Case Law post CJEU ruling Huawei v ZTE

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Updated 23 January 2018

LG Mannheim

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

A. Facts

Case No. 7 O 24/14 [8] related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard (‘subtitle data encoding/decoding and recording medium for the same’). [9] The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used such DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. In early 2013, the patent pool approached the defendant’s parent company about the use of their patents in general.

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

On 13 March 2015, the claimant made an offer for a worldwide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details as to how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. The claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s parent company on 3 September 2015, the parties were unable to reach an agreement. On 30 September 2015, the claimant sent a PowerPoint presentation containing explanations regarding the patent and the calculation of the license fees.

The District Court of Mannheim granted an injunction order on 4 March 2016. [10] It also held that the defendant was liable for compensation and ordered it to render full and detailed accounts of its sales to determine the amount of compensation owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

B. Court’s Reasoning

1. Notice of Infringement

According to the Huawei/ZTE ruling, the claimant is required to notify the defendant of the alleged patent infringement. According to the District Court, this notice is supposed to provide the defendant an opportunity to assess the patent situation. [11] Thus, it is insufficient to notify the defendant that its products contain the respective standard and it is therefore infringing the SEP. Instead, the claimant is required to specify the infringed patent, the standard in question, and that the patent has been declared essential. The level of detail required depends on the respective situation. [12] However, the description does not need to be as thorough as a statement of claim in patent litigation. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. By sending the charts to the defendant, the claimant had met its obligations under the Huawei/ZTE ruling. [13]

The Huawei/ZTE principles require the SEP holder to give notice of infringement before commencing patent infringement proceedings. Otherwise, the SEP holder would abuse its market power, which would mean that the patent infringement court would not be able to grant an injunction order. However, according to the District Court, in such a situation the SEP holder would not lose its patent rights, but would be prevented from exercising those rights in court. [14] Proceedings that had been commenced prior to the Huawei/ZTE ruling present a special case. In that situation, the SEP holder could not have been aware of the obligations that the CJEU subsequently imposed on claimants. Thus, it must be possible for an SEP holder to go through the Huawei/ZTE process subsequently without losing the pending lawsuit. [15] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [16]

2. The SEP Owner’s Licensing Offer

The District Court expressed its view that the CJEU had wanted to establish a procedure that keeps the infringement proceedings free of complicated deliberations about the conditions of the offer, similarly to the German Federal Court of Justice decision Orange Book Standard. [17] If the alleged infringer argues that the conditions of the offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. [12] Thus, the District Court took the view that an infringement court only assesses in a summary review whether the conditions were not evidently non-FRAND. An offer is only non-FRAND if it is under the relevant circumstances abusive. For example, this would be the case if the conditions offered to the alleged infringer were significantly worse than those offered to third parties. [18] The District Court held that in the case in issue the royalties were not evidently non-FRAND because the royalty rates were generally accepted in the market. [19]

The offer needs to include the calculation method in respect of the royalties. [18] However, the CJEU did not elaborate on the level of detail required. [20] The District Court took the view that the SEP holder needs to enable the alleged infringer to understand why the offer is FRAND. In the case in issue, the claimant had included the calculation method. It had also provided further explanations regarding the calculation, which met the Huawei/ZTE requirements. [21]

3. The standard implementer’s reaction

The alleged infringer is required to respond to the SEP proprietor’s license offer, even if the infringer is of the opinion that the offer does not meet the FRAND criteria. [20] The only possible exception is an offer that, by means of summary examination, is clearly not FRAND, which would constitute an abuse of market power. A counter-offer would need to be made as soon as possible, taking into account recognized commercial practices in the field and good faith. The District Court held that the defendant had not made an adequate counter-offer. It is common business practice to enter into license agreements in respect of worldwide portfolio licenses. [22] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [22] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [23]

C. Other Important Issues

The court held that the procedures prescribed by the Huawei/ZTE ruling apply to applications for injunctions and recall orders, but not to rendering accounts and compensation. Regarding rendering accounts and compensation, SEP holders could pursue their rights in court without additional requirements. [20]

Further, the District Court was of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. Even if the claimant’s conduct was anti-competitive pursuant to Art. 101 TFEU, the standardisation agreement would be void. [24] This has no implications for patent infringement proceedings.

The court also held that there was no general rule that the SEP holder could only bring proceedings against the manufacturer of the infringing product. [25] In the eyes of the District Court, the Higher Regional Court of Karlsruhe decision 6 U 44/15 (23 April 2015) did not establish such a principle. In that case, the defendant was a company that acted merely as a distributor of infringing products (which means it was reselling the products without making any alterations). In contrast, the defendant in the present case had installed the infringing software onto laptops and then sold them under its own brand name. Thus, the two cases were not comparable. [25]

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

Updated 10 April 2019

Huawei v ZTE

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

A. Facts

The Claimant, Huawei Technologies Co. Ltd., holds a patent declared as essential to the practice of the LTE wireless telecommunication standard (Standard Essential Patent, or SEP) developed by the European Telecommunications Standards Institute (ETSI) [88] . In March 2009, the Claimant committed towards ETSI to make the patent in question accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [89] .

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

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

In April 2011, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court), seeking for injunctive relief, the rendering of accounts for past uses, the recall of products and an award for damages for patent infringement [93] .

The District Court stayed its proceedings and submitted a reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) to the Court of Justice of the European Union (CJEU). In brief, the District Court noted that the German Federal Court of Justice (Bundesgerichtshof) and the European Commission appeared to have adopted conflicting positions on the question under which conditions an action for a prohibitory injunction brought by a SEP holder against a SEP user constitutes an abuse of dominant position in violation of Article 102 TFEU [94] : In its Orange Book ruling, the German Federal Court of Justice held that, in infringement proceedings concerning SEPs, the defendant is entitled to raise a defence under Article 102 TFEU (and thus avoid an injunction), only and insofar as it submits an unconditional, fair offer to conclude a licence to the patent holder, accounts for past acts of use and also makes a deposit on the royalty payments resulting thereof [95] . The European Commission, on the other hand, in proceedings relating to enforcement actions taken by Samsung against Apple in a number of EU member states, took the view that an action for injunctive relief concerning a SEP may, in principle, infringe Article 102 TFEU to the extent to which the defendant has demonstrated his willingness to negotiate a licence on FRAND terms in accordance with the patent holder’s FRAND commitments [96] .

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

  • firstly, notified the user about the infringement of its patent ‘by designating that patent and specifying the way in which it has been infringed’, and
  • secondly, if the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated[97] .

By contrast, the SEP user may invoke the abusive nature of a patent holder’s action for a prohibitory injunction and/or for the recall of products, only if it responds to SEP holder’s offer without delay [98] . In case that the patent user rejects that offer, it has to

  • submit ‘promptly and in writing, a specific counter-offer that corresponds to FRAND terms’ to the patent holder [99] and
  • if its counter-offer is rejected, provide appropriate security for the use of the patent(s), ‘for example by providing a bank guarantee or by placing the amounts necessary on deposit[100] .

The CJEU made clear that the above framework does not apply to SEP holders’ claims for damages and/or the rendering of accounts in relation to past acts of use; actions concerning these claims cannot infringe Article 102 TFEU, since they have no impact on whether standard compliant products can appear or remain on the market [101] .

B. Court’s Reasoning

The CJEU stressed the need to balance, on the one hand, the effective judicial protection of SEP holders’ fundamental intellectual property rights (IPRs) and, on the other hand, the public interest in free undistorted competition [102] .

Since the parties had not contested that the Claimant held a dominant market position, the Court’s analysis focused on the existence of an ‘abuse’ in terms of Article 102 TFEU [103] . According to the CJEU, the exercise of an IPR cannot ‘in itself’ be abusive, even if it is the act of an undertaking holding a dominant position [104] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[105] .

Cases, in which SEPs are involved, distinguish themselves from other IPR-related cases: First, the fact that the patent has obtained SEP status means that the patent holder can ‘prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question[106] . Besides that, by making a FRAND commitment, the patent holder has created ‘legitimate expectations’ to third parties implementing the standard that the SEP will be accessible on FRAND terms [106] . Having regard to the ‘legitimate expectations’ created, the patent user sued in infringement proceedings can, in principle, defend himself by invoking Article 102 TFEU, in case that the SEP holder refused to grant him a FRAND licence [107] .

Although the SEP holder cannot be deprived of its rights to have recourse to legal proceedings for the protection of its IPRs, the CJEU found that the FRAND undertaking justifies the imposition of an obligation on the SEP holder to comply with specific requirements, when seeking for injunctive relief [108] . In particular, in order to avoid a violation of Article 102 TFEU, the SEP holder should meet the following conditions: (a) prior to the filing of an action for a prohibitory injunction, it must notify the user about the infringement ‘by designating that SEP and specifying the way in which it has been infringed[109] , and (b) submit a specific written offer for a licence on FRAND terms to the user, particularly specifying ‘the royalty and the way in which it is to be calculated’, if the latter has expressed its willingness to enter into such a licence [110] . In this context, the CJEU observed that the SEP holder can be expected to make such an offer, since it is ‘better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer’, because, as a rule, no public standard licensing agreement exists and the terms of existing agreements entered by the SEP holder with third parties are not made public [111] .

On the other hand, the (alleged) infringer must diligently respond to the SEP holder’s offer, ‘in accordance with recognised commercial practices in the field and in good faith’ [98] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[98] .

In case that the infringer finds the proposed terms as falling short of the patent holder’s FRAND commitment and chooses to reject the SEP holder’s licensing offer, it must submit a specific written counter-offer on FRAND terms to the SEP holder [99] . If the counter-offer is rejected and the (alleged) infringer already used the SEP in question without a licence, it is obliged to provide ‘appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit[100] . The calculation of that security must include, inter alia, ‘the number of the past acts of use of the SEP’, and the alleged infringer must be able to render accounts in respect of those acts of use [100] .

When no agreement is reached following the counter-offer by the (alleged) infringer, the CJEU pointed out that the parties have the option, to request ‘by common agreement’ that the amount of the royalty be determined ‘by an independent third party, by decision without delay[112] .

Finally, the CJEU made clear that the (alleged) infringer is allowed to challenge the validity and/or the essentiality and/or the actual use of SEP holder’s patents in parallel to the licensing negotiations, or to reserve the right to do so in the future [113] .


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

Updated 24 July 2020

Sisvel v Haier, Federal Court of Justice (Bundesgerichtshof)

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

B. Court's reasoning

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

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

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

Dominant market position

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

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

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

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

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

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

Abuse of market dominance

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

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

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

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

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

Notification of infringement

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

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

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

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

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

Willingness

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

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

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

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

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

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

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

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

Updated 26 January 2017

Unwired Planet v Samsung

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

  1. Facts
    Since 7 March 2014 Claimant, a non-practicing entity, is the proprietor of European patent EP D, allegedly covering a feature of the GSM standard, originally granted to the Intervener, and subsequently transferred to company “I”. Defendants, belonging to the K-group, produce and market GSM- and UMTS-based devices.
    In an agreement as of 26 October 2011, the Intervener granted a worldwide non-exclusive license to Qualcomm Inc., being, in turn, allowed to grant sub-licenses to its customers. Furthermore, by agreement as of 1 February 2014 one of the Defendants was granted a worldwide, non-exclusive license to patents owned by the Intervener.
    On 10 January 2013, the Intervener concluded a so-called “Master Sales Agreement” (MSA), concerning the exploitation of a portfolio of more than two thousand patents, with “E”, “F” and its subsidiaries. Claimant became a party to the MSA later on. After its accession to the MSA, “I”, by assuming the existing FRAND obligation of the Intervener in accordance with the MSA, made a separate FRAND commitment towards ETSI on 14 June 2013 and declared, in an agreement as of 13 February 2013, to ensure that subsequent acquirers equally assume this obligation. Accordingly, after the transfer of patent EP D to Claimant the latter made, on 6 March 2014, a separate commitment towards ETSI declaring to be willing to grant licenses on FRAND terms with regard to, inter alia, patent EP D.
    In order to implement the MSA the parties concluded three transfer agreements. Claimant argues that the Intervener validly transferred a part of its patent portfolio, including patent EP D, by agreement as of 11 February 2013 to undertaking “B”. On 13 February 2013, “B”, in turn, transferred the patent portfolio, including patent EP D, to “I”. After successfully requesting, on 3 September 2013, an amendment of the patent register, being performed on 24 October 2013, “I” transferred, on 27 February 2014, the patent portfolio, including patent EP D, to Claimant. Claimant successfully requested, on 7 March 2014, an amendment of the patent register which was performed on 3 July 2014.
    As a reaction to Claimant’s public license proposal including a royalty of USD 0.75 per mobile device Defendants allegedly submitted a counter-offer but no licensing agreement was concluded.
  2. Court’s reasoning
    1. Market power
      The court stressed that an application of Article 102 TFEU does not automatically result from SEP ownership but that it requires proof of a dominant position on the relevant market being conveyed by the SEP in question. Due to the fact that products not implementing the patent-in-suit could not effectively compete on the relevant market because of GSM being a key feature for such products market power of Claimant was affirmed. [266]
    2. Applicability of the Huawei rules to damages and the rendering of accounts
      While the Huawei rules of conduct apply to actions for injunction, recall and destruction of products they are, in principle, not directly applicable to claims for damages and the rendering of accounts. [267] Nor is it necessarily abusive for a SEP proprietor to bring an action for damages and the rendering of accounts without having notified the standard implementer of an infringement and without having offered a FRAND license beforehand. The Huawei obligations do, however, have an indirect impact on the extent to which damages and the rendering of accounts are due: Where the SEP proprietor fails to grant a FRAND license although he has made a FRAND commitment and the standard implementer has expressed its readiness to take a license, damages are limited to the FRAND royalty level but only for the period after the SEP proprietor’s abusive refusal to license. [268] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [269]
    3. Cap on damages/rendering of accounts in casu
      In casu Defendant could not show that he had complied with its Huawei obligation to sufficiently express its willingness to take a FRAND license. In consequence, no cap on Claimant’s claim for damages was deemed appropriate. [269]
  3. Other important issues
    Whether a SEP proprietor is free to enforce its patent in court or whether the proprietor is obliged to grant a FRAND license has to be determined under Art. 102 TFEU, not Art. 101 TFEU. [270] A FRAND declaration is not an unconditional offer made by the patent proprietor to enter into a licensing agreement with anyone willing to take a license, it merely expresses that the proprietor is, in principle, ready to grant a FRAND license if the patent in question conveys market dominance. As such, the FRAND commitment merely specifies a duty to license which competition law would impose anyway but it has an impact on the patent owner’s obligations under Art. 102 TFEU. [271]
    As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes—also with regard to claims for damages and the rendering of accounts—presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. The non-registration of “B” as an interim owner was considered irrelevant under the circumstances of the present case (but not generally). Case No. 4b O 120/14, para. I, 1-2
    The MSA and the subsequent transfer agreements neither violate the German provisions on merger control (§§ 35-43 GWB) since, in any case, merger control thresholds are not reached.
    Nor was a violation of the European provisions on anticompetitive agreements (Article 101 TFEU) or on the abuse of a dominant position (Article 102 TFEU) found. Case No. 4b O 120/14, para. I, 4, a-c In particular, the transactions did not aim at enforcing non-FRAND royalties or at discriminating between licensees and the agreements framing the transactions ensured that the acquirers of the relevant patents were bound by (the initial) FRAND commitments. [272] The acquirer of a SEP is neither obliged to continue the transferor’s licensing practice in an unmodified manner nor to implement exactly the same conditions in all licensing agreements, provided the conditions are FRAND and no unjustified discrimination takes place. It is not abusive in itself for a (former) SEP proprietor to split its portfolio and to transfer the parts to several acquirers, thereby trying to arrive at higher overall royalties being paid for the portfolio. Nor is a resulting increase in the number of licenses a standard implementer has to take per se inacceptable. However, licensing conditions are FRAND only if the cumulative royalty level resulting from the licensing of all pertinent SEPs is not excessive. Putting it differently, where the royalty level for the entire portfolio was below or at the lower end of the FRAND range, it is not abusive to arrive, by way of splitting the portfolio and licensing its parts separately, at a higher overall royalty level within the FRAND range. Furthermore, the transaction agreements did not amount to price fixing. [273]
  • [266] Case No. 4b O 120/14, para. VII, 6, a
  • [267] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
  • [268] Case No. 4b O 120/14, para. VII, 6, b, dd
  • [269] Case No. 4b O 120/14, para. VII, 6, b, ee
  • [270] Case No. 4b O 120/14, para. VII, 4
  • [271] Case No. 4b O 120/14, para. VII, 5
  • [272] Case No. 4b O 120/14, para. I, 4, b, aa
  • [273] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

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) [439] . 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 [440] .

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 [441] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [441] .

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 [441] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [441] . 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 [442] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [443] . 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 [444] .

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 [445] . 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) [445] . This deadline was extended for almost three weeks until 7 May 2018 [445] .

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) [445] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [446] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [446] . 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 [447] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [448] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [446] . 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) [446] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [449] . 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 [450] . 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” [450] . The Court held that the Defendant failed to establish such fact [449] . 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?) [449] .

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 [451] .

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 [452] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [452] . 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 [442] . 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 [442] . 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 [453] .

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 [451] . 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 [451] .

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 [451] . 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 [455] .

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 [456] .

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) [457] .

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 [442] . 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) [442] .

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) [458] .

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) [443] .

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 [443] .

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) [459] . 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 [443] .

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 [460] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [460] . 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 [460] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [460] .

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 [461] . 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 [461] . 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”) [461] . 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 [462] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [462] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [462] .


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 [463] . On the other hand, it does not define the ownership of the patent in material legal terms [464] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [465] .

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 [466] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [466] . The Defendant failed convince the Court that this was the case with the SEP in suit [466] .

  • [439] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [440] Ibid, page 23 et seq.
  • [441] Ibid, page 5.
  • [442] Ibid, page 25.
  • [443] Ibid, page 26.
  • [444] Ibid, pages 5 et seq.
  • [445] Ibid, page 6.
  • [446] Ibid, page 19.
  • [447] Ibid,page 23.
  • [448] Ibid, pages 16 et seqq.
  • [449] Ibid, page 20.
  • [450] Ibid, page 21.
  • [451] Ibid, page 22.
  • [452] Ibid, page 24.
  • [453] Ibid, pages 24 et seq.
  • [454] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [455] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [456] Ibid,pages 23 and 25.
  • [457] Ibid, page 23.
  • [458] Ibid, pages 23 and 25 et seq.
  • [459] Ibid, pages 26 et seqq.
  • [460] Ibid, page 27.
  • [461] Ibid, page 28.
  • [462] Ibid, page 29.
  • [463] Ibid, page 10.
  • [464] Ibid, pages 10 et seq.
  • [465] Ibid, page 11.
  • [466] Ibid, page 30.

Updated 21 June 2019

Unwired Planet v Huawei

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

A. Facts

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

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

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

In March 2014, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court) based on one of its SEPs, asking for a declaratory judgement recognising the Defendants’ liability for damages on the merits, as well as information and the rendering of accounts [635] . At the same time, the Claimant also initiated infringement proceedings against the Defendants in the UK (UK proceedings). During the course of the UK proceedings, the parties made certain licensing offers. However, an agreement was not reached.

By judgment dated 19th January 2016, the District Court found that the Defendants infringed the patent in suit, recognised the Defendant’s liability for damages on the merits and ordered the Defendants to render accounts to the Claimant [636] . The Defendants appealed the District Court’s ruling.

With the present judgment, the Higher District Court (Oberlandesgericht) of Düsseldorf (Court), basically, upheld the decision of the District Court. However, following a partial withdrawal of claims by the Claimant, the Court limited the Defendants’ obligation to render accounts by excluding information about production costs (broken down by single cost factors) and realised profits [637] .

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

B. Court’s reasoning

The Court confirmed the District Court’s finding that the Defendants had infringed the patent in suit by offering for sale and selling standard-compliant products in Germany [638] .

The Court also agreed with the District Court’s finding that the Claimant was entitled to assert claims against the Defendants: in its view, the patent in suit had been validly transferred to the Claimant [639] .

Transfer of SEPs

The Defendants had argued that the agreements underlying the transfer of said SEP to the Claimant had several flaws, which the District Court had not evaluated properly. In a lengthy reasoning, the Court dismissed this argument and confirmed the validity of the agreements in question [640] .

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

In the Court’s eyes, the – repeated – transfer of a SEP does not constitute an abuse of market power in violation of Article 102 TFEU [641] , since the FRAND undertaking, which – according to the Court – irrevocably limits the exclusion rights arising from a patent ‘in rem’ (‘dinglich’) [642] , is directly and indispensably binding for the new patent holder (irrespective of any contractual obligation assumed by the latter) [643] . Due to the ‘automatic’ transfer of the FRAND undertaking, there is no reason for prohibiting the transfer of SEPs or imposing limitations regarding to whom the SEP is assigned to; insofar, the patent holder has a free choice [644] .

Furthermore, the Court found that the transfer of the SEP in suit to the Claimant did not violate Article 101 TFEU [645] . Reciprocal agreements, as the agreements underlying the transfer of said patent, per se do not violate Article 101 TFEU, unless they contain side agreements which could impede competition [646] . According to the Court, this was not the case here. In this context, the Court explained that the fact that Ericsson had transferred only a part of its portfolio to the Claimant could not have any anti-competitive effect in terms of Article 101 TFEU [647] . Reason for this is that the FRAND-undertaking, to which both Ericsson and the Claimant are bound, sets the upper limit for the financial or other kind of burden from the licence that can be imposed on any licensee with respect to the entire patent portfolio [647] .

FRAND-undertaking

Having taken the view that the FRAND-undertaking is ‘automatically’ transferred to the new SEP holder, the Court suggested that it is binding for the latter not only ‘on the merits’ (‘dem Grunde nach’), but also in terms of ‘amount and content’ (‘der Höhe und dem Inhalt nach’) [648] . In other words: the new patent holder is not only – generally – obliged to offer access to the SEP on FRAND terms, it is, moreover, bound to the actual licensing practice of the previous patent holder [648] . The Court found that this is needed for ensuring that the SEP holder will not exempt itself of its FRAND commitment – especially the non-discrimination obligation – by transferring the SEP to a third party [649] .

Existing licensing agreements / Confidentiality

Accordingly, the Court held that existing licensing agreements of the previous patent holder (which have not expired yet) need to be considered for the assessment of the non-discriminatory character of licensing offers made by the new SEP holder [650] . Consequently, in the Court’s view, the SEP holder’s FRAND undertaking obliges the latter to provide its successor with information regarding to the content of licensing agreements which it had concluded with third parties [650] .

To be able to establish the non-discriminatory character of its licensing offer, the new SEP holder needs to make sure that it will be able to refer to and present licensing agreements of the prior SEP holder, particularly in court proceedings [651] . An exception could be made only when presenting such agreements would violate contractual confidentiality obligations. For this, the content of relevant confidentiality clauses must be presented in detail in trial, in order to allow an assessment of the extent of the patent holder’s obligations [652] . In addition, the party bound to respective clauses must demonstrate that it cannot release itself from its confidentiality obligations, by showing that all existing licensees have refused – upon request – to waive their rights arising from each clause in question [652] . Notwithstanding this, the Court expressed the view that agreeing to comprehensive confidentiality clauses will, as a rule, bar the SEP holder (and/or its successor) from invoking confidentiality with respect to existing licences in pending court proceedings: in this case, the refusal to present licences cannot be justified, since the patent holder acted culpably by agreeing to confidentiality with other licensees, regardless of its FRAND-obligation to provide information to its successor with respect to the licensing agreements it has signed [652] . Its unjustified refusal to present existing licences will, moreover, also affect the position of the new patent holder in trial (leading potentially to a dismissal of its claims for lack of evidence of the FRAND-conformity of its licensing offer) [652] .

In this context, the Court noted that presenting existing licensing agreements with third parties in trial does not raise antitrust concerns (especially under Article 101 TFEU) [653] . According to the Court, the fact that business secrets will be disclosed to potential competitors of the existing licensees is not harmful from an antitrust perspective, since measures to protect confidentiality in trial are available [653] . In particular, the addressee of confidential information is obliged to sign a Non-Disclosure Agreement (NDA), if the holder of such information (a) concretely explains why this information constitutes a business secret, (b) presents in detail which measures were taken so far for securing confidentiality with respect to the information in question, (c) demonstrates in a substantiated and verifiable manner (for each information separately), which concrete disadvantages would be suffered, if the information would be disclosed and (d) also explains, with which degree of certainty the said disadvantages are expected to occur [653] . If these requirements are met, the opposing party’s refusal to sign an NDA would allow the party holding confidential information to limit its pleadings in trial to ‘general, indicative statements’ [653] . According to the Court, this was, however, not the case here.

Application of the Huawei framework

On the merits of the case, the Court made clear that the conditions established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE [654] (Huawei framework or obligations) apply only to claims for injunctive relief and the recall of infringing products, not to the patent holders’ claims for information, rendering of accounts and damages [655] . In particular, when deciding about the implementer’s liability for damages on the merits, courts do not have to consider whether the patent holder has met its Huawei obligations or not [656] .

This question is, however, relevant for deciding on the amount of damages owed to the patent holder. The non-compliance of the SEP holder with the Huawei framework can limit the amount of damages that it can claim to the amount of a FRAND royalty (for certain periods of time) [657] . Since the right to request the rendering of accounts serves the calculation of the amount of damages, the Court took the view that the SEP holder is barred from claiming information about production costs and/or realised profits for periods of time, in which it is not entitled to damages going beyond the FRAND royalty, because this information is not required for calculating the latter [658] .

SEP holder’s offer to the implementer

Looking at the present case, the Court held that the Claimant had not fulfilled its Huawei obligation to make a written and specific FRAND licensing offer to the Defendants [659] . In particular, in the offers made the Claimant failed to adequately specify both the calculation and the non-discriminatory nature of the royalties proposed [660] .

For allowing the implementer to assess the non-discriminatory character of the SEP holder’s licensing offer, the Court repeated that the latter is obliged to disclose whether other licensees exist and, if so, to which conditions they have been licensed [661] . This obligation extends also to licensing agreements concluded by the previous patent holder(s) [661] . Only agreements that have expired or have been terminated do not need to be considered in this respect [662] . As a result, the Claimant should have referred to both the licences covering the SEP in suit that it had concluded with third parties after the transfer of the patent, and to all licences, which Ericsson had concluded with licensees prior to the transfer of said patent and were still in force, when the Claimant made the respective licensing offer to the Defendants [663] .

The Court took the view that, prior to granting the very first FRAND licence, the SEP holder ought to select a specific ‘licensing concept’. This ‘concept’ is ‘legally binding’ for the future licensing conduct of the SEP holder and potential successors. In other words: the licensing conditions established by the first FRAND licence granted outline the leeway available to the SEP holder for future licensing negotiations [664] . This is also the case, when the royalties agreed for the first licence lie at the lower end of the FRAND scale available to the patent holder [665] . Accordingly, any deviation from the ‘licensing concept’ is allowed only and to the extent that (existing and new) licensees are not discriminated through less favourable conditions [664] .

The Court allowed SEP holders to select a new ‘licensing concept’ (within the available FRAND range), provided that all licensing agreements subject to the existing ‘concept’ will expire at the same point in time [666] . In the Court’s view, this could be achieved, for instance, by agreeing with all later licensees that their licence will expire at the same time as the first FRAND licence ever granted [662] . The Court recognised that this would require substantial efforts, particularly when considerable patent portfolios are involved; this fact did not, however, speak against binding the successor to the licensing practice of the previous SEP holder [667] .

C. Other important issues

According to the Court, the fact that the UK proceedings were directed towards setting the terms of a worldwide licence between the parties, covering all SEPs held by the Claimant did not require the Court to stay its own proceedings [668] . According to Article 27 of the Brussels I Regulation, the court later seized of the matter has to stay its proceedings until the jurisdiction of the court first seized of the case has been settled. The Court saw, however, no indication that the UK proceedings (had ever) concerned the claims asserted in the proceedings brought before it (claims limited to Germany) [668] .

Besides that, the Court confirmed that German courts have international jurisdiction for the claims brought against Huawei China [669] . If infringing products are offered over the internet, the international jurisdiction of German courts is established, when German patent rights are being affected and the website can be accessed in Germany [669] .

  • [635] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 32 (cited by www.nrwe.de).
  • [636] Ibid, para. 41. See District Court of Duesseldorf, judgement dated 19 January 2016, Case No. 4b O 49/14.
  • [637] Ibid, paras. 139 et seqq.
  • [638] Ibid, paras. 252-387.
  • [639] Ibid, paras. 161 et seqq.
  • [640] Ibid, paras. 169-199.
  • [641] Ibid, para. 203 et seqq.
  • [642] Ibid, para. 205.
  • [643] Ibid, paras 205 et seqq.
  • [644] Ibid, para 209.
  • [645] Ibid, paras. 235 et seqq.
  • [646] Ibid, para. 236.
  • [647] Ibid, para. 242.
  • [648] Ibid, paras. 212 et seqq.
  • [649] Ibid, para. 214.
  • [650] Ibid, paras. 216 et seq.
  • [651] Ibid, para. 216.
  • [652] Ibid, para. 218.
  • [653] Ibid, para. 220.
  • [654] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [655] Unwired Planet v Huawei, Higher District Court of Düsseldorf, 22 March 2019, para. 159 (cited by www.nrwe.de).
  • [656] Ibid, para. 396.
  • [657] Ibid, para. 402.
  • [658] Ibid, para. 402 et seq. Insofar the Court expressly disagreed with the District Court of Mannheim, which in a previous decision had denied any limitations of the patent holder’s right to demand the rendering of accounts, in case of non-compliance with the Huawei framework; cf. District Court of Mannheim, judgment dated 10 November 2017, Case No. 7 O 28/16, GRUR-RR 2018, 273.
  • [659] Ibid, paras. 406 et seqq.
  • [660] Ibid, para. 411.
  • [661] Ibid, para. 419.
  • [662] Ibid, para. 420.
  • [663] Ibid, para. 423.
  • [664] Ibid, paras. 413 et seq.
  • [665] Ibid, para. 413.
  • [666] Ibid, paras. 414 and 420.
  • [667] Ibid, para. 421.
  • [668] Ibid, para. 144.
  • [669] Ibid, paras. 153 et seqq.

Updated 4 June 2020

Sisvel v Xiaomi, Court of Appeal of The Hague

Dutch court decisions
17 March 2020 - Case No. C/09/573969/ KG ZA 19-462

A. Facts

Sisvel International S.A. (Sisvel) is the parent company of the Sisvel group [753] . In 2012, Sisvel acquired EP 1 129 536 B1 (EP 536) [754] . EP 536 relates to the EGPRS technology, which forms part of a GSM telecommunications standard that implements EDGE [755] .

Xiaomi is a manufacturer of mobile phones with headquarters in China [756] .

On 10 April 2013, Sisvel submitted to the European Telecommunication Standards Institute (ETSI) a declaration under which it committed to make a list of patents, including EP 536, accessible to standard users under Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (FRAND commitment) [757] .

On 15 October 2013, Sisvel notified Xiaomi about its Wireless Patent Portfolio [755] . On 16 July 2014, Sisvel sent a letter to Xiaomi, inviting Xiaomi to contact Sisvel regarding to the conclusion of a licence [755] . Further e-mails were sent to Xiaomi on 3 December 2014, 4 December 2014 and 5 March 2015 [755] .

In an article dated 29 March 2019 published on nu.nl [758] and ad.nl [758] , Xiaomi announced that it would enter the Dutch market with online shops and physical stores [759] .

On 23 April 2019, Sisvel initiated legal proceedings against Xiaomi before the English High Court of Justice in London (English proceedings) [760] . Sisvel requested the court to declare that the terms and conditions of the MCP Pool Licence, under which EP 536 as part of the Wireless Patent Portfolio is licensed [761] , are FRAND or alternatively, to determine FRAND licensing terms and conditions and find three patents (including EP 536) to be valid and infringed [760] .

On 30 August 2019, Xiaomi filed two legal actions against Sisvel in Beijing [762] . Xiaomi asked, in one of the cases, the court to determine FRAND terms and conditions for a licence limited to China and, in the other case, to declare that Sisvel had abused its dominant position [755] .

In the Netherlands, Sisvel requested a preliminary injunction against Xiaomi, until Xiaomi accepts Sisvel’s offer to go to arbitration, as well as the recall and destruction of products, information over profit made and additional documentation with respect to resellers, a penalty fee, and – as a subsidiary motion – the removal of the EGPRS/EDGE extension of the GSM functionality [763] . With judgment dated 1 August 2019, the Court of The Hague rejected Sisvel’s claims in first instance and sentenced Sisvel to the process costs, in view of the balance of interests between the parties and the complexity of the case [764] .

Sisvel appealed the first instance decision on 29 August 2019 [765] . During the course of the appeal proceedings, on 22 January 2020, Xiaomi deposited funds [766] on an escrow account held by Intertrust [767] . With the present judgment, the Court of Appeal of The Hague (Court) rejected Sisvel’s appeal and sentenced Sisvel to higher process costs [768] .

B. Court’s reasoning

The Court focused on the balance of interests between the parties.

Injunction

The Court considered that the harm caused to Sisvel by the infringement of EP 536 was limited, taking into account only infringing uses in the Netherlands, as well as the fact that EP 536 is only one out of many patents held by Sisvel, and almost expired [769] . Considering that Sisvel’s business model is to conclude licences, Sisvel did not have to fear damages caused by free riding on the cellphone market, but only damages resulting from denied profits under a license [770] . Therefore, only financial damages could incur which the Court considers to be relatively simply compensated at a later point in time [771] . Additionally, Xiaomi had provided security [771] . The security addresses the problem raised by Sisvel, i.e. Xiaomi becoming insolvent and unable to pay damages for patent infringement [755] .

With respect to Xiaomi’s interest, the Court noted that an injunction would force Xiaomi to stop sales, close shops in the Netherlands and stop its distribution contracts with customers [772] . The consequences would thus be severe and could hardly be undone, even if Xiaomi could resume sales again after the expiration of EP 536 [755] . The only way for Xiaomi to avoid those consequences would be to take a license, which also brings important consequences. Indeed, the MCP license offered by Sisvel is not only for EP 536 but for more than 1000 patents in all countries worldwide [773] . By accepting a licence Xiaomi would be irrevocably bound to comply with it, including with its rate [774] . The stop of sales in the Netherlands would create loss of profits for Xiaomi and worsen its relationships with its customers [755] . The Court highlighted such damages are difficult to evaluate as Xiaomi is still building its market position and there are many other players on the market [755] .

The Court further argued that the case was complex for a preliminary decision, because it required an opinion on the validity and scope of a patent protecting a complex technology as well as an assessment of Xiaomi’s FRAND defence, for which parties have arguments over many facts and the principles to determine a FRAND rate [775] . Additionally, the court that would be entrusted with the main proceedings could have a different opinion on the validity of the technology and the FRAND defence [755] . Therefore, the Court concluded there was no reason, even if the patent was valid and the FRAND defence had to be rejected, to force Xiaomi to leave the Dutch market or to take a licence from Sisvel [755] . The Court found that Xiaomi’s interest to reject the request for a preliminary injunction was stronger than Sisvel’s interest to stop the continuation of the infringement [775] .

The Court also rejected Sisvel’s claim that Xiaomi was an unwilling licensee [776] . Such claim could be used to invalidate Xiaomi’s FRAND defence, but the Court stated that the examination of Xiaomi’s FRAND defence had to be separated from the balance of interests’ assessment in preliminary proceedings [755] .

Reviewing Sisvel’s request based on the EU enforcement directive 2004/48 and Article 9 of such directive did not lead the Court to another conclusion: in light of the enforcement directive, the injunction would not be proportionate in this case, therefore the Court had no obligation to use Article 9 of the EU enforcement directive [777] .

Even in combining the application of Article 3 of the EU enforcement directive, Article 5, 17 and 47 of the European Charter of Fundamental Rights the Court came to the same interpretation: an injunction for the limited remaining time of EP 536 would not help [778] . The lack of an injunction would not unreasonably delay the case as the Court argued that the effective remedy would be compensation for the damages in main proceedings [755] . Additionally, the Court found this conclusion to be supported by the fact that Sisvel had only initiated main proceedings against other parties in the Netherlands and abroad [755] .

Sisvel’s claim that the lack of an injunction would create an unfair playing field between market participants was also rejected by the Court [779] . The Court stated that Xiaomi’s security and the possibility for Sisvel to get compensation for damages in main proceedings created an equal playing field [755] . Sisvel had relied on a decision of the Dutch Supreme Court, according to which a patent can only be effectively protected if there is a quick stop to further infringement [780] . The Court explained that this is the case only when the damages for patent infringement are difficult to determine; this was, however, not the case here [755] .

Security

The Court rejected Sisvel’s claim that the deposit on the escrow account had been made in such a way that it would be impossible for Sisvel to get paid [781] . Indeed, the Court underlined that Sisvel can unilaterally reclaim payment, especially if a FRAND rate is determined in the English proceedings [755] . Moreover, Xiaomi declared itself to be ready to adapt the amount placed on the escrow account in close cooperation with Sisvel, if Sisvel wishes to do so or has requests about the escrow account [755] . The Court noted it did not seem Sisvel made use of this possibility to adapt the amount [755] .

The amount deposited for fees under Sisvel’s MCP Patent Licence was considered as sufficient by the Court for the products sold in the Netherlands for the lifetime of EP 536 [782] . The Court added that this would still be the case even in the event that Sisvel wanted to increase the licensing rate for non-compliant users or to account for profits based on the infringement [755] . The Court underlined that in the Huawei v. ZTE decision of the CJEU [783] , the security had to be “appropriate”, which depends on the context of the FRAND defence [755] .

Recall and destruction of products

Sisvel’s request to have infringing products recalled and destroyed, as well as all mentions about those products removed, resellers informed and profits provided was rejected by the Court [784] . Sisvel had asserted the same urgent interest as for the preliminary injunction to support this request: stopping and preventing infringement of EP 536. Since the request for a preliminary injunction failed, the further claims asserted by Sisvel had to follow the same fate [755] . The Court stated that there was no urgent interest to have Xiaomi disclosing its profits, or at least that was more important than having Xiaomi keeping this information confidential [755] . Sisvel did also not explain why profits data should be disclosed in advance of the main proceedings [755] .

C. Other important issues

The Court also denied Sisvel’s request to grant a preliminary injunction, as long as Xiaomi did not agree to initiating arbitration procedures [785] . The Court argued that if Xiaomi would be forced to have an arbitration tribunal determining the terms and conditions for all patents of the MCP Patent Licence for the whole world, this would deprive Xiaomi of its fundamental right of access to a court [755] . The acceptance of such arbitration proposal without conditions would have drastic consequences on Xiaomi’s position [755] .

  • [753] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.2.
  • [754] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.4.
  • [755] Ibidem
  • [756] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.8.
  • [757] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.5.
  • [758] Dutch newspaper.
  • [759] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.11.
  • [760] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.12.
  • [761] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 3 and 4, par.2.7 and 2.12.
  • [762] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.13.
  • [763] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.14.
  • [764] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 4 and 5, par.3.3.
  • [765] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.1.
  • [766] Amount has been redacted.
  • [767] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.3.5.
  • [768] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 10 and 11, par. 4.24 and following.
  • [769] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.4.3.
  • [770] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 5 and 6, par.4.3.
  • [771] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.3.
  • [772] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.7.
  • [773] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 6 and 7, par.4.8.
  • [774] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.9.
  • [775] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.11.
  • [776] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.2.12.
  • [777] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.14.
  • [778] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.15.
  • [779] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.16.
  • [780] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 8 and 9, par.4.17.
  • [781] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.5.
  • [782] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.6.
  • [783] Court of Justice of the European Union, Huawei Technologies Co.Ltd. v. ZTE Corp. and ZTE Deutschland GmbH, 16 July 2015.
  • [784] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par. 4.2.1.
  • [785] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par.4.18.

Updated 30 October 2018

­Vodafone v Intellectual Ventures, High Court of Ireland

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

A. Facts

The Claimant, Vodafone GmbH, is a German company offering communication services in Germany, including DSL internet connections based on the standards ADSL2+ and VDSL2 [716] .

The first Defendant, Intellectual Ventures II LLC (IV LLC), is a US company that holds patents declared as essential to the above standards (Standard Essential Patents or SEPs), including German designations of several European patents [717] . The second Defendant, Intellectual Ventures International Licensing (IV Licensing), is an Irish company engaged in patent licensing [717] . IV LLC granted IV Licensing a sub-licence which allows the latter to grant non-exclusive licences in respect to IV LLC’s portfolio [718] .

In January 2016, IV LLC brought infringement actions against the Claimant before the District Court (Landgericht) of Düsseldorf in Germany (Düsseldorf Court) based on the German designation of two of its SEP relating to the ADSL2+ and VDSL2 standards (German proceedings) [719] . In the German proceedings, IV LLC sought for a declaration that the Claimant is liable for damages arising from the infringement of the SEPs in suit as well as the provision of information and the rendering of accounts [719] .

During the course of the German proceedings, IV Licensing made an offer for a licensing agreement to the Claimant comprising the German designations of sixteen European Patents, including the two patents already asserted before the Düsseldorf Court [720] . The Claimant made a counter-offer which was, however, rejected [721] .

Subsequently, the Claimant filed an action for a declaratory judgement against the Defendants before the Dublin High Court (High Court) in Ireland (Irish proceedings). The Claimant requested the High Court inter alia to declare (1) that IV Licensing’s offer was not Fair, Reasonable and Non-Discriminatory (FRAND) and, therefore, amounted to an abuse of dominant position contrary to Article 102 of the Treaty on the Functioning of the EU (TFEU) and (2) that Claimant’s counter-offer was FRAND [722] . In case that the High Court held that neither IV Licensing’s offer nor Claimant’s counter-offer were FRAND, the Claimant also sought for a declaration as to which terms and conditions would be FRAND [722] .

The Defendants challenged the jurisdiction of the High Court. They requested the High Court – among other motions – to decline jurisdiction in favour of the Düsseldorf Court, or, in the alternative to stay its proceedings [723] .

With the present judgment the High Court refused to decline jurisdiction over the dispute brought before it [724] . The Court ordered, however, a stay in the proceedings, until the Düsseldorf Court delivered its final judgment in the German proceedings [724] .

B. Court’s reasoning

The High Court held that neither Article 24 nor Article 29 of the Recast Brussels Regulation [725] require the court to decline jurisdiction in favour of the Düsseldorf Court, even though the German proceedings were initiated prior to the Irish proceedings.

Pursuant to Article 24 of the Regulation, the Courts of each EU Member State have exclusive jurisdiction in proceedings concerned with the validity of any European Patent granted for that Member State. Both pending proceedings concern German designations of IV LLC’s European patens. However, this fact did not hinder the High Court to assume jurisdiction over the present case: In the High Court’s eyes, no issue as to the validity the patents which ought to be licensed has been placed in issue in the Irish proceedings; moreover, no part of Claimant’s cause of action concerning the (alleged) abuse of dominance depends in any way on the validity of the SEPs in suit [726] .

Furthermore, the High Court found that Article 29 of the Regulation does not apply to the present case, either. The High Court took the view that the Irish proceedings and the German proceedings do not involve the “same cause of action”, as Article 29 of the Regulation requires [727] . Although there are overlapping issues in both proceedings (for instance, Article 102 TFEU is mentioned in parties’ pleadings in both trials), this fact does not suffice to establish a “same cause of action” in terms of Article 29 of the Regulation [727] . In particular, Article 102 TFEU, to the extent that it features in the German proceedings is not concerned with an (alleged) abuse of dominant position by way of the offer made to the Claimant by IV Licensing [727] . Besides that, the High Court also pointed out, that – at least regarding to IV Licensing – it is not presented with proceedings “between the same parties” (since IV Licensing in not party to the German proceedings) which is, however, a further prerequisite for the application of Article 29 of the Regulation [728] .

Notwithstanding the above, the High Court held that some form of relief under Article 30 of the Regulation ought to be granted to the Defendants [729] . Under this provision, a court is allowed (meaning that the power given to the court is discretionary) to either stay its proceedings (Article 30 para. 1) or decline jurisdiction (Article 30 para. 2), in case that a “related action” is already pending before another court [730] . The objective of Article 30 of the Regulation is “to improve co-ordination of the exercise of judicial functions” within the EU and to avoid “irreconcilable judgments” [731] . In the matter at hand, the High Court found that these ob­jectives are served by an order to stay the proceedings according to Article 30 para. 1 of the Regulation [724] .

Looking at the present case, the High Court explained that a risk of “irreconcilable judgments” exists, since at the heart of both the Irish and the German proceedings lies the question whether the parties have complied with their conduct obligations under the judgment of the Court of Justice of the EU in the matter Huawei v ZTE [732] (Huawei requirements), especially with the obligation to exchange licensing offers on FRAND terms [733] .

In the Irish Proceedings, the claims made by the Claimant expressly address this question. In the German Proceedings, the same question will be of “direct relevance” for the nature and scope of the claim for damages and the accessory claim for the rendering of accounts asserted by IV LLC [734] . Although compliance with the Huawei requirements is – in contrast to claims for injunctive relief – no direct prerequisite for the enforcement of SEP holder’s damage claims (including the auxiliary claims for information and the rendering of accounts) [735] , it has an impact on the scope of such claims: according to the case law of the Düsseldorf Courts, if the patent holder does not meet the Huawei requirements or both the patent holder and the potential licensee comply with the Huawei requirements, the patent holder’s damage claim is limited to the FRAND licence fees and the claim for the rendering of accounts is limited to the information needed in order to calculate the respective damages (using the so-called “licence analogy” method) [736] . Accordingly, the Düsseldorf Court would not be able to decide on the merits of the claims raised by IV LLC before it, without first determining whether the parties fulfilled the Huawei requirements [737] .

In addition, the High Court pointed out that setting the FRAND terms and conditions for the patent portfolio offered to the Claimant, as the latter requested in the Irish proceedings, could also lead to “irreconcilable judgments”, particularly if the Düsseldorf Court would be asked by IV LLC at a later point in time to fix the damages for the two SEPs asserted in the German proceedings (since these SEPs were also part of the portfolio offered) [738] . Insofar, the High Court was not convinced by the Claimant’s argument, that fixing of rates for a patent portfolio usually involves different considerations to the fixing of a rate for individual patents [738] . On the contrary, the High Court recognized that within the “longstanding industry practice” of portfolio licensing, the fixing of rates for a portfolio of patents does, in general, involve the same methodology as the fixing of rates for individual patents. Consequently, rates set by the High Court in the Irish proceedings might conflict with any rates determined by the Düsseldorf Court with respect to the damage claims made in the German proceedings [738] .

  • [716] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 1.
  • [717] Ibid, para. 2.
  • [718] Ibid, para. 3.
  • [719] Ibid, para. 37.
  • [720] Ibid, paras. 10-12 and 93.
  • [721] Ibid, paras. 13-16.
  • [722] Ibid, para. 5.
  • [723] Ibid, para. 7.
  • [724] Ibid, para. 180.
  • [725] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12th December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), OJ L 351/1 of 20th December 2012.
  • [726] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 122.
  • [727] Ibid, para. 146.
  • [728] Ibid, para. 148.
  • [729] Ibid, para. 166.
  • [730] Ibid, para. 119.
  • [731] Ibid, para. 165.
  • [732] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [733] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 52.
  • [734] Ibid, paras. 52 and 60.
  • [735] Ibid, paras. 55 et seqq.
  • [736] Ibid, para. 61 et seq.
  • [737] Ibid, para. 62.
  • [738] Ibid, para. 93.