Case Law post CJEU ruling Huawei v ZTE

Case law search


Updated 22 August 2018

TQ Delta LLC v Zyxel Communications and Ors., EWHC

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

A. Facts

The Claimant acquired patents which were declared as essential to the DSL standard under the so-called "ITU Recommen¬dations" (Standard Essential Patents, or SEPs) from a company called Aware Inc [387] . The ITU Recommendations require from the SEP holder to make its patents accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [388] . The Defendants manufacture and sell various types of equipment complying with the DSL standard [388] .

The Claimant asserted claims against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds [389] . The proceedings involve, on the one hand, technical issues concerning the validity, essentiality and infringement of the SEPs in question and, on the other hand, the licensing of these SEPs on FRAND terms [390] .

Prior to service of the statements of case, the Court ordered the Claimant to disclose licence agreements concluded with third parties covering the SEPs in suit (comparable agreements) [391] . The Claimant entered into licences with two companies (in the following referred to as "counterparty A" and "counterparty B") [392] and also possesses copies of licences previously granted by Aware Inc. to other SEP users [393] . Counterparty A and Aware Inc. argued that their licence agreements can only be disclosed on an "external eyes only" basis (that is only towards i.e. external counsels and independent experts), since they contain confidential information, such as party names, pricing terms and other commercial information [394] . Counterparty B did not object to the disclosure of its licence agreement to the Defendant (provided that this would take place on a confidential basis), but argued that any other confidential information provided to the Claimant in the course of negotiations for the licence can only be disclosed to "external eyes only" [395] .

The Claimant suggested that the parties to the proceedings enter into a co-called "Confidentiality Club Agreement". The agreement proposed by the Claimant differentiated between "Confidential Infor-mation" and "Highly Confidential Information" [396] . Whether information is designated as "Confidential" or "Highly Confidential" would be determined by the disclosing party [396] . Information designated as "Highly Confidential" would be subject to an "external eyes only" limitation [396] . This limitation would apply to both comparable licences granted by the Claimant and licences granted by Aware Inc. [397] . The Defendants did not agree with the Claimant’s proposal. Instead, they requested that two named individuals from the Defendant’s group should be given access to the comparable licences [396] .

The Court did not approve the establishment of an "external eyes only" mechanism as suggested by the Claimant [398] and ordered disclosure of the comparable licences. Nevertheless, the Court temporarily stayed that order to give the third parties affected (counterparties A and B and Aware Inc.) the opportunity to set it aside or vary it, before disclosure of the comparable licences is made [399] .


B. Court’s reasoning

In the Court’s eyes, it is "common practice" in patent cases for parties to reach Confidentiality Club Agreements [396] ; such agreements are "often essential", when disclosure of confidential information is required in court proceedings [400] . In cases involving intellectual property rights, a mechanism for disclosure limiting access to confidential documents to specific representatives of one of the parties is considered "commonplace" [400] . Furthermore, documents can be redacted to exclude confidential material which is irrelevant to the dispute [400] .

Looking particularly at "external eyes only" mechanisms, the Court takes the view that such mechanisms can be included in Confidentiality Club Agreements upon agreement of the parties (as it was the case in the matter Unwired Planet v Huawei [401] ) [402] . If no agreement can be reached on such a provision, parties can request the Court to restrict access to specified documents to "external eyes only" [393] .

The Court finds, however, that such a confidentiality regime can be applied only to exceptional cases [403] . An "external eyes only" mechanism enables one party to exclude access to any document that it chooses, placing the burden of seeking access to documents to the opposing party, despite the fact that the latter is prima facie entitled to such access [404] . In the Court’s view, the opposite should rather be the case: The party wishing to limit access to documents to "external eyes only" should be obliged to justify that limitation [405] .

According to the Court, when determining whether "external eyes only" restrictions should be ordered, the role which the affected documents are expected to play in the case must be considered [406] . Where the documents are of limited, if any, relevance to the proceedings and their disclosure could be unnecessarily damaging for the party asserting confidentiality, ordering an "external eyes only" limitation may be justified in specific cases [400] (insofar the Court adopts the notion expressed in the matter IPCom v HTC [407] ). Furthermore, the Court did not rule out that in certain exceptional cases an "external eyes only" mechanism might also be justified with respect to specific documents of "greater relevance", at least at an interim stage of the proceedings [408] .

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

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

  • [387] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 2.
  • [388] Ibid, para. 3.
  • [389] Ibid, para. 1.
  • [390] Ibid, para. 1. With respect to the relationship between the 'technical trials' (that means the proceedings concerning the validity, essentiality and infringement of the SEPs in suit) and the 'non-technical trial' regarding to FRAND licensing see, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 21 November 2017, Case-No. HP-2017-000045, [2017] EWHC 3305 (Pat)
  • [391] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), paras. 25 and 30.
  • [392] Ibid, para. 25.
  • [393] Ibid, para. 25.
  • [394] Ibid, paras. 26 and 28.
  • [395] Ibid, para. 27.
  • [396] Ibid, para. 4.
  • [397] Ibid, para. 22.
  • [398] Ibid, paras. 34 et seqq.
  • [399] Ibid, para. 35.
  • [400] Ibid, para. 23.
  • [401] Unwired Planet v Huawei, UK High Court of Justice, 5 April 2017, Case-No. HP-2014-000005, [2017] EWHC 711 (Pat).
  • [402] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.
  • [403] Ibid, para. 21.
  • [404] Ibid, paras. 21 and 34.
  • [405] Ibid, para. 34.
  • [406] Ibid, para. 15.
  • [407] IPCom GmbH and Co KG v HTC Europe Co. Limited and ors, judgement dated 23 January 2013, Case No. HC11 C02064, [2013] EWHC 52 (Pat).
  • [408] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13 June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), para. 23.

Updated 17 January 2018

Sisvel v Haier

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

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [2] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [3] and that the claimant had not made a license offer on FRAND conditions. [4] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [5] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [6] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [7]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [8] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [9] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [9] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [10] because the patent in question was related to data transfer, an essential function of the GPRS standard. [11]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [12] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [13] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [13] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [14]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [15] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [15]

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

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [16] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [17] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [17] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [17]

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

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [18] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [19] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [19] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [19] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [20] because it discriminated against the defendants. [21] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [22]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [23] SEP owners have discretion regarding the license fees that they charge. [24] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [25] Further, license conditions can be abusive only if they are significantly different between licensees. [25] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [26] The burden of proof for such substantially unequal treatment lies with the defendant, [27] whilst the onus is on the claimant to prove that this unequal treatment is justified. [27] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [27] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [28] without having a proper justification. [29] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [30] or that these discounts were a result of the particularities of the case. [31]

  • [2] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [3] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
  • [4] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [5] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [6] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [7] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [8] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [9] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [10] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [11] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [12] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [13] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [14] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [15] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [16] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [17] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [18] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [19] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [20] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [21] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [22] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [23] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [31] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [146] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [147] The court declared the Huawei rules applicable to claims for the recall of products. [148] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [149] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [150] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [151] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [152] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [153] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [154] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [155] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [156] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [157] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [158] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [159]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [160] Whether the Intervener satisfied the ECJ criteria was left undecided. [161] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [162] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [163] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [164] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [165] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [166] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [167] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [168]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [169] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [170] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [171]
  • [146] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
  • [147] Case No. 4a O 73/14, para. 184
  • [148] Case No. 4a O 73/14, para. 187
  • [149] Case No. 4a O 73/14, para. 195 et seq.
  • [150] Case No. 4a O 73/14, para. 208-210
  • [151] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [152] Case No. 4a O 73/14, para. 193
  • [153] Case No. 4a O 73/14, para. 270 et seq.
  • [154] Case No. 4a O 73/14, para. 222 et seq.
  • [155] Case No. 4a O 73/14, para. 225 et seq.
  • [156] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [157] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [158] Case No. 4a O 73/14, para. 256 et seq.
  • [159] Case No. 4a O 73/14, para. 279 et seq.
  • [160] Case No. 4a O 73/14, para. 214-220
  • [161] Case No. 4a O 73/14, para. 214-220; 278
  • [162] Case No. 4a O 73/14, para. 266
  • [163] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [164] Case No. 4a O 73/14, para. 264
  • [165] Case No. 4a O 73/14, para. 291 et seq.
  • [166] Case No. 4a O 73/14, para. 278
  • [167] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [168] Case No. 4a O 73/14, para. 304
  • [169] Case No. 4a O 73/14, para. 189
  • [170] Case No. 4a O 73/14, para. 309-313
  • [171] Case No. 4a O 73/14, para. 317 et seq.

Updated 21 November 2018

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

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

A. Facts

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

The Claimant acquired its portfolio of SEPs from Nokia by a ‘Purchase and Sale Agreement’ concluded in 2011 [652] . The Claimant, Nokia and Microsoft also concluded a so-called ‘Royalty Participating Agreement’, referring to encumbrances [653] .

The parties failed to reach an agreement on a licence for Claimant’s SEP portfolio. Consequently, the Claimant brought an infringement action against the Defendants before the District Court (Tribunal de Grande Instance) of Paris, based on five French patents of its portfolio. The District Court of Paris dis-missed Claimant’s action [654] .

In the ongoing appeal proceedings before the Court of Appeal (Cour d’ Appel) of Paris (Court), the Defendants requested the Court to order the Claimant to produce the ‘Purchase and Sale Agreement’, the ‘Royalty Participating Agreement’, as well as all licensing agreements concluded by the Claimant with third parties, covering the patents in suit [652] . A few days prior to the oral hearing, the Claimant requested, in turn, that the Defendants produce four license agreements which they had entered with third parties [655] .

With the present decision, the Court dismissed Claimant’s request; it held that it was delayed and that the Claimant failed to explain the relevance of the requested licensing agreements to the present pro-ceedings [653] .

On the other hand, the Court granted the Defendants’ request [653] under the following conditions: First, the relevant documents will be made available (unredacted) only to the parties’ counsels, within a deadline of one month after the Court’s order [656] . The parties’ counsels will then be given the opportunity to argue by written submissions which parts or elements of these documents may affect business secrets [656] . On this basis, the Court will decide whether further measures (as set-forth in paragraphs 2, 3 or 4 of Article L. 153-1 of the French Commercial Code) are required for the protection of potential confidential information, or not [656] .


B. Court’s reasoning

The Court made use of the procedural possibilities for the protection of business secrets in court pro-ceedings recently introduced to the French Commercial Code by Law No. 2018-670 dated 30 July 2018 [657] .

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

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

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

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

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

  • [652] Court of Appeal (Cour d’ Appel) of Paris, judgment dated 9 October 2018, page 5.
  • [653] Ibid, page 5.
  • [654] District Court (Tribunal de Grande Instance) of Paris, judgment dated 17 April 2015, Case No. 14/14124.
  • [655] Ibid, page 2.
  • [656] Ibid. page 6.
  • [657] Ibid, page 5 et seq.

Updated 23 January 2018

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

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

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [427] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [428] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [429]

In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [430] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [431] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [432]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [433] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [434]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [435] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [436] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [437]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [438] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [439] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [440] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [440]

The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [441] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [442] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [443]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [444] This eliminates the so-called Vringo-problem, [445] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [446]

The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [447] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [449] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [449]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [450] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [451] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [452]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [451] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [453] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [452]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [454] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [454] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [455] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [456] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [457]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [458] Other freely-negotiated license agreements might be used as comparables. [459] This may be compared with a top down approach [460] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [461] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [458] License agreements must meet certain criteria to be comparable. [462] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [462] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [463]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [464] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive.

Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [427] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [428] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [429] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [430] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [431] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [432] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [433] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [434] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [435] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [436] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [437] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [438] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [439] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [440] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [441] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [442] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [443] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [444] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [445] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [446] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [447] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [448] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [449] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [450] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [451] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [452] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [453] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [454] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [455] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [456] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [457] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [458] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [459] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [460] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [461] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [462] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [463] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [464] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
    Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
    On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [180] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [181] The court declared the Huawei rules applicable to claims for the recall of products. [182]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [183] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [184] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [185]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [186]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [187] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [188]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [189] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [190] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [191]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [192]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [193]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [194] Whether the Intervener satisfied the ECJ criteria was left undecided. [195]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [196] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [197] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [198]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [199] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [200]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [201] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [202]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [203]
    Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [204]
    Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [205]
  • [180] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
  • [181] Case No. 4a O 73/14, para. 184
  • [182] Case No. 4a O 73/14, para. 187
  • [183] Case No. 4a O 73/14, para. 195 et seq.
  • [184] Case No. 4a O 73/14, para. 208-210
  • [185] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [186] Case No. 4a O 73/14, para. 193
  • [187] Case No. 4a O 73/14, para. 270 et seq.
  • [188] Case No. 4a O 73/14, para. 222 et seq.
  • [189] Case No. 4a O 73/14, para. 225 et seq.
  • [190] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [191] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [192] Case No. 4a O 73/14, para. 256 et seq.
  • [193] Case No. 4a O 73/14, para. 279 et seq.
  • [194] Case No. 4a O 73/14, para. 214-220
  • [195] Case No. 4a O 73/14, para. 214-220; 278
  • [196] Case No. 4a O 73/14, para. 266
  • [197] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [198] Case No. 4a O 73/14, para. 264.
  • [199] Case No. 4a O 73/14, para. 291 et seq.
  • [200] Case No. 4a O 73/14, para. 278
  • [201] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [202] Case No. 4a O 73/14, para. 304
  • [203] Case No. 4a O 73/14, para. 189
  • [204] Case No. 4a O 73/14, para. 309-313
  • [205] Case No. 4a O 73/14, para. 317 et seq.

Updated 17 January 2018

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

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

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [466] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [467]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [468] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [469] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [469]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [470] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [471] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [470] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [472] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [472]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [473] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [474] One reason is that it involves a public vindication of the claimant’s rights. [474] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [474] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [475] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [476] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [476]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [477] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [478] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [479] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [480] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [481] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [482] The ensuing question was whether any deductions were appropriate. [483] The court held that neither party had offered terms that were essentially FRAND. [484] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [484] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [485] second, the hard-edged non-discrimination point; [486] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [487] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [488]

  • [465] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [466] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [467] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [468] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [469] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [470] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [471] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [472] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [473] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [474] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [475] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [476] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [477] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [478] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [479] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [480] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [481] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [482] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [483] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [484] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [485] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [486] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [487] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [488] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 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) [228] . 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 [229] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [230] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [230] .

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) [231] . 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 [232] . 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 [233] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [233] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [234] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [232] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [235] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [236] , it found that the Claimant cannot enforce its patent rights for the time being [237] , 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) [235] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [239] .

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 [240] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [241] . 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 [242] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [243] .

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 [244] . 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 [244] . 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 [244] .

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 [244] . 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) [244] . 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 [244] .

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 [245] .

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 [246] . 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 [247] .

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 [248] .

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 [249] . 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 [249] .

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 [250] . 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 [250] . 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 [250] .

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) [251] . 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) [251] . 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 [251] .

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 [252] .

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 [253] .

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 [254] . Given the circumstances of the specific case, even an implicit behaviour can suffice [254] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [255] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [255] . 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 [255] . 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 [255] .

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 [256] . 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 [257] .

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 [258] .

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 [259] . 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 [232] .

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 [260] . 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 [261] .

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 [262] . 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 [262] . 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 [262] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [263] . 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 [264] .

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 [234] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [265] .

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 [266] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [267] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [268] .

First, the terms did not adequately consider the effects of patent exhaustion [269] . As a rule, FRAND requires licensing offers to contain respective provisions [270] . 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 [271] .

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 [272] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [273] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [274] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [275] . 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 [275] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [276] .

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 [266] . 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) [277] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [278] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [278] . 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 [279] .

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 [280] . 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 [281] .

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 [282] . 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 [283] . 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 [284] .

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 [285] . 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 [285] . 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) [285] . 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 [285] . 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 [286] .

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 [287] . 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 [288] . 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 [289] .

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 [290] .


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 [291] .

  • [228] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [229] Ibid, para. 13.
  • [230] Ibid, para. 12.
  • [231] Ibid, paras. 14 and 211.
  • [232] Ibid, para. 15.
  • [233] Ibid, para. 16.
  • [234] Ibid, para. 236.
  • [235] Ibid, paras. 140 and 313 et seqq.
  • [236] Ibid, paras. 114 et seqq.
  • [237] Ibid, paras. 60 and 140.
  • [238] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [239] Ibid, para. 142.
  • [240] Ibid, para. 148.
  • [241] Ibid, paras. 153 and 146.
  • [242] Ibid, paras. 159 - 181.
  • [243] Ibid, para. 158.
  • [244] Ibid, para. 147.
  • [245] Ibid, paras. 183 et seqq.
  • [246] Ibid, para. 191.
  • [247] Ibid, para. 188.
  • [248] Ibid, paras. 195 et seqq.
  • [249] Ibid, para. 199.
  • [250] Ibid, para. 198.
  • [251] Ibid, para. 200.
  • [252] Ibid, para. 203.
  • [253] Ibid, para. 205.
  • [254] Ibid, para. 208.
  • [255] Ibid, para. 207.
  • [256] Ibid, para. 210.
  • [257] Ibid, para. 212.
  • [258] Ibid, paras. 215 et seq.
  • [259] Ibid, para. 220.
  • [260] Ibid, paras. 222 et seqq.
  • [261] Ibid, para. 225.
  • [262] Ibid, para. 233.
  • [263] Ibid, para. 228.
  • [264] Ibid, para. 230.
  • [265] Ibid, para. 237.
  • [266] Ibid. para. 241.
  • [267] Ibid, para. 242.
  • [268] Ibid, paras. 283 et seqq.
  • [269] Ibid, para. 285.
  • [270] Ibid, para. 288.
  • [271] Ibid, paras. 292 et seq.
  • [272] Ibid, paras. 298 et seqq.
  • [273] Ibid, para. 301.
  • [274] Ibid, para. 306.
  • [275] Ibid, para. 311.
  • [276] Ibid, para. 271.
  • [277] Ibid, para. 250.
  • [278] Ibid, para. 248.
  • [279] Ibid, para. 267.
  • [280] Ibid, paras. 256 and 259 et seq.
  • [281] Ibid, para. 262.
  • [282] bid, paras. 258 and 264.
  • [283] Ibid, paras. 263 and 265.
  • [284] Ibid, para. 265.
  • [285] Ibid, para. 273.
  • [286] Ibid, para. 274.
  • [287] Ibid, para. 276.
  • [288] Ibid, para. 277.
  • [289] Ibid, para. 281.
  • [290] Ibid, para. 315.
  • [291] 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) [357] . 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 [358] .

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 [359] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [359] .

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 [359] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [359] . 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 [360] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [361] . 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 [362] .

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 [363] . 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) [363] . This deadline was extended for almost three weeks until 7 May 2018 [363] .

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) [363] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [364] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [364] . 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 [365] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [366] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [364] . 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) [364] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [367] . 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 [368] . 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” [368] . The Court held that the Defendant failed to establish such fact [367] . 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?) [367] .

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 [369] .

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 [370] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [370] . 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 [360] . 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 [360] . 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 [371] .

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 [369] . 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 [369] .

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 [369] . 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 [373] .

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 [374] .

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) [375] .

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 [360] . 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) [360] .

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) [376] .

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) [361] .

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 [361] .

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) [377] . 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 [361] .

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 [378] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [378] . 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 [378] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [378] .

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 [379] . 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 [379] . 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”) [379] . 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 [380] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [380] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [380] .


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 [381] . On the other hand, it does not define the ownership of the patent in material legal terms [382] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [383] .

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 [384] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [384] . The Defendant failed convince the Court that this was the case with the SEP in suit [384] .

  • [357] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [358] Ibid, page 23 et seq.
  • [359] Ibid, page 5.
  • [360] Ibid, page 25.
  • [361] Ibid, page 26.
  • [362] Ibid, pages 5 et seq.
  • [363] Ibid, page 6.
  • [364] Ibid, page 19.
  • [365] Ibid,page 23.
  • [366] Ibid, pages 16 et seqq.
  • [367] Ibid, page 20.
  • [368] Ibid, page 21.
  • [369] Ibid, page 22.
  • [370] Ibid, page 24.
  • [371] Ibid, pages 24 et seq.
  • [372] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [373] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [374] Ibid,pages 23 and 25.
  • [375] Ibid, page 23.
  • [376] Ibid, pages 23 and 25 et seq.
  • [377] Ibid, pages 26 et seqq.
  • [378] Ibid, page 27.
  • [379] Ibid, page 28.
  • [380] Ibid, page 29.
  • [381] Ibid, page 10.
  • [382] Ibid, pages 10 et seq.
  • [383] Ibid, page 11.
  • [384] Ibid, page 30.

Updated 1 November 2017

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

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

  1. Facts
    The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [491] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [492] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [493]
    In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [494] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [495] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [496]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [497] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [498]
  2. Court’s reasoning
    1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [499] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [500] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [501]
    2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
        The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [502] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [503] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [504] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [504]
        The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [505] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [506] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [507]
      2. ‘True FRAND Rate’
        The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [508] This eliminates the so-called Vringo-problem, [509] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [510]
        The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [511] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [512] Since Art. 102 TFEU condemns excessive pricing, [513] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [513]
      3. Discrimination
        The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [514] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [515] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [516]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [515] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [517] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [516]
      4. Territorial Scope of License
        The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [518] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [518] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [519] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [520] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [521]
  3. Court’s reasoning
    1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [522] Other freely-negotiated license agreements might be used as comparables. [523] This may be compared with a top down approach [524] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [525] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [522] License agreements must meet certain criteria to be comparable. [526] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [526] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [527]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [528] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [491] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [492] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [493] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [494] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [495] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [496] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [497] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [498] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [499] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [500] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [501] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [502] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [503] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [504] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [505] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [506] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [507] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [508] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [509] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [510] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [511] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [512] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [513] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [514] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [515] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [516] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [517] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [518] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [519] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [520] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [521] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [522] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [523] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [524] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [525] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [526] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [527] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [528] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

Updated 6 June 2017

OLG Düsseldorf

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

  1. Facts
    The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a telecommunications company, which inter alia sells mobile phones allegedly using Claimant’s SEPs. Upon Claimant’s action, the Regional Court of Düsseldorf (1) ordered the Defendant to render accounts regarding the sales of mobile phones embedding Claimant’s SEPs and (2) recognized Defendant’s obligation to pay damages to the Claimant resulting from the infringement of its SEPs (cf. Regional Court of Düsseldorf, decision dated 19th January 2016, Case No. 4b O 49/14). The Defendant appealed this judgement. In the appeal proceedings before the Higher Regional Court of Düsseldorf (Case No. 2 U 31/16), one issue in dispute was whether the license fees, which the Claimant had calculated, were Fair, Reasonable and Non-Discriminatory (FRAND). The Claimant explained its calculation in a statement to the court that was produced in two versions. In the first version, which was filed only with the court, the information regarding the FRAND calculation (including comparable license agreements pre¬sented as evidence), were fully disclosed. In the second version, which was presented to the Defendant and a third party that had joined the proceedings (Intervener), the respective sections (and evidence) were redacted.
    With the present interlocutory application, the Claimant requested the court to order that disclosure of full information (and evidence) regarding its FRAND calculation shall be required only towards Defendant’s and Intervenor’s counsels, provided that the court would oblige the counsels to full confi-dentiality towards everyone, including their clients themselves (that is the Defendant and the Intervener). The Defendant objected this request. The Intervener, on the other hand, stated that it agreed with the proceeding defined in Claimant’s request.
    In its first decision dated 14th December 2016, the court rejected the application with respect to both the Defendant and the Intervener. Instead, the court encouraged the parties to enter into a Non-Disclosure Agreement (NDA) reinforced by a contractual penalty, in case confidentiality was breached.
    This decision was consequently modified by a further decision rendered by the court on 17th January 2017. The court granted Claimant’s application in respect to the Intervener, but again rejected the application in respect to the Defendant. The court, however, requested from the Defendant to present an offer for an NDA to the Claimant incorporating particularly the following conditions within a deadline of three weeks:
    • The confidential information should be used only in the context of the present litigation.
    • The information would be made available only to four company representatives of the Defendant (as well as any experts engaged by the Defendant in the ongoing litigation).
    • These persons shall be themselves obliged to confidentiality by the Defendant.
    • In case confidentiality was breached, the Defendant shall be liable for payment of a contractual pen-alty amounting to EUR 1 million.




  2. Court’s Reasoning
    In its first decision, the court found that the German rules of Civil Procedure do not provide a legal basis for granting an order in the form requested by the Claimant. [51] Such an order would exclude Defendant’s right to be heard with respect to Claimant’s FRAND calculation, in breach of Art. 103 Sec. 1 of the German Constitutional Law (Grundgesetz). [51] The fact that Defendant’s counsels would have access to the relevant information, does not suffice to meet the requirements set forth by the aforementioned provision. Party’s right to be heard contains also the right to personally participate in the proceedings. Consequently, a limitation of a party’s right to be heard reaching so far as Claimant requested, is not possible, unless the party affected expressly waives its right to personally participate in the proceedings. [51] Since the Defendant decided to not do so, a respective order cannot be rendered against it.
    The fact that the Intervener waived its respective right, can also not justify rendering such an order against the Defendant. [52] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [53] Accordingly, it cannot make decisions that would affect the party’s standing, such as a declaration to waive the right to be heard. In the present case, the Intervener’s decision to waive its respective right may, therefore, impact its own standing in the proceedings, but cannot affect Defendant’s position.

    As a result, the Claimant can either make the confidential information available to the Defendant or keep this information redacted, accepting that the court cannot take redacted information into consideration for its decision. [54]

    Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [55] the court held, that, as a rule, it can be expected from the implementer of SEPs to enter into a NDA reinforced by a contractual penalty with the SEP holder. [56] SEP implementer is obliged to facilitate FRAND licensing negotiations to the best of its ability. This includes also taking justified confidentiality interests of the SEP holder into account. [56]

    In its second decision dated 17th January 2017 the court applied the above considerations. Since the Intervener waived its right to be heard, the court found that there is no reason to deny Claimant’s request in relation to the Intervener. On the other hand, due to Defendant’s denial to waive its respective right, the court still refrained for granting Claimant’s request against the Defendant. Taking Claimant’s confi¬dentiality interests into account, the court ordered, however, the Defendant to submit an offer for a NDA to the Claimant based particularly on the conditions mentioned above.
  • [51] Judgement dated 14th December 2016, para. 1
  • [52] Judgement dated 14th December 2016, para. 2
  • [53] Judgement dated 14th December 2016, para. 2
  • [54] Judgement dated 14th December 2016, para. 3
  • [55] Bundesgerichtshof, Decision dated 19th February 2014, Case No. I ZR 230/12
  • [56] Judgement dated 14th December 2016, para. 5

Updated 27 June 2018

OLG Düsseldorf

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

A. Facts

The Claimant holds a patent essential to a technical standard (Standard Essential Patent or SEP) which is subject to a so-called “FRAND-undertaking”, that is a commitment to make the SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant entered into nego¬tiations for a FRAND licensing agreement with the Defendant. In June 2017, the parties signed a Non-Disclosure Agreement (NDA). [57] A few days later, the Claimant entered into an NDA also with a third party, the Intervener . Shortly after signing the NDA, the Intervener [58] argued that several clauses of the agreement were void. [59]

In September 2017, the Claimant initiated infringement proceedings against the Defendant before the District Court of Düsseldorf (District Court). The Intervener joined these proceedings in support of the Defendant. After joining the proceedings, the Intervener claimed that the NDA with the Claimant does not cover information which the latter has to produce in the trial. This is particularly the case with infor-mation regarding to comparable licensing agreements concluded by the Claimant with third parties (comparable licences), which the Claimant regarded as strictly confidential. [60]

In December 2017, the Intervener requested full access to the court files. [61] The District Court dismissed the Intervener’s motion in part, namely by excluding access to confidential information, including information on comparable licences. The District Court held that the protection of such information was not adequately ensured, since the Intervener’s behaviour raised significant doubts that he considered himself bound to confidentiality by the NDA signed with the Claimant. [62] The Intervener appealed this decision.

The Higher District Court of Düsseldorf (Court) set the above ruling aside and requested the District Court to further clarify the facts of the case and decide again on the Intervener’s motion for full access to the court files on basis of the principles set forth in its present judgement. [63] In particular, the Court requested from the District Court to (re-)examine whether the Claimant actually possessed confidential business information which needed protection. [63] If this fact could be positively established, then a limited access to the court files would, basically, be justified, if the party seeking access to the files refused to commit itself to confidentiality. [64]

B. Court’s reasoning

The Court pointed out that parties to court proceedings seeking to protect confidential information must undertake efforts to sign an NDA with the opposing party and any intervener that has joined or is expected to join the proceedings with a high degree of certainty, before disclosing such information in the trial. [65] A party doing so without an NDA has to accept that the opposing party and/or the intervener could gain access to confidential information through an inspection of the court files. [66]

In the eyes of the Court, requesting from the party seeking to protect confidential information to actively pursue the conclusion of NDAs with other parties involved in the proceedings does not put that party at a disadvantage. The unjustified refusal of the opposing party (or an intervener) to enter into an NDA allows the party seeking protection to use only non-confidential information in the proceedings for specifying the FRAND conformity of its licensing offer to the potential licensee. [67] Although still obliged to specify the conditions of its FRAND licensing offer, the party has a lower burden to bear; to the extent (and not be¬yond) that is required for protecting its justified confidentiality interests, the party can meet its respective obligation by making “merely indicative observations” in the trial. [68]

In case that an intervener joins the proceedings at a point in time, in which a party has already produced confidential information on grounds of an NDA previously signed with the opposing party, the intervener’s right to inspect the court files can only be limited, if it was (or can) be established that the party seeking protection actually possesses confidential business information. [69] The fact that the other parties involved in the proceedings have already signed an NDA does not of itself limit the intervener’s right to full access to the court files. [70]

To establish that it possesses confidential business information worthy of protection, a party must identify such information and concretely explain why this information constitutes a business secret. [71] The party also needs to present in detail which measures were taken so far for securing confidentiality with respect to the information in question. [71] In addition, the party has to demonstrate in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed. [71] It also needs to be explained, with which degree of certainty the said disadvantages are expected to occur. [71]

When protection of confidential information contained in comparable licences is sought, the existence of confidentiality interests requires, in general, special justification. [72] In the Court’s view, the SEP holder’s FRAND-undertaking entails transparency vis-à-vis interested stakeholders with respect to licensing conditions. [72] Moreover, knowledge of licensing conditions already accepted in the market can help potential licensees exercise their rights in infringement proceedings effectively. [72] Considering the non-discriminating element of SEP holder’s FRAND undertaking, it is not immediately apparent to the Court which interest worthy of legal protection the SEP holder could have in keeping conditions agreed in existing licensing agreements confidential. [72] In fact, several licensing pools (e.g. MPEG) publish their licensing agreements online. [72]

Should the party seeking protection fail to establish that it possesses confidential business information needing protection, full access to the court files must be granted to the intervener upon request, irrespective of whether the latter signs an NDA or not. [73] Conversely, if the existence of confidential business information is established, the intervener’s right to inspect the court files can be limited only to non-confidential information, as long as the intervener refuses to enter into an NDA with the party seeking protection of its confidentiality interests. [64]

In case that a party which has signed an NDA breaches its obligations under this agreement or “backs out” of the NDA, the party relying on the protection of its confidentiality interests can again limit its (future) submissions of facts in the proceedings to non-confidential information. [74] In other words, in terms of detail, the party must again not present information going beyond “merely indicative observations”. [74] Whether a party has “backed out“ of an NDA is a question of fact which has to be decided on a case-by-case basis. [75] For this, it is required that the party’s behaviour has caused a high risk of a breach of confidentiality. [75] For instance, this could be the case, when legal arguments brought by the party against the validity of the NDA are not reasonable, but rather serve as a pretext. [75]

  • [57] Higher District Court of Düsseldorf, judgement dated 25 April 2018, Case No. I-2 W 8/18, para. 26
  • [58] Ibid, para. 26
  • [59] Ibid, para. 32
  • [60] Ibid, para. 35
  • [61] Ibid, para. 2
  • [62] Ibid, para. 27
  • [63] Ibid, para. 36 et seq
  • [64] Ibid, para. 17
  • [65] Ibid, paras 11 and 14
  • [66] Ibid, para. 11
  • [67] Ibid, para. 13
  • [68] Ibid, para. 13
  • [69] Ibid, para. 15
  • [70] Ibid, para. 15 et seq
  • [71] Ibid, para. 23
  • [72] Ibid, para. 24
  • [73] Ibid, para. 16
  • [74] Ibid, para. 20
  • [75] Ibid, para. 21

Updated 30 October 2018

Unwired Planet v Huawei, UK Court of Appeal

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

A. Facts

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

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [540] In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court). [541] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [542]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [543] By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid. [543] The parties agreed to postpone further technical trials indefinitely. [543]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [544] The Claimant also settled the infringement proceedings with Google. [545]

In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. [546]

In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND) [547] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [548] Pending appeal, the High Court stayed the injunction. [549]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [550]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [551]


B. Court’s reasoning

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

1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. [552]

2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. [553]

3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE [554] (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). [555]

Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. [556]


1. Worldwide licences

The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). [557]

The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence) [558] . [559]

Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI. [560] Such an undertaking has international effect. [561] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [562] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [562] Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. [563]

Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND. [564] German Courts (in Pioneer Acer [565] and St. Lawrence v Vodafone [566] ) as well as the European Commission in its Communication dated 29 November 2017 [567] had also adopted a similar approach. [568]

Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist. [563] In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe. [569] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [569]

In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. [570]

In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. [571] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [571] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [572] If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. [572]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [573] In particular, the Defendants argued that this approach encourages over-declaration of patents [574] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [575] which requires relief for patent infringement to be proportionate. [576]

Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties. [577] The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. [578]


2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [579] that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. [580]

The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung. [581] In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position [582] or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. [583]

Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers). [584] It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology. [585] It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. [586]

Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. [587]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [588] the FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates. [588] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [589]

The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth. [590] However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. [590]

In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare. [591] The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth. [591] Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. [592]


3. Abuse of dominant Position / Huawei v ZTE

The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. [593]

To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter. [594] It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP [595] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [596] and the risk of hold-out that is immanent to the structure of the respective market, [597] can either alone or together rebut the assumption that it most likely holds market power. [598]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [599]

The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU. [600] The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse. [601] If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. [602]

In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents. [603] This follows from the clear language used by the CJEU with respect to this obligation. [604] The precise content of such notice will depend upon all the circumstances of the particular case. [604] In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. [605]

On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. [606]

Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior. [607] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [608] St. Lawrence v Vodafone [608] and Sisvel v Haier [609] ) [610] .

  • [540] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
  • [541] Ibid, para. 6 et seqq.
  • [542] Ibid, para. 233.
  • [543] Ibid, para. 7.
  • [544] Ibid, paras. 8 and 137 et seqq.
  • [545] Ibid, para. 8.
  • [546] Ibid, para. 9 et seqq.; para. 31 et seqq.
  • [547] Ibid, para 17.
  • [548] Ibid, para 130.
  • [549] Ibid, para 18.
  • [550] Ibid, para 112.
  • [551] Ibid, para 291.
  • [552] Ibid, paras. 19 and 45 et seqq.
  • [553] Ibid, paras. 20 and 132 et seqq.
  • [554] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
  • [555] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
  • [556] Ibid, para. 17.
  • [557] Ibid, paras. 74 and 77 et seq.
  • [558] Ibid, para. 82.
  • [559] Ibid, para. 80.
  • [560] Ibid, para. 79 et seq.
  • [561] Ibid, para. 26.
  • [562] Ibid, para. 53.
  • [563] Ibid, para. 54 et seq., para. 59.
  • [564] Ibid, para. 56.
  • [565] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
  • [566] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
  • [567] Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
  • [568] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
  • [569] Ibid, para. 111.
  • [570] Ibid, para. 128.
  • [571] Ibid, para. 121.
  • [572] Ibid, para. 125.
  • [573] Ibid, para. 75.
  • [574] Ibid, para. 92
  • [575] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
  • [576] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
  • [577] Ibid, para. 96.
  • [578] Ibid, para. 98.
  • [579] Ibid, para. 20 and 132 et seqq.
  • [580] Ibid, paras. 207 and 210.
  • [581] Ibid, para. 176.
  • [582] Ibid, para. 173.
  • [583] Ibid, para. 169 et seq.
  • [584] Ibid, paras. 194 et seqq.
  • [585] Ibid, para. 198.
  • [586] Ibid, para. 198.
  • [587] Ibid, para. 199.
  • [588] Ibid, para. 195.
  • [589] Ibid, para. 202.
  • [590] Ibid, para. 196.
  • [591] Ibid, para. 197.
  • [592] Ibid, para. 200.
  • [593] Ibid, para. 21, paras. 211 et seqq and para. 251.
  • [594] Ibid, para. 212.
  • [595] Ibid, para. 216.
  • [596] Ibid, para. 219.
  • [597] Ibid, para. 220.
  • [598] Ibid, para. 229.
  • [599] Ibid, para. 284.
  • [600] Ibid, para. 269.
  • [601] Ibid, para. 270.
  • [602] Ibid, para. 269 and 282.
  • [603] Ibid, para. 253 and 281.
  • [604] Ibid, para. 271.
  • [605] Ibid, para. 273.
  • [606] Ibid, para. 284
  • [607] Ibid, para. 275
  • [608] See above
  • [609] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
  • [610] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

Updated 30 October 2018

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

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

A. Facts

The Claimant, TQ Delta LLC, acquired patents that had been declared as essential to the DSL standard under the so-called “ITU Recommen­dations” from a company called Aware Inc. (Standard Essential Patents, or SEPs) [1] . The ITU Recommendations require from the SEP holder to make its patents accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] . The Defendants, Zyxel Communications UK Ltd. and Zyxel Communications A/S, manufacture and sell various types of equipment complying with the DSL standard [2] .

The Claimant brought an infringement action against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds [2] . The proceedings involve, on the one hand, technical issues concerning the validity, essentiality and infringement of the SEPs in question and, on the other hand, the licensing of these SEPs on FRAND terms [3] .

Prior to service of the statements of case, the Court ordered the Claimant to disclose licence agreements concluded with third parties, covering also the SEPs in suit (comparable agreements) [4] . The Claimant requested the Court to establish an “external eyes only” regime with respect to comparable agreements, especially a licence entered with a company called Zhone (Zhone licence) as well as a licence concluded with another company referred to as company “X” (X licence). In June 2018, the Court dismissed Claimant’s motion [5] . After that, the Court ordered standard disclosure, requesting both parties to search for documents relevant to the case and produce so-called “disclosure statements”, containing the documents identified [6] .

In its disclosure statement, the Claimant included only the licences concluded by Aware Inc. with third parties covering also the patents in suit (of which he possessed only redacted copies; “Aware licences”), the assignment agreement signed with Aware Inc., the inter partes correspondence with the latter as well as a few public validity findings made by the US Patent and Trademark Office on certain patents of its portfolio [7] .

The Defendants, who had obtained unredacted copies of the Aware licences directly from Aware Inc. [7] , complained that the Claimant’s disclosure was not appropriate and set out various categories of documents which, in their view, should have been in disclosure [7] . Accordingly, the Defendants requested an order for standard disclosure to be repeated, backed this time by a so-called “unless order” (meaning that non-compliance with the order will be sanctioned by the dismissal of Claimant’s claims) [8] .

On 28 September 2018, the Court made an order requesting disclosure of the following specific categories of documents by the Claimant [9] :

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

On the other hand, the Court refused to order disclosure of documents relating to the negotiations leading to the Zhone licence, the X licence and the Aware licences, documents concerning licensing negotiations between the Claimant and third parties which have not resulted in a licence yet [12] , as well as documents regarding to assessments of the validity [13] or the technical significance of Claimant’s patents within the standard [10] .

With judgment dated 11 October 2018, the Court set forth the specific terms of the order [14] . Since the Court held that the Claimant did not carry out a proper search for existing documents under the previous standard disclosure order, it required the Claimant to conduct such a search and deliver a new statement of disclosure [15] . In addition, the Court ordered the Claimant to disclose the aforementioned specific categories of documents, ruling that failure to comply with this order, will lead to the dismissal of Claimant’s claim [15] .

B. Court’s reasoning

The Court explained that disclosure can be refused only with respect to documents not relevant to the case and/or documents which are relevant but might have been privileged or disproportionate to search for [16] . In the Court’s eyes, proportionality comes in play in this context under two aspects: On the one hand, the cost and complexity of searching for and extracting the relevant material should be considered [17] . On the other hand, the impact of the documents on the trial as well as the cost and complexity of deploying any material which is produced in the proceedings needs also to be taken into account [17] .

Further, the Court made clear that disclosure cannot be refused on the grounds that documents referring to a specific transaction (e.g. a licensing agreement) are subjective in nature (whereas FRAND is objective); in the Court’s eyes, even then, the acts of individuals working in a field is capable of being evidence on what “reasonable business people” might do in similar circumstances [12] .

On this basis, the Court held that documents concerning the assignment of the SEPs in suit from Aware Inc. to the Claimant should be disclosed [12] . The fact that the Claimant had disclosed the assignment agreement itself does not mean that further disclosure is not necessary [12] . Documents referring to the assignment might be “potentially highly relevant information” in FRAND-related trials, since they could provide insights into how different parts of the patent portfolio assigned were valued, offering (presumably “at arm's length”) a “concrete data point” for the respective valuation [12] .

The Court further found that documents concerning the assessment of whether the patents in suit are (from a technical perspective) essential to the DSL standard should also be disclosed [13] , because it is particularly relevant to know what proportion of the patents which were assigned to the Claimant by Aware Inc. are essential to the DSL standard [13] .

Furthermore, the Court requested disclosure of documents referring to the Claimant’s royalty calculation, since they were regarded as “directly relevant” to the case [13] . The fact that respective documents were prepared in connection with previous litigation between the parties in the United States does per se hinder disclosure, unless litigation was the “dominant purpose” for which the documents were made [9] . In other words, the litigation privilege applies only to documents created in litigation to put forward arguments about what is and is not FRAND in court; on the contrary, documents which – in Claimant’s practice as a licensing company – led to the creation of the royalty rates and other terms in FRAND offers are subject to disclosure [9] .

On the other hand, the Court held that disclosure of documents relating to the negotiations which had led to the Zhone licence, the X licence and the Aware licences was not required [17] . Although such documents might, in principle, be relevant to the case (particularly for demonstrating what the parties may have said in the licensing negotiations about the value of the patents and their relevance to the standard) [18] , the Court found that disclosure of documents related to the Zhone licence and the X licence would be disproportionate in the present case, since it would have limited probative value [17] . This is because the Defendants had argued that the Zhone licence was not a relevant comparable agreement [8] . In addition, none of the parties advanced the X licence as a comparable agreement in connection with the royalty rates; in the Court’s eyes, the fact that it might be comparable in relation to other licence terms, did not have “significant utility” for the case [17] . With respect to documents related to the negotiations of the Aware licences, the Court refrained from ordering disclosure, because it was convinced that the Claimant was not in possession of such documents [18] .

Regarding to documents concerning licensing negotiations between the Claimant and third parties the Court held that, although these documents might be relevant to the case, their disclosure would also be disproportionate in light of the rather limited probative value that they are likely to have [12] .

Furthermore, the Court explained that documents referring to the individual technical significance of a patent within a standard (in a sense that some patents might be of higher value to the standard than others), were not relevant in the present case, since no party pleaded that respective considerations need to be taken into account for the royalty determination [10] . In this context, the Court expressed doubts about whether a method of determining royalties based on such considerations is workable in practice at all [12] .

The Court finally refused disclosure of documents relating to the validity of Claimant’s patents [13] . Insofar, the Court followed the usual practice of UK Courts in patent cases, according to which, as a rule, unspecific disclosure relating to patent validity is refused [13] .

  • [1] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 1.
  • [2] Ibid, page 1.
  • [3] Ibid, page 1 et seq. With respect to the relationship between the “technical trials” (that means the proceedings concerning the validity, essentiality and infringement of the SEPs in suit) and the “non-technical trial” regarding to FRAND licensing see, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 21st November 2017, Case-No. HP-2017-000045, [2017] EWHC 3305 (Pat); summary available at caselaw.4ipcouncil.com/english-court-decisions/tq-delta-llc-v-zyxel-communications-ewhc
  • [4] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018, Case-No. HP-2017-000045, [2018] EWHC 1515 (Ch), paras. 25 and 30; summary available at caselaw.4ipcouncil.com/english-court-decisions/tq-delta-llc-v-zyxel-communications-and-ors-ewhc
  • [5] Ibid, TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 13th June 2018.
  • [6] Q Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 2.
  • [7] Ibid, page 2.
  • [8] Ibid, page 3.
  • [9] Ibid, page 7.
  • [10] Ibid, pages 5 et seq.
  • [11] Ibid, pages 6 et seq.
  • [12] Ibid, page 5.
  • [13] Ibid, page 6.
  • [14] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 11th October 2018, Case-No. HP-2017-000045, [2018] EWHC 2677 (Pat).
  • [15] Ibid, pages 2 et seq.
  • [16] TQ Delta LLC v Zyxel Communications, UK High Court of Justice, 28th September 2018, Case-No. HP-2017-000045, [2018] EWHC 2577 (Pat), page 2.
  • [17] Ibid, page 4.
  • [18] Ibid, pages 3.