any allegations raised by the implementer with respect to the FRAND conformity of the patent holder’s offer cannot, in principle, be based on the (alleged) unlawfulness of individual contractual clauses. Moreover, the FRAND compliance of an offer must be assessed based on a general overview of the overall agreement [267] . An exception only applies, when a specific clause has an ‚unacceptable effect’ [267] . In the present case, the Court found that none of the clauses contained in the 2018 offer had such effect [267] .

In particular, the Court held that a clause placing the burden of proof with regard to the exhaustion of patents covered by the offered licence on the licensee (here: Wiko) is acceptable [268] . Contrary to the view taken by the District Court of Duesseldorf in a similar case, the Court argued that it is appropriate to request the licensee to establish the relevant facts, since it will be better situated to trace the licensing chain by engaging with its suppliers [268] .

Furthermore, the Court did not consider that a clause limiting the term of the offered licence to five years had an ‘unacceptable effect’ from an antitrust perspective. The Court found that a term of five years is in line with the prevailing practice in the wireless telecommunications industry, in which rapid technological developments are typical [269] .

The Court further pointed out that a clause establishing a right for the extraordinary termination of the licensing agreement in case of violation of reporting duties by the licensee or a delay of payments exceeding 30 days did not have an ‘unacceptable effect’ in the above sense [269] .

The Court did not raise any objections against the fact that the 2018 offer did not contain a clause stipulating an adjustment of the agreed royalty rates in case of changes in the number of covered patents during the term of the agreement. According to its view, including such a clause in a FRAND licence is not per se required [269] . An exception should be made, however, in cases, in which the pool predominantly consists of patents that will expire soon after the signing of the licence agreement [269] . In general, the absence of an ‘adjustment’ clause will not be problematic, especially when the licensing offer does not limit or exclude the statutory right of the parties to request an adjustment of the licence due to frustration of the contractual base (Sec. 313 para. 1 German Civil Code) [269] .


Non-discrimination / confidentiality

Referring to the non-discriminatory element of a FRAND licensing offer, the Court expressed the view that Art. 102 TFEU establishes a (secondary) duty of the patent holder to show in pending infringement proceedings that its offer to the defendant does not discriminate the latter in relation to similarly situated competitors [266] .

The Court made, nevertheless, clear that this duty does not legally entail ‘full transparency’ in every given case [266] . The antitrust obligations of the SEP holder do not always outweigh confidentiality interests of the latter that are worthy of legal protection; moreover, the special circumstances of the individual case can require protection of confidentiality [266] .

Looking particularly at information contained in existing licensing agreements of the SEP holder with third similarly situated licensees (comparable agreements), the Court took the view that the extent of the patent holder’s obligation to disclose such agreements shall be determined by the infringement court on a case by case basis under consideration of both parties’ pleadings in the proceedings [266] .

According to the Court, the patent holder will have to establish the existence of confidentiality interests worthy of protection; the mere fact that comparable agreements are subject to confidentiality clauses does not per se justify limitations regarding to the extent of patent holder’s disclosure obligations [270] . On the other hand, the defendant will need to explain to the court why the information requested is required for assessing the FRAND conformity of the patent holder’s licensing offer [270] . The defendant will have to establish concrete facts, indicating a potentially discriminatory conduct of the SEP holder [271] .

With this in mind, the Court disagreed with the view expressed by the Duesseldorf courts, according to which the SEP holder is in any case obliged to produce all existing comparable agreements in infringement proceedings [272] . Especially in cases, in which the patent holder has concluded only standard licensing agreements with implementers, the terms and conditions of which are publicly accessible, the Court saw no reason for obliging the patent holder to produce a (large) number of identical contracts in the proceedings. Insofar, it will be sufficient to disclose how many (standard) licensing agreements have been concluded so far [272] .

Accordingly, the Court found that the list of existing licensees produced by Sisvel to Wiko along with the 2018 offer was sufficient for establishing the FRAND conformity of this offer, even though the names of the licensees were redacted. In the Court’s eyes, Wiko had failed to explain the reasons why the identity of the existing licensees was needed to assess the FRAND conformity of the 2018 offer [273] . In addition, the Court also took into account the fact that Wiko had refused to sign the NDA offered by Sisvel during the stay of the proceedings for the purpose of disclosing the identities of the existing licensees [274] . Since it had no objections against the FRAND conformity of the 2018 offer, the Court did not rule on the question whether Wiko’s refusal to enter into an NDA could be considered as a sign of unwillingness to comply with the Huawei framework or not. The Court agreed, however, with the view taken by the Duesseldorf courts in this respect, according to which the implementer’s refusal to sign an adequate NDA is, in principle, a factor that should be considered in connection with the assessment of the SEP holder’s offer [274] .

Besides that, the Court also considered the possibility of facilitating the use of comparable agreements in infringement proceedings through document production orders issued by the competent court pursuant to Sec. 142 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO) [271] . This option should particularly be taken into account by infringement courts in individual cases, in which confidentiality clauses contained in comparable agreements allow for a disclosure of the agreement only upon court order. According to the Court, such confidentiality clauses do not per se violate antitrust law and should, therefore, be respected, unless the patent holder cannot establish a confidentiality interest worthy of protection in the proceedings [271] . If the patent holder, who is bound to a confidentiality clause, is willing to produce comparable agreements in trial, then the infringement court could – based on the concrete circumstances of each case– issue a document production order according to Sec. 142 ZPO [271] . In case that the patent holder refuses to comply with such order, the court could consider the respective behaviour as a signal of bad faith in its overall assessment of the parties’ conduct under the Huawei framework [271] . The same will apply also when the implementer does not agree with a stay of the proceedings, after it was granted access to comparable agreements based on a court order issued pursuant to Sec. 142 ZPO [271] .

Implementer’s counteroffer

The Court found that Wiko had failed to meet its Huawei obligation to make a FRAND counteroffer to Sisvel in due course. For the respective assessment, the Court focused on Wiko’s reaction to the 2018 offer [275] .

The Court made clear that an implementer has a duty to react to a licensing offer of the SEP holder, which is based on concrete facts, irrespective of whether it considers this offer to be FRAND, or not (which will usually be the case) [271] . Furthermore, the implementer must react as soon as possible, considering the facts of each case, the industry practice in the specific sector as well as the principle of good faith [255] .

Taking into account that Wiko did not react at all to the 2018 offer for more than three months, the Court held that it violated the above obligations [251] . In the Court’s eyes, Wiko engaged in delaying tactics [251] . The Court did not accept that French school holidays and/or the fact that – according to Wiko’s own statement– only two employees covered licensing-related matters can provide sufficient justification for the delay in Wiko’s reaction [275] . As a company engaging in international business, Wiko should ensure that it has sufficient staff resources to deal with respective issues in due course [275] .


C. Other important issues

Apart from Sisvel’s claims for injunctive relief and the removal and destruction of infringing products from the market, the Court also rendered a declaratory judgment, recognising Wiko’s liability for damages on the merits [276] .

The Court found that Wiko had culpably infringed the patent in suit. In particular, Wiko had acted, at least, negligently [276] . Wiko had argued that the high complexity of standardised technologies (especially the significant number of patents incorporated into a standard), made it difficult to assess the status regarding intellectual property rights (and, therefore, excluded negligence). The Court made, however, clear that a higher degree of complexity of the underlying technologies generates enhanced due diligence requirements on the implementers’ side [277] .

  • [249] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16.
  • [250] Ibid, pages 17-31.
  • [251] Ibid, page 46.
  • [252] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [253] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 42.
  • [254] Ibid, page 43 and page 51 et seq.
  • [255] Ibid, page 42.
  • [256] Unwired Planet v Huawei, Court of Appeal of England and Wales, judgment dated 23 October 2018, [2018] EWCA Civ 2344, para 282.
  • [257] Philips v Asus, Court of Appeal of The Hague, 7 May 2019, Case-No. 200.221 .250/01.
  • [258] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 44.
  • [259] Ibid, page 44.
  • [260] Ibid, page 37.
  • [261] Ibid, pages 47 and 53.
  • [262] Ibid, page 38.
  • [263] Ibid, pages 37 et seq.
  • [264] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 39.
  • [265] Ibid, page 39.
  • [266] Ibid, page 40.
  • [267] Ibid, page 53.
  • [268] Ibid, page 54.
  • [269] Ibid, page 55.
  • [270] Ibid, page 40 and 49.
  • [271] Ibid, page 41.
  • [272] Ibid, page 49.
  • [273] Ibid, page 50.
  • [274] Ibid, page 51.
  • [275] Ibid, page 47.
  • [276] Ibid, page 35.
  • [277] Ibid, page 35 et seq.

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. [278] 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. [279]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [280] Moreover, the Court of Appeal found the patent essential and infringed. [281]

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) [282] . 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. [283] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [284]

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. [285] 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. [286]

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. [287] 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. [288] 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. [289] 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. [290] 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.”’ [291]

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. [292] 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. [293] 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. [294]

  • [278] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [279] 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.
  • [280] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [281] ibid, paras 4.118 et seq.
  • [282] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [283] 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.
  • [284] ibid, paras 4.155 and 4.157.
  • [285] ibid, para 4.159.
  • [286] ibid, para 4.164.
  • [287] ibid, para 4.171.
  • [288] ibid, para 4.172.
  • [289] ibid.
  • [290] ibid, paras 4.172-4.179.
  • [291] ibid, para 4.179.
  • [292] ibid, para 4.183.
  • [293] ibid, para 4.185.
  • [294] ibid, paras 4.202 et seq.

Updated 9 November 2020

Nokia v Daimler

LG Mannheim
18 August 2020 - Case No. 2 O 34/19

A. Facts

The claimant is part of the Nokia group with headquarters in Finland (Nokia). Nokia is a major provider of telecommunication services and holds a significant portfolio of patents declared as (potentially) essential to the practice of various wireless telecommunication standards (Standard Essential Patents, or SEPs) developed by the European Telecommunications Standards Institute (ETSI).

The defendant, Daimler, is a German car manufacturer with a global presence. Daimler produces and sells cars in Germany with connectivity features which implement standards developed by ETSI.

Nokia declared the patent involved in the present case as essential for the 4G/LTE Standard towards ETSI. ETSI requires patent holders to commit to make patents that are or might become essential to the practice of a standard accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

On 21 June 2016, Nokia informed Daimler about its SEP portfolio by providing a list containing all patents and patent applications which Nokia declared as (potentially) essential towards ETSI. Daimler responded that a licence could be taken under the condition that its products actually infringe Nokia's patents.

On 9 November 2016, Nokia made a first licensing offer to Daimler. On 7 December 2016, Nokia shared further information regarding its patent portfolio with Daimler. On 14 December 2016, Daimler replied that it would be more efficient to license its suppliers manufacturing the so-called 'Telematics Control Units' (TCU), which are built into Daimler's cars. From January 2017 until February 2019, Daimler did not engage in further negotiations with Nokia and also refrained from participating in discussions which Nokia had with Daimler's suppliers.

On 27 February 2019, Nokia made a second licensing offer to Daimler to which further claim-charts mapping its patents to the relevant parts of the affected standards were attached. On 19 March 2019, Daimler rejected this offer as well, basically, by arguing that the royalties for Nokia's portfolio should be calculated on basis of the components provided to Daimler by its suppliers and not the cars produced by Daimler.

Subsequently, Nokia filed several infringement actions against Daimler before the District Courts of Munich, Duesseldorf and Mannheim in Germany.

On 9 May 2019, shortly after the infringement proceedings were initiated, Daimler made a counteroffer to Nokia. Basis for the calculation of the royalties for Nokia's portfolio was the average selling price for TCUs paid by Daimler to its suppliers. Nokia rejected this counteroffer.

On 10 June 2020, Daimler made a second counteroffer to Nokia. Nokia would be able to unilaterally determine the licensing fees (in accordance with Sec. 315 of the German Civil Code). Daimler would, however, have the right to contest the fee determined before court. The second counteroffer was also rejected.

On 18 June 2020, the German Federal Cartel Office (Cartel Office) intervened in the present proceedings before the District Court of Mannheim (Court) and recommended that the Court referred certain questions concerning the nature of the FRAND commitment to the Court of Justice of the EU (CJEU). The Court did not follow the recommendation of the Cartel Office.

With the present judgment [295] (cited by www.juris.de), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.


B. Court's reasoning

The Court found that Daimler infringed the patent-in-suit [296] . For this reason, Nokia was entitled -among other claims- to injunctive relief [297] .

Daimler and its suppliers that joined the proceedings asserted so-called 'FRAND-defences', arguing that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. In particular, it was argued that Nokia had failed to comply with the conduct requirements established by the CJEU in the matter Huawei v ZTE [298] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [299] .

Huawei framework

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents Ibid, para. 146. 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 Ibid, para. 146.

An abuse of market dominance by the enforcement of patent rights does not occur, if the patent holder complies with its duties under the Huawei framework [301] . These duties presuppose, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [302] . The Court explained that it cannot be requested by the patent holder to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [302] . Moreover, the 'particular responsibility' attached to its dominant position requires from the SEP holder to make 'sufficient efforts' to facilitate the signing of an agreement towards a licensee in principle willing to take a licence [303] .

Notification of infringement

According to the Court, these 'efforts' include a duty to notify the implementer about the infringement of the patent(s) involved as well as the possibility and need to take a licence prior to filing an infringement action Ibid, para. 152. Looking at the specific case, the Court found that Nokia met this obligation Ibid, paras. 151-156.

In terms of content, the notification of infringement must name the patent infringed and describe the specific infringing use and the attacked embodiments [304] . 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 [304] . As a rule, presenting claim charts will be sufficient (but not mandatory) [304] . The Court also pointed out that the patent holder is not required to address a separate notification of infringement to each supplier of an end-device manufactures infringing its patents [306] .

In the eyes of the Court, Nokia's e-mails dated 21 June 2016, 9 November 2016 and 7 December 2016 meet the above requirements [307] . The fact that -at least initially- Nokia did not indicate the concrete section of the standards documentation to which the patent-in-suit referred to was not considered harmful, since the notification of infringement is not required to facilitate a final assessment of infringement [308] .

Furthermore, the Court held that it was not necessary for Nokia to identify in the notification of infringement the specific components which generate connectivity according to the relevant standard, e.g. the TCUs built into Daimler's cars [309] . Since Daimler purchases and uses these components in its products, no information deficit could occur [309] .

Willingness

Moreover, the Court found that Daimler did not adequately express its willingness to enter into a FRAND licence with Nokia and could, thus, not rely on a FRAND defence to avoid an injunction Ibid, paras. 157-231.

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' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [311] . The 'target-oriented' engagement of the implementer in licensing negotiations is of decisive importance: since implementers, as a rule, already use the patented standardized technology prior to the initiation of licensing negotiations, they could have an interest to delay the signing of a licence until the expiration of the patent, which, however, conflicts with the spirit of the Huawei decision [312] . Accordingly, 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 [311] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [311] . What is more, refusing to discuss about any improvement of a counteroffer made to the patent holder could also be considered as an indication of unwillingness from the side of the implementer [311] .

Based on the above, the Court took the view that by initially making the signing of a licence subject to the condition that its products actually infringe Nokia's patents, Daimler did not adequately express willingness to sign a FRAND licence [313] . The Court added that Daimler's counteroffers could neither be considered as a sufficient sign of willingness: especially the second counteroffer, giving Daimler the right to contest the royalty rates that Nokia would unilaterally set, would just postpone the actual dispute between the parties about the determination of the licensing fees to later court proceedings [314] .

The Court also held that Daimler did not act as an 'willing' licensee, since it did not engage in negotiations with Nokia, but insisted that its suppliers take a direct licence from the latter, instead [315] . Furthermore, the missing willingness of Daimler was also confirmed by its insistence on applying the average selling price of TCUs purchased by Daimler by its suppliers as base for the calculation of the licensing fees for Nokia's SEP portfolio [316] .

Calculation of FRAND fees

The Court found that the use of TCUs as the 'reference value' for the calculation of the royalty fees for Nokia's SEP portfolio was not appropriate Ibid, para. 169.

In general, there is not only a single set of FRAND terms and conditions; usually, there is a range of licensing conditions and fees which are FRAND [318] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [318] .

The Court pointed out, however, that the patent holder must, in principle, 'be given a share' in the 'economic benefits of the technology to the saleable end product at the final stage of the value chain' [319] . Reason for that is, that the use of the protected invention 'creates the chance' to gain an 'economic profit' with the end product, which is based on the invention [319] . The Court did not agree with the notion that by considering the value of the patented technology for the end product SEP holders benefit from innovation taking place at other stages of the value chain [320] . The Court noted that there are several instruments available to make sure that this will not occur [320] .

Accordingly, the Court rejected the notion of using the so-called 'Smallest Saleable Patent Practising Unit' (SSPPU), that is the smallest technical unit integrated in a product, as base for the calculation of FRAND royalty rates [320] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [320] . Apart from that, this option would make it more complex to identify and avoid 'double-dipping', meaning licensing the same patent at several stages of the value chain [320] .

Having said that, the Court clarified that the above principle does not necessarily mean that licensing agreements should be signed exclusively with end-device manufacturers [321] . The Court considered that there are various possibilities to factor the value of the patented technology for the saleable end product also at other stages of a supply chain [321] .

Against this background, the Court found that the selling price of TCUs did not sufficiently mirror the value of Nokia's SEPs for the cars produced by Daimler, which are the relevant end devices in the present case [322] . The selling price of TCUs corresponds only to Daimler's respective costs [323] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [324] . Connectivity secures the chance to create this value [325] . In addition, the Court noted that the acceptance of the licensing model of the Avanci platform (which grants licences exclusively to car manufacturers) by several of Daimler's main competitors serves as a further indication that focusing on the value of the protected technology for the end product is reasonable also in the automotive sector [326] .


Non-discrimination

Furthermore, the Court found that the assertion of patent claims against Daimler by Nokia was not discriminatory and could, therefore, not justify Daimler's insistence that licences must be taken by its suppliers Ibid, paras. 201-212.

The Court explained that the patent holder is, basically, allowed to freely choose the stage of the supply chain, at which it will assert its rights [328] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [328] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [328] . The non-discrimination obligation established by Article 102 TFEU intends to prevent a distortion of competition in upstream or downstream markets, but does not exclude different treatment of licensees, if sufficient justification exists [329] .

In the present case, the Court saw no indication that Nokia's claim to use the end-product as a royalty base could impact competition [330] . Especially the fact that in the automotive sector it is common that suppliers take licences for components sold to car manufacturers, does not require Nokia to change its practice, not least because the licences granted by the Avanci platform to Daimler's competitors show that the respective practice -which is prevailing in the telecommunications sector- has already been applied also in the automotive field [331] . Furthermore, the Court did not consider that the assertion of SEPs against end-device manufacturers could lead to limitations in production, sales and technical development to the detriment of consumers [332] . In this respect, the Court referred to so-called 'have-made-rights' which according to the ETSI IPR Policy should be included in a FRAND licence and allow component manufacturers to produce, sell and develop their products [333] .

SEP holder's offer / information duty

Furthermore, the Court held that Daimler could not justify its unwillingness to obtain a licence by claiming that Nokia had refused to provide sufficient information concerning its licensing offers Ibid, paras. 216 et seqq.

The Court pointed out that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [335] . In case that the patent holder has already concluded agreements with third licensees on non-standard terms, it will be, as a rule, under a duty to disclose and present –at least– the content of the key contractual provisions in a way, which would allow the implementer to assess whether it has been offered different commercial conditions [335] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [335] .

Considering this, the Court expressed the view that Nokia had provided sufficient information to Daimler, by sharing –among other things– a study on the value of connectivity for vehicles and a licensing agreement signed with another major car manufacturer [336] . In this context, the Court denied that Nokia was under a duty to disclose licensing agreements with smartphone manufacturers to Daimler. The Court rejected the notion that the SEP holder's information duty extends to the full content of every licensing agreement previously signed and that the SEP holder is obliged to disclose all existing agreements [337] . Adding to that, the Court noted that licensing agreements from the telecommunications sector are not relevant for the assessment of FRAND conformity of licences in the automotive field [337] .

FRAND defence raised by suppliers

Apart from the above, the Court also highlighted that Daimler could not profit from the FRAND defences raised by its suppliers that joined the proceedings Ibid, paras. 232 et seqq.

The Court left the question open whether an end-device manufacturer that has been sued can, in principle, rely on a FRAND defence raised by one of its suppliers, or not. According to the Court, this would, however, in any case require that the supplier is willing to obtain a licence from the patent holder calculated on basis of the value of the patent(s) in question for the end-product (and not for the component it produces) [339] . This had not been the case in the present proceedings [340] .

The Court did not ignore that it can be challenging for suppliers to pass on the royalty fees paid to the SEP holder to their clients [341] . However, the contractual arrangements of third parties (here: the arrangements between suppliers and end-device manufacturers) should not, in the eyes of the Court, direct the SEP holder towards licencing agreements that do not allow a participation in the value created by the patented technology for the end-product [341] .


C. Other issues

Finally, the Court held that -contrary to the recommendation of the Cartel Office – there was no need to suspend the proceedings and refer certain questions revolving around whether the SEP holders' FRAND commitment establishes a direct claim for everyone within a value chain to be granted a bilateral licence (License-to-all approach), or just a claim to have access to the standardised technology (Access-to-all approach), to the CJEU.

The Court left this question open, since neither Daimler nor its suppliers were willing to obtain a licence on FRAND terms from Nokia based on the value of the protected technology for the cars manufactured by Daimler  Ibid, paras. 253 and 291. The Court also noted that the fact that the patent-in-suit would expire in few years from now would also speak against ordering a stay of the proceedings [343]

  • [295] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19
  • [296] Ibid, paras. 49-136
  • [297] Ibid, para. 138
  • [298] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [299] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19, para. 144
  • [300] Ibid, para. 146
  • [301] Ibid, para. 147
  • [302] Ibid, para. 148
  • [303] Ibid, para. 149
  • [304] Ibid, para. 152
  • [305] Ibid, paras. 151-156
  • [306] Ibid, para. 248
  • [307] Ibid, paras. 153 et seq
  • [308] Ibid, para. 154
  • [309] Ibid, para. 155
  • [310] Ibid, paras. 157-231
  • [311] Ibid, para. 158
  • [312] Ibid, para. 159
  • [313] Ibid, para. 161
  • [314] Ibid, para. 197-199
  • [315] Ibid, paras. 157, 160 and 162-164
  • [316] Ibid, paras. 160 and 165-168
  • [317] Ibid, para. 169
  • [318] Ibid, para. 170
  • [319] Ibid, para. 171
  • [320] Ibid, para. 172
  • [321] Ibid, para. 173
  • [322] Ibid, paras. 174 et seqq
  • [323] Ibid, paras. 174
  • [324] Ibid, paras. 177
  • [325] Ibid, para. 180
  • [326] Ibid, paras. 187 et seqq
  • [327] Ibid, paras. 201-212
  • [328] Ibid, para. 202
  • [329] Ibid, para. 203
  • [330] Ibid, para. 205
  • [331] Ibid, para. 210
  • [332] Ibid, para. 213
  • [333] Ibid, para. 215
  • [334] Ibid, paras. 216 et seqq
  • [335] Ibid, para. 217
  • [336] Ibid, para. 218
  • [337] Ibid, para. 230
  • [338] Ibid, paras. 232 et seqq
  • [339] Ibid, paras. 234 and 236 et seqq
  • [340] Ibid, paras. 240 et seqq
  • [341] Ibid, para. 239
  • [342]  Ibid, paras. 253 and 291
  • [343] Ibid, para. 291.